MINING LEASE
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THIS LEASE AGREEMENT, entered into this 8th, day of December , 1987, by
and between the CITY OF XXXXXXX, a municipal corporation organized under the
laws of the state of Idaho, party of the first part and hereinafter referred to
as the "LESSOR", and WALLACE SILVER,INC., an Idaho Corporation, having its
principal place of business within the City of Xxxxxxx, County of Shoshone,
State of Idaho, party of the second part, hereinafter referred to as the
"LESSEE".
W I T N E S S T H:
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The LESSOR and LESSEE both own certain mineral rights situated within
the exterior boundaries of the City of Xxxxxxx, Shoshone County, State of Idaho
and the parties desire to enter into a lease whereby the LESSOR will lease its
mineral rights to the LESSEE.
NOW THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. The LESSOR does hereby let, lease and demise to the LESSEE, for the
term of TWENTY FIVE (25) years pursuant to Idaho Code, Section 50-234, subject
to the right to renew as set forth in paragraph 1.3, the exclusive right and
privilege in the LESSEE to mine for and extract any and all minerals which may
underly the surface of the real property within the exterior geographical
boundaries of the City of Xxxxxxx, County of Shoshone, State of Idaho, which are
presently owned by said LESSOR.
1.1 Attached hereto as Exhibit "A" is a map setting forth the
real property and mineral rights thereto owned by the LESSOR and which
is commonly referred to herein as 'they property' the subject of this
lease.
MINING LEASE - 1
1.2 This lease shall not extend to any property the LESSOR
acquires via annexation, gift or otherwise after the effective date of
this lease.
1.3 This lease will be for a period of TWENTY FIVE (25) years
with the option of LESSEE to renew this lease for an additional TWENTY
FIVE (25) years if LESSEE is and has been pursuing efforts to interest
a third party to explore and develop the property, taking into account
economic conditions existing and the condition of the mining industry
in general, including the market price of precious metals. As a further
condition of renewal, LESSEE shall be in good standing with the State
of Idaho and federal authorities, as applicable.
2. It is understood between the parties hereto that with some
exceptions, the LESSEE is the owner of the remaining subsurface mineral rights
within the exterior boundaries of the city of Xxxxxxx, County of Shoshone, State
of Idaho, and that the LESSEE and/or its assignees would intend to explore and
develop the mineral rights owned by the LESSOR and the LESSEE jointly. In this
regard it is specifically understood by and between the parties hereto that the
LESSEE intends to enter into certain negotiations with a third party for the
exploration and development of the mining properties owned by the LESSOR and the
LESSEE and to receive from the exploration and development therefrom certain
royalties to be paid by said third party for minerals extracted from the
properties of the LESSOR and the LESSEE. In this regard, it is understood and
agreed by the parties hereto that in consideration of the lease granted
hereunder by the LESSOR to the LESSEE, that the LESSOR shall be entitled to
receive THIRTY per cent (30%) of any and all gross payments received under any
lease or other mining agreement pertaining to any production, exploration,
development, or rights of access for any of the property.
MINING LEASE - 2
2.1 The percentage payment shall be made to the LESSOR within
THIRTY (30) days of receipt of the same by the LESSEE from the third
party. Proof of the amount received as well as a copy of the
exploration agreement shall be provided to the LESSOR.
2.2 As additional consideration, LESSEE agrees to issue and
deliver 100,000 shares of Xxxxxxx Silver, Inc. common stock to the
LESSOR. Said stock shall be restricted within the meaning of Federal
and State Securities Law and is the subject of specific agreement
between Lessor and Lessee.
3. It is understood and agreed by the LESSEE that in accordance with
Idaho Code, Section 50-234, that the surface of said property shall, to the
extent provided by said statute, in no wise be interfered with or disturbed, by
the LESSEE in the mining and extraction of any and all minerals which may be
found within the property herein leased by the LESSOR.
