EXHIBIT 10.1
MINING LEASE AND OPTION T0 PURCHASE
Lease made March 30, 1992, between Deer Trail Development Corporation, a
Utah corporation ("Deer Trail") of 00000 Xxxxxxx Xxxx, Xxxxx 0000, Xxxxxx,
Xxxxx 00000, as Lessor and Unico, Incorporated, an Arizona corporation
("Unico") of P .0. Xxx 000, Xxxxxxx, Xxxxxxxxxx 00000, as Lessee.
HEREAS Deer Trail is the owner of certain mining claims more fully
described below (the "Claims") and desires to lease the Claims to Unico; and
WHEREAS Deer Trail 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
royalties, covenants and agreements hereinafter expressed to be paid, kept and
performed by Unico, Deer Trail hereby leases to Unico the following premises
near Marysvale, Utah, County of Piute, consisting of patented and unpatented
mining claims and mill sites:
See attached Exhibit A
The leased premises includes within its bounds, but is not limited to, those
workings commonly known as the "Deer Trail Mine", the "PTH tunnel" and
premises, the "Xxxxxx and Lucky Boy mines" and the "deep target"
molybdenum-copper prospect potential believed by Xxxxxx Dodge and the U.S.
Geological Service to exist, to the extent that the "deep target" lies beneath
the claim groups described on Exhibit A. In the event Lessor acquires a group
of approximately 33 claims adjoining the Claims described on Exhibit A, which
claims where formerly owned by Xxx Xxxxx, Lessor grants to Lessee an option
during the term of this lease to acquire said claims for Lessor's acquisition
costs or staking costs for said claims and reimbursement to Lessor of its
minimum annual assessment costs expended to maintain the claims from the time
of acquisition to the time of exercise of the option.
As additional consideration for the payment of the advance royalty,
royalties and other commitments of Lessee found herein, Lessor hereby grants
to Lessee an option to purchase all of the Claims and mill sites as described
herein and on Exhibit A attached hereto including all dumps, equipment and
personal property contained therein, commencing with the Effective Date of
this Lease and for the following periods and prices:
From 6/1/92 to 5/31/95 $1,000,000 total
From 6/1/95 to 5/31/99 $2,000,000 total
From 6/1/99 to 5/31/02 $4,000,000 total
Upon exercise of the purchase option and payment therefor in cash or certified
funds, Lessor agrees to convey good and marketable title to the above
described leased premises to Lessee free and clear of any liens, encumbrances,
overriding royalties, carried interests (including but not limited to that of
Xxxxxx Dodge) or other interests, except such as may have arisen on account of
Lessee's operation and lease of the premises. Upon exercise of the Purchase
Option and payment therefor 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.
Lessee shall give Lessor 30 days advance written notice of its intention
to exercise the purchase option, which notice shall be received by Lessor
during the period for which the option price applies. (For instance, notice
delivered to Lessor by Lessee on May 31, 1995 shall entitle Lessee to purchase
the Claims for $1,000,000, though payment need not be made until the Lessor's
option described below has been exercised or expired). Upon receipt of
Lessee's notice of purchase, Lessor may at its option for 30 days, elect to
retain a carried interest of 5% of net smelter returns from the Claims in
perpetuity in lieu of the cash payment offered by Lessee for the Claims.
Losses and profits allocable to said carried working interest shall be
computed in the same manner as the 5% royalty referred to in paragraph 3
below. Lessor shall advise Lessee in writing by the 30th day after receipt of
Lessee's purchase notice of its intent to take the carried interest in lieu of
the cash payment. If Lessee has not received notice of election by Lessor by
the thirtieth day, then it shall pay the applicable purchase price by the
sixtieth day after the delivery of its original purchase notice and Lessor
shall transfer fee title ownership of the Claims to Lessee. Should Lessee for
any reason be unable to pay the purchase price, then the Mining Lease-Option
to Purchase shall continue in full force and effect subject to its terms. In
the event Lessor gives notice of its election to take the 5% carried interest,
Lessee may within 30 days thereafter, at its sole option, and upon notice to
Lessor, elect to reduce the carried interest by up to 50 percent. In such
case, Lessee shall pay that portion of the applicable purchase price which
corresponds to the percentage by which the carried royalty interest is
reduced. For example, if under the $1,000,000 purchase price, Lessor elects
to take the 5% carried interest in lieu of the cash price, then Lessee, at its
option, may reduce the carried interest to as low as 2 1/2% and pay up to
$500,000 cash purchase price for the reduction. As an additional example, if
the cash purchase price were $2,000,000 and the Lessor elected the 5% carried
interest in lieu of the cash payment, then Lessee could reduce the carried
interest to as low as 2 1/2% by paying up to $1,000,000.
