OPTION AGREEMENT TO PURCHASE MINE PROPERTY
Exhibit
10.3
TO
PURCHASE MINE PROPERTY
This Option Agreement made
at Reno, Nevada this 21 day of September, 2009 by and
between
Mexus
Gold U.S., hereinafter called “Optionee”,
W
I T N E S S E T H:
Optionor
is the owner of certain patented and or unpatented mining claims situated
in
Xxxxxxxxx
County, Nevada
And more
particularly described in Exhibit “A” attached hereto and made a part hereof and
hereinafter referred to as the PROPERTY.
This Option Agreement will set forth
all the terms and conditions under which the Optionor grants Optionee an Option
Agreement of the Property for the purpose and term hereinafter
provided.
In consideration of the covenants and
agreements hereinafter set forth, the parties agree as follows:
X.
XXXXX
Optionor
hereby grants an Option Agreement and demises the Property, including such
personal property as may be located thereon, together with all privileges and
appurtenances, all right, title and interest owned, available or granted to the
Optionor and pertaining to the Property.
II.
TERM
This
Option Agreement is granted for a term commencing from and after the date hereof
and shall extend until this Option Agreement be terminated as hereinafter
provided.
III.
PURPOSES
The
purposes of this Option Agreement are to grant to the Optionee the exclusive
right to enter into and upon the Property, and each and every part thereof so
long as this Option Agreement remains in effect, and to explore for, develop,
mine, xxxxx in place, treat, produce, mill, ship, and sell, all for its own
account, such ores, material (metallic and nonmetallic), and minerals as may be
found therein or thereon, and all of which shall hereinafter be referred to as
PRODUCTION.
IV.
ROYALTIES/RENTALS
4.1 The
Optionee shall issue to Optionor the sum of 250,000 restricted shares of
Optionee’s common stock upon the signing of this Agreement, thereby granting
Optionee an eight (8) month Option Period. During the term of this Option
Period, there will not be any Advance Minimum Royalty or Lease/Rental or any
other payments due or payable to the Optionor.
4.2 At
the end of the Option Period, if Optionee wants an extension or renewal of the
Option Period, or this Option Agreement, Optionee will pay to Optionor the sum
of One Seventy Five Thousand Dollars ($75,000) and restricted shares of the
Optionee’s common stock in the amount equal to Seventy Five Thousand Dollars
($75,000), thereby granting the Optionee an additional six (6) month Option
Period. The number of restricted common shares to be issued under
this provision shall be calculated using the average share price of Optionee’s
stock for a period of 30 days prior to the election to extend the Option
Period.
4.3
However, and notwithstanding the above, during the Option Period production from
the property is subject to the Three Percent (3%) Net Smelter Return Royalties
from production as more fully described in Exhibit B attached
hereto.
V.
OPERATIONS OF OPTIONEE
5.1
Optionee shall conduct all mining and other operations under the Option
Agreement in accordance with GOOD MINING PRACTICES and SOUND PRINCIPLES OF
CONSERVATION and in accordance with all APPLICABLE LAWS and rules and
regulations promulgated by Federal, State and local authorities.
5.2
Optionee shall keep and maintain true and correct BOOKS OF ACCOUNT AND RECORDS
which shall show the amount of Production from the Property and the amount of
proceeds derived from the sale of such Production. Said books and records shall
be open for INSPECTION and audit by Optionor or its agent at all reasonable
times and for a period of one (1) year following termination of this Option
Agreement.
5.3
Optionor expressly reserves the right, at Optionor’s option and expense, to
maintain an AGENT on the Property for the purpose of verifying activities
ranging from drilling results to production, and to check, inspect and keep
account of all drill results and also production from said property, provided
that such Agent and/or inspections do not interfere with Optionee’s
operations.
VI.
INSURANCE/INDEMNITY
6.1 It is
specifically agreed by the parties hereto that the Optionor shall not be liable
to third parties, or employees, or agents of the Optionee, for the activities
and obligations of the Optionee during the term hereof, and that sufficient
notice to such effect shall be posted on the property and appropriately filed in
accordance with the laws of the political jurisdiction(s) within which the
Property is located and wherever Optionee conducts operations relevant to this
Option Agreement.
6.2 Prior
to commencement of operations hereunder, Optionee shall obtain all workmen’s
compensation insurance, liability insurance, and policies of insurance against
other risks for which Optionor may reasonably be considered to have exposure as
a result of Optionee’s operations or tenancy of the Property. All insurance
shall be maintained by Optionee at its own expense throughout the duration of
this Option Agreement, and whenever Optionor reasonably requests, Optionee shall
furnish to Optionor evidence that such insurance is being
maintained.
