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MINING LEASE AGREEMENT

Lease Agreement

MINING LEASE AGREEMENT | Document Parties: ROMARCO MINERALS INC | PARAGON PRECIOUS METALS, LLC, You are currently viewing:
This Lease Agreement involves

ROMARCO MINERALS INC | PARAGON PRECIOUS METALS, LLC,

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Title: MINING LEASE AGREEMENT
Governing Law: Nevada     Date: 6/30/2005

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MINING LEASE AGREEMENT

This Agreement is made effective as of December 31, 2003

BETWEEN:

ROMARCO MINERALS INC. , a corporation incorporated under the laws of Ontario and having an address of Suite 1500, 885 West Georgia Street, Vancouver, British Columbia V6C 3E8, facsimile no.: (604) 688-9274

(“ Romarco ”)

AND:

PARAGON PRECIOUS METALS, LLC , a limited liability company, organized under the laws of Nevada and having an address of 80 Bitterbrush Road, Reno, Nevada 89523, facsimile no.: (775) 345-7699

(“ Paragon ”)

WHEREAS:

A.     

Paragon has the right to conduct mining exploration and related operations on the Property (as defined below) known as the Buckskin National Project located in the National District of Humboldt County, Nevada; and

 

 

B.     

Paragon has determined to grant Romarco an exclusive lease of the Property.

NOW THEREFORE in consideration of the mutual promises made to each other in this Agreement, Paragon and Romarco (each a “ Party ” and collectively the “ Parties ”) hereby agree as follows:

1.     

Interpretation

 

1.1     

Definitions. For the purposes of this Agreement the following words and phrases will have the following meanings:

 

 

(a)     

“Affiliate” means any person, partnership, limited liability company, joint venture, corporation, or other form of enterprise which Romarco Controls, is Controlled by, or is under common Control with.

 

 

(b)     

“Additional Claims” means any mining claims which either party may acquire and/or stake on open locatable ground during the Term of this Agreement within the Property and the area lying within one mile of the outer boundaries of the Property.

 

 

(c)     

“Control” used as a verb means, when used with respect to an entity, the ability, directly or indirectly through one or more intermediaries, to direct or cause the direction of the management and policies of such entity through (i) the legal or beneficial ownership of voting securities or membership interests; (ii) the right to appoint managers, directors or corporate management; (iii) contract; (iv) operating agreement; (v) voting trust; or otherwise; and “Control” used as a noun means an interest which gives the holder the ability to exercise any of the foregoing powers.

 


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(d)     

“Effective Date” means the date of this Agreement first written above.

 

 

(e)     

“Effective Date Anniversary” means the anniversary of the Effective Date in each year of the Term.

 

 

(f)     

“Expenditure” means all costs incurred to perform work on the Property.

 

 

(g)     

“Land Holding Fees” means all required payments in connection with keeping the Property in good standing including either (i) the U.S. Bureau of Land Management; or (ii) Humboldt County, Nevada.

 

 

(h)     

“Lease” means the grant of all rights, title and interest in and to the Property including, without limitation, the surface (if any) and subsurface rights thereof, all ores, minerals and mineral rights, and all the rights, title and interest which may be acquired by or for Paragon in or pertaining to the Property or any part of it during the Term.

 

 

(i)     

“Market Price” at any time means the weighted average closing price of the Shares for the 20 trading days prior to the date of determination, as posted by the TSX Venture Exchange, or such other exchange where the Shares may be listed (or quoted) for trading from time to time, and if the Shares are not listed (or quoted) for trading on any stock exchange, then the Market Price shall be determined by the Board of Directors of Romarco, acting reasonably.

 

 

(j)     

“Net Smelter Returns” means the gross amount paid by smelters or purchasers for the minerals or metals in the ores from the Property during each year, after deducting only the charges made for smelting, treating and refining the ores, minerals and metals, all as determined in accordance with Schedule “C” attached hereto.

 

 

(k)     

“Net Smelter Returns Royalty” means a royalty on the Net Smelter Returns calculated using the percentages set out on Schedule “B” attached hereto.

