EXHIBIT 10.5
MINING LEASE AND OPTION T0 PURCHASE
Mining Lease and Option to Purchase ("Lease Agreement") made this 20th
day of July 2001 (the "Effective Date"), between Kaibab Industries, Inc., an
Arizona corporation ("Kaibab Industries" or "Lessor") of 0000 X. Xxxxxx Xxxx,
Xxxxxxx, Xxxxxxx 00000, as Lessor and Unico, Incorporated, an Arizona
corporation ("Unico" or "Lessee") of P .0. Xxx 000, Xxxxxxx, Xxxxxxxxxx
00000, as Lessee.
WHEREAS Kaibab Industries is the owner of certain mining claims more
fully described below (the "Claims") and desires to lease the Claims to Unico;
and
WHEREAS Kaibab Industries has taken all necessary board action and no
shareholder action is necessary to approve the lease of the Claims to Unico;
THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Property Leased and Purchase Option. In consideration of the
covenants and agreements hereinafter expressed to be kept and performed by
Unico, Kaibab Industries hereby leases to Unico all of the equipment and other
personal property described on Exhibit "A" and the following premises located
in Garfield County, State of Utah consisting of patented mining claims and
mill sites (if any):
The patented mining claims in the Xxxxx Mountain Mining
District in Garfield County, State of Utah, all of U.S.
Survey #3002, Mineral Entry #2103, consisting of the
following: El Padre, Cuprum, Stevenite, Coney, Bromide
Lodes, and the Triume Placer, containing 83.34 acres and
more particularly described in the Deed Record Book "B"
at Pages 215-220 of the records of the Office of the
County Recorder of Garfield County, Utah (collectively
he "Leased Premises").
As additional consideration for the commitments of Lessee found herein,
Lessor hereby grants to Lessee an option to purchase all of the Claims and
mill sites (if any) as described herein (including all dumps, if any), and all
equipment and other personal property described on Exhibit A, commencing with
the Effective Date of this Lease Agreement and continuing thereafter for a
period of three years. The option exercise price shall be One Million Dollars
($1,000,000) less any amounts paid by Unico to Kaibab Industries for the
separate purchase of any of the equipment or other personal property described
on Exhibit A. Any net smelter returns paid by Unico to Kaibab Industries
pursuant to section 3 shall not be counted as part of the purchase price.
Upon exercise of the purchase option and payment therefor in cash or certified
funds, Lessor shall convey good and marketable title to the above described
Leased Premises to Lessee, free and clear of any liens, encumbrances,
overriding royalties, carried interests or other interests, except such as may
have arisen on account of Lessee's operation and lease of the Leased Premises.
Upon exercise of this purchase option and payment of all amounts due hereunder
by Lessee, this Lease Agreement and all rights of either party thereto shall
be extinguished and Lessee shall become the fee title owner of the above
described Leased Premises and all of the equipment and other personal property
described on Exhibit A.
Lessee shall give Lessor at least 10 days advance written notice of its
intention to exercise the purchase option.
Lessor agrees to furnish Lessee with copies of (or at its option to make
available for copying by Lessee) all maps, drawings, reports and any available
mine history, showing the location of drill holes, drifts driven, stockpiles,
blocked out reserves, probable and or possible reserve estimates, assays,
assay reports, development and other data, as is reasonably available to
Lessor. Lessee agrees to return any and all such information to Lessor as
soon as copied or within 30 days. Lessor shall furnish Lessee copies of
drilling reports on the property at the time of signing of this Lease
Agreement, which shall be returned to Lessor as provided above. At any
termination of this Lease Agreement, Lessee agrees to furnish any similar data
or information as to its development of the Claims to Lessor on the same
basis. Lessee agrees to accept the property "as is" and to indemnify and hold
Lessor harmless for any damages incurred by Lessor arising out of damage to
property or the personal injury or death of the employees or agents of Lessee,
or any other person where such damage arises on account of or in connection
with the use, operation or development of the property by Lessee.
Lessor agrees, warrants and represents that its board of directors has
taken all action necessary to enter into this Lease Agreement and that
shareholder approval of this Lease Agreement is not necessary. Lessor further
agrees, warrants and represents that neither the execution of this document
nor the exercise of the purchase option by Lessee would result in the
disposition of all or substantially all of the assets of Lessor so as to
require shareholder approval under applicable state law. Further, Lessor
agrees, warrants and represents that in the event any shareholder of Lessor
threatens to contest or contests, by court action or otherwise, the grant or
validity of the Lease Agreement or the grant, validity or exercise of the
purchase option thereunder, in any manner, that Lessor will indemnify and hold
harmless Lessee from any and all damages, costs and attorneys fees it may
suffer as a result of such contest and Lessor agrees to use its best efforts
to obtain any shareholder approval or consent which may be determined to be
required.