6.3
Optionee agrees to indemnify and save Optionor harmless from and against any and
all liability, claims and causes of action for personal injury or death, and
damage to, or loss or destruction of property, resulting from its tenancy of the
Property and from its operations hereunder.
VII.
ASSESSMENT WORK
7.1
Optionee shall perform such ASSESSMENT WORK as may be required by Federal, State
and local law and shall prepare and record, for and on behalf of the Optionor,
an affidavit(s) of labor and improvements during each assessment year in order
to maintain all claims in good standing in the name of the
Optionor. Optionee shall pay the ANNUAL MAINTENANCE FEE with the
Bureau of Land Management, Department of the Interior and file and pay recording
fees with the County Recorder’s office(s) NOTICE OF INTENT TO HOLD, for all
unpatented mining claims wherein the filing requirements of Assessment Work has
been superseded by the requirement by Federal, State and or local laws for the
payment of Annual Maintenance Fees for maintaining title to unpatented mining
claims in good standing. Optionee and Optionor shall each provide the
other with a copy of all such filings made in respect to the Property. Should
this Option Agreement be terminated within ninety (90) days before the end of
the then current assessment year, or annual maintenance fee filing deadline,
Optionee shall nevertheless perform the annual labor or pay the annual
maintenance fee and comply with the other requirements of this paragraph. Should
this Option Agreement be terminated prior to said ninety (90) days, Optionee
shall have no obligation to perform such assessment work or pay such annual
maintenance fees.
7.2
During the initial Option Period Optionor acknowledges that all annual
maintenance fees, taxes and other recordings required to maintain title to the
property has been completed and that the above section 7.1 will become active
only if the Option Period is extended or renewed for an additional period of
time.
VIII.
ASSIGNMENT
Either
the Optionor or the Optionee may assign all or any portion of their right, title
and interest in this Option Agreement and/or in the Property at any time and
from time to time upon the giving of written notice of the identity and address
of the assignee, providing however that notwithstanding said assignment(s) in
whatever form, both the Optionee and the Optionor shall remain primarily and
unconditionally liable, respectively, for the performance of all terms and
conditions hereof prior to the date of assignment, as such terms and conditions
are applicable to each.
IX.
TAXES
Optionee
shall pay before delinquent all taxes and assessments that may be levied or
assessed against the Property, or against Production therefrom, except those
taxes which Optionee is contesting in good faith, and except those taxes against
the Property for the first and last year, which taxes shall be pro-rated between
Optionee and Optionor.
X.
WARRANTIES AND TITLE
10.1
Optionor makes no warranties, express or implied, as to the value or condition
of the Property, or existence or adequacy of any facilities or equipment which
are the subject of this Option Agreement. However, Optionor will at all times
during the term of this Option Agreement furnish Optionee with any and all
geological, production, and metallurgical data which may be available to
Optionor. Optionor takes no responsibility for the interpretation of such
data.
10.2
Optionor does warrant that it has good and valid title to the Property, that
there are presently no adverse claims that will affect the Property or this
Option Agreement, and that it will upon demand promptly furnish to the Optionee
copies of all documents and other evidence relating to Optionor’s claim of
title, including, but not limited to, copies of all Patents, location notices
and affidavits relating to assessment work.
10.3
Optionor agrees to notify the Optionee at once of any claim against Optionor’s
interest in the Property or against this Option Agreement and will immediately
undertake the defense of that claim at Optionor’s own expense.
10.4
Optionor further agrees that at the option of the Optionee, Optionee may
undertake the defense of any claim against Optionor’s interest in the Property
or against this Option Agreement, and that Optionor will be liable for damages
sustained by Optionee including the cost of such defense. Upon request by
Optionee, Optionor will deliver to the Optionee all evidence and information
reasonably required to defend against such claim, and will cooperate fully in
such defense.
10.5
Optionor and Optionee each agree to execute, during the term of this Option
Agreement as an accommodation, such additional documents and agreements as the
other may reasonably require in connection herewith, provided that such
additional document(s) or agreement(s) would not impose additional obligations
upon or impair the rights of the accommodating party.
XI.
