M I N I N G L E A S E
THIS MINING LEASE, (this Lease) is effective the 1st day of September,
1997, (the Effective Date) between HORN SILVER MINES, INC., a Utah corporation,
(the Lessor) and WORLD HYDROCARBONS, INC., a Texas corporation, and MINERALS
PROCESSING, INC., a Utah corporation (collectively the Lessees).
WITNESSETH
WHEREAS, the Lessor is the owner of the patented and unpatented mining
claims (the Mining Claims) described on Exhibit A attached hereto, and thereby
made a part hereof.
WHEREAS, the Lessees are interested in entering into a mining lease
covering the Mining Claims for the purpose of exploring for and mining of the
Wollastonite reserves found on the Mining Claims to which the Lessor is
agreeable under certain terms and conditions.
NOW, THEREFORE, for and in consideration of the mutual covenants
hereinafter set forth, and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Grant of Lease. The Lessor hereby demises, leases, and lets the Mining
Claims to the Lessees, subject, however, to all of the terms, provisions, and
conditions hereinafter set forth.
2. Term of this Lease. Unless sooner terminated as provided in this Lease,
the term of this Lease shall be for the following periods:
(a) An initial term of five (5) years from the Effective Date (the Initial
Term); and
(b) Four (4) additional terms of five (5) years each after the Initial Term
if prior to the expiration of the pertinent previous term the Lessees shall
elect to extend this Lease by giving notice to the Lessor to that effect in the
manner provided for in Paragraph 17 below.
3. Wollastonite Restriction. This Lease is being granted by the Lessor to
the Lessees so as to enable the Lessees to explore for and mine the Wollastonite
reserves found on the Mining Claims. Accordingly, the following obtains under
this Lease regarding the Mining Claims, viz:
(a) The geologic horizons covered by this Lease are only those which
contain wollastonite and extend from the surface to the base of the deposits
that contain Wollastonite and no further.
(b) All geologic horizons other than those described in Subparagraph 3(a)
above are reserved to the Lessor.
4. Minimum Royalty. Subject to the right of the Lessees to terminate this
Lease as provided below the Lessees shall pay to the Lessor during the term of
this Lease the following minimum royalty, viz:
(a) Upon the execution of this Lease, the sum of One Thousand Five Hundred
Dollars ($1,500.00); and
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(b) On the 20th day of each calendar month subsequent to the calendar month
during which this Lease is so executed, the sum of One Thousand Five Hundred
Dollars ($1,500.00). All amounts paid to the Lessor by the Lessees under this
Paragraph 4 may be accumulated and deducted from amounts due to the Lessor from
production royalty payable under Paragraph 5 below.
5. Production Royalty. The Lessees shall pay to the Lessor a production
royalty as follows:
(a) Regarding Wollastonite: Six Percent (6%) of the net
returns.
(b) Regarding all other minerals included in the Wollastonite and for which
payment is received: Six Percent (6%) of the net returns. For purposes of this
Paragraph 5, "net returns" mean the gross amount that the Lessees receive for
any product derived from the Wollastonite produced from the Mining claims.
6. Exploratory Drilling. (a) before commencing any mining program for
Wollastonite on the Mining Claims, the Lessees shall carry out sufficient
exploratory drilling to he able to formulate a mining plan for the Wollastonite
to be found on the Mining Claims. The Lessees shall prepare a preliminary draft
of this mining plan and shall submit it to the Lessor at least sixty (60) days
prior to the date when the Lessees propose to commence mining for Wollastonite
on the mining Claims. The Lessor shall have thirty (30) days after receipt of
this preliminary draft to make comments and suggestions to the Lessees about the
proposed plan. These comments and suggestions shall be given serious
consideration by the Lessees in the formulation of the final draft of this
mining plan, which also shall be submitted to the Lessor. (b) Respecting the
exploratory drilling required under Subparagraph 6(a) above, the Lessees shall:
(1) Take samples in such manner as to provide the Lessor with
duplicates of each sample so taken, as properly divided, bagged, and labelled;
(2) Provide the Lessor with true copies of all assays, geological
data, reports, and all other information obtained respecting the Mining Claims;
all of which shall be at the sole expense of the Lessees.
7. Lessees' Mining Restrictions. (a) Any mining operation being carried on
by the Lessees on the Mining Claims shall be such as to qualify as a "Small
Mining Operation" under Rules 000-0-000 and 000-0-000 et seq. of the Rules
adopted by the Utah Board of Oil, Gas, and Mining. (b) The Lessees shall have
the right to follow the reserves of Wollastonite beyond the boundaries of the
Mining Claims to other mining claims owned by the Lessor under the following
terms and conditions, viz:
(1) The Lessees shall notify the Lessor to that effect in the manner
provided for in Paragraph 17 below, specifying therein the area into which the
Lessees propose for such expansion.