Lessee may, in its discretion, record the Notice of Interest attached
hereto as Exhibit B.
2. Term; Assignment. Unico shall hold the Leased Premises for the purpose
of mining all kinds of minerals and ores for a period of three (3) years from
the date of this Lease Agreement (the "Effective Date"), unless the Lease
Agreement is sooner terminated under any provision contained herein. Each
party, with the prior written consent of the other, which consent shall not be
unreasonably withheld, shall have the power to assign or sublet this Lease
Agreement or any interest hereunder. Notwithstanding the Effective Date,
Unico shall have reasonable access to the Leased Premises prior to the
Effective Date to prepare work plans and complete preliminary preparations.
3. Duties of Lessee; Payments to Kaibab Industries. Unico agrees to
perform all work in a thorough and workmanlike manner, to keep underground
workings securely timbered, drained, and clear of loose rock and rubbish, to
properly dispose of loose rock outside the mine, to comply with all mining and
environmental laws, rules and regulations, to keep accurate accounts, to
render necessary statements to Kaibab Industries showing the amount and
character of production, and to pay to Kaibab Industries, or its designated
agent, as rental for the leased Claims, a five percent (5%) net smelter return
upon all ore taken from the Leased Premises during the term of this Lease
Agreement. Net smelter return payments shall be adjusted to provide for
payment of the actual cost of transportation from the mine to the receiving
plant or smelter, and less any assaying, weighing, treatment and special
sampling charges. Net smelter return payments by Unico shall be made to Kaibab
Industries at the above address, or its designated agent or bank by the 15th
of the month next succeeding the calendar month during which Unico shall have
received payment for such shipment. Unico shall conduct resource definition
and an induced polarization geophysical survey of the property. All data
gathered by Unico concerning the Property during the term of this Agreement
shall be shared with Kaibab Industries. Unico shall carry its own worker's
compensation and liability insurance.
4. Minimum Production Requirements. Unico agrees that commencing 30
days after the Effective Date of this Lease Agreement, Unico shall then begin
to produce not less than the lesser of the following: (a) the mining and
removal of a minimum of 1,000 tons of ore per month from the Leased Premises;
or (b) the refining of a minimum of 1,000 ounces of gold per month mined from
the Leased Premises. Because mining operations of the Leased Premises are
seasonal, the parties agree that these minimum production requirements shall
only apply from June 10 until November 20 (a total of 5 months and 10 days)
during each year during the term of this Lease Agreement, and the minimum
production requirements for all partial months shall be pro rated.
5. Right of Access. Kaibab Industries or its designated representative,
shall have the right, upon reasonable notice, to enter upon the Leased
Premises to inspect the same or take samples therefrom, and to enter upon the
mill site at Unico's Deer Trail Mine (to verify that there has been no
commingling of ores as described in Section 10), and Lessee will render to
Lessor reasonable assistance in its power in so doing. Kaibab Industries
shall also have the right, upon reasonable notice, to review and make copies
of the books and records of Unico which relate to this Lease Agreement.
6. Taxes and Assessments. Unico agrees to pay when due all taxes and
assessments levied against the Leased Premises on account of the production of
ore under this Lease Agreement. All assessment work shall be performed and
affidavits of labor recorded by Lessee in due time as may be required by law.
To the extent that Lessee's operating expenditures on the Leased Premises
exceed the minimum required to qualify for assessment work on any unpatented
claims (if any) included in the Leased Premises, the excess may be reported by
Lessor to qualify as assessment work on its contiguous unpatented claims (if
any) as permitted by law.
7. Default by Lessee. Unico agrees that in case of its failure in any
substantial respect to keep and fulfill any one or more of the covenants or
agreements herein or its failure to pay any net smelter returns due Kaibab
Industries, it shall then be lawful for Lessor to declare this Lease Agreement
ended. Upon any default by Lessee, Lessor shall give Lessee written notice of
such default and Lessee shall have thirty days (30 days) thereafter to correct
such default. In the event of an uncorrected default, (and also upon
termination of this Lease Agreement) Lessee agrees to surrender and deliver
the Lessor quiet and peaceable possession of the Leased Premises. Upon
termination of this Lease Agreement, for any reason other than the exercise of
the purchase option by Lessee, Lessee shall have a period of 30 days in which
to remove any and all of its own mining equipment being used in operating the
Leased Premises or transporting ore from such operations.
In the event that a default occurs due to Lessee's failure to pay to
Lessor any net smelter returns due to the Lessor, then Lessee shall continue
to be liable to pay all delinquent net smelter returns to Lessor, regardless
of whether Lessor terminates this Lease.