DISPUTES
It is
specifically agreed that should there arise any dispute between the parties
hereto, such dispute shall not interrupt performance of this Option Agreement by
either Optionee or Optionor, nor will Optionee’s operations hereunder be
interrupted, delayed, or impaired during the pendency of and until the final
settlement of such dispute. In the event of litigation between the parties
hereto, the prevailing party will be entitled to all costs of the litigation,
including but not limited to, reasonable attorney’s fees.
XII.
FORCE MAJEURE
In the
event that Optionee shall be prevented from operating upon the PROPERTY or from
performing its obligations hereunder by reason of Acts of God, Government, or of
the common enemy, insurrection, riot, labor disputes, fire, explosion, flood,
earthquake, interruption of transportation, or the inability to obtain permits,
such circumstances shall relieve Optionee of its obligations hereunder, but only
for the duration of such disruption.
XIII.
TERMINATION
13.1
Optionee may at any time after the date hereof, surrender this Option Agreement,
provided written notice of termination is given Optionor not less than thirty
(30) days prior to the effective date of such termination, after which all right
and obligations of Optionee hereunder shall cease.
13.2 In
the event of Optionee’s failure to comply with any substantial and material
provision of this Option Agreement, Optionor shall provide Optionee with a
written notice within thirty (30) days setting forth the nature of such
non-compliance, after receipt of which Optionee shall have not less than thirty
(30) days to cure such non-compliance. In the event Optionee fails to cure its
non-compliance within the prescribed period, Optionor may thereupon terminate
this Option Agreement by the giving of written notice, after the receipt of
which all rights of Optionee hereunder shall cease. However, should there be an
issue as to whether or not non-compliance has occurred, then resort shall be
held to the provisions of paragraph XI hereof.
13.3 In
the event of termination of this Agreement, Optionee shall deliver to Optionor
within sixty (60) days following the effective date of said termination, a
written release and quit claim deed releasing all of the rights granted to and
acquired by Optionee under this Agreement and quit claiming to Optionor all of
the rights granted, title and interests of Optionee in and to the
Property.
13.4 If
otherwise still in effect, the terms of this Option Agreement shall not extend
for a period longer than is allowed by applicable law.
XIV.
PURCHASE OPTION
14.1 By
notification of intent to purchase the Property given to Optionor by Optionee
this Option Agreement shall thereafter be considered a CONTRACT TO PURCHASE. The
aggregate price of Five Million Dollars ($5.0 million) is payable in a
combination of cash and stock, with a minimum cash payment of $1,500,000 and the
balance in shares of the Optionee’s common stock. The Purchase Price
shall be paid in quarterly installments beginning ninety (90) days from the date
of notification of intent to purchase the Property. Each installment will
consist of a cash payment of Seventy Five Thousand Dollars ($75,000) and
restricted shares of Optionee’s common stock in an amount equal to Seventy Five
Thousand Dollars ($75,000). The number of restricted common shares to be issued
under this provision shall be calculated using the average share price of
Optionee’s stock for a period of thirty (30) days prior to the installment due
date. On the fifth anniversary of the signing of this Option
Agreement, the date first above appearing, Optionee is to pay to Optionor the
remainder of any and all cash and stock payments of the Purchase Price so that
the aggregate payment to Optionor equaling $1,500,000 cash and common stock in
an amount equal to $3,500,000 has been paid by Optionee on or before five (5)
years from the signing of this Agreement. Notwithstanding the
hereinabove, the 3% Net Smelter Return overriding royalty obligations remain.
Upon the notification of Optionee’s election to Purchase the Property, Optionee
has, at its sole discretion, the right to make payment in full on or before the
period of five (5) years from the date of such election, with no prepayment
penalty.
14.2 Upon
receipt of said notice, Optionor shall within sixty (60) days thereafter,
deliver into escrow with a title insurance company licensed to operate in the
state in which the Property is located, or other escrow agent as the parties may
agree upon, such deed(s) and other documents as the Optionee may reasonably
require, constituting evidence of good and sufficient title to the
Property. Instructions to the escrow agent shall include the
application of all terms and conditions of this Option Agreement interpreted as
a purchase agreement and shall provide that subsequent payments to Optionor be
made through the escrow agent and that sufficient funds be held by the escrow
agent to assure that title to the Property will be delivered to purchaser free
and clear of all liens and encumbrances, immediately upon there having been
received by and on behalf of the Optionor, payments which in the aggregate
amount to the total purchase price.
XV.