(2) The Lessor shall have thirty (30) days after receipt of such plan
of expansion to approve it, which approval shall not be unreasonably withheld.
Upon such approval, the area covered by such plan of expansion shall become
subject to all of the terms, provisions, and conditions of this Lease.
8. Contractor Requirements. All drilling and mining operations conducted by
the Lessees on the Mining Claims shall be done by contractors having proven
qualifications and good reputations, notifications as to the identities of which
shall be provided to the Lessor prior to the Lessees entering into contracts
with such contractors in the manner provided for in Paragraph 17 below.
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9. Lessor's Activities on the Mining Claims. If the Lessor shall desire at
any time while this Lease remains in effect to carry on any exploration or
mining of the Mining Claims for reserves other than Wollastonite, the Lessor
shall have the right to do this subject to the following restrictions:
(a) The Lessor shall notify the Lessees in the manner provided for in
Paragraph 17 below of the Lessor's intent to carry out such exploration or
mining at least sixty (60) days prior to the time when the Lessor contemplates
the beginning of such exploration or mining.
(b) Any such exploration or mining by the Lessor shall be done in such
manner as not to interfere unreasonably with any drilling or mining of the
Wollastonite reserves found on the Mining claims then being conducted by the
Lessees.
(c) if during any mining operations of the Lessor on the Mining claims, the
Lessor shall encounter wollastonite reserves of such quantity and quality as the
Lessees determine to be of commercial grade and the Lessees then shall notify
the Lessor to this effect in the manner provided for in Paragraph 17 below, then
from that time on the Lessor shall at the expense of the Lessor stockpile any
such Wollastonite reserves for further processing by the Lessees under this
Lease.
10. Lessor's Title to the Mining Claims. The Lessor covenants and
represents that to the best of the Lessor's information and belief:
(a) The Lessor is the owner of the Mining Claims.
(b) The Lessor has not sold, assigned, conveyed, or otherwise encumbered
any rights that the Lessor has respecting the Mining claims, except as otherwise
provided in this Lease.
(c) The Mining Claims are free and clear of all lions, claims. demands, or
encumbrances, except as otherwise provided in this Lease.
11. Mining Rights of that Lessees. Except as otherwise provided in this
Lease, the Lessees shall have the following exclusive rights regarding the
geologic horizons in the Mining Claims from the surface to the bass of the
Wollastonite deposit, viz:
(a) To enter upon, explore, examine, and investigate the Mining Claims and
to survey, map, test,and sample the Mining Claims and to carry on such
geological and geophysical with respect thereto as the Lessees, in their sole
judgment and discretion, may desire;
(b) To delineate ores and ore occurrences and to drill and secure cores and
samples from the Mining Claims at such places and quantities as the Lessees, in
their sole judgment and discretion may desire;
(c) To prospect and search for minerals in or on the Mining Claims by means
of drilling, trenching, drifting, cross cutting, raising, and sinking of shafts
or winzes or by any other development or exploration methods, whether surface or
underground, as the Lessees, in their sole judgment and discretion may desire;
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(d) To mine, extract, mill, process, concentrate, beneficiate, or otherwise
treat any ores or minerals from the Mining Claims in unlimited quantities and to
ship, market, sell, or otherwise dispose of the same to such established buyers
as the Lessees, in their sole judgment and discretion, may desire, provided,
however, that if the Lessees are not dealing on an arms-length basis with any
such buyer, then the amounts received from that buyer shall be required to be
equal to the normal amounts that would be received between armslength parties
for the same products;
(e) To construct, install, operated and maintain upon the Mining claims
such crushing facilities, roads, power and telephone lines, ditches, camps,
hoists, buildings, and other structures and facilities as the Lessees, in their
sole judgment and discretion, may desire;
(f) To take any and all other action upon or in connection with the mining
Claims, whether similar to the actions described above in this Paragraph 11 or
not, as the Lessees, in their sole judgment and discretion, may desire.
12. Protection for the Lessor. During the term of this Lease, the following
rights and restrictions shall be observed, viz:
(a) The Lessees shall conduct all drilling and mining operations on the
Mining Claims in accordance with good industry practices and all applicable
laws, rules, and regulations and shall indemnify and hold the Lessor harmless
from any claims, loss, liability, or expense arising out of injuries or death of
persons (including employees of the Lessees) or damage to property of third
persons (including property of the Lessees) by reason of operations of the
Lessees, their employees and servants, on the Mining Claims.
