EXHIBIT 10.4
EXPLORATION LICENSE, MINERAL PURCHASE OPTION AND LEASE AGREEMENT
THIS EXPLORATION LICENSE, MINERAL PURCHASE OPTION AND LEASE AGREEMENT is
made this 7th day of December, 1999 by and between A. Xxxxxxx Xxxxxx and Xxxxx
Xxx Xxxxxx, h/w, Joint Tenants ("Owners"); and Xxxxx Minerals, Inc. ("Xxxxx").
A. Owners own and possesses NW1/4se1/4 (100% of Minerals & Surface);
NE1/4SW1/4 (50% Minerals & 100% Surface); SE1/4NW1/4 (50% Minerals & 100%
Surface); of Section 14, in Township 14 North, Range 24 East, Fergus County,
Montana, for a total of 80 mineral acres. All ores, minerals, mineral rights,
and the right to explore for, mine, remove the same and so much of the water as
will be required or with the right to drill a water well, with ingress and
egress over adjoining lands now owned by Owners shall be referred to
collectively as "Mineral Property", except oil and gas, and the remainder of the
surface, water rights and improvements, easements, licenses, rights-of-way and
other interests appurtenant thereto, shall be referred to collectively as the
"Surface".
B. The parties now wish to enter into an agreement giving Xxxxx an
exclusive license to explore the Mineral Property and the exclusive option to
purchase the Mineral Property on the terms and conditions set forth below.
THEREFORE, the parties have agreed as follows.
SECTION ONE
Exploration License
1.1 Grant of Exploration License. Owners hereby grant to Xxxxx the
exclusive right and option to enter upon and explore the Mineral Property. The
Exploration License shall have a term of Two (2) years commencing on execution
of this agreement by both parties (the "Effective Date"). During the term of the
license, Xxxxx shall have the right to undertake geological, geophysical, and
geochemical examinations of the Mineral Property, to sample the Mineral Property
by means of pits, trenches, and drilling by any means, and to take mini-bulk
samples (not to exceed 1 ton total) from the Mineral Property for the purpose of
conducting mineralogical tests, etc. However, Xxxxx shall not commence mining
activities on the Mineral Property unless it exercises its option to purchase
set forth in Section 2 below.
1.2 Payments For Exploration License. In consideration of this License,
Xxxxx shall pay Owners the sum of Three Thousand Dollars ($3,000.00) upon
execution of this agreement. Xxxxx shall also pay to owners the sum of Three
Thousand Dollars ($3,000.00) on or before the anniversary date of this
Agreement, in order to maintain this Exploration Licence in effect.
1.3 Delivery of Data. Following execution of this Agreement, Owners
shall allow Xxxxx to review and copy (at Xxxxx'x cost) all data and reports, if
any, in the possession of Owners.
1.4 Termination of Exploration License. This exploration license shall
terminate two (2) years from the Effective date, unless extended by mutual
agreement of the parties. Xxxxx shall have
the right to terminate the License at any time and shall, upon delivery of a
termination notice to Owners, be relieved of all further obligations after
termination date.
1.5 Work Commitment. The payment set forth in Section 1.2 above shall be
in lieu of any work commitment on the Mineral Property, and Xxxxx shall have no
obligation, express or implied, to explore, develop, or mine the Mineral
Property.
1.6 Environmental Liabilities. Owners shall remain solely liable and
responsible for all environmental conditions and reclamation responsibilities
which arose prior to the execution of this Agreement. Xxxxx shall have
responsibility for all environmental conditions and reclamation responsibilities
arising from Xxxxx'x activities on the Surface after execution of this
Agreement.