 

 

(l)     

“Property” means the 90 unpatented mining claims held by Paragon and known as the Buckskin National Project located in the National District of Humboldt County, Nevada, and which are listed on Schedule “A” attached hereto together with any rights of Paragon in any Additional Claims.

 

 

(m)     

“Term” means the period of time referred to and described in Section 3.

 

 

(n)     

“Shares” means the common shares in the capital of Romarco.

 

 

(o)     

“Transfer” means transfer by sale, assignment, bequest, inheritance, trust, operation of law or other disposition.

 

 

 

 

 

1.2

Currency. Unless otherwise specified, all references to “$” or “dollars” shall mean United States dollars.

 

 

2.

Representations and Warranties

 

 

2.1

Paragon represents and warrants to Romarco that:

 


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(a)     

Paragon is a limited liability company duly organized, validly existing, and in good standing under the laws of Nevada.

 

 

(b)     

Paragon has the requisite corporate power and authority:

 

 

 

(i)     

to enter into this Agreement; and

 

 

 

(ii)     

to carry out and perform its obligations under the terms and provisions of this Agreement.

 

 

(c)     

All requisite action on the part of Paragon, and its managers and members, necessary for the execution, delivery and performance of this Agreement has been taken. This Agreement, when executed and delivered by Paragon, will be legal, valid, and binding obligations of Paragon enforceable against Paragon in accordance with their terms. The execution, delivery and performance of this Agreement will not violate any provision of law; any order of any court or other agency of government; or any provision of any indenture, agreement or other instrument to which Paragon is a party or by which its properties or assets are bound; or be in conflict with, result in a breach of, or constitute (with due notice and lapse of time) a default under any such indenture, agreement or other instrument. There is no law, rule or regulation, or any judgment, decree or order of any court or governmental authority binding on Paragon which would be contravened by the execution, delivery, performance or enforcement of this Agreement. However, no representation is made as to:

 

 

 

(i)     

the remedy of specific performance or other equitable remedies for the enforcement of this Agreement; or

 

 

 

(ii)     

rights to indemnity under this Agreement for securities law liability.

 

 

 

Additionally, this representation is limited by applicable bankruptcy, insolvency, moratorium, and other similar laws affecting generally the rights and remedies of creditors and secured parties.

 

 

(d)     

Paragon has the right to Lease the Property to Romarco and to grant any rights given to Romarco in this Agreement.

 

 

(e)     

Paragon is, subject to the paramount title of the United States, the sole and only owner of the unpatented mining claims comprising the Property.

 

 

(f)     

To the best of its knowledge and belief each of the unpatented claims included in the Property will have been validly located, filed and recorded in compliance with the laws of the State of Nevada and of the United States as they relate to location and recording of such claims; that Paragon will have timely complied with all of the filing provisions of the Federal Land Policy and Management Act (43 U.S.C. Section 1701, et seq.) as they pertain to the unpatented claims included within the Property; and that said claims are valid and subsisting mining claims. Paragon disclaims any representation or warranty concerning the existence or proof of a discovery of locatable minerals on or under the Property.

 


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(g)     

Paragon has fully and timely paid the Land Holding Fees required to maintain the unpatented mining claims to the Effective Date of this Agreement.

 

 

(h)     

Paragon’s rights in the Property are not subject to any prior agreement, encumbrance, burden or restriction, created by any act or instrument of Paragon other than the assignment by Paragon of a one-half interest in certain royalty rights to Buckskin National Mine Ltd. and John Bell pursuant to that certain assignment dated February 27, 2004; that to the best of Paragon’s knowledge, the Property is free from liens and encumbrances and other adverse claims by third parties; and that the Property is not burdened with any royalties, overriding royalties, net profits interests or payments on production.

 

 

(i)     

There are no outstanding pending actions, suits or claims affecting all or any of the Property, nor, to the best of Paragon’s knowledge, has any such action, suit or claim been threatened, either verbally or in writing, nor, to the best of Paragon’s knowledge, is there any basis for any action, suit or claim.