(b) The Lessor, or its authorized representatives, shall have the right at
all reasonable times during daylight hours to enter upon the mining Claims and
any mine workings thereon for the purpose of inspecting the same, provided that
any such entry will be at the sole risk of the Lessor.
(c) The Lessees shall carry such insurance, covering all persons working in
or on the Mining Claims for the Lessees as will comply with the laws of the
State of Utah and the United States pertaining to Xxxxxxx'x Compensation,
occupational diseases, social security, unemployment compensation, wages, hours
and conditions of labor, or otherwise.
(d) The Lessees shall before any work is done or performed on the Mining
Claims post notices of non-responsibility of the Lessor so as to keep the Lessor
free and harmless from any claims whatsoever by any xxxxxxx or materialman or
others for any wages or charges of any kind brought about by reason of the
Lessees' use and occupancy of the Mining Claims, the original copy of which
notice shall be recorded as is contemplated by law and which other copies the
Lessees shall keep continuously posted as required by law upon the Mining
Claims.
(e) The Lessees shall indemnify and hold the Lessor harmless from all
claims of damage to persons or property and from any claims against the Lessor
or the Mining Claims arising from the Lessees' operations under this Lease,
provided, however, such that any such obligation shall not apply to any
liability asserted on account of any act or omission of the Lessor and provided
further that any exercise of the right of access to the Mining Claims by the
Lessor, or its representatives, shall be at the Lessor's risk.
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(f) The Lessees shall provide the Lessor with quarterly summary reports of
activities and results obtained during each year that this Lease is in effect,
such reports to contain reasonably-detailed data, including maps, drill results,
sampling results, geological studies, geophysical results, production and sales
statistics, and other exploration and development information, as such data is
acquired by the Lessees. If the Lessees shall deem any such data to be of
confidential nature, the Lessees shall advise the Lessor to this effect when
such data is delivered to the Lessor. From that point an the Lessor shall not
disclose any of this confidential data to parties other than the Lessees without
the prior written consent of the Lessees until this data shall become publicly
known, if ever.
13. Payment of Taxes and Maintenance Fee. Subject to the Lessor's timely
providing the Lessees with copies of the pertinent tax notices, the Lessees
shall not permit any tax liens or other encumbrances to attach against the
Mining Claims through any neglect or fault of the Lessees, and the Lessees shall
further pay any and all taxes assessed against the Mining Claims for 1997 and so
long afterwards as this Lease remains in affect, provided, however, that any
taxes based upon net proceeds from the Mining Claims shall be paid
proportionately by the Lessor and the Lessees in accordance with their
respective proportions of such net proceeds during any tax period. The Lessees
shall also pay in a timely manner all maintenance fees and related costs
required to be paid to the United States Department of the Interior or any other
governmental office to keep any of the Mining Claims that are unpatented in
force and effect, providing the Lessor with evidence of each such payment.
14. Default by the Lessees. If the Lessees shall fail to make any payment
to the Lessor under this Lease within fifteen (15) days after such Payment was
due or shall default in the performance Of any other obligation under this Lease
and shall fail to remedy or initiate good faith steps to remedy any such default
of any other obligation within thirty (30) days following notice of such default
from the Lessor to the Lessees in the manner provided for in Paragraph 17 below,
then in either of these circumstances the Lessor may at its option terminate
this Lease and enter into possession of the Mining Claims.
15. Termination by the Lessees. At any time after the execution of this
Lease the Lessees shall have the right to terminate this Lease by giving the
Lessor Sixty (60) day's notice to this effect in the manner provided for in
Paragraph 17 below.
16. Effect of Termination. Upon the effective date of any termination of
this Lease under either Paragraph 14 or 15 above:
(a) This Lease shall be deemed terminated, and the parties hereto shall
have no further obligations to each other under this Lease except as otherwise
provided in this Paragraph 16.
(b) The Lessees shall execute and deliver to the Lessor a good and
sufficient release of this Lease in recordable form and satisfactory to the
Lessor and its attorneys.
(c) Surviving any such termination of this Lease are the following:
(1) Any rights and obligations of any of the parties hereto that accrued
prior to the effective date of such termination.
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(2) The right of the Lessees within one hundred twenty (120) days after the
effective date of such termination to remove from the Mining Claims all their
machinery, buildings, structures, facilities, equipment, and other property of
every nature and description erected, placed or situated thereon, except
foundations of a permanent nature, supports, track, and pipe placed in shafts,
drifts, or openings on the Mining Claims, but any such property not so removed
by the end of this one hundred twenty (120) day period shall become the property
of the Lessor.
