MINERAL LEASE AGREEMENT
Exhibit
10.1 to Form 8-K
THIS
MINERAL LEASE AGREEMENT ("Agreement") is made effective as of the day
of
October 24, 2006 ("Effective Date"), between XXXXXX LIVESTOCK, a Nevada general
partnership, and XXXXXXXX RANCH, a Nevada corporation, Lessors, and NEWGOLD,
INC., a Delaware corporation, Lessee.
RECITALS
A. Lessors
are owners of the surface and varying interests of the minerals in and to
property described in Exhibit "A" attached hereto, which property is located
in
Elko County, Nevada (the "Premises").
B. Lessee
desires to lease the interests of Lessors in the Premises upon the terms and
conditions herein set forth.
C. Lessors
desire to lease their interests in the Premises to Lessee upon the terms and
conditions herein set forth.
AGREEMENT
FOR
AND
IN CONSIDERATION of the payments herein required, the mutual covenants
herein
contained, and other good and valuable consideration, the receipt and
sufficiency of which are
hereby acknowledged, Lessors and Lessee (the "Parties" and individually a
"Party") agree as follows:
1.
GRANT OF LEASE RIGHTS
X. Xxxxx
of Lease.
Lessors
hereby lease exclusively to Lessee and its successors and assigns
all of Lessors' interest in and to all minerals, including barite, (hereafter
the "Mineral Substance") except for and excluding all oil, gas, oil shale and
other hydrocarbons (liquid or gaseous), coal, uranium and fissionable materials
and geothermal resources, of every nature and kind (hereinafter "reserved
substances") beneath the surface of, within, or that may be produced from the
premises.
B. Rights
of Lessee.
Lessee
shall have the following rights in respect of the Premises:
i. Mining
and Access Rights.
Subject
only to any limitations imposed by federal,
state and local regulations, the free, unrestricted and uninterrupted right
of
access, ingress and egress to the Premises over existing roads or alternate
routes approved by Lessors and the right to enter upon and occupy the Premises
for all purposes reasonably incident to exploring for, developing, mining (by
underground mining, surface mining, strip mining or any other surface or
subsurface method, including any method later developed), extracting, milling,
smelting, refining, stockpiling, storing, processing, removing and marketing
therefrom all ores, metals, minerals, mineral products (including intermediate
products) and materials of every nature or sort, and the right to place,
construct, maintain, use and thereafter remove such structures, facilities,
equipment, roadways, haulageways, utility lines, reservoirs and water courses,
and other improvements as may be necessary, useful or convenient for the full
enjoyment of all of the rights granted under this Agreement subject to
subsection F herein. Lessee shall have sole and exclusive custody, possession,
ownership and control of all ore, rock, drill core and other Mineral Substances
extracted or removed from the Premises and may sell or otherwise dispose
thereof. In the exercise of such rights, Lessee shall be subject only to
compliance with applicable statutes, rules, regulations and the terms of this
Agreement. These rights are also granted and may be utilized for the purpose
or
in the course of carrying on exploration, development or mining operations
on
any other properties in which Lessee may have or acquire any right or interest,
provided Lessors assent to the same.
ii. Cross
Mining.
The
right, if Lessee so desires, to mine and remove any Mineral Substances existing
on, in or under the Premises through or by means of shafts, openings or pits
which may be sunk or made upon adjoining and nearby properties, and the right
to
store any Mineral Substances from the Premises upon any such properties. In
addition, Lessee may use the Premises for any shafts, openings, pits and storage
areas sunk or made for the mining, removal and/or stockpiling of any Mineral
Substances from any adjoining or nearby properties. Mineral Substances taken
from the Premises shall at all times be kept entirely separate and distinct
from
any other ore or concentrated product until the same are measured and sampled
so
that the rights of Lessors shall be at all times preserved and
protected
iii. Commingling.
The
right to commingle ore removed from the Premises or products
derived therefrom after treatment, with other ore or products, before or after
concentration or beneficiation, so long as the data necessary to determine
the
weight, grade, and recoverability of both the ore removed from the Premises
or
products derived therefrom and the ore or products with which it is commingled
are obtained by Lessee. Lessee shall then use that data to determine Lessors'
royalty for such in minerals, metals and/or other products extracted from ores
or products so mixed. Such data and determinations shall be acquired and
completed in accordance with generally accepted industry practices.
iv. Deposit
of Waste Materials.
The
right to temporarily or permanently deposit on or off the Premises tailings,
waste rock, overburden, surface stripping materials, process solutions, and
all
other materials originating from the Premises or from adjoining or nearby
properties, even if the sole use of the Premises may be for the placement of
such materials subject to any and all reclamation as required by state and
Federal statutes and regulations, including but not limited to providing access
for livestock and seeding.
v. Treatment.
The
right, at Lessee's election and in any manner it deems fit, to beneficiate,
concentrate, process, smelt, refine, and otherwise treat on or off the Premises
any Mineral
Substances taken from the Premises or from adjoining or nearby properties by
any
physical or chemical method or methods. In exercising this right, Mineral
Substances may be removed to a plant or plants existing, established or
maintained upon the Premises or elsewhere.
vi. Water
Rights.
The
right to use any of Lessors' water rights on, about, under or appurtenant to
the
Premises or to which the Premises are riparian to facilitate the exploration,
mining
and processing rights granted in this Agreement subject to approval of the
Lessors which will not unreasonably be withheld if such use does not materially
interfere with Lessors' livestock use of the area.