MINING LEASE - 3
3.1 It is expressly understood and agreed by and between the
LESSOR and the LESSEE that all work which may be performed under the
terms of this lease agreement by the LESSEE and/or its assignee, shall
be performed in such a manner and at such depths below the surface as
will not cause or result in any caving or settlement of the surface or
any damage to any buildings or other structures on the surface and
situated within the exterior boundaries of the City of Xxxxxxx, County
of Shoshone, State of Idaho.
3.2 No mining shall occur within 500 feet of the surface of
the property.
3.3 LESSEE shall not conduct any surface activities within the
City of Xxxxxxx without having first obtained approval from the City of
Xxxxxxx Planning & Zoning Commission for said any surface activities.
3.3.1 If said Planning & Zoning Commission approves
diamond drilling activities, the LESSEE agrees as follows:
3.3.1.1 All drill holes will be plugged with
a concrete plug.
3.3.1.2 All drilling residues and debris
will be removed from the area and the area restored
to its original condition.
4. It is expressly understood and agreed that the LESSEE may either
choose to explore and/or develop the mineral rights of the LESSOR subject to
this agreement or to engage a third party assignee to perform such exploration
and/or development. The LESSOR hereby agrees that the LESSEE shall have the
right to assign this agreement and all rights pertaining thereto.
MINING LEASE - 4
4.1 However, the LESSEE shall not assign, sublease, or enter
into any agreement affecting the property without the express written
consent of the LESSOR. The City may not withhold its consent to an
exploration and/or development agreement with a third party if said
third party is a bona fide and recognized development or exploration
company. The intent being: the LESSOR'S only grounds for refusing to
give its consent would be based on the lack of expertise and
qualifications of the third party.
4.2 If LESSEE is acquired by merger, consolidation, or sale of
assets, then this agreement between the parties is subject to
termination, provided there is a reasonable good faith basis far the
termination.
4.2.1 The LESSEE shall promptly notify the LESSOR in
writing if any of the above events set forth in paragraph 4.2
have taken place. Thereafter, the LESSOR shall have THIRTY
(30) days to notify the LESSEE if it intends to declare the
lease terminated.
4.3 LESSEE agrees to allow the Lessor access to LESSEE'S
records, books and accounts covering the operations of the property
upon reasonable prior notice. The LESSOR shall also have access to the
property. In any agreement that LESSEE negotiates with a third party
for exploration and development, the LESSEE intends to secure access to
that company's books and records and the property covered by that,
agreement. The LESSOR will have the same access rights that LESSEE
obtains. Attached hereto as Exhibit "B" are the type of provisions
LESSEE will negotiate for and endeavor to secure. The terms set forth
in Exhibit "B" are for illustrative purposes only.
MINING LEASE - 5
5. This lease of subsurface minerals is intended to and does convey
according to the terms and conditions hereof to the LESSEE and/or its assignees
during the term of this agreement and any renewal or extension thereof, all
veins, fissures, stringers or other mineral bearing structures and all ores
therein containing precious or base metals, including but not limited to,
silver, lead, zinc, gold and copper, together with the right to enter into the
above described property by such underground tunnels, drifts, crosscut,
laterals, raises, winzes or other necessary or appropriate openings as in the
judgment of the LESSEE and/or its assignees shall be necessary or convenient in
its exploration and/or development of the property of the LESSOR.
5.1 Oil and gas rights are excluded from this lease.
6. The Lessee, any and all future third parties contracted with, or any
and all fourth party contractors will hold the Lessor from harm, liability, or
free from any and all legal suits brought against the contracting agents to
include all parties above listed. The Lessor shall be saved harmless from any
liability or costs, except for the Lessor's own negligence.
MINING LEASE - 6
7. This lease shall be effective upon due compliance with Idaho Code
Section 50-234.
IN WITNESS WHEREOF, the LESSOR has caused these presents to be signed
by its duly authorized Mayor and attested to by its City Clerk, and the LESSEE
has caused these presents to be signed by its duly authorized President and
attested thereto by its duly authorized secretary, the day and year first above
written.
CITY OF XXXXXXX
By /s/
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Mayor
Attest:
/s/
---------------------------------
City Clerk
WALLACE SILVER, INC.