SECTION TWO
Option to Lease
2.1 Grant of option. In consideration of the payment made in Section
1.2, Owner hereby grants to Xxxxx the exclusive right and option to Purchase
Owners' ownership interest, in and to all mineral interests, as defined in "A"
above, and Lease so much of the Surface as needed and/or required for the sum of
Forty Thousand Dollars ($40,000.00) to be paid according to the schedule set
forth below. The option shall have a term of five (5) years unless sooner
terminated or canceled as hereinafter provided, and the Surface Lease shall run
for 5 years or so long after the end of such term as there is production from
the Mineral Property. The Lease shall commence on the date Xxxxx gives Owners
notice of executive of Option to Purchase and makes a payment of Two Thousand
Dollars ($2,000.00). In order to maintain the option in effect, Xxxxx shall make
the following annual option payments to Owners:
Anniversary of Option Date Option Payment
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1 $ 3,000.00
2 $ 5,000.00
3 $ 8,000.00
4 $10,000.00
5 $12,000.00
2.2 Exercise of Option. Xxxxx shall elect (a) to terminate this
Agreement and relinquish the Mineral Property and Surface to Owners in
accordance with Section 6.1 below, or (b) to exercise its option and purchase
the Mineral Property for the price set forth in Section 2.1 and Lease so much of
the Surface as is needed and/or required. During the term of the five year
Option, if Xxxxx elects to purchase the Mineral Property, the parties shall open
an escrow account and proceed to complete the sales transaction within sixty
(60) days following Xxxxx'x election. Owners shall deposit a Warranty Deed into
the escrow account conveying the Mineral Property to Xxxxx, and Xxxxx shall
deposit the purchase price in to escrow. Upon deposit of both the deed and
purchase payment, the
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deed shall be released and recorded, and the initial payment shall be delivered
to owners. Xxxxx shall bear all of the costs of escrow and recording.
The parties acknowledge that Xxxxx shall have the right to terminate the
option at any time in accordance with Section 6 below.
2.3 Production Royalty. If the Premises are placed into commercial
production, Xxxxx agrees to pay to Owners a production royalty of one percent
(1%) of the Net Returns, as defined herein, from the proceeds received from
commercial production from the Mineral Property. Payments of such production
royalty from the proceeds received from commercial production shall be
determined at the end of each calendar quarter after the effective date.
Payments of the production royalty shall be made within thirty (30) days after
the end of each calendar quarter.
2.3.1 "Net Returns" shall mean for any period the amount of
earned revenues actually paid to and received by Xxxxx by
any refinery or other purchaser of metals, ores, minerals
or mineral substances, or concentrates produced therefrom
for products mined from the Property, less all of the
following.
2.3.2 Treatment charges and penalties, including, but without
being limited to, penalties for impurities and charges
for refining, selling, and transportation to refinery and
from refinery to market;
2.3.3 Production taxes, net proceeds of mine taxes, severance
taxes and sales, privileges and other taxes levied on
product or on the production thereof.
Net Returns for product treated at a refinery owned,
operated or controlled by Xxxxx, shall be computed in the
above manner, with deductions for all charges and items
of cost equivalent to the deductions described above.
2.4 Quitclaim of Mineral Rights. Upon completion of mining operations,
the Mineral Property ownership will be quit claimed to Owner, at the sole
discretion of Xxxxx.
SECTION THREE
Conduct of Operations
3.1 Right to Explore. Following the execution of this Agreement, Xxxxx
shall have the right to make geological investigations and surveys, to drill on
the Surface by any means, and to have all the rights and privileges incident to
Owner's ownership of the Mineral Property. However, Xxxxx shall not commence
development or mining operations on the Mineral Property unless it has executed
the option to purchase the Mineral Property in accordance with Section 2 above.
3.2 Conduct of Work. Xxxxx shall perform its activities on the Mineral
Property in accordance with good mining practices, shall comply with the
applicable laws and regulations relating to the performance of exploration
operations on the Mineral Property, and shall comply with the applicable
worker's compensation laws of the State of Montana.
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3.3 Liability. During the term of the Agreement, Xxxxx shall indemnify
and hold Owners harmless from any claims, demands, liabilities or liens arising
out of Xxxxx'x activities on the Mineral Property.
3.4 Liens. Xxxxx shall keep the Mineral Property free and clear from any
and all mechanics' or laborers' liens arising from labor performed on or
material furnished to the Mineral Property at Xxxxx'x request.
3.5 Installation of Equipment. Xxxxx may install, maintain, replace, and
remove during the term of this Agreement any and all machinery, equipment,
tools, and facilities which it may desire to use in connection with its
exploration activities on the Mineral Property. Upon termination of this
Agreement for any reason, Xxxxx shall have a period of ninety (90) days
following such termination during which it may remove all or part of the above
items at its sole cost and expense. Any equipment remaining on the Mineral
Property after ninety (90) days shall become property of Owners.
3.6 Acquisition of Permits. Xxxxx shall acquire all federal, state and
county permits required for its operations. In the event that Xxxxx is required
to post a reclamation bond, the bond will revert to Xxxxx upon satisfactory
completion of the reclamation program.
