MINERAL LEASE AGREEMENT AND OPTION TO
PURCHASE
This, MINERAL LEASE AGREEMENT AND OPTION TO
PURCHASE hereinafter referred to as "Agreement," made and entered
into by and between IMA-1, LLC, 2705 Lorraine Drive, Missoula, MT
59803 hereinafter referred to as "Owner," and Bardswich, Idaho,
LLC, 571 Cedar Hills Road, Whitehall, MT 59759. its assigns and
successors, hereinafter referred to as "Lessee."
RECITALS
A. Owner represents that it is in possession, to
best of Owners understanding, of all interests in two Assessor
parcels numbered T-487 and T-491 in Section 22, 22 Patented Mining
Claims located in Sections 13, 14, 23, 24, plus
N½NW¼, less exceptions; N½NE¼, less
exceptions; S½SE¼ less exceptions; located in Section
27, hereinafter collectively referred to as the "Premises,"
situated in Township 14 North, Range 23 West, Boise Meridian, Lemhi
County, State of Idaho, more particularly described in Exhibit "A"
attached to this Agreement and incorporated by reference in this
Agreement.
B. Lessee desires to obtain and Owner is
willing to grant a mining lease of the Premises, together with an
exclusive option to purchase the Premises upon the terms and
conditions herein set forth.
C. Lessee desires to examine the mineral
potential of the Premises and possibly to develop commercial mines
thereon.
NOW THEREFORE, in consideration of their mutual
covenants and agreements herein, the parties hereby agree as
follows:
1. Grant .
1.1
Grant of Exploration Privilege . Owner
hereby grants to Lessee, its successors and assigns the exclusive
right and privilege to enter upon the Premises for the purposes of
exploration, prospecting and development, production, removal and
sale of all minerals, mineral substances, metals, ore bearing
materials and rocks of every kind, including the right of ingress
and egress for personnel, machinery, equipment, supplies and
products and the right to use so much of the surface and water
located thereon as may be reasonably needed for such purposes.
THIS AGREEMENT IS SUBJECT TO ARBITRATION
§27-5-114 MCA
1.2
Grant of Mineral Rights . Owner hereby
grants, leases and demises the Premises, and warrants peaceable
enjoyment of the Premises pursuant to the warranties contained
herein, unto Lessee, its successors and assigns, for the term and
for the purposes hereinafter provided. The term "Premises" as
used herein includes all of the right, title and interest of Owner
in the Patented Mining Claims and Fee Land described herein and
including Unpatented Mining Claims located by Lessee and or their
Agents, Assignees in the Area of Interest lying within two miles
from the perimeter as described under Section 5. 2 Definitions.
1.3
Grant Purposes . The purposes of this
Agreement are to grant to Lessee, its successors and assigns, the
exclusive right to enter upon and occupy the Premises for all
purposes reasonably incident to exploring for, developing,
reprocessing of tailings and mine dumps, 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 (Mineral
Substances), and the right to place, construct, maintain, use and
thereafter remove such structures, facilities, equipment, roadways,
haulageways, utility lines, reservoirs and waterways, and other
improvements as may be necessary, useful or convenient for the full
enjoyment of all of the rights granted under this Agreement.
Lessee, its successors and assigns, 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.
1.4
Water Rights . Lessee shall have the
right, subject to the regulations of the State of Idaho concerning
the appropriation and taking of water, to drill wells for the water
on the Premises, and may lay and maintain all necessary water lines
as may be required by Lessee in its operations on the claims;
provided, however, that all such wells shall be constructed in
compliance with the regulations of the State of Idaho and such
wells installed by Lessee shall, on the cancellation or termination
of this Agreement, become the property of Owner, unless this
Agreement is terminated by exercise of the option granted by
paragraph entitled "Option". In the event of assignment by
Lessee to Owner, Lessee will cease to have any rights or liability
to the wells and water rights. The purchase shall include any
and all water rights relevant to the Premises held by Owner.
Such water rights shall be transferred to Lessee upon the
exercise of the option.
1.5
Limitation . The performance by Lessee
of its duties and obligations under this Agreement shall not bind
and obligate Lessee to perform any additional services to Owner nor
to invest any funds of any nature whatsoever in the exploration of,
development or delineation of the Premises. Lessee may
explore, conduct geological and geophysical investigations, map,
drill or otherwise seek, in the manner and to the extent that
Lessee, in its sole discretion, deems advisable, to locate and
develop ores, minerals and metals in commercial quantities in and
upon the Premises. Only the express duties and obligations
provided under this Agreement shall be binding upon Lessee and
Lessee shall have no duties or obligations, implied or otherwise,
to explore for, develop, and/or mine mineral ores within the
Premises, it being understood that the payments described herein
are in lieu of any such implied or other duties or obligations.
