EXHIBIT 10.6
LEASE AND PURCHASE OPTION AGREEMENT
BY THIS LEASE AND OPTION AGREEMENT dated the 12th day of March, 1998,
by and between XXXXXX XXXXX GOOD (also know as A. J. Good) and XXXXX
XXX GOOD, husband and wife whose address is 000 Xx Xxxxxx Xxxxx, Xxxxxxx Xxxxxxx
00000 ("LESSOR" herein),
and
Can-Cal Resources, Ltd., whose address is 0000 Xxxxxxxxxx Xxxxxx, Xxxx 000, Xxx
Xxxxx, Xxxxxx 00000 ("Lessee" herein)
the Lessor, in consideration of the payments and promises set forth herein, has
granted certain rights to Lessee under the following terms and conditions:
1. GRANT
a. LEASE - Lessor hereby grants, demises, leases and lets those certain
patented mining claims known as JUROR #1, JUROR #2, CERBAT, REDDOG and ROLLING
WAVE, located in the Gold Nugget Cerbat Mountain, Hualapai Mining District,
Mojave County, Arizona, more particularly described in the attached Exhibit "A"
(the "Property" herein), including all rights appurtenant to the Property
recognized under the mining laws of the United States or established under the
laws of the State of Arizona, including water rights, easements, and
rights-of-way pertaining or appurtenant to the Property, exclusively unto
Lessee, its successors, and assigns, with the exclusive rights and privileges to
explore for, mine (by open pit, strip, underground, solution mining or any other
method, including and method hereafter developed), extract, mill, store,
process, remove and market all ores and minerals as may be authorized by the
mineral laws of the United States from in, upon or under the Property. Lessee is
further granted the right to place, construct, maintain, use, and remove such
structures, facilities, equipment, roadways, haulage ways and such other
improvements on the surface or subsurface of the Property as Lessee, consistent
with authorizations obtained from the Governmental Agencies, if applicable,
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may deem necessary, useful or convenient for the full enjoy enjoyment of all the
rights herein granted.
2. b. TERM
Unless sooner terminated under the termination provisions hereinafter
contained, the term of this Agreement shall be for a term of Twenty (20) years
commencing on the effective date hereof.
3. PAYMENTS TO LESSOR
a. COMPENSATION - Lessee shall pay Lessor as compensation upon execution
of this Agreement a total of Two Thousand Five Hundred Dollars ($2,500.00).
b. Lessee shall pay Lessor as additional compensation thirty days from
the date of execution of this Agreement an additional Two Thousand Five Hundred
Dollars ($2,500.00).
c. Lessee shall pay Lessor as additional compensation sixty days from
the date of execution of this Agreement an additional Five Thousand Dollars
($5,000.00).
d. MINIMUM ROYALTY - Beginning with the first yearly quarter after the
effective date of this agreement, the sum of fifteen hundred dollars ($1,500.00)
will be paid. Every quarter thereafter a payment of fifteen hundred dollars
($1,500.00) will be paid. Such advance royalties shall be a credit toward any
moneys due Lessor under the provision of subsection c of this Section 3.
e. PRODUCTION ROYALTY - If Lessee mines and markets Leased Substances
from the Property, Lessee shall pay to Lessor a production royalty of FIVE
PERCENT (%5) of the "Gross Returns" received by Lessee from the sale or other
disposition of Leased Substances. The term "Gross Returns" received by Lessee
from the sale or other disposition of Leased Substances. The term "Gross
Returns" shall mean the total dollar value received from the purchaser of Leased
Substances, less only any weighing, sampling, penalty, processing or other
charges assessed by the purchaser. Production Royalty is to continue for 10
years or until the Lessee exercises it option to purchase, whichever occurs
sooner.
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f. PAYMENT OF PRODUCTION ROYALTY -
(1) Production royalty paid to Lessor hereunder shall be due and payable
within thirty (30) days after the end of each calendar quarter for those Leased
Substances sold and a settlement sheet received during the applicable calendar
quarter after first deducting any advance minimum royalty paid under subsection
b of Section 3 not previously recovered from prior payments under this
subsection d. All production royalty shall be accompanied by the settlement
sheets or a similar statement showing the basis upon which the payment was
computed.
(2) Lessor may elect to receive its royalty in kind by physical delivery
of gold and/or silver bullion for any calendar year, by notifying Lessee of its
election on or before December 1 in the preceding calendar year. An election by
Lessor to receive its royal in kind shall be irrevocable for the calendar year
for which it was made. Failure of Lessor to notify Lessee by December 1 or its
election to take the royalty in kind, shall be deemed a waiver by Lessor of all
rights to take the royalty in kind during the following calendar year.