(3) The obligation of the Lessees to complete after the effective date of
such termination at the sole expense of the Lessees all reclamation requirements
respecting the Mining claims imposed by the United States or the State of Utah,
or any of their agencies, or any other governmental entity having jurisdiction
over the Mining claims within the time frames established by these entities.
This obligation on the part of the Lessees shall not extend to shaft openings,
dumps, excavations, or other surface disturbances in existence on the Mining
Claims prior to the Effective Date, which shall remain the obligation of the
Lessor.
17. Notices. Any Notice required or permitted under this Lease shall be
deemed to have been properly given when made in writing and effective when:
(a) Delivered personally or by reputable commercial
courier service to the party to whom directed;
(b) Deposited in the United States Mail, either registered or certified,
with return receipt requested; or
(c) Sent by telegraph, telecopy, facsimile, or other electronic means with
all necessary charges prepaid; and addressed or delivered to the parties hereto
as follows:
If to the Lessor;
Horn Silver Mines, Inc.
Attn: Xxxx X. Xxxxxxxxx, President
4444 South 000 Xxxx Xxxxxx, Xxxxx 000
Xxxx Xxxx Xxxx, Xxxx 00000-0000
If to the Lessees:
World Hydrocarbons, Inc.
Attn: X. X. Xxxxxx, Xx., President
00000 Xxxxx Xxxxxxx Xxxxxxxxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
Minerals Processing, Inc.
Attn: X. X. Xxxx, President
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000
and
R. E. Xxxxxx
0000 Xxxxxxxxxx Xxxx
Xxxx Xxxx Xxxx, Xxxx 00000.
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Any of the parties hereto may by notice to the other, as provided in this
Paragraph 17, change the pertinent foregoing address for future notices.
18. Enforcement. This Lease shall be construed, interpreted, and governed
by the laws of the state of Utah. If any action is brought to enforce any of the
provisions of this Lease, the action shall be brought in a court of competent
jurisdiction in the State of Utah, and the prevailing party shall be entitled to
recover as a part of such action all costs of such enforcement, including court
costs and reasonable attorneys' fees.
19. Memorandum. This Lease shall not be recorded, and the parties hereto
shall execute and acknowledge a memorandum of this Lease suitable for recording
in the appropriate county office or other governmental offices.
20. Binding Effect. The terms, provisions, and conditions of this Lease
shall inure to the benefit of and be binding upon the parties hereto, their
legal representatives, successors, and assigns, subject, however, to the
following limitation: the Lessees may not sell, assign, encumber, or otherwise
dispose of any of their rights and interests under this Lease without the prior
written consent of the Lessor, but such consent will not be unreasonably
withheld if the Lessees are then in full compliance with the provisions of this
Lease.
IN WITNESS WHEREOF, this Lease has been executed effective as of the date
first above written.
THE LESSOR:
HORN SILVER MINES, INC.
/s/ Xxxx X. Xxxxxxxxx
------------------------------
President
THE LESSEES:
WORLD HYDROCARBONS, INC.
/s/ X.X. Xxxxxx, Xx.
------------------------------
President
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ACKNOWLEDGMENTS
STATE OF UTAH )
)ss.
COUNTY OF SALT LAKE )
The foregoing instrument was acknowledged before me this 6th day of August
1997, by Xxxx X. Xxxxxxxxx, as President of Horn Silver Mines, Inc.
/s/ Xxxx X. Xxxx
------------------------------
Notary Public
Residing at:
My commission expires:
4-10-2201
----------------------
STATE OF TEXAS )
)ss.
COUNTY OF DALLAS )
The foregoing instrument was acknowledged before me this
8th day of August, 1997, by X.X. Xxxxxx, Xx., as President of
World Hydrocarbons, Inc.
/s/ Xxxxx X. Xxxx
------------------------------
Notary Public
Residing at:
My commission expires:
03-03-01
---------------------------
STATE OF CALIFORNIA )
)ss.
COUNTY OF MARIN )
The foregoing instrument was acknowledged before me this
13th day of August, 1997, by W. N. Xxxx, as President of Minerals
Processing, Inc.
/s/ Xxxxx X. Xxxxxx
------------------------------
Notary Public
Residing at:
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E X H I B I T A
1. Patented Mining Claims:
Name of Claim U.S. Patent Survey No.
-------------- ----------------------
Antwerp 43 (Am)
Washington 5946
Washington Xx. 0 0000
Xxxxxxxxxx Xx. 0 0000
Xxxxxxxxxx No. 10 5946
2. Unpatented Mining Claims:
Name at Claim B.L.M. Serial Number
------------- --------------------
K-1 UMC363366.