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, which
shall be returned to Lessor as provided above. At any termination of this
lease, 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 person of the
employees or agents of Lessee, or any other person (other than the Lessor and
those acting in Lessor's behalf) where such damage arises on account of or in
connection with the use, operation or development of the property by Lessee.
Lessee agrees to have in effect at the Effective Date and during the term of
this lease a public liability insurance policy in a reasonable amount, being
at least $1,000,000 per occurrence insuring against liability for damage to
person or property which may arise from operation of the Lease.
Lessor agrees, warrants and represents that its board of directors has
taken all action necessary to enter into this Mining Lease-Option to Purchase
Agreement and that shareholder approval of this Mining Lease-Option to
Purchase 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 Utah 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 or the grant,
validity or exercise of the purchase option thereunder, in any manner that it
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 and I.N.
Xxxx, individually each agree to use their best efforts to obtain (and I.N.
Xxxx agrees to vote all stock he owns or controls in favor of) any shareholder
approval or consent which may be determined to be required and in such event,
Lessor and I.N. XXXX agree to recommend in writing approval of the Mining
Lease-Option to Purchase to the shareholders of Deer Trail. Lessor further
agrees to provide a legal opinion or such further assurances as Lessee may
require during the term of this lease as to the agreements, representations
and warranties contained in this paragraph.
2. Term; Assignment. Unico shall hold the leased premises for the purpose
of mining all kinds of minerals and ores for a period of six months from June
1, 1992 (the "Effective Date" ) and so long thereafter (but not to exceed 10
years maximum from the Effective Date) as the minimum royalty payments are
being made, unless the lease 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 or any interest hereunder. Notwithstanding the
Effective Date, Unico shall have reasonable access to the premises prior to
the Effective Date to prepare work plans and complete preliminary
preparations.
3. Duties of Lessee; Royalty. 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 assume payment of utility costs and taxes on
the Claims estimated to be approximately $25,000 per year plus any increase
due to Lessee's operations and normal cost increases over time, (such costs
and taxes for the year this lease is signed shall be prorated between the
parties as of the Effective Date: such utility costs are primarily to maintain
and operate the water pumps and ventilating fans in the PTH tunnel): to keep
accurate accounts, to render necessary statements to Deer Trail showing the
amount and character of production, and to pay to Deer Trail, or its
designated agent, as rental for the leased Claims, a five percent (5%) royalty
upon all ore taken and sold from the premises. Royalty payments shall be based
on the gross receipts received by Unico from sales of the mineral in the ore
taken from the leased premises, less the actual cost of transportation from
the mine to the receiving plant or smelter, and less any assaying, weighing,
treatment and special sampling charges. Payments of royalty by Unico shall be
made to Deer Trail 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. In addition to the royalty
payments to be made, Unico agrees that if it moves and/or sells approximately
200 tons of marketable ore which has been broken out and is presently located
in the ore bins at the 8,000 foot area of the PTH tunnel, that it will pay the
net mill receipts from said 200 tons to Lessor, less Unico's cost of moving
and shipping said ore. Lessor agrees that it has no objection to Lessee's
employing the services of its employee Xxxx Xxxxxxxxx on a part time basis to
assist in maintenance of the Claims.
4. Minimum Royalty. Unico shall pay a minimum royalty of $4,000 per
month to Deer Trail, regardless of the amount of actual production from the
lease during a given month. A six month advance minimum royalty of $24,000
shall be paid upon signing of this lease for the first six months of the lease
commencing with the Effective Date. The six month advance royalty shall
guarantee a minimum lease term of six months from the Effective Date. The
minimum royalty shall increase to $6,000 per month commencing in July, 1994,
$8,000 per month commencing in July, 1997 and $10,000 per month commencing in
July, 2000.