In the event that a default occurs due to Lessee's failure to meet the
minimum production requirements specified in Section 4 of this Lease
Agreement, then Lessor's exclusive remedy shall be to terminate this Lease
Agreement, and Lessor may then require Lessee to purchase all or any portion
of the equipment and personal property described on Exhibit A for the agreed
upon value specified on Exhibit A. In no event shall Lessee be required to
pay to Lessor the value of any net smelter returns that Lessor would have
received if the minimum production requirements had been met, or any other
damages due to Lessee's failure to meet minimum production requirements.
8. Successors and Assigns. All covenants and agreements contained herein
shall extend to and be binding upon the heirs, legal representatives,
successors, and assigns of the parties.
9. Termination. Lessee may, at any time, surrender and terminate this
Lease Agreement upon giving to Lessor sixty (60) days notice in writing and
paying all net smelter returns owing through the effective date of
termination. The parties may also terminate this Lease Agreement by mutual
agreement. This Lease Agreement shall terminate three (3) years from the
Effective Date or upon execution of the purchase option and payment of the
purchase price by Lessee. Lessor may terminate this Lease Agreement as
described in paragraph 7 above or otherwise as permitted by law. If this
Lease Agreement is terminated for any reason other than Lessee's exercise of
the option granted herein, Lessee shall record a release of the Notice of
Interest in a form satisfactory to Lessor.
In the event Lessee acquires any interest in any other claims located
within one mile of the Leased Premises ("Nearby Claims") during the term of
this Lease Agreement, and in the event Lessee does not exercise the purchase
option described in Section 1, then upon the termination of this Lease
Agreement, Lessee's interest in all such Nearby Claims shall be transferred to
Lessor without Lessor being required to make any payments to Lessee therefor.
10. No Commingling of Ores. Unico agrees to keep all of the ore removed
from the Leased Premises separate from ore removed from the Deer Trail Mine
and all other mines that may be operated by Unico in the future. Unico will
take steps to assure that there is no commingling of ores, so that Unico's
performance under this Lease Agreement can be accurately measured and any
amounts to become due and owing to Kaibab Industries under this Lease
Agreement in the future can be accurately computed.
11. Compliance with Laws. All operations of Lessee shall be conducted so
as to comply with the laws of the State of Utah and with all statutes, rules,
regulations, orders, and requirements of federal authorities and Lessee agrees
to indemnify and hold harmless Lessor for any obligations, liens or similar
liabilities arising as a result of the operations of Lessee and constituting a
lien or obligation against the Leased Premises. The parties understand and
agree that the mine is an underground mine and that no significant reclamation
of the mine site is anticipated following normal mining procedures on the
Claims. Lessor is not aware of any notice of non-compliance from any
governmental agency regarding the property. Each party to this Lease Agreement
shall be responsible for any environmental, pollution or aesthetic
requirements or liability legitimately made or assessed by a governmental
entity attributable to each party's respective period of occupancy and
operation of the Claims. To the extent permitted by law, Lessee shall be
entitled to any depletion allowance on the property as a result of its mining
activities. If Lessee exercises its option to purchase, Lessee shall be
responsible for any environmental, pollution or aesthetic requirements related
to the property, which arise on or after the Effective Date of the Lease
Agreement, and Lessee shall defend and hold Lessor harmless from and against
any claim, liability or expense, including assessment or remediation costs,
arising out of any such environmental, pollution or aesthetic requirements.
12. Entire Agreement; Governing Law. This Lease Agreement contains the
entire agreement between the parties hereto and any amendments thereto shall
be in writing. This Lease Agreement shall be governed and construed under the
laws of the State of Utah.
EXECUTED as of the date first above written.
LESSEE: LESSOR:
UNICO, INCORPORATED KAIBAB INDUSTRIES, INC.
/s/ Xxx X. Xxxxx /s/ X. Xxxxx Whiting_____
Xxx X. Xxxxx, President R. Xxxxx Xxxxxxx, President
State of Nevada )
: ss.
County of Xxxxx )
Personally appeared before me, Xxx X. Xxxxx, this 28th day of July, 2001,
who declared to me that he is the President of Unico, Incorporated and
acknowledged to me that he executed the foregoing agreement on behalf of said
corporation by authority of a resolution of its board of directors or bylaws.
/s/ M. Xxxx Xxxxxxx
NOTARY PUBLIC
Commission Expires: 9-22-01
Residing At: _Las Vegas, Nevada
State of Arizona )
: ss.
County of Maricopa )
Personally appeared before me, R. Xxxxx Xxxxxxx, this 20th day of July,
2001, who declared to me that he is the President of Kaibab Industries, Inc.
and acknowledged to me that he executed the foregoing agreement on behalf of
said corporation by authority of a resolution of its board of directors or
bylaws.