 

 

(j)     

The execution, delivery and performance of this Agreement by Paragon and the consummation of the transactions contemplated herein, including the Lease of the Property to Romarco, does not and will not result in or constitute any of the following: (i) adefault, breach or violation or an event that, with notice or lapse of time or both, would be a default, breach or violation of any of the terms, conditions or provisions of the articles or by-laws of Paragon, or any lease, lien, permit, promissory note, security agreement, commitment, indenture, mortgage, hypothecation, deed of trust or other agreement, instrument or arrangement to which Paragon is a party or by which it or the Property is bound; (ii) an event that would permit any party to rescind any agreement or accelerate the maturity of any obligation of Paragon related to the Property; (iii) the creation or imposition of any lien on the Property; or (iv) an event requiring the consent of any other party, including, without limitation, the members or owners of Paragon.

 

 

(k)     

To the best of Paragon’s knowledge, there are no outstanding work orders or actions required to be taken relating to environmental matters, or any existing condition on the Property which could be the basis therefor, in respect to the Property or any operations thereon and that it has no knowledge of any other environmental issues affecting the Property.

 

 

(l)     

With respect to the Share Payments to be made pursuant to Section 5.3:

 

 

 

(i)

Paragon was not organized for the purpose of investing in the Shares;

 

 

 

(ii)

Paragon is acquiring the Shares solely for its own account for investment and not with a view to or for sale or distribution of the Shares or any portion thereof and without any present intention of selling, offering to sell or otherwise disposing of or distributing the Shares or any portion thereof in any transaction other than a transaction complying with the registration requirements of the Securities Act of 1933, as amended (the “Act”), and applicable state securities laws, or pursuant to an exemption therefrom;

 

 

 

(iii)

Paragon has had access to all the information it deems necessary and appropriate to enable it to evaluate the financial risk inherent in making an investment in the

 


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Shares, including the information contained in Romarco’s periodic reports and other materials publicly filed by Romarco in Canada (the “Disclosure Documents”);

 

 

 

(iv)

Paragon has relied solely on the Disclosure Documents, the advice of its representatives, and independent investigations made by it and/or its representatives in making the decision to purchase the Shares;

 

 

 

(v)

Paragon understands that its investment in the Shares involves a high degree of risk and will be a highly speculative investment, and Paragon is able, without impairing its financial condition, to hold the Shares for an indefinite period of time and to bear the economic risk of, and withstand a complete loss of, any investment in the Shares;

 

 

 

(vi)

Paragon acknowledges that Romarco has a history of losses, and Romarco’s ability to continue its operations is dependent upon its ability to raise adequate funding or generate adequate revenues, and to reverse such losses, none of which is assured.

 

 

 

 

If Romarco is unable to raise adequate funding or is unable to cease accumulating losses, it may be required to restrict or cease its operations, which may result in the loss of Paragon’s investment in the Shares;

 

 

 

(vii)

Paragon has carefully considered and has, to the extent it believes such discussion necessary, discussed with its professional legal, tax and financial advisors the suitability of an investment in Romarco for the particular tax and financial situation of Paragon, and Paragon and/or Paragon's advisors have determined that the Shares are a suitable investment for Paragon;

 

 

 

(viii)

Paragon, through its representatives and/or its professional legal, tax and financial advisors, has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of its acquisition of the Shares, or has a pre-existing personal or business relationship with Romarco or any of its officers, directors, or controlling persons of a duration and nature that enables Paragon to be aware of the character, business acumen and general business and financial circumstances of Romarco;

 

 

 

(ix)

Paragon understands that there may be material tax consequences to it of an acquisition or disposition of the Shares under applicable United States and Canadian federal, provincial/state and local tax laws, and Paragon is solely responsible for determining such consequences and the suitability of an investment in the Shares in light of such tax consequences; in particular, Romarco makes no representation as to whether it has been or will be a “passive foreign investment company” for United States tax purposes;

 

 

 

(x)

Paragon has received no general solicitation or general advertisement and has attended no seminar or meeting (whose attendees have been invited by any general solicitation or general advertisement) and has received no advertisement in any newspaper, magazine, or similar media, broadcast on television or radio regarding the offering of the Shares;

 


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(xi)

Paragon acknowledges that the Shares have not been registered under the Act, or the securities laws of any state of the United States, that the Shares are being offered and sold to Paragon in reliance upon an exemption from such registration requirements, and such securities must be held indefinitely unless a transfer of them is subsequently registered under the Act and applicable state securities laws or an exemption from such registration requirements is available.