(3) On or before the fifth day of the month following the end of each
calendar quarter, Lessee shall make the bullion available to Lessor at the place
where the bullion has been refined. The bullion shall be in the form in which
Lessee sells or otherwise disposes of same. Lessee shall provide ten (10) days'
prior notice Lessor of the name and location of the refinery and the date or
dates on which the bullion will be available to Lessor. If Lessor desires Lessee
to deliver the bullion to it at a place other than the place of refining, Lessor
shall reimburse Lessee for the costs incurred by Lessee in making such delivery,
which costs include transportation and insurance.
(4) The value of any in kind royalty delivered to Lessor for purposes of
establishing the credit for advance minimum royalty shall be based upon the
"Quarterly Average Gold Price" as of the date of delivery to Lessor. The
Quarterly Average Gold Price shall be the price for immediate delivery quoted at
the close of business by the COMEX, calculated by dividing the sum of all such
prices reported for the quarter by the number of days for which such prices were
quoted.
(e) METHOD OF MAKING PAYMENTS - All payments required hereunder may be
mailed or delivered to Lessor's address or to any single depository as Lessor
may instruct. Upon making payment to the authorized agent or depository, Lessee
shall be relieved of any
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responsibility for the distribution of such payment to Lessor. The delivery or
the deposit in the mail of any payment hereunder on or before the due date
thereof shall be deemed timely payment hereunder.
4. EXERCISE OF OPTION; PURCHASE PRICE
a. Exercise of Option - Lessee may elect to exercise its option to
purchase the Property at any time during the term specified in Section 2 by
giving written notice of its election in the manner specified in Section 9 of
this Agreement, which notice shall also designate a bank or title insurance
company within the state of Arizona to serve as escrow agent. Lessor and Lessee
shall promptly execute and deliver instructions to the escrow agent consistent
with the terms and conditions of this Agreement.
b. PURCHASE PRICE - If Lessee exercises its option to purchase the
Property, the purchase price shall be (1) Two Hundred Fifty Thousand Dollars
($250,000.00) plus interest at the rate of EIGHT PERCENT (%8) compounded
annually from and after the date of its exercise of the option to purchase the
property. If Lessee exercises its option to so purchase, all funds paid to
Lessor under the terms of Section 3 hereof shall be a credit toward such
purchase price as of the date such payments were made hereunder.
c. CLOSING - Within the (10) days after Lessee has exercised its option
to purchase, Lessor shall furnish escrow agent with a conveyance of the Property
in a form acceptable to Lessee. Lessee shall, within the (10) days after its
receipt of the form of the conveyance pay the purchase price to the escrow
agent. Upon such receipt, escrow agent shall close the escrow by recording the
conveyance in the official records of Mojave County and paying the purchase
price to Lessor. One-half of the charges of the escrow agent shall be paid by
each party. Lessee shall pay all recording fees in connection with its exercise
of its option to purchase.
5. INSPECTION
Lessor (or any agent of Lessor with authorization in writing), at
Lessor's risk and expense, may (1) enter upon the Property to inspect the same
at such times and upon such notice to lessee as shall not unreasonably or
unnecessarily hinder or interrupt the operations of Lessee, and (2) inspect the
accounts and records used in calculating production royalty paid to Lessor
hereunder, which right may be exercised, at any reasonable time during a period
of one (1) year from and after the date on which the applicable quarterly
payment of production royalty was
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made. Lessor agrees to treat all information received hereunder as confidential
and not to disclose the same without proper permission of Lessee.
6. OBLIGATIONS OF LESSEE
a. CONDUCT OF OPERATIONS - All work performed by Lessee on the Property
pursuant to this Agreement shall be done in good and workmanlike manner and in
compliance with all state and federal laws and regulations governing such
operations, together with all local ordinances, including without limitation,
those regulations related to the use of the Property and all sanitary and health
regulations. The operations of Lessee shall be further subject to the following
special requirements:
(1) Lessor shall be furnished with copies of all notices of
intent, plans of operation, or other documents furnished to government entities
having supervision or control of Lessee's activities hereunder; and
(2) Lessee shall not stockpile ore or concentrates off of the
Property without the prior written consent of Lessor.