By /s/
---------------------------------
President
Attest:
/s/
---------------------------------
Secretary
MINING LEASE - 7
STATE OF IDAHO )
)ss
County of Shoshone )
On this 8th day of December, 1987, before me, the undersigned, a Notary
Public in and for the state aforesaid, personally appeared Xxxxxxx Xxxxxxxxxx
and Xxxxxx X. Xxxxx , Mayor and City Clerk, respectively, of the CITY OF
XXXXXXX, the municipal corporation whose name is subscribed to the foregoing
instrument and acknowledged to me that such municipal corporation executed the
same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my Notarial
seal the day and year in this certificate first above written.
/s/
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Notary Public in and for the State
of Idaho, residing at: Wallace
Idaho.
My commission Expires: Dec. 26, 1992
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STATE OF IDAHO )
)ss
County of Shoshone )
On this 8th day of December , 1987, before me, the undersigned, a
Notary Public in and for the state aforesaid, personally appeared Xxxxxx X.
Xxxxxxxx and Xxxxxxxx X. Xxxxxxxx, President and Secretary, respectively, of
XXXXXXX SILVER, INC., the corporation whose name is subscribed to the foregoing
instrument and acknowledged to me that such corporation executed the same.
MINING LEASE - 8
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my Notarial
seal the day and year in this certificate first above written.
/s/
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Notary Public in and for the State of
Idaho, residing at: Mullan
Idaho.
My Commission Expires: 9/3/91
MINING LEASE - 9
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EXHIBIT "B",
Progress Reports; Inspection
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Within twenty (20) days after the end of each calendar quarter operator
shall furnish to W.S. progress reports showing the character and amount of work
performed by Operator during the preceding calendar year on the Property, which
reports shall identify the place or places where said work was performed.
Operator shall maintain at its office all sample data,
geological maps, and other items of information resulting from such
work. W.S. shall have the right to make and remove copies of all such
data but W.S. shall not remove original documents without written
consent of Operator.
Operator shall retain samples splits, drill core, mill
retainers or other samples as are dictated by good geologic, mining or
metallurgical practice. Such samples shall be the property of W.S. ,
but shall not be removed from Operator's control until termination of
this Lease, at which time they shall be promptly removed by W.S.
W.S. hereby agrees that it shall only publish such results,
data and information from Operator's work as are required by law and
rules and regulations of the Securities and Exchange Commission, unless
it first obtains prior agreement and consent in writing.
W.S. 's authorised representatives may during normal business hours
i-srpect.. the information or samples required to be kept by Operator pursuant
to this agreement and on at least one day's notice (which notice need not be in
writing) may enter upon the Property and inspect the work performed by the
operator pursuant to this Lease.
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Entry upon the Property by W.S. or its authorized
representatives shall be at W.S.'s risk. W. S. indemnifies and holds
Operator harmless for any claim, damage, or demand by reason of injury
to representatives, invitees or the like, incurred as a result of their
inspecting the Property.
Books and Records: Statements.
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Operator shall maintain at the office of the Operator or such other
office within the County of Shoshone, records and accounts consistent with those
ordinarily kept by mining ventures, covering operations on the Property,
including the mining, milling, other metallurgical processing, sale and disposal
of ores and concentrates; such books, records and accounts to be kept in
accordance with generally accented principles and practices of accounting.
Within twenty (20) days after the end of each calendar quarter Operator
shall furnish W.S. statements showing in reasonable detail the financial results
of operations conducted on or associated vith the Property or the products mined
therefrom during the preceding quarter.
If within thirty (30) days after receipt by W.S. of any statement
rendered to it by Operator , W.S. does not object in writing to said statement,
there shall be conclusively deemed to be an account stated between the parties,
and such account shall be conclusively deemed correct.
The books and records of Operator insofar as they relate to operations
on the Property pursuant to this Lease shall be open to the inspection of W.S.
or its duly authorized representatives during regular business hours of
operator.
Once during each calendar year W.S. ,may at its sole cost and
expense, make or have made an audit of the accounts and records of
operator concerning operations on the Property, provided W.S. notifies
Operator of its intention to cause such an audit to be made thirty (30)
days in advance of such date.
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