 

 

 

(xii)

Paragon agrees that the certificates representing all of the Shares, and any certificates issued in exchange therefor or in replacement thereof shall have endorsed thereon a legend to the following effect:

 

 

 

 

“THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”). THESE SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (A) TO THE COMPANY, (B) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE 1933 ACT, (C) IN COMPLIANCE WITH THE EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER THE 1933 ACT PROVIDED BY RULE 144 THEREUNDER, IF AVAILABLE, AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, OR (D) IN A TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE 1933 ACT OR ANY APPLICABLE STATE LAWS AND REGULATIONS GOVERNING THE OFFER AND SALE OF SECURITIES, AND THE HOLDER HAS, PRIOR TO SUCH SALE, FURNISHED TO THE COMPANY AN OPINION OF COUNSEL, OF RECOGNIZED STANDING, OR OTHER EVIDENCE OF EXEMPTION, REASONABLY SATISFACTORY TO THE COMPANY. DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE “GOOD DELIVERY” IN SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN CANADA. AT ANY TIME THE SECURITIES ARE BEING SOLD WHILE COMPANY IS A “FOREIGN ISSUER” AS DEFINED IN RULE 902 UNDER THE 1933 ACT, A NEW CERTIFICATE, BEARING NO LEGEND, THE DELIVERY OF WHICH WILL CONSTITUTE “GOOD DELIVERY” MAY BE OBTAINED FROM THE COMPANY’S TRANSFER AGENT UPON DELIVERY OF THIS CERTIFICATE AND A DULY EXECUTED DECLARATION, IN FORM SATISFACTORY TO THE COMPANY AND ITS TRANSFER AGENT TO THE EFFECT THAT THE SALE OF THE SECURITIES IS BEING MADE IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE 1933 ACT.”;

 

 

 

 

provided, however, that if any such Shares are being sold outside the United States in compliance with Rule 904 of Regulation S under the Act at a time when Romarco is a “foreign issuer” as defined in Rule 902 under the Act, the foregoing legend may be removed by providing a declaration to Romarco and its transfer agent to the following effect (or as Romarco may determine from time to time):

 

 

 

 

“The undersigned (a) acknowledges that the sale of the securities of the Company to which this declaration relates is being made in reliance on Rule 904 of

 


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Regulation S under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”) and (b) certifies that (1) the undersigned is not an affiliate of the Company (as that term is defined in Rule 405 under the U.S. Securities Act), (2) the offer of such securities was not made to a person in the United States and either (A) at the time the buy order was originated, the buyer was outside the United States, or the seller and any person acting on its behalf reasonably believe that the buyer was outside the United States or (B) the transaction was executed on or through the facilities of The Toronto Stock Exchange, or the TSX Venture Exchange and neither the seller nor any person acting on its behalf knows that the transaction has been prearranged with a buyer in the United States, (3) neither the seller nor any affiliate of the seller nor any person acting on any of their behalf has engaged or will engage in any directed selling efforts in the United States in connection with the offer and sale of such securities, (4) the sale is bona fide and not for the purpose of “washing off” the resale restrictions imposed because the securities are “restricted securities” (as that term is defined in Rule 144(a)(3) under the U.S. Securities Act), (5) the seller does not have a short position in the securities sold in reliance on Rule 904 of Regulation S under the U.S. Securities Act and does not intend to replace such securities with fungible unrestricted securities, and (6) the contemplated sale is not a transaction, or part of a series of transactions, which, although in technical compliance with Regulation S, is part of a plan or scheme to evade the registration provisions of the U.S. Securities Act. Terms used herein have the meanings given to them by Regulation S.”; and

 

 

 

 

provided, further, that if any of such Shares are being sold in compliance with Rule 144 under the Act and in compliance with applicable state securities laws, the foregoing legend may be removed by providing Romarco with a written opinion of U.S. counsel reasonably satisfactory to Romarco to the effect that such legend is no longer required;

 

 

 

(xiii)

Paragon acknowledges that Romarco is under no obligation to remain a “foreign issuer” as defined in Rule 902 under the Act; and

 

 

 

(xiv)

Paragon understands that Romarco will make a notation in its records of the above described restrictions on transfer.