/s/ Xxxxxx X. Xxxxx
NOTARY PUBLIC
Commission Expires: 11-18-04
Residing At: _Chandler, Arizona
EXHIBIT A
DESCRIPTION OF EQUIPMENT AND OTHER PERSONAL PROPERTY COVERED BY
THE LEASE AGREEMENT AND ITS AGREED UPON VALUE.
Description of Equipment or Personal Property with the Agreed Upon Value
----------------------------------------------------------------------------
|Dux Ore Hauler D100-208 |$ 6,000 | Xxxx Deere Loader 79932 |$ 8,000|
|Case Backhoe 580C8427 | 11,000 | Hercules Generator 2004A 15KW| 2,500|
|Isuzu Engine 301612 | 1,000 | Lincoln Welder A859446 400DC | 1,500|
|Quincy Compressor 325-4-239-| 400 | Xxxxxxx Xx Concentrator Table| 7,000|
| L | | 7405 17945 | |
|Super Collider 90930dynamill| 2,000 | Lab items,crucibles,molds,etc| 500|
|Xxxxxxx Xx Concentrator | 2,000 | Klondike Trommel 125 | 800|
| Table 18548 | | Centrifugal Pump 981209 1998 | 25,000|
|Veculla Electric 3638 Mod.30| 1,000 | Misc. Items (see list below) | 5,000|
|Sioux Water Heater | 900 | Grand Rapid Power Source | 2,000|
| Model #D1000 1000000 BTU | | Xxxx Dryer Oven Mod. 959-402L| 200|
|Dryer Steam 1998 | 1,000 | Pumps (see list below) | 15,225|
|Tanks (see list below | 24,405 | Xxxxxxx Denver 83 Drill | 300|
|Long Year Drill | 8,000 | 6 electric motors | 500|
|Safety Equipment* | 1,000 | Furnace hood | 200|
|Vent Fans | 200 | Electrical panel | 200|
|Vacuum Pumps | 200 | Water pumps | 200|
|Tilt Furnace 430 crucible | 2,000 | HyGy Collider | 25,000|
|Brawn Mixers | 5,325 | | |
|Winkie Drill w/rods | 6,000 | | |
------------------------------------------------------------------------------
Total $164,755.00
Misc items: 14" conveyor w/belt, sm. ball mill, sm. jig, xxxx tank, chemicals,
lumber, tele. poles, tables, water meters, etc., flooring, electrical cords,
misc. wire on pallet, castings and propane stove.
Tanks: 1-350 gal. cone/stand, 2-1100 gal. cone w/stand, 2-1600 gal. cone
w/stand, 1-375 gal vertical , 1-550 gal. vertical, 2-1050 gal. vertical, 1-
1600 gal. vertical, 3-6500 gal. vertical all new.
Pumps: 5-w/40 IHF, 5 w/50 IHF 14.4 cubic meters per minute, 5-w/65 IHF 28.8
cubic meters per minute.
* To include miners belts, lights, w/charger, self rescuers, boots, first aid
kits, etc.
/s/ RBW
-------
initials
/s/ RCB
-------
initials
EXHIBIT B
WHEN RECORDED MAIL TO: Unico, Incorporated
x/x Xxx X. Xxxxx
X.X. Xxx 000
Xxxxxxx, XX 00000
NOTICE OF INTEREST
Notice is hereby given that Unico, Incorporated, an Arizona corporation,
claims an interest in the real property described below, on Exhibit A attached
hereto, located in Garfield County, Utah. Said interest is evidenced by that
certain MINING LEASE AND OPTION TO PURCHASE dated July __, 2001 wherein Kaibab
Industries, Inc. is Lessor and Unico, Incorporated is Lessee. The property
affected by the MINING LEASE AND OPTION TO PURCHASE is located in Garfield
County, State of Utah, and is more particularly described as follows:
The patented mining claims in the Xxxxx Mountain Mining District in
Garfield County, State of Utah, all of U.S. Survey #3002, Mineral Entry
#2103, consisting of the following: El Padre, Cuprum, Stevenite, Coney,
Bromide Lodes, and the Triume Placer, containing 83.34 acres and more
particularly described in the Deed Record Book "B" at Pages 215-220 of
the records of the Office of the County Recorder of Garfield County,
Utah.
Dated the ____ day of July, 2001.
Unico, Incorporated
________________________
Xxx X. Xxxxx, President
STATE OF __________ )
:ss.
COUNTY OF _________ )
On the ____ day of July, 2001, personally appeared before me Xxx X.
Xxxxx, who being by me duly sworn, did say that he is the President of Unico,
Incorporated and that he signed the foregoing Notice of Interest on behalf of
the corporation by authority of its board of directors or bylaws and
acknowledged to me that said corporation executed the same.
_____________________________
Notary Public
Commission Expires:____________
Residing in: __________________