2.
TERM
A.
Term.
The
term of this Agreement shall commence as of the Effective Date and shall
continue for a period of five years thereafter unless sooner terminated in
the
manner herein provided. If at the end of said five-year period, being the
primary term, Lessee is engaged in Mining Operations (as defined below), the
term of this Agreement shall automatically continue for so long thereafter
as
Lessee continues to be engaged in Mining Operations.
B. Definition
of Mining Operations.
For
purposes of this Agreement "Mining Operations"
shall include, but shall not be limited to, development, extraction, processing.
leaching or sale of ores, concentrates or derivatives retrieved through leaching
of ores, produced from the Premises. Activities off the Premises shall
constitute Mining Operations when they are conducted in connection with an
integrated mining operation involving the Premises and other properties in
which
Lessee holds an interest. Development includes activities, including permitting,
carried on diligently and in good faith preparatory to commencing or resuming
operations at a mine. Lessee shall be deemed to be actively engaged in Mining
Operations so long as all such operations, once begun, do not cease for a period
of more than 365 consecutive days. In the event Lessee is actively engaged
in
Mining Operations at the end of the primary term but at any time is unable
to
obtain a satisfactory market or a satisfactory price for Mineral Substances
and
as a result suspends mining, processing or marketing operations from time to
time, then Mining Operations shall not be deemed to have ceased and this
Agreement shall not expire or terminate provided that Lessee notifies Lessors
of
such loss of market or inability to obtain a satisfactory price and diligently
attempts to market Mineral Substances at a satisfactory price and recommence
operations. Mining Operations shall not be deemed to have ceased if once begun
they are interrupted through Force Majeure in accordance with Section 8. If
Mining Operations have not commenced at the end of the primary term because
of
Force Majeure conditions, the primary term shall be extended until such Force
Majeure conditions cease.
C. Continuation
of Use.
If, at
the end of the primary or extended term, Lessee is not conducting
or has ceased Mining Operations, but is utilizing the Premises in support of
Mining Operations
on other lands, then this Agreement shall continue in force as to the lands
subject to such uses and such expansions thereof as may reasonably be
contemplated, as designated in good faith by Lessee, and the payment provided
in
Section 3.A shall be rental for such uses.
3.
PAYMENTS TO LESSORS
A. Annual
Rental.
As
initial consideration for the lease rights granted herein, Lessee shall pay
to
Lessors Twenty Thousand Dollars ($20,000.00). Subject to Lessee's right to
terminate this Agreement, Lessee shall pay the following additional amounts
to
Lessors as rent:
|
Due
Date (in each case prior to )
|
Payment
|
|
First
yearly anniversary of Effective Date
Second
yearly anniversary of Effective Date
Third
yearly anniversary of Effective Date
Fourth
yearly anniversary of Effective Date
Fifth
yearly anniversary of Effective Date and
each
subsequent anniversary of Effective Date thereafter
|
$50,000
$50,000
$50,000
$50,000
$50,000
|
On
each
five year term the annual rentals shall be subject to adjustment as set forth
in
subsection E herein.
None
of
the payments made in accordance with the schedule set forth above shall be
deductible as
a
credit against production royalties payable to Lessors pursuant to Section
3.B
until production commences. After production commences no production royalties
shall be due Lessors until the royalties exceed the annual $50,000.00 rental
after each anniversary of the effective date. Lessee's production royalties
shall be deductible as a credit against the annual payment until the royalties
exceed $50,000.00 during the lease year and then paid to Lessors.
B. Production
Royalty.
When
Lessee commences production of ores, minerals or materials from the premises,
Lessee shall pay to Lessors a production royalty equal to Lessors' percentage
in
the mineral interest of the parcel from which production occurs as set out
in
Exhibit "B" of a percentage of the Net Smelter Returns (NSR) received by Lessee
from the sale of said ores, minerals or materials, except for barite, from
the
Premises, should such amount exceed the annual rental payment specified above.
The percentage of net smelter returns to which Lessors' percentage payment
shall
be applied or credited to Lessee's annual rental is as follows:
|
Price
of Gold (U.S.)
|
Percent
NSR
|
|
$150.00
to $250.00 per ounce or less
$250.00
to $350.00 per ounce
$350.00
to $450.00 per ounce
$450.00
to $550.00 per ounce
$550.00
to $650.00 per ounce
$650.00
to $750.00 per ounce
$750.00
per ounce or above
|
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
|
For
all
other minerals other than gold, the average fair market value at the time of
production, as quoted in Metals
Week
or a
comparable publication.
For
barite, the production royalty shall be 5% of the gross revenues derived from
the sale of any barite mined upon the premises adjusted to Lessors' percentage
in the mineral interest in the parcel from which production occurs.