b. PROTECTION FROM LIENS - Lessee shall pay all expenses incurred by it
in its operation on the Property hereunder and shall allow no liens arising from
any act of Lessee to remain upon the property; provided, however, that Lessee
shall not be required to remove any such lien as long as Lessee is contesting in
good faith the validity or amount thereof. Lessee shall post and maintain upon
the Property a notice of non-liability.
c. INDEMNITY AND INSURANCE - Lessee shall protect, defend and indemnify
Lessor against and hold Lessor harmless from any suit, claim, judgment or
demand, administrative proceeding or sanction, expense, including attorney's
fees, whatsoever arising out of Lessee's exercise of any of its rights pursuant
to this Agreement, provided that if any individual Lessor or any person or
instrumentality acting on Lessor's behalf shall have been a contributing cause
to the event giving rise to such suit, claim, demand or judgment, Lessee's
obligation to indemnify Lessor hereunder shall be limited to the extent
permitted by law under the permitted application of rules of contributory or
comparative negligence. Lessee shall further maintain insurance to support the
combined bodily injury and property damage, and a similar amount of property
damage. Lessor shall be named as co-insured under such policies and Lessee shall
furnish Lessor with a certificate of such insurance prior to conducting any
activities on the Property
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pursuant to this Agreement excepting such activities as securing mine shafts,
tunnels, holes or other hazardous situations.
d. PAYMENT OF TAXES - Lessee shall pay all taxes levied against the
Property and production therefrom. Lessee shall not be liable for any taxes
levied or measured by income of Lessor. Lessee shall have the right to contest,
in the courts or otherwise, the validity or amount of any taxes or assessments,
before it shall be required to pay the same. If this Agreement is terminated or
otherwise expires, and if the Property is classified as an "Operating Mine" as a
result of lessee's activities, Lessee shall pay all ad valorem taxes based on
such classification until such classification is removed.
7. TITLE MATTERS
a. REPRESENTATION - Lessor represents to lessee that to the best
of its knowledge: (1) the patented mining claims constituting the Property have
been located and appropriate record made thereof in compliance with the laws of
the United States and the laws of Arizona; (2) there is no claim of adverse
mineral rights affecting such claims; (3) except as specified in Exhibit A,
Lessor's possessory right and title to the Property is free and clear of all
lines and encumbrances, and (4) the Lessor has the full right, power and
capacity to enter into this Agreement upon the terms set forth herein.
b. TITLE DOCUMENTS; DATA - Upon written request of Lessee at any time
during the term hereof, Lessor shall promptly deliver to Lessee all abstracts of
title to and copies of all title do cuments affecting the Property which Lessor
has in its possession.
c. OBJECTIONS TO TITLE - If, during the first six months from and after
the effective date of this Agreement, Lessee notifies Lessor of the existence of
any matter related to the status of title to the Property constituting a
material violation of the representations made under in subsection a of this
Section 6, Lessor agrees to either (1) remove such defects at lessor's costs, or
(2) return all funds theretofore paid to Lessor under the terms of Section 3.
d. CHANGE OF LAW - If the laws of the United States concerning mineral
rights on private managed lands is repealed, amended, or new legislation is
enacted, Lessee shall have the right to take whatever action it deems
appropriate to preserve a right to explore for, develop, and mine Leased
Substances. If Lessee elects to take any action under the terms of this
subsection, it shall first notify Lessor in writing setting forth the nature of
the proposed action and an
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explanation thereof. Lessor agrees to cooperate with Lessee and execute whatever
documents are deemed necessary to Lessee to accomplish such action. Nothing in
this subsection shall impose any obligation upon Lessee to take any action, or
diminish the right of Lessor to take action it deems appropriate; provided,
however, that if Lessor chooses to take any action, it will first inform Lessee
of the nature of such contemplated action.
e. GENERAL - Nothing herein contained and no notice or action which may
be taken under this Section 7 shall limit or detract from Lessee's right to
terminate this Agreement in the manner hereinafter provided.