SECTION FOUR
Inspection by Owner
During the term of this Agreement, Owners, or their authorized agents or
representatives, shall be permitted to enter upon the Mineral Property for the
purpose of inspection. Owners shall enter upon the Mineral Property at their own
risk and so not to hinder unreasonably the operations of Xxxxx. Owners shall
indemnify and hold Xxxxx harmless from any damage, claim, or demand by reason of
injury to Owners or their agents or representatives on the Mineral Property or
the approaches thereto.
SECTION FIVE
Taxes
Xxxxx shall pay all taxes levied or assessed upon any improvements
placed on the Mineral Property by Xxxxx. Upon termination of this Agreement for
any reason, taxes shall be paid by Xxxxx for the remaining portion of the
calender year. However, Owners shall not be liable for taxes on any tools,
equipment, machinery, facilities, or improvements placed upon the Surface unless
Xxxxx fails to remove them within the time provided by this Agreement.
SECTION SIX
Termination and Default
6.1 Termination. Xxxxx shall have the right to terminate this Agreement
at its sole discretion at any time upon written notice to Owners. Upon
termination, Owners shall retain all payments previously made as liquidated
damages and this Agreement shall cease and terminate. Xxxxx will also deliver a
Quitclaim Deed to Owners.
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6.2 Default. If Xxxxx fails to perform its obligations under this
Agreement and in particular fails to make any payment due to Owners hereunder,
Owners may declare Xxxxx in default by giving Xxxxx written notice of default
which specifies the obligation(s) which Xxxxx has failed to perform. If Xxxxx
fails to remedy or satisfactorily respond to a notice of default within thirty
(30) days, Owners may terminate this Agreement and Xxxxx shall peaceably
surrender possession of the Mineral Property to Owners. Notice of termination
shall be in writing and served in accordance with this Agreement.
6.3 Obligations Following Termination. In the event of voluntary or
involuntary termination, Xxxxx shall surrender possession of the Mineral
Property to the Owners and shall have no further liability or obligation under
this Agreement except for its obligation (1) to pay its apportioned share of
taxes, as provided for in Section Five, (2) to pay the cost of removal of all
equipment, (3) to fulfill its reclamation responsibility, and (4) to satisfy any
accrued obligations or liabilities, and (5) to satisfy any other obligation
imposed by this agreement or by law. Upon termination of this Agreement, except
termination upon Xxxxx'x exercise of the Option, Xxxxx will provide a copy of
all drilling logs, assays, maps and other factual data which Xxxxx has prepared
in connection with its exploration and development of the Mineral Property under
this Agreement.
SECTION SEVEN
Notices and Payments
7.1 Notices. All notices to Xxxxx or Owners shall be in writing and
shall be sent certified or registered mail, return receipt requested, to the
addresses below. Notice of any change in address shall be given in the same
manner.
TO Owners: A. Xxxxxxx Xxxxxx or Xxxxx Xxx Xxxxxx
X.X. Xxx 00
Xxxxxxxxxx, XX 00000
TO Xxxxx: Xxxxx X. Xxxxxxxxx, President
Xxxxx Minerals, Inc.
X.X. Xxx 0000
Xxxxxxxx, XX 00000
7.2 Payments. All payments shall be in U.S. currency payable to Owners
at the address above.
SECTION EIGHT
Assignment
Xxxxx may assign this Agreement at any time, in whole or in part, upon
the prior notification to Owners. Owners, prior to conveying their royalty
interest under this Agreement to any other party, shall first offer Xxxxx a
60-day opportunity to acquire Owners' interests on the same terms and conditions
offered by a third party.
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SECTION NINE
Warranty of Title
9.1 Warranty. Owners represent that they are the owners of the Mineral
Property and Surface as described; that Owners have created no Liens or
encumbrances affecting the Mineral Property, and that Owners have and will
continue to have the right to commit the Mineral Property and Surface to this
Agreement.
9.2 Examination of Title Documents. Promptly after execution of the
Option to Purchase section of this Agreement, Owners shall deliver to Xxxxx
available copies of all documents bearing upon Owners' title, interest, and
ownership in the Mineral Property. Xxxxx may then undertake such further
investigation of the title and status as Xxxxx shall xxxx necessary. If that
investigation should reveal defects in the title, Xxxxx agrees to proceed
forthwith to cure the title defects to their own satisfaction.