(1) If
Lessee
sells refined gold or silver, Lessee will be deemed to have received proceeds
from the sale thereof equal to the number of ounces of refined gold or silver
outturned to Lessee's account during the calendar quarter multiplied in the
case
of gold by the average daily London Bullion Brokers P.M. Gold Fixing during
such
calendar quarter and in the case of silver by the average of the daily Engelhard
industrial bullion price for silver during the calendar quarter. The average
price for a calendar quarter shall be determined by dividing the sum of all
daily prices posted during the calendar quarter by the number of days that
prices were posted The posted price shall be obtained from the Wall Street
Journal, Reuters, E&MJ or other industry-accepted source. If a posted price
referenced above becomes no longer available, Lessee shall, acting reasonably,
select an alternative posted price that closely approximates such original
posted price. Lessee shall have the right to market and sell to third parties
refined gold and silver in any manner it chooses, including the sale of such
refined gold and silver on the commodity market. In this regard, Lessors shall
have no right to participate in any gains and/or profits or obligation to suffer
any losses accruing to Lessee as a result of forward sales, options trading,
commodities futures trading or similar transactions.
(2) Charges
to be deducted from proceeds in determining Net Smelter Returns are
the
following:
(a) all
costs, charges and expenses paid or incurred by Lessee for treatment
in the smelting and refining processes (including handling, processing, interest
and provisional
settlement fees, sampling, assaying and representation costs, penalties and
other processor
deductions);
(b
) all
costs, charges and expenses paid or incurred by Lessee for transportation
(including freight, insurance, security, transaction taxes, handling, port,
demurrage, delay and forwarding expenses incurred by reason of or in the course
of such transportation) of Mineral Substances from the Premises to the place
or
places of treatment and thence to the place or places of sale;
(3) Royalties
shall accrue quarterly (based on calendar quarters) and shall become
due and payable by Lessee prior to the end of the month following the end of
each quarter. Royalty payments shall be accompanied by pertinent information
in
sufficient detail to explain the calculation of the royalty
payment.
(4) All
statements for royalties rendered to Lessors by Lessee during any quarter shall
conclusively be presumed to be true and correct after one year following the
end
of such quarter unless within said one-year period Lessors takes written
exception thereto and makes a claim on Lessee for adjustment. No adjustment
favorable to Lessee shall be made unless it is made within the same prescribed
period.
(5) Lessors,
upon notice in writing to Lessee, and utilizing a designated representative,
shall have the right to audit Lessee's accounts and records relating to the
payment of the royalty for any calendar quarter within the one-year period
following the end of such calendar quarter; provided, however, the making of
any
audit shall not extend the time for the taking of written exception to and
the
adjustment of accounts as provided for in the paragraph above. All audits shall
be conducted by Lessors, at Lessors' sole expense, at the office of Lessee
where
the relevant books and records are maintained and such audit shall be conducted
during normal business hours.
C. Place
and Allocation of Payment.
All
payments shall be made and allocated in accordance
with the provisions of Section 9 below.
D. No
Royalty on Test Materials.
Lessee
shall have the right to mine and market amounts
of Mineral Substances reasonably necessary for sampling. assaying. metallurgical
testing and evaluation of the mineral potential of the Premises without
incurring any obligation to make production royalty payments.
E. The
primary term base rental shall be adjusted upward or downward, on each Fifth
yearly anniversary of the effective date by an increase or decrease based on
the
Consumer Price Index (1982-84=100), base beginning with August 2006, published
by the Bureau of Labor and Statistics, United States Department of Labor, as
follows:
1. A
basic
index figure for the purpose herein shall be the index figure for the month
of
August 2006 for "all items" in the Consumer Price Index' All Urban Consumers,
which is agreed to be 2039. If the corresponding index figure for the month
of
August immediately preceding the commencement of each FIVE (5) year term renewal
of this Lease, shall vary from the basic index figure for the month of August
2006, then the base rental for the Lease term commencing on the next anniversary
of the Effective Date following shall be adjusted upward or downward to an
amount arrived at by multiplying the sum of $50,000.00, times the percentage
increase or decrease in the basic index figure from August 2006 to the month
of
August preceding the commencement of said the second five year term. (Example:
Based upon an August 2006 Consumer Price Index of 203.9 and an increase to
215.00 for August 2011. 215.0-203.9 = 5.44%. (5.44% X $50,000.00) + 50,000.00
=
$52,720.00 rental for the succeeding five year period.
2. The
adjustment of the base rental, as provided in paragraph 1 above, shall be
determined as soon as the corresponding index figure to the basic index figure
is available from the Bureau of Labor Statistics, United States Department
of
Labor, and the annual rental payment shall be adjusted accordingly. The adjusted
rental shall be applicable from the beginning of each five year term, whether
or
not it has been calculated by said date.
3. The
parties understand and agree that the provision for adjustment of base rental
herein contained is intended to provide for an increase or decrease, to keep
the
base rental, commencing with the second five year term of this lease and each
five year term thereafter equivalent to the base rental adjusted for the
increase or decrease in the Consumer Price Index.
4. In
the
event that the Bureau of Labor Statistics, United States Department of Labor
changes the form or the basis of calculating the Consumer Price Index, the
parties agree that the comparable date shall be used to adjust the base rental
to an amount equivalent to the purchasing power of such rental as of August,
2006. In the event the Bureau of Labor Statistics shall change the base period
(now 1982-84 = 100), the new index number for the month of August, 2006 shall
be
substituted for the number used in this Lease.
F. Compensation
for Surface Disturbance and Use.
Lessors
shall receive no compensation for surface damage to the Premises for the use
of
existing roads or alternate routes approved by Lessors.