5. Rate of production. Unico agrees to use its best efforts to mine and
remove mineral ores from the leased premises beginning upon the Effective Date
or as soon thereafter as is feasible, as rapidly and in such quantities each
month as reasonably can be done, unavoidable delays, shortages of fuel and
labor, market conditions, adverse weather and other conditions beyond the
control of Unico to be taken into consideration as well as reasonable start-up
time. A copy of Lessee's initial work plan is attached hereto as Exhibit A.
6. Right of Access. Deer Trail 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 Lessee will render to Lessor
reasonable assistance in its power in so doing.
7. Taxes and Assessments. Unico agrees to pay when due all taxes and
assessments levied against the demised premises on account of the production
of ore under this lease. 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 premises exceed the minimum
required to qualify for assessment work on the unpatented claims included in
the leased premises, the excess may be reported by Lessor to qualify as
assessment work on its contiguous unpatented claims as permitted by law.
8. 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 the minimum monthly royalty, it shall
then be lawful for Lessor to declare this lease 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 uncorrected default, (and also upon termination of this lease) Lessee
agrees to surrender and deliver the Lessor quiet and peaceable possession of
the leased premises. Upon termination of this lease, for any reason, Lessee
shall have a period of 120 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.
9. 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.
10. Termination. Lessee may, at any time, surrender and terminate this
lease upon giving to lessor sixty (60) days notice in writing and paying all
royalties owing through the effective date of termination. The parties may
also terminate this lease by mutual agreement. This Lease shall terminate 10
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 as
described in paragraph 8 above or otherwise as permitted by law.
11. Mining Equipment. Unico shall be entitled to use Deer Trail's on
site equipment, consisting of air pumps, ore cars, electrical stations,
compressors, duct works, fans, trams, rails, hoists, excavating equipment and
other equipment in the mine or located on the mining claims comprising the
leased premises and shall upon termination of the lease, return such equipment
to Deer Trail in as good a condition as received, reasonable wear and tear
excepted. Unico shall conduct all maintenance and repair of such equipment
during the term of the lease. Unico agrees not to remove such on site
equipment from the leased premises.
12. 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 rules,
regulations 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 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, except as described on Exhibit B, which Exhibit
and the agreement contained therein is incorporated herein by reference. Each
party to this lease shall be responsible for any environmental, pollution or
aesthetic requirements or liability legitimately made or assessed by a
governmental entity attributable to each partys' 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.
13. Entire Agreement; Governing Law. This lease contains the entire
agreement between the parties hereto and any amendments thereto shall be in
writing. This lease 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 DEER TRAIL DEVELOPMENT CORPORATION
/s/ Xxx Xxxxx /s/ I.N. Xxxx
----------------------- ---------------------------
Xxx Xxxxx, President I.N. Xxxx, President
As to the agreements, representations and warranties in the last paragraph of
paragraph one of this agreement:
/s/ I.N. Xxxx
----------------------------
I.N. Xxxx, individually and as
an authorized officer of Lessor
State of California )
: ss.
County of Butte )
Personally appeared before me, Xxx Xxxxx, this 1st day of April, 1992,
who declared to me that he is the President of Unico, Incorporated and
acknowledged to me that he executed the foregoing lease on behalf of said
corporation by authority of a resolution of its board of directors or bylaws.
/s/ Xxxxxxxx X. Xxxxxxxxx
---------------------------
NOTARY PUBLIC
Commission Expires: 1-29-93
Residing At:
State of Texas )
: ss.
County of Dallas )
Personally appeared before me, I.N. Xxxx, this 30 day of March, 1992, who
declared to me that he is the President of Deer Trail Development Corporation
and acknowledged to me that he executed the foregoing lease on behalf of said
corporation by authority of a resolution of its board of directors or bylaws.
/s/ Jo Xxx Xxxxxx
--------------------
NOTARY PUBLIC
Commission Expires: 7-12-94
Residing At:
State of Texas )
: ss.
County of Dallas )
Personally appeared before me, I.N. Xxxx, this 30 day of March, 1992, who
acknowledged to me that he executed the foregoing lease as to the last
paragraph of paragraph one in his individual capacity.