PAYMENTS
All
payments made by the Optionee to the Optionor pursuant to provisions of this
Option Agreement shall be made promptly and will be remitted to Optionor at the
address herein designated for receipt of notices by Optionor, except as Optionor
may from time to time otherwise designate in writing, and except as provided in
paragraph XIV above.
XVI.
MISCELLANEOUS PROVISIONS
16.1 This
Option Agreement shall be construed in accordance with the Laws of the State of
Nevada.
16.2 The
failure of either party to enforce any provision hereof at any time shall not be
construed to be a waiver of such provision or of any other
provisions.
16.3 This
Option Agreement supersedes all prior agreements between Optionee and Optionor
relating to the subject Property and constitutes the entire agreement thereof.
No amendment or modification of this Option Agreement shall be binding on either
Optionee or Optionor unless made in writing and duly executed by
both.
16.4
Titles and boldface type used in this Agreement are provided for convenience
only and shall not be construed to alter the meaning of the text.
16.5 This
Option Agreement has been executed in Two (2) counterpart(s) each of which shall
be deemed to be an original but all of which together shall constitute one and
the same Option Agreement.
16.6 If
any term, provision, covenant or condition of this Option Agreement, or any
application thereof, should be held by a court of competent jurisdiction to be
invalid, void or unenforceable, all provisions, covenants and conditions of this
Option Agreement, and all applications thereof not held invalid, void or
unenforceable, shall continue in full force and effect and shall in no way be
affected, impaired or invalidated thereby.
16.7 All
Notices to Optionee shall be given only by certified mail and addressed
to:
Nevada
Pacific Rim
X.X. Xxx
00000
Xxxx,
Xxxxxx 00000
except as
may be subsequently designated in writing by Optionee.
16. 8 All
Notices to Optionor must be written and signed by Optionee and shall be given by
certified mail and addressed to:
Mexus
Gold U.S.
1805 X.
Xxxxxx Street, #150
Carson
City, Nevada
except as
may be subsequently designated in writing by Optionor.
16.9 To
the extent that State or Federal “depletion allowance” is available with respect
to Production from the Property to which this Option Agreement relates, such
depletion allowance(s) shall be reserved for use by the Optionee.
16.10
Wherever used herein, Optionor and Optionee shall include the singular and the
plural and in the event that either Optionor or Optionee, or both, is/are more
than one person, natural or otherwise, the obligations and liabilities created
by this Option Agreement are the joint and several obligations and liabilities
of all such persons, respectively constituting either the Optionor or the
Optionee.
XVII.
OTHER PROVISIONS
17.1 This
Agreement is for a period of Eight (8) Months from the date first above
appearing and may be extended for an additional Eight (8) Months upon written
notification to Optionor by Optionee two (2) weeks prior to the end of the
Agreement period. After which, Optionee, at its sole discretion, may
either exercise its right to Purchase the Property, to negotiate a renewal or
lease agreement of the Property, or allow this Option Agreement to
expire.
17.2 The
Property is subject to certain Net Smelter Return royalty provisions which are
more fully described in Exhibit B hereto.
IN
WITNESS WHEREOF THE PARTIES hereto have executed this Option Agreement as of the
21 day of September, 2009.
OPTIONOR:
/s/
Xxxxxx X. Xxxxxxxx
____________________________
Xxxxxx X.
Xxxxxxxx
President
Nevada
Pacific Rim
OPTIONEE:
/s/ Xxxx
X. Xxxxxxxx
_____________________________
Xxxx X.
Xxxxxxxx
President
EXHIBIT
A
LEGAL
DESCRIPTION
Mining
properties consisting of patented and unpatented mining claims and appropriated
water rights situated in the Xxxx Mining District, Xxxxxxxxx County, Nevada, as
enumerated and described herein
A. Wisconsin Patented Group of
Claims. Those certain patented mining claims, U.S. Mineral
Survey No. 3388, located in the Xxxx Mining District, Xxxxxxxxx
County, State of Nevada, that are described as follows:
NEVADA; WISCONSIN; XXXX XXXXXXX; BELLE
OF XXXX; LUCKY
XXX; LUCKY XXXX; ALHAMBRA; MOUNTAIN
VIEW and SAVAN
FRACTION, expressly excepting and
excluding from these presents all that
Portion of the ground hereinbefore
described embraced in said XXXXXX
Xxxx claim Survey No. 3281, in conflict
with said SAVANA FRACTION
Lode claim, and also all veins, lodes,
and ledges, throughout their entire
depth, the top or apexes of which lies
inside of such excluded ground.