Lessors
shall receive compensation for those rights granted to Lessee set forth in
subsection B on any portion of the Premises used by Lessors in excess of a
total
of 100 acres upon which Lessors do not hold a 100% interest in the mineral
estate. Such compensation shall be at the rate of $25.00 per acre per annum
which may be prorated as follows:
1. If
Lessors have an interest in the mineral rights and that portion is actively
being mined, the compensation shall be prorated on the basis of Lessors'
interest. Example: Lessors have a 50% interest in the minerals on a parcel
being
actively mined. Lessors shall be compensated at the rate of $12.50 per acre
per
annum for any acreage in excess of 100 acres in the entire Leased
area.
2. If
an
area in excess of 100 acres is being disturbed by the uses set forth in
subsection B, and Lessors have no mineral interest in the excess acreage,
Lessors shall be compensated at the rate of $25.00 per acre per
annum.
3. If
Lessors have an interest in the mineral estate and that portion of the Premises
is not being actively mined but is occupied by the Lessee for other uses
incidental to such mining operation, and the total disturbed acreage in the
entire leased Premises exceeds 100 acres, Lessors shall be compensated at $25.00
per acre per annum prorated as to their interest, unless they will receive
royalties from other portions of the Premises Leased.
There
shall be excluded from the 100 acre limit, any portion of the Premises leased
upon which Lessors own a 100% interest in the mineral estate and that portion
is
being actively mined.
4.
TITLE MATTERS
A. Representations
and Warranties.
Lessors
covenant and warrant to Lessee, which covenants
and warranties shall survive termination of this Agreement, as
follows:
(1) Lessors
warrant, to the best of their knowledge and belief, there are no claims,
actions, suits or proceedings pending or threatened on account of or as a result
of ownership of the real property which, if adversely determined, would prevent
or hinder the conditions contained in this Agreement.
(2) Lessors
warrant, to the best of their knowledge and belief, they have good and
merchantable title to the surface of the property, except for reservations
and
exceptions made by previous owners, including any reservations contained in
patents issued by the United States of America or the State of Nevada and that
Lessee has not entered into any leases, licenses, easements or other agreements,
recorded or unrecorded, granting rights to any parties in any of the premises
and no person or other entity has any right to possess in their occupancy of
any
portion of the premises. Notwithstanding the foregoing, nothing contained in
this Agreement shall be construed to create an obligation on the part of the
Lessors to take any title clearative action whatsoever, including, but not
limited to, corrections to remove reservations, restrictions, restrictive
easements, easements or rights-of-way of record as may exist to the date
hereof.
(3) Lessors
warrant that they have no knowledge of violation of law or ordinance with
respect to the use of ownership of the premises.
(4) Lessors
are duly organized and in good standing under the laws of the State of Nevada
and has full right, power and capacity to enter into this Agreement under the
terms set forth herein.
(5) Lessee
shall have quiet and peaceable possession of the Premises.
(6) Lessors
have no knowledge or information indicating that any reclamation obligations
for
prior operations on the Premises are unsatisfied.
B. Title
Defects, Defense and Protection.
Lessee
may at any time cause a title search to be made covering all or any part of
the
Premises. Lessors shall provide Lessee with any abstracts and other evidences
of
title in Lessors possession or control. If, (1) in the opinion of Lessee,
Lessors title to all or any part of the Premises is defective or less than
as
represented in Section 4.A; or (2) Lessors title is contested, questioned or
limited by any person or entity and Lessors are unable or unwilling to promptly
correct the alleged defects, Lessee may, without obligation and without waiver
of any remedies of Lessee, attempt to perfect or defend Lessors' title. In
that
event, Lessors shall cooperate as reasonably necessary to assist Lessee in
its
efforts to perfect or defend Lessors title, time being of the essence. Any
improvement or perfection of title to the Premises shall inure to the benefit
of
Lessee in the same manner and to the same extent as if such improvement or
perfection had been made prior to the execution of this Agreement.
C. Lesser
Interest.
If
Lessors' mineral ownership interest in any of the Premises from which production
is made is less than 100%, then the production royalty payable pursuant to
Section 3.B shall be payable only as to the share of production that is
attributable to Lessors actual mineral ownership interest in the portion of
the
Premises from which such production is made. Such reductions in payments shall
not waive or eliminate any other rights or remedies Lessee may have in
connection with the extent of Lessors' actual mineral interest in the Premises.
This lesser interest shall not apply to the payments payable pursuant to Section
3.A.
5.
OBLIGATIONS OF LESSEE
A. Outstanding
Mineral Interests.
Lessee
has conducted a mineral review of the Premises described in Exhibit "A" and
is
aware Lessors' mineral interest in the above described lands vary from NONE
to
100%. Lessee shall have the obligation, to determine the outstanding mineral
ownership on parcels of interest and obtain proper authorization to mine from
those third parties.
B. Protection
from Liens.
Lessee
shall keep title to the Premises free and clear from any
liens, claims and encumbrances (other than liens for taxes not yet due and
delinquent) arising from
its
operations hereunder. Lessee shall pay for all labor performed upon or material
furnished to the Premises at the request of Lessee and shall keep the Premises
free and clear from liens of mechanics or materialmen in connection with
services performed and material supplied at Lessee's request. Lessee shall,
however, have the right in good faith to contest the validity of any lien,
claim
or liability and shall not be required to remove any such lien, claim or
liability so long as Lessee is contesting the validity or the amount thereof.