1.6
Relationship of the Parties . Nothing
contained herein shall be deemed to constitute any party, in its
capacity as such, the partner, agent or legal representative of any
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 and
unrestricted right independently 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. In particular, without limiting the foregoing,
neither party to this Agreement shall have any obligation to the
other as to any opportunity to acquire any money, property,
interest or right offered to it outside the Premises.
2
Option to Purchase . Owner hereby
grants to Lessee, its successors and assigns the sole and exclusive
option (the "Option), to purchase all of Owner's property, more
particularly described in Exhibit "A" referred to as the
"Premises,", for a total cash consideration of Five Million
Dollars, United States Dollars ($5,000,000.00 USD) (the "purchase
price"). When all payments have been made, the Option shall
be deemed, fully exercised. All minimum royalty payments and
net smelter return payments will be credited against this purchase
price. The sale and purchase of the Premises shall be closed
as follows:
2.1
Instruments to be Executed by Owner .
Upon exercise of the Option granted herein, Owner, at any
time before or after the closing date, shall execute, acknowledge
and deliver any further deeds, conveyances and other assurances
reasonably requested by Lessee, and shall take any other action
consistent with the terms of this Agreement, that may reasonably be
requested for the purpose of transferring and conveying to Lessee
the Premises to be conveyed and transferred by this Agreement.
2.2
Closing Costs . Lessee shall pay for
the revenue stamps, if any, the cost of escrow, including the cost
of preparation of any title reports, and all recording costs
incurred in the consummation of the transaction provided for in
this Agreement.
2.3
Accrued Taxes . Payment of any and all
state and local real and personal property taxes on the Premises
not otherwise provided for herein shall be prorated between the
parties as of the closing date upon a thirty day month.
Lessee shall pay all taxes levied against the Premises during
the term of this Agreement. If Owner receives tax bills or
claims which are the responsibility of Lessee hereunder, the same
shall be promptly forwarded to Lessee for appropriate action.
Lessee shall provide Owners with copies of receipts within
two weeks of payment of such taxes.
2.4
Escrow . The parties shall establish
an escrow for the orderly exercise of the Option and the orderly
purchase of the Premises to be completed within 30 days of the
exercise date. The parties shall execute and deliver to a
mutually acceptable escrow holder, escrow instructions consistent
with the terms and conditions of this Agreement, and, in the event
the parties do not execute and deliver such escrow instructions,
this Agreement shall constitute the parties' escrow instructions.
Lessee shall execute and deposit into escrow a Release of
this Agreement, and the escrow holder shall be instructed not to
record of deliver same to Owner unless this Agreement is
terminated, except by termination upon Lessee’s exercise of
the Option, in which case the Release shall be delivered to Owner.
Owner shall execute and acknowledge a Quit Claim Deed and
deposit into escrow prior to the final payment being made pursuant
to the payment schedule described in Paragraph 4.1. The
escrow holder shall be instructed not to record or deliver same to
Lessee in the event of any default or failure by Lessee to comply
with any of the covenants, terms or conditions of this
Agreement.
3.
Duration . For purposes of this
Agreement, the effective date shall be March 1, 2007. The
term of this Agreement shall be until the total purchase price of
Five Million Dollars, United States Dollars ($5,000,000.00 USD) has
been paid in full, unless sooner terminated or canceled as
hereinafter provided. While this Agreement is in effect, each
successive one (1) year period commencing with the effective date
and each annual anniversary date thereof shall be deemed an option
year.
4.
Advance Minimum Royalty Payments .
4.1
Advance Minimum Royalty Payments .
Lessee shall pay to Owner, Advance Minimum Royalty Payments
in the amounts and on or before the dates described below:
Date of Payment
Amount
On Signing
$40,000.00
On or Before 6 Months after signing
$60,000.00
On or Before 1 year after signing
$100,000.00
On or Before 2 year after signing
$100,000.00
On or Before 3 year after signing
$100,000.00
On or Before 4 year after signing
$200,000.00
Each yearly anniversary thereafter
until the total purchase price of
Five Million Dollars, ($5,000,000.00)
has been paid, unless terminated or
canceled.
$200,000.00
Timely payment in the manner provided herein, mailed to
the address as listed, shall maintain this Agreement in full force
and effect:
IMA-1, LLC
2705 Lorraine Drive
Missoula, MT 59803
Lessee shall be obligated to deliver only one (1) check
or payment, and Lessee shall have no responsibility for
disbursement or distribution of any such payment after receipt by
Owner.
4.2
Production Royalty . All advance
minimum royalty payments described in Section 4.1 shall be credited
against the production royalty and option purchase price. If
the Premises (including unpatented mining claims located by Lessee,
its agents or assigns within the area of Interest as described
under Section 5. Definitions) are placed into commercial
production, Lessee agrees to pay to Owner a Net Smelter Returns
Royalty of Three percent (3%) on production of molybdenum, copper,
lead, and zinc and a Net Smelter Returns Royalty of Five percent
(5%) from all other ores, minerals, or other products removed from
the Premises (including unpatented mining claims located by Lessee,
its agents or assigns within the area of Interest as described
under Section 5 Definitions). Payments of such Net Smelter
Returns Royalty from the proceeds received from production shall be
determined at the end of each calendar quarter after the effective
date. Payments of the Net Smelter Returns Royalty shall be
made within thirty (30) days after the end of each calendar quarter
for which Net Smelter Returns Royalty is determined to be payable
on the date on which Lessee receives a smelter or refinery
statement for production during such calendar quarter, whichever
date is later, mailed to the address as listed.