8. TERMINATION; REMOVAL OF PROPERTY; DATA
a. TERMINATION BY LESSOR - If Lessee defaults in the performance of its
obligations hereunder, Lessor shall give Lessee written notice specifying the
default. If the default is not cured within sixty (60) days after Lessee has
received the notice, or if Lessee has not within that time begun action to cure
the default and does not thereafter diligently prosecute such action to
completion, Lessor may terminate this Agreement by delivering to Lessee written
notice of such termination, subject to Lessee's right to remove its property and
equipment from the Property, as hereinafter provided. If Lessee in good faith
disputes the existence of a default, Lessee shall initiate appropriate action in
court of competent jurisdiction within the 60-day period and the time to cure
shall run from the date of a final determination that a default exists. Lessor
shall have no right to terminate this Agreement except as set forth in this
subsection a of Section 8.
b. TERMINATION BY LESSEE - Lessee shall have the right to terminate this
Agreement at any time by written notice from Lessee to Lessor. From and after
the date of termination, all right, title and interest of Lessee under this
Agreement shall terminate, and Lessee shall not be required to make any further
payments or to perform any further obligations hereunder concerning the
property, except payment and obligations the due dates for the payment or
performance of which occur prior to the termination date, including the
obligations related to damages to the surface and improvements thereon.
c. REMOVAL OF PROPERTY - Upon any termination or expiration of this
Agreement Lessee shall have a period of one (1) year from and after the
effective date of termination within which it may elect to remove from the
Property all of its machinery, buildings, structures, facilities, equipment and
other property of every nature and description erected, placed or
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situated thereon, except supports placed in shafts, drifts or opening in the
property. Failure of Lessee to do so shall constitute an abandonment by Lessee
to Lessor of the same; provided, however, that Lessee may be required to remove
such property upon notice form Lessor given at any time during the one-year
period and sixty (60) days thereafter.
d. RELINQUISHMENT OF RECORD - If this Agreement is terminated or
otherwise expires, Lessee shall provide Lessor with a recordable document
sufficient to provide notice that Lessee no longer asserts rights to the
Property under this Agreement.
9. NOTICES
Any notice or communication required or permitted hereunder shall be
effective when personally delivered or deposited, postage prepaid, certified or
registered, in the United States mail to the address specified above. Either
party may, by notice to the other given as aforesaid, change its mailing address
for future notices.
10. BINDING EFFECT; ASSIGNMENT
The rights of either party hereunder may be assigned in whole or in part
and the provisions hereof shall inure to the benefit of and be binding upon the
heirs, personal representative, beneficiaries, successors and assigns, but no
change or division of ownership of the Property or payments hereunder, however
accomplished, shall operate to enlarge the obligations or diminish the rights of
Lessee hereunder. No such change or division in the ownership of the Property
shall be binding upon Lessee for any purpose until the first day of the month
next succeeding the month in which such person acquiring any interest shall
furnish evidence to Lessee's satisfaction of such change, transfer or division
of ownership.
11. FORCE MAJEURE
If Lessee is delayed or interrupted in or prevented from excising its
rights or performing its obligation, as herein provided by reason of "force
majeure," then, and in all such cases, Lessee shall be excused, without
liability, from performance of its obligations set forth in this Agreement
(except as to obligations to pay money set forth in Section 3 and 6), but the
provisions shall again come into full force and effect upon the termination of
the period of delay, prevention, disability or condition. Lessee shall notify
Lessor of the beginning and ending date of any period of force majeure and the
period of the disability. "Force majeure" includes all
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disabilities arising from causes beyond reasonable control of Lessee, including
without limitation, acts of God, accidents, fires, damages to facilities, labor
troubles, unavailability of fuels, supplies and equipment, orders or
requirements of courts or government agencies, or the inability to obtain
environmental clearance or operating permits that may be required by
governmental authorities.
12. MEMORANDUM
The parties to this Agreement agree to execute and record a Memorandum
of this Agreement in a form sufficient to constitute record notice to third
parties of the rights granted hereunder, which may be recorded in the official
records of Mojave County, Arizona.
13. CONSTRUCTION
a. GOVERNING LAW - This Agreement shall be construed by the internal
laws but not the laws of conflict of the State of Arizona.
b. HEADINGS - The headings used in this Agreement are for convenience
only and shall not be deemed to be a part of this Agreement for purposes of
construction.
c. INTEGRATION - The entire agreements and understandings of the parties
with reference to the Property are contained in this Agreement and this
Agreement superseded all prior agreements and understandings regarding the
Property.
SIGNED, effective as of the date recited above.
LESSOR LESSEE
.
/s/ Xxxxxx Xxxxx Good CAN-CAL RESOURCES, LTD
----------------------------------
Xxxxxx Xxxxx Good
/s/ X. X. Xxxxx
------------------------------------
Xxxxxx X. Xxxxx, President
/s/ Xxxxx Xxx Good
----------------------------------
Xxxxx Mae Good
/s/ Xxxx Xxxxx /s/ Xxxxxxxx Xxxxx
---------------------------------- ------------------------------------
Witness Witness
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