The foregoing provisions shall not restrict Lessee from placing a mortgage,
trust deed or other lien upon its interest in the Premises for financing
purposes.
C. Indemnification.
Lessee
shall protect Lessors against any damages arising out of Lessee's
operations on the Premises and shall indemnify Lessors against liability
resulting from Lessee's
operations on the Premises; provided, however, that any act or omission by
Lessors or any agent acting on their behalf, or any breach of warranty by
Lessors, shall not have been a contributing cause to the event giving rise
to
any such damages.
D. Taxes
and Assessments.
Except
as provided below, Lessee shall pay promptly before
delinquency all taxes and assessments that may be assessed during the term
of
this Agreement
upon the Premises resulting from Lessee's activities and products derived
therefrom. However,
Lessee shall always have the right to contest, in the courts or otherwise,
either in its own name or in the name of Lessors, the validity or amount of
any
such taxes or assessments, or to take such other steps or proceedings as it
may
deem necessary to secure a cancellation, reduction, readjustment or equalization
thereof, before it shall be required to pay such taxes or assessments.
Notwithstanding the foregoing, Lessee shall not permit any part of the Premises
to be conveyed and title lost as the result of nonpayment of such taxes and
assessments. Lessee shall provide Lessors with copies of all receipts evidencing
payment of such taxes and assessments. If Lessors should receive tax bills
or
claims that are the responsibility of Lessee, Lessors shall promptly forward
such bills or claims to Lessee for appropriate action. Lessee shall pay the
above-referenced taxes that are assessed from the Effective Date of this
Agreement to its date of termination. Nothing in this paragraph shall be
construed to obligate Lessee to pay that portion of any tax based upon an
assessment of improvements or structures made or placed on the Premises by
Lessors. Lessee shall not be liable for any taxes levied on or measured by
Lessors' income or based upon payments made to Lessors by Lessee under this
Agreement.
E.
Compliance
with Laws and Regulations.
Lessee
shall perform all of its operations on the Premises in compliance with all
applicable federal, State and local laws and regulations pertaining to
environmental protection, reclamation and bonding. Specifically, Lessee shall
comply with all permitting and other regulatory requirements set forth by the
U.S. Bureau of Land Management, the U.S. Forest Service, the U.S. Environmental
Protection Agency, the Nevada Department of Environmental Protection, and any
other regulatory authority having rightful jurisdiction in the conduct of
exploration, development and production operations on the Premises, including
without limitation, requirements applicable to the plugging of drill holes
and
reclaiming, re-contouring and re-seeding of drill pads, trenches, access roads
and other disturbances. Lessee shall have no obligations with respect to prior
operations or preexisting conditions on the Premises. The indemnification
obligations of Lessee pursuant to Section 5.B shall specifically be applicable
to all of Lessee's environmental obligations. The obligations of Lessee under
this Section 5.D shall survive termination of this Agreement.
F. Cooperation
with Lessors' Ranching Operations.
In
exercising its rights hereunder, Lessee shall use reasonable efforts to avoid
interfering with Lessors' ranching operations on the Premises and immediate
vicinity. Such efforts shall include, but not be limited to the
following:
(1) Location
of roads.
(2) Control
of dust conditions on the roads which are causing damage to livestock forage
whether such roads are on or off the leased lands but within the grazing area
of
use.
(3) Fencing
of areas which create a hazard for livestock use together with the gates and
cattle guards as may be requested by Lessors.
(4) Placement
of culverts at road crossings and water courses and drainage to insure natural
stream flow and drainage.
(5) Reimbursement
to Lessors for the full market value for all livestock killed or injured by
activities of the Lessee.
(6) Placement
of livestock waters comparable to those now used by Xxxxxxx in the event
existing stockwater sources are damaged or inaccessible to livestock and such
use adversely effects the customary grazing of livestock in the
area.
(7) Remediation
of any noxious weeds introduced by its activities on the premises.
G. Lessors'
Right to Inspect.
During
the term of this Agreement Lessee shall allow Lessors
and representatives of Lessors, at their sole risk and expense, access to the
Premises for the purposes of viewing or inspecting Lessee's operations, at
times
which, in Lessee's discretion, do not unreasonably interfere with its
operations. Lessors and Lessors' representatives agree to indemnify, protect,
save and hold harmless Lessee and its affiliated and direct and indirect parent
corporations and their respective directors, partners, officers, employees,
agents and corporate affiliates from and against any and all losses, costs,
damages, expenses, attorney fees, claims, demands, liabilities, suits and
actions of every kind and character that may be imposed upon or incurred by
Lessee and its affiliated and direct and indirect parent corporations and their
respective directors, partners, officers, employees, agents or corporate
affiliates on account of, or arising directly or indirectly from, Lessors rights
under this Section 5.G. Lessors acknowledges and agrees that information
obtained pursuant to this Section 5.G shall be subject to the confidentiality
provisions set forth in Section 10 hereof.
H. Delivery
to Data.