/s/ Jo Xxx Xxxxxx
---------------------
NOTARY PUBLIC
Commission Expires: 7-12-94
Residing At:
LEASE MADE 0-00-00, XXXXXXX XXXX XXXXX DEVELOPMENT CORPORATION, AS LESSOR AND
UNICO, INCORPORATED, AS LESSEE
EXHIBIT A
Work Plan: The parties agree that the purpose of the Lease is to develop and
prove the geologic potential of the Claims; Lessee agrees each year, by the
Effective Date, to provide Lessor with a copy of its Work Plan with that
objective for the ensuing Lease year, which Work Plan shall be delivered to
Lessor for information purposes. The content of the Work Plan shall not
require the consent of the Lessor but shall be in compliance with the terms of
this Lease. The Description of claims leased consists of three pages attached
hereto.
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 on Exhibit A attached
hereto, located in Piute County, Utah. Said interest is evidenced by that
certain MINING LEASE AND OPTION TO PURCHASE dated March 30, 1992 wherein Deer
Trail Development corporation is Lessor and Unico, Incorporated is Lessee.
The property description attached hereto is a corrected description of the
property subject to the aforementioned MINING LEASE AND OPTION TO PURCHASE.
Dated the 18th day of June, 1992
Unico, Incorporated
/s/ Xxx X. Xxxxx
--------------------
Xxx X. Xxxxx, President
STATE OF CALIFORNIA )
:ss.
COUNTY OF BUTTE )
On the 18th day of June, 1992 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.
/s/ Xxxxxxxx X. Xxxxxxxxx
---------------------------
Notary Public
Commission Expires:
Residing in:
UNPATENTED MINING CLAIMS - DEER TRAIL DEVELOPMENT CORP.
------------------------------------------------------
Name Book Page BLM Serial No.
---- ----- ----- --------------
Apex Xxxx X 00 XXX 00000
Xxxxxxx X 423 UMC 95580
Buster No. 1-3 G 460-461 UMC 95586-95588
Xxxxxx Xx. 0-0 X 000-000 XXX 00000-00000
Xxxxxxxxx Xxxx X 000 XXX 00000
Xxxxxxxx Xxxx X 684 UMC 95599
Cliff No. 1-8 Lode D 371-374 UMC 95600-95607
Columbine Xxxx X 000 XXX 00000
Xxxxx Xxxx X 452 UMC 00000
Xxxx Xxxxx No. 11 A 135 UMC 00000
Xxxx Xxxxx No. 12-19 A 142-145 UMC 95613-95620
Deer Trail No. 21-29 24 114-120 UMC 95621-95629
Xxxx Xxxxx Xx. 00 X 000 XXX 00000
Xxxx Xxxxx No. 32 24 122-123 UMC 95631
Xxxx Xxxxx Xx. 00-00 X 00-000 XXX 95632-95635
Xxxx Xxxxx Xx. 00-00 X 000-000 XXX 95636-95638
Xxxx Xxxxx Xx. 00-00 X 000-000 XXX 95639-95640
Xxxx Xxxxx Xx. 00 X 000 XXX 00000
Xxxx Xxxxx Xx. 00-00 X 322-324 UMC 95642-95647
Xxxx Xxxxx Xx. 00-00 X 000-000 XXX 95648-95664
Xxxx Xxxxx Xx. 00 X 000 XXX 00000
Xxxx Xxxxx Extension C 250 UMC 00000
Xxxx Xxxxx Extension 1-11 C 250-254 UMC 95667-95677
Falcon Lode D 584 UMC 95682
Fire Fly Lode D 584 UMC 95682
Golden Eagle Xxxx X 000 XXX 00000
Xxxxx Xxxx X 453 UMC 95697
Grand View Xxxx X 000 XXX 00000
Xxxxxxx Xxxx X 000 XXX 00000
Xxxxxxx X 000 XXX 00000
Xx Xxxxxx D 587 UMC 00000
Xxxxx Xxxxx Mining Claim N 125 UMC 95709
Xxxxx Xxxxxxxx X 000 XXX 00000
Xxxxxxx #3-9 B 123-126 UMC 95719-95725