SECTION TEN
Miscellaneous Provisions
10.1 Binding Effect. This Agreement shall inure to the benefit of and
be binding upon the parties hereto, their respective heirs, executors,
administrators, successors, and assigns.
10.2 Applicable Law. The terms and provisions of this Agreement shall be
interpreted in accordance with the laws of the State of Montana.
10.3 Entire Agreement. This Agreement terminates and replaces all prior
agreements, either written, oral or implied, between the parties hereto, and
constitutes the entire agreement between the parties.
10.4 Recording Memorandum of Agreement. The parties hereto agree to
execute a Memorandum of this Agreement (short form) for the purpose of recording
same in the records of Fergus County, Montana so as to give public notice,
pursuant to the laws of the State of Montana, of the existence of this
Agreement.
10.5 Void or Invalid Provisions. If any term, provision, covenant or
condition of this agreement, or any application thereof, should be held by a
court of competent jurisdiction to be invalid, void or unenforceable, all
provisions, covenants and conditions of this Agreement, and all applications
there of not held invalid, void or unenforceable, shall continue in full force
and effect and shall in no way be affected, impaired, or invalidated thereby.
10.6 Time of the Essence. Time is of the essence of this Agreement and
each and every part thereof.
10.7 Confidentiality. All reports and data provided by Xxxxx to Owners
shall be held in strictest confidence, and Owners shall not disclose such
information without Xxxxx'x prior written consent.
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10.8 Water Well Development. In the event that Xxxxx should encounter
productive groundwater during the course of the exploration drilling, the Owners
will be notified and Xxxxx agrees to install, to the best of their ability,
water well casing to be provided by Owners, into exploration drillhole, upon the
request of the Owners. Water well casing will be installed using drill rig
before removing from drill site.
SECTION ELEVEN
Surface Owner
The Surface Owner now wishes to enter into this agreement giving Xxxxx
the exclusive right to Lease so much of the surface as is needed and/or required
to explore for, mine, produce and remove the Mineral Property, as defined above
in "A" and referenced to Exhibit "A". In consideration for the right to use so
much of the surface as is needed and/or required, Xxxxx will pay Surface Owners
$150.00 per acre per year for grazing land taken out of production until the
time Xxxxx reclaims the land to its original productivity, or final surface
damage payment is paid. Xxxxx also agrees to pay Surface Owners a final payment
of $1,000.00 per acre for crop land and $500.00 per acre for grazing land as
compensation for any land taken out of permanent grazing or farming production.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day
and year first above written.
Owners:
/s/ A. Xxxxxxx Xxxxxx /s/ Xxxxx Xxx Xxxxxx
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X. Xxxxxxx Xxxxxx Xxxxx Xxx Xxxxxx
Xxxxx Minerals, Inc.
By: /s/ Xxxxx Xxxxxxxxx
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Xxxxx X. Xxxxxxxxx, President
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STATE OF MONTANA )
)ss:
COUNTY OF FERGUS )
On this 7th day of December, in the year 1999, before me, a Notary
Public in and for said state, personally appeared Xxxxx X. Xxxxxxxxx, who is
President of Xxxxx Minerals, Inc., personally known (or proved) to me to be the
person who executed the above instrument, and acknowledged to me that he
executed the same for purposes stated therein.
/s/ Xxxxxx X. Xxxxxx
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Notary Public
My Commission Expires 6-5-2002
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STATE OF MONTANA )
)ss:
COUNTY OF FERGUS )
On this 7th day of December, in the year 1999, before me, a Notary
Public in and for said state, personally appeared A. Xxxxxxx Xxxxxx, personally
known (or proved) to me to be the person who executed the above instrument, and
acknowledged to me that he executed the same for purposes stated therein.
/s/ Xxxxxx X. Xxxxxx
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Notary Public
My Commission Expires 6-5-2002
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STATE OF MONTANA )
)ss:
COUNTY OF FERGUS )
On this 7th day of December, in the year 1999, before me, a Notary
Public in and for said state, personally appeared Xxxxx Xxx Xxxxxx, personally
known (or proved) to me to be the person who executed the above instrument, and
acknowledged to me that he executed the same for purposes stated therein.
/s/ Xxxxxx X. Xxxxxx
-----------------------------------
Notary Public
My Commission Expires 6-5-2002
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