Upon
termination of this Agreement, Lessee shall furnish Lessors within a reasonable
time and without warranty or liability one set of copies of all available data
generated from work by or for Lessee on the Premises. Such data is to include,
but not necessarily be limited to, geochemical and assay data; sample maps;
geologic maps, cross sections and reports; geophysical maps, cross sections
and
reports; and drill logs. Lessee shall authorize and permit Lessors to take
possession of any available drill core, drill cuttings, rejects and pulps
derived from the Premises whether or not such materials are stored on the
Premises. Lessee shall have no liability to Lessors or any third party for
lack
of availability or poor condition of any such cores or samples or for any
deficiencies in the accuracy, reliability or completeness of any information
and
data furnished to Lessors. Lessors shall assume all risks stemming from reliance
upon such data by itself and by third parties after disclosure thereof by
Lessors and shall indemnify and hold harmless Lessee as to any claims made
by
such third parties.
I.
No
Obligation to Mine.
Nothing
in this Agreement shall impose any obligation or covenant,
express or implied, upon Lessee to conduct any exploration, development or
mining operations
upon the Premises, it being the intent of the Parties that Lessee shall have
sole discretion to determine the technical and economic feasibility, timing,
method, manner and rate of conducting any such operations. Only the express
duties and obligations provided under this Agreement shall be binding upon
Lessee. The nature, manner and extent of all exploration development, mining
and
other operations, if any, shall be matters to be determined solely within the
discretion of Lessee.
J. Exploration.
Lessee
shall expend sums for exploration work within the premises as
follows:
|
First
lease year
Second
lease year
Third
lease year
Fourth
lease year
Fifth
lease year
|
$
|
150,000.00
450,000.00
1,000,000.00
1,500,000.00
2,000,000.00
|
At
the
request of Lessors, Lessee shall provide to Lessors an accounting of the
expenditures made to evidence satisfaction of this obligation.
6.
TERMINATION
A.
Termination
by Lessors.
In the
event Lessors consider that Lessee has not complied with any obligation
hereunder, Lessors shall notify Lessee setting out specifically in what respect
it is claimed that Lessee has breached this Agreement. If the alleged breach
is
not cured within 30 days after written notice is given of default for failure
to
make a required cash payment or 60 days after written notice is given of any
other default or if Lessee has not within that time either commenced to cure
the
alleged breach (other than a breach for non-payment) and does not thereafter
diligently complete such cure, or challenges the legitimacy of the allegation,
Lessors may terminate this Agreement by delivering to Lessee written notice
of
such termination; provided, however, that in the event Lessee challenges the
legitimacy of the allegation, Lessee may give written notice to Lessors within
such 30-day or 60-day period setting forth such fact. If Lessors give written
notice within 15 days of Lessee's notice that Lessors reject Lessee's position
then this Agreement shall not be terminable by Lessors until there is a final
judicial determination by a court of competent jurisdiction that a default
exists and shall not be terminated thereafter if Lessee shall satisfy such
judgment within 30 days following its entry (or if an appeal of such judgment
is
taken following its affirmance by the highest court to which such an appeal
is
made). Failure of Lessors to give such notice shall constitute agreement by
Lessors that Lessee is not in default. Lessors shall not be entitled to
terminate this Agreement for any default which by its nature is not
retroactively curable if Lessee has used its best efforts to cure such a default
to the extent practical or if Lessee has paid Lessors' damages for such default
where damages are an appropriate remedy. Lessors shall have no right to
terminate this Agreement except as expressly provided in this Section 6.A,
and
termination of this Agreement shall be the sole remedy of Lessors. Neither
the
service of any notice nor the performance of any acts by Lessee intended to
meet
any such alleged breach shall be deemed an admission or presumption that Lessee
has failed to perform all of its obligations under this Agreement.
Notwithstanding the foregoing provisions of this Section 6.A, this Agreement
may
not be terminated, in whole or in part, by less than all the individuals or
entities included within the term "Lessors."
B. Termination
by Lessee.
Lessee
shall have the right in its sole discretion to terminate this Agreement atany
time with respect to all or any part of the Premises by giving Lessors written
notice of such termination. Partial termination shall not cause a reduction
in
the payments prescribed in Section3.A. Upon such termination, all right, title
and interest of Lessee under this Agreement shall terminate with respect to
the
Premises affected. Lessee shall be relieved of all further obligations set
forth
in this Agreement as to the Premises affected except those obligations, if
any,
which have accrued prior to such termination. Any taxes, assessments and
governmental charges for which Lessee was responsible prior to termination
shall
be prorated as of the termination date.
C. Release.
Following termination of this Agreement as to all or a part of the Premises,
Lessee shall promptly deliver to Lessors a fully executed release of this
Agreement in recordable
form, as to those parts of the Premises that are affected.
D. Reclamation:
Removal of Property.
Upon
termination of this Agreement, Lessee shall
have a continuing right to enter upon the Premises to complete required
reclamation. Lessee shall
within one year after the date of termination remove from the Premises all
of
its 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 in the Premises. Any property of Lessee
not
removed by the
end
of this one-year period shall become the property of Lessors; however, Lessee
does not warrant
the condition or safety of any such property. Lessee shall have the right to
keep a watchman
on the Premises during this one-year period.
7.
LIENS
In
the
event that Lessors fail to promptly pay, when due, taxes, mortgages or other
liens levied against the Premises and payable by Lessors, Lessee shall have
the
right (but shall not be obligated) to pay such past due amounts and, if Lessee
does so, Lessee shall be subrogated to all the rights of the holders thereof
and
Lessors shall reimburse Lessee for all such payments and for all related costs
and expenses paid or incurred by Lessee (including, without limitation, related
attorney fees) within three months after the same are paid or incurred by
Lessee. Any payments to Lessors under this Agreement may be credited by
reimbursements to Lessee under this Section. The provisions of this Section
shall survive termination of this Agreement.