Mountain Chief Amended D 589 UMC 95726
Mountain Chief 1-2 M 128-129 UMC 95727-95728
Old Channel Lode M 81 UMC 95747
Old Channel Lode #1 M 81 UMC 95748
Pluto Fraction N 273 UMC 95741
Porcupine Xxxx X 000 XXX 00000
Xxxxxx Xxxx X 585 UMC 95729
Portal Xxxx X 000 XXX 00000
Xxxxxx Lode 1-2 M 82-83 UMC 95750-95751
Red Xxxxx Xxxx X 000 XXX 00000
Xxxxx Xxxxx X 464 UMC 95735
Snow Shoe Xxxx X 000 XXX 00000
Xxxxxx Placer Mining Claim N 126 UMC 95763
Siver Xxxxx X 000 XXX 00000
Xxxxx No. 0-0 Xxxx X 000-000 XXX 00000
Xxxxx Xx. 0 X 00 XXX 00000
Xxxxx No. 5-6 M 127 UMC 95756-95757
Xxxxxxx Xxxx X 000 XXX 00000
Xxx Reef Xxxx X 000 XXX 00000
Xxxxx Xxxx X 587 UMC 95768
Tomahawk Lode D 583 UMC 95767
Victory Lode D 586 UMC 95771
White Flint Xxxx X 000 XXX 00000
Xxxx Xxx Xxxx X 585 UMC 95768
Xxxxxxxx Xxxx X 000 XXX 00000
Xxxxxx Treasure D 589 UMC 95701
PATENTED MINING CLAIMS DEER TRAIL DEVELOPMENT CORP.
----------------------------------------------------
Name Recorded Book Page
------- -------- ----- ----
Cliff, #41 04/23/1892 102 000
Xxxx Xxxxx #0, #6365A 03/03/1919 274 000
Xxxx Xxxxx #0, #6365A 03/03/1919 274 000
Xxxx Xxxxx #0, #6353A 03/03/1919 274 000
Xxxx Xxxxx #0 Xxxx, 0000 03/03/1919 274 000
Xxxx Xxxxx #0, #6403A 04/22/1919 275 00
Xxxx Xxxxx #0, #6403A 04/22/1919 275 00
Xxxx Xxxxx #8-9-10-20-38 02/05/1925 288 177
#6V36
Deer Trail #30-33-34-35-36-37 08/29/1923 285 443
#0000
Xxxx Xxxxx Fraction #37 #6720 09/23/1924 286 000
Xxxx Xxxxx #00X (Xxx "A" 04/23/1892 93 157
only)
Xxxx Xxxxx Xxxx Xxxx 00X
Xxxxxx & Xxxxxxxx #00X 05/11/1896 166 000
Xxxxxx & Xxxxxxxx Xxxx Xxxx #00X
Green Eyed Monster 43A 04/23/1892 93 181
(Xxx "A" only)
Monster Apex #5972 04/28/1910 259 495
Monster Apex #2, #5972 04/28/1910 259 495
Pluto #46 06/02/1896 106 382
Sphinx #6397 06/20/1919 274 000
Xxxx Xxxxx #0 Xxxxxxxx 0000 X 03/03/1919 274 000
Xxxx Xxxxx #0 Xxxxxxxx 0000 X 03/03/1919 274 000
Xxxx Xxxxx #0 Xxxxxxxx 0000XX 03/03/1919 274 000
Xxxx Xxxxx #0 Xxxxxxxx 0000 X 04/22/1919 275 00
Xxxx Xxxxx #0 6403 A 04/22/1919 275 31
UNPATENTED MINING CLAIMS - DEER TRAIL DEVELOPMENT CORP.
Exhibit B
Deer Trail Development Corporation has been contacted by the U.S. Forest
Service which has informally requested that Deer Trail remove the dump
material on the property or trade certain lands owned by Deer Trail in another
area for patented claim rights to the lands underlying the dumps. Deer Trail
is presently considering its response to the Forest Service's proposal and the
Forest Service has not set a fixed deadline for compliance or resolution of
the matter. Deer Trail believes that removal of the dump material will not be
an issue while the mine is being operated. Should the Forest Service renew the
issue during the term of the Mining Lease-Option to Purchase, Deer Trail
agrees to work in good faith with the U.S. Forest Service to reach an
agreement to resolve the matter, whether by land exchange or otherwise, at its
own expense, so long as Unico continues to operate the property.