B. Florida Patented Group of
Claims. Those certain patented mining claims, U.S. Mineral
Survey No. 3281, located in the Xxxx Mining District, Xxxxxxxxx County, State of
Nevada, that are described as follows:
FATHER, MOTHER, XXXXXX, FLORIDA,
expressly excepting and excluding from these presents all that portion of the
ground hereinbefore described embraced in the said FATHER Lode claim Survey No.
3281 which has been sold in a private sale consisting of five (5) acres or more
or less situate on the north side of the State Route 3 which boundaries can be
established by survey.
C. Monaco Unpatented Group of
Claims. Those certain unpatented mining claims and millsites located in
the Xxxx Mining District, Xxxxxxxxx County, Nevada, that are described as
follows:
Claim
Name Serial
Number
Monaco
#1 123398
Monaco
#2 123399
Monaco
#3 123400
Monaco
#4 123401
Monaco
#5 123402
Monaco
#6 123403
Monaco
#7 123404
Monaco
#8 123405
Monaco
#9 123406
Monaco #10
Fraction 123407
Monaco #20
Millsite 123408
Monaco #21
Millsite 123409
D. Xxx-A-Xxx Group of
Claims Those certain unpatented mining claims located in the
Xxxx Mining District, Xxxxxxxxx County, Nevada, that are described as
follows:
Claim
Name Serial
Number
Xxx-A-Lew
#7 628131
Xxx-A-Xxx
#9 628133
E. Water Rights State of
Nevada Certificate of Appropriation of Water No. 13630
EXHIBIT
B
The
Wisconsin Group of Patented Claims as more fully described in Exhibit A are
subject to a 2% NSR (a two percent net smelter return) overriding royalty upon
mineral production from the subject property held by Summa Corporation
(“Summa”), pursuant to terms of that certain Letter Agreement dated April 12,
1977 and recorded in Book 54, Pages 21 through 25 in the records of Mineral
County, Nevada between Summa Corporation and Houston Oil and Minerals
Corporation. The Florida Group of Patented Claims may also be
subject to the same 2% NSR overriding royalty. Optionor is conducting
an investigation to determine whether or not this 2% NSR is subject to
release. The unpatented mining claims are not the subject of the 2%
NSR overriding royalty provisions.
There is
a 1% NSR (one percent net smelter return) overriding royalty upon mineral
production from the entire property, whether patented or unpatented, held by the
Optionor, Nevada Pacific Rim. The Optionor and Optionee are willing
and open to consideration and negotiation of selling this 1% NSR to Optionee if
Optionee elects to enter into a Purchase Agreement to purchase the
Property.
NET
SMELTER RETURN defined:
The term “Net Smelter Returns” as used
in this agreement shall mean the net payments received from a smelter, mill,
reduction works, refinery or other processor or purchaser after deduction for
all of the following:
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1.
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All
charges by a smelter, mill, reduction works, refinery or other processor
or purchaser, including, but not limited to, selling charges, treatment,
smelting, or other reduction charges, penalties and all other deduction
and expenses;
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2.
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All
costs of transportation incurred on all minerals produced, whether
transported by Purchaser or a third party and including charges by a
common or contract carrier;
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3.
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The
amount of all taxes, whether sales tax, net proceeds mines tax, severance
tax, or any other tax imposed upon or in connection with mining, removal
or the sale of ores, concentrates or other products and minerals, other
than federal or state income tax.
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In
calculating the Net Smelter Returns, there shall also be included as part of the
net proceeds any premium, subsidies or bonuses received for production from the
state or federal government to the extent that the same may be legally included.
Payments of Net Smelter Returns shall be made monthly on or before the last day
of each calendar month following the month in which settlement is made by the
smelter or other purchaser, and each such payment shall be accompanied by a
complete copy of settlement schedules received from the smelter or other
purchase. The term “reduction works” as used herein shall include any works in
which concentrated, upgraded or beneficiated minerals are refined. In the event
that the ores, concentrates or other minerals are treated at a mill or smelter
owned or operated by Purchaser or any affiliated corporation of Purchaser the
charges for processing and milling services shall be deductible from the
proceeds to determine net Smelter Returns, but they shall not exceed the average
of the highest and lowest charges charged for processing services at the xxxxx,
smelters or reduction works located closest to the mill, smelter or reduction
works in which ores similar to those from the Mining Properties are being
processed.