8.
FORCE MAJEURE
Lessee
shall not be liable for failure to perform any of its obligations, other than
making payments due under Section 3A, during any period in which performance
is
prevented, in whole or inpart, by causes herein termed Force Majeure. For
purposes of this Agreement, the term "Force Majeure" shall include labor
disputes; acts of God; action of the elements, including inclement weather,
floods, slides, cave-ins, sinkholes, earthquakes and drought; laws, rules,
regulations, orders, directives and requests of governmental bodies or agencies;
delay, failure or inability of suppliers or transporters of materials, parts,
supplies, services or equipment or by contractors' or subcontractors' shortage
of, or inability to obtain, labor, transportation, materials, machinery,
equipment, supplies, utilities or services; accidents; breakdown of equipment,
machinery or facilities; judgments or orders of any court or agency; inability
to obtain on reasonably acceptable terms or in reasonably acceptable time any
public or private licenses, permits or other authorizations; curtailment or
suspension of activities to remedy or avoid an actual or alleged, present or
future violation of federal, state or local environmental standard; acts of
war
or conditions arising out of or attributable to war, whether declared or
undeclared; riot; civil strife; fire; explosion; or any other cause whether
similar or dissimilar to the foregoing, except for the inability to meet
financial commitments. If Lessee desires to invoke the provisions of this
Section, Lessee shall give notice of the commencement of the circumstances
giving rise to such Force Majeure. The time for discharging Lessee's obligations
with respect to the prevented performance, or the time within which Lessee
must
undertake or complete any activity, shall then be extended for the period of
Force Majeure.
9.
NOTICES AND METHODS OF MAKING PAYMENTS
A.
Notices.
Any
required notice or communication shall be in writing and shall be effective
when personally delivered (including delivery by express courier service) to
the
following addresses, or when addressed as follows and deposited, postage
prepaid, in the United States mail for certified delivery:
|
If
to Lessors:
If
to Lessee:
|
Xxxxxx
Xxxxxxxx
Xxxxxxxx
Ranch
XX
Xxx 000
Xxxxx,
XX 00000
Newgold,
Inc.
000
Xxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxx,
XX 00000
|
Xxxxxx
Xxxxxx
Xxxxxx
Livestock
XX
00, Xxx 000
Xxxxx,
XX 00000
|
Either
party may, by notice to the other given as aforesaid, change its mailing address
for future notices.
B. Any
payment required to be made by Lessee to lessors may be made in cash or by
check, in the sole discretion of Lessee, and may be delivered personally or
deposited in the United States mail, postage prepaid and registered or
certified, return receipt requested. All payments shall be allocated as
follows:
(1) The
initial consideration and each annual rental shall be paid one-half (1/2) to
XXXXXX LIVESTOCK and one-half (1/2) to XXXXXXXX RANCH.
(2) Any
production royalty shall be paid to each Lessors or credited to each Lessor
in
the percentage as set forth in Exhibit "B".
C. Payments
After a Transfer of Interest. In
the
event payments should be made to other parties because of any transfer of the
interest of any of the entities constituting Lessors, payments tendered to
Lessors' designated agent, or to the party making the transfer if only one
party
constitutes Lessors, shall conclusively be deemed payment to the transferee
until Lessee receives notice and evidence satisfactory to it from both the
agent
(if applicable) and the transferor that the transferor's interest has been
transferred and that payments should be made to the transferee or the
transferee's designated agent.
10.
CONFIDENTIALITY
Lessors
shall not, without the express written consent of Lessee not to be unreasonably
withheld, disclose any information concerning the terms of this Agreement
(excepting the Memorandum of Mineral Lease Agreement described in Section 11.F)
or operations conducted under this Agreement (except information and data that
is generally available to the public), nor issue any press releases concerning
such information. However, if Lessors contemplates transferring its interest
to
a third party, it shall have the right to disclose such information to that
party if it first obtains an agreement in writing from such third party,
satisfactory to Lessee after review in advance, providing that the third party
shall hold confidential the information furnished to it.
11.
MISCELLANEOUS
A. Cooperation
by Lessors.
Lessors
shall execute all documents and otherwise cooperate with Lessee as needed in
connection with the conduct of operations on the Premises, including the
acquisition of governmental permits, post-mining reclamation approvals, water
rights, and other rights and privileges related to the conduct of operations
on
the Premises and reclamation thereof. In that regard, Lessors agrees not to
protest, challenge or otherwise oppose any water right or operational permit
filings that Lessee may make to facilitate operations or proposed operations
on
or in connection with the Premises if, in the opinion of Lessors, any such
water
right or permit filing does not adversely effect Lessors' livestock operation
or
water rights presently held by Lessors.
B.
Sharing
of Data by Lessors.
Lessors
shall, upon execution of this Agreement, provide or make available to Lessee
any
available technical and title information and drill core and other samples
(such
as cuttings, pulps, drill logs, assay results, feasibility reports, etc.)
concerning the Premises that are in Lessors' possession or control. Similarly,
Lessors shall, as soon as possible, provide or make available to Lessee any
such
information and samples that Lessors may acquire subsequent to the execution
of
this Agreement, whether obtained personally or from third parties..