 

 

 

 

2.2

Romarco represents and warrants to Paragon that:

 

 

(a)     

Romarco is a corporation duly organized, validly existing, and in good standing under the laws of the Province of Ontario, Canada.

 

 

(b)     

Romarco is duly registered to do business in the State of Nevada.

 

 

(c)     

Romarco has the requisite corporate power and authority:

 

 

 

(i)     

to enter into this Agreement; and

 

 

 

(ii)     

to carry out and perform its obligations under the terms and provisions of this Agreement.

 


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(d)     

All requisite corporate action on the part of Romarco, and its officers and directors, necessary for the execution, delivery and performance of this Agreement has been taken.

 

 

 

This Agreement, when executed and delivered by Romarco, will be legal, valid, and binding obligations of Romarco enforceable against Romarco in accordance with their terms. The execution, delivery and performance of this Agreement will not violate any provision of law; any order of any court or other agency of government; or any provision of any indenture, agreement or other instrument to which Romarco is a party or by which its properties or assets are bound; or be in conflict with, result in a breach of, or constitute (with due notice and lapse of time) a default under any such indenture, agreement or other instrument. There is no law, rule or regulation, or any judgment, decree or order of any court or governmental authority binding on Romarco which would be contravened by the execution, delivery, performance or enforcement of this Agreement. However, no representation is made as to:

 

 

 

(i)     

the remedy of specific performance or other equitable remedies for the enforcement of this Agreement; or

 

 

 

(ii)     

rights to indemnity under this Agreement for securities law liability.

 

 

 

Additionally, this representation is limited by applicable bankruptcy, insolvency, moratorium, and other similar laws affecting generally the rights and remedies of creditors and secured parties.

 

 

(e)     

Romarco has obtained all consents, approvals, authorizations, declarations, or filings required by any federal, state, local, or other authority (except the TSX Venture Exchange), or any lenders, creditors, and other third parties in connection with the valid execution, delivery, and performance of this Agreement and the consummation of the transactions contemplated hereby.

 

 

(f)     

All negotiations relative to this Agreement and the transactions contemplated hereby have been carried on by Romarco in such manner as not to give rise to any valid claim against Paragon for a brokerage commission, finder’s fee or other fee or commission arising by reason of the transactions contemplated by this Agreement.

 

 

(g)     

When issued, the Share Payments (as defined in Section 5.3) will be subject only to those limitations on trading imposed by the TSX Venture Exchange or applicable securities laws including the restrictions described in Section 2.1(l).

2.3         The representations and warranties set out in Sections 2.1 and 2.2 are conditions upon which each of Paragon and Romarco has relied in entering into this Agreement and will survive the termination of the Agreement, and each of Paragon and Romarco hereby forever indemnifies and saves the other harmless from all loss, damage, costs, actions and suits arising out of or in connection with any breach of any representation or warranty made by it and contained in this Agreement.

3.           Term

This Agreement will have a term of 10 years, commencing on the Effective date (the “ Term ”), unless sooner terminated pursuant to the terms of this Agreement. Romarco will have the option, in its sole discretion, to renew this Agreement at the end of the Term for one or more additional 10 year terms, but may not renew this Agreement more than five successive times.


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4.           Grant of Lease

4.1         Grant . In consideration of the rents, payments, covenants and agreements hereinafter contained on the part of Romarco to be paid, observed and performed, and except as specifically provided, Paragon will Lease the Property exclusively to Romarco for the Term, for the purposes and subject to the terms and conditions provided in this Agreement.

4.2         Mining Rights. Paragon will grant to Romarco the exclusive right to use the Property for the Term of this Agreement in the following manner:

 

(a)     

Romarco will act as exclusive operator of the Property and will be entitled to enter into and on the Property throughout the Term to prospect and explore for, develop


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