IMA - 1, LLC
2705 Lorraine Drive
Missoula, MT 59803
Lessee shall be obligated to deliver only one (1) check
or payment, and Lessee shall have no responsibility for
disbursement or distribution of any such payment after receipt by
Owner or Bank described above. At the time of making such
payment, Lessee shall deliver to Owner a statement showing the
amount of production royalty due and the manner in which it was
determined and shall submit to Owner data reasonably necessary to
enable Owner to verify the determination.
4.3
Recoupment of Advance Minimum Royalties .
All advance minimum royalty payments shall be recouped by Lessee,
by crediting such advance royalties against and deducting them from
Net Smelter Returns Royalty.
4.4
Audit . After the Premises are placed
into commercial production as defined herein below, Owner or its
authorized agents shall have a right to audit and inspect Lessee's
accounts and records used in calculating payments to Owner
hereunder, which right may be exercised as to each payment at any
reasonable time during a period of one (1) year from the date on
which the payment was made by Lessee. If no such audit is
performed during such period, such accounts, records and payments
shall be conclusively deemed to be true, accurate and correct.
5.
Definitions . The following defined
terms, wherever used in this Agreement, shall have the meanings as
set forth below:
5.1
“Area of Interest" shall mean the area lying
within two miles from the perimeter of the Patented Mining Claims
described in Exhibit "A" on the date of this Agreement, together
with any unpatented mining claims all or any part of which is
within the area of first above described located by Lessee, its
agents and/or assignees. The Area of Interest will not
include any other patented lands leased or purchased, but will
include all unpatented mining claims located by Lessee, its agents
and/or assignees.
5.2
"Commercial production." For the purposes of
this Agreement, the Premises shall come into commercial production
on the date upon which ore mined from the Premises is first
delivered to a purchaser on a commercial basis or on the date upon
which concentrates or other products derived therefrom are first
delivered to a purchaser on a commercial basis, whichever date is
earlier, it being agreed that deliveries of such ores, concentrates
or other products resulting from pilot or test operations shall not
be considered as deliveries on a commercial basis for the purposes
of this paragraph. Lessee shall deliver to Owner notice
indicating said date as soon as practicable after the occurrence
thereof.
5.3
"Net Smelter Returns" means for any period/year the
amount of earned revenues actually paid to and received by Lessee,
its agents and/or assigns by any smelter, refinery or other
purchaser (hereinafter "smelter") of metals, ores, minerals or
mineral substances, or concentrates produced therefrom for products
mined from the Premises, including unpatented mining claims located
by Lessee, its agents or assigns within the area of Interest as
described under Section 5 Definitions, less all of the
following:
5.3.1 Custom smelting costs, treatment charges and
penalties, including, but without being limited to, metal losses,
penalties, for impurities and charges for refining, selling, and
transportation from smelter to refinery and from refinery to
market;
5.3.2 Cost of transporting product from the
property to a concentrator or other place of treatment;
5.3.3 Costs of transporting product from the
concentrator to a smelter or other place of treatment; and
5.3.4 Production taxes, gross and/or net proceeds
of mines taxes, severance taxes and sales, privileges and other
taxes levied on product or on the production thereof.
5.4
"Owner" shall mean IMA - 1, LLC, 2705 Lorraine
Drive Missoula, MT 59803, and all persons, individually and
collectively, having an interest in the Premises and executing this
Agreement, or a counterpart thereof, other than Lessee.
5.5
"Product" shall mean the following:
5.5.1
All ore mined or removed from place in the Premises
during the term hereof and shipped and sold by Lessee prior to
treatment; and,
5.5.2
All concentrates, precipitates and mill products
produced by or for Lessee from ore mined or removed from place in
the Premises, or from ore leached in place in the Premises, during
the term of this Agreement.
5.6
"Lessee" shall mean Bardswich, Idaho, LLC, its
assigns and successors.
5.7
"Waste" shall mean earth, rock or material mined or
removed from place in the Premises during the term of this
Agreement, but which is not "Ore" as defined above.
6.
Compliance with the Law . All
exploration and development work performed by Lessee during the
term of this Agreement shall conform with the applicable laws and
regulations of the State of Idaho and the United States of America.
Lessee shall be fully responsible for compliance with all
applicable Federal, State and Local reclamation statutes,
regulations and ordinances relating to such work, all at Lessee 's
cost, and Lessee shall indemnify and hold harmless Owner from any
and all claims, assessments, fines and actions arising from Lessee
failure to