C.
Relationship
of the Parties.
Nothing
contained herein shall be deemed to constitute
either
Party, in its capacity as such, the partner, agent or legal representative
of
the other Party, or to create any partnership, mining partnership or other
partnership relationship, or fiduciary relationship between them, for any
purpose whatsoever. Except as expressly provided in this Agreement, each Party
shall have the free, unrestricted and independent right to engage in and receive
the full benefits of any and all business endeavors of any sort whatsoever
outside the Premises or outside the scope of this Agreement, whether or not
competitive with the endeavors contemplated herein, without consulting the
other
or inviting or allowing the other therein.
D. Transfers.
Lessors
and Lessee and their respective successors shall have the right to assign or
otherwise transfer their respective interests in this Agreement in whole or
in
part provided that the transferee agrees in writing to assume all, or a portion
of all if applicable, obligations of Lessors or Lessee hereunder, as the case
may be. No such transfer shall be effective against the non-transferring Party
until that Party receives written notice of the transfer in accordance with
Section 9A.
E.
Binding
Effect.
Subject
to the provisions of Section 11.D above, the provisions of this
Agreement shall inure to the benefit of and be binding upon the Parties and
their respective
heirs,
executors, administrators, personal representatives, beneficiaries, successors
and assigns.
F. Memorandum
of Agreement.
Upon
execution of this Agreement, the Parties shall also execute a short form of
this
Agreement (the "Memorandum of Mineral Lease Agreement") which shall be recorded
in the office of the EIko County Recorder. The execution and recording of the
Memorandum of Mineral Lease Agreement shall not limit, increase or in any manner
affect any of the terms of this Agreement, or any rights, interests or
obligations of the Parties.
G. Construction
of Agreement.
This
Agreement and its Exhibit constitute the entire understanding
of the Parties with respect to the Premises, all previous agreements, promises,
representations,
negotiations, writings and understandings between the Parties concerning the
Premises
being expressly rescinded. Except for obligations of good faith and fair
dealing, there are no terms or conditions, express or implied, other than herein
stated. This Agreement shall be subject
to all valid and applicable provisions of statutory or common law, rules and
regulations. Should
this Agreement or any of its provisions or operations be found to be contrary
to
any such valid
law, rule or regulation, the latter shall be deemed to control and this
Agreement shall be regarded
as modified accordingly. Subject to the preceding sentence, no modification
or
alteration of this Agreement shall be effective unless made in writing and
executed by the Parties with the same formality as this Agreement. Wherever
the
term "including" is used herein. it shall be deemed to mean "including without
limitation, " and wherever the phrase "shall include" is used herein, it shall
mean "shall include without limitation. "
H. Headings.
The
headings used herein are for convenience only and shall be disregarded
in construing and enforcing this Agreement.
I. Multiple
Counterparts.
This
Agreement may be executed in multiple counterparts and
all
counterparts taken together shall be deemed to constitute one and the same
document
J.
Rule
Against Perpetuities.
The
Parties do not intend nor desire for this Agreement to violate the common law
Rule Against Perpetuities or any analogous statutory provision or any other
statutory or common law rule imposing time limits on the vesting or termination
of estates in
land.
If any provision of this Agreement does or would violate the Rule Against
Perpetuities or
any
analogous statutory provision or any other statutory or common law rule imposing
time limits
on
the vesting or termination of estates in land, then this Agreement shall not
be
deemed void
or
voidable, but shall be interpreted in such a way as to maintain and carry out
the Parties' objectives
to the fullest extent possible by law.
K. Applicable
law.
This
Agreement shall be construed, interpreted and governed by the
laws
of the State of Nevada.
L.
Attorney
Fees.
In the
event either Party brings any action or proceeding for damages or equitable
relief against the other Party for an alleged breach or default of any provision
of this Agreement to recover monies due or to enforce, protect or establish
any
right or remedy of either Party under this Agreement, the prevailing Party
shall
be entitled to recover as a part of such action or proceeding reasonable
attorney fees and court costs.
M.
Disputes.
Disputes or differences between the Parties shall not interrupt performance
of
this Agreement or the continuation of operations hereunder. In the event of
any
dispute or difference. operations may be continued and payments may be made
hereunder in the same manner as prior to such dispute or difference, In case
of
suit, adverse claim. dispute or question as to the ownership of the Premises
or
production royalties. or any interest therein. Lessee may, in its sole
discretion, deposit the payment ( or the portion of the payment in dispute.
if
less than the whole payment is in dispute) into an escrow account and Lessee
shall not be held in default in payment thereof until such suit, claim. dispute
or question has been finally disposed of.
IN
WITNESS WHEREOF the Parties have executed this Agreement on the dates set forth
in the acknowledgments below. but effective as of the Effective
Date.
|
LESSORS:
XXXXXX
LIVESTOCK, a Nevada partnership
By:
/s/
D. Xxxxxx
Xxxxxx
D.
XXXXXX XXXXXX, General Partner
XXXXXXXX
RANCH, a Nevada corporation
By:
/s/
Xxxxxx X.
Xxxxxxxx
XXXXXX
X. XXXXXXXX, President
LESSEE:
NEWGOLD,
INC., a Delaware corporation
By:/s/
Xxxxx
Xxxxxxx
XXXXX
XXXXXXX, President
|
