LEASE AND SUPPLY
AGREEMENT
THIS AGREEMENT
(this “Agreement”), is made and entered into this
5 th
day of May, 2008, between Ready Mix,
Inc, a Nevada corporation (“RMI”), and GILA RIVER LAKE,
LLC, an Arizona Limited Liability Company, d/b/a/ Buckeye Sand and
Gravel (“Buckeye”).
WHEREAS, Buckeye
is the owner of certain real estate located in Maricopa County,
Arizona at 10423 South Apache Road, Buckeye, AZ 85326 on which
Buckeye operates a construction aggregates mining facility and more
particularly described on Exhibit A , hereto (the
“Property”); and
WHEREAS, the
Property has been designed to contain three separate sites or
“pads” intended for ready-mix concrete
(“RMC”) plants and a hot-mix asphalt plant that will
use Buckeye’s aggregates products (collectively, the
“Plant Sites”);
WHEREAS, RMI
wishes to lease one Plant Site consisting of approximately +/-4 (to
be determined upon completion of site plan) acres and shown on
Exhibit B (the “Leased Premises”) for a
period of seven (7) years for the purposes of operating a RMC
Plant (the “Plant”). and
WHEREAS, RMI is
contracting with Buckeye to purchase the aggregates necessary to
operate its Plant in accordance with the Purchase Order
(PO) attached hereto as Exhibit C , and
NOW, THEREFORE,
For One Dollar and other good and valuable consideration and in
further consideration of the mutual covenants and agreements of the
parties contained herein, the parties intending to be legally bound
hereby and agree as follows:
1.1 Grant.
Buckeye hereby leases the Leased Premises to RMI for the purpose of
locating, erecting and operating the Plant and, to the extent
necessary and incidental to the operation thereof, the placing on
the Leased Premises of fencing or other improvements and ancillary
equipment. Buckeye represents that it is the owner of the Property,
including the Leased Premises, and warrants to RMI quiet and
peaceable possession of the Leased Premises under the terms of this
Agreement. All plant and equipment located on the Leased Premises
by RMI shall remain the personal property of RMI and shall not
become part of the real property or otherwise the property of
Buckeye.
1.2 Restrictive
Covenant. RMI agrees not to operate a RMC Plant within
(ten) 10 miles of the Property during the term of this
Agreement (the “RMI Restrictive Covenant”) without the
express written consent of Buckeye. Buckeye may at
its discretion
allow RMI to operate a RMC Plant on a project specific basis,
within (ten) 10 miles of the property, provided Buckeye
retains the right of first refusal to supply coarse and fine
aggregate for that specific project.
1.3 Potable
Water Well. In the event RMI and/or proposed additional tenants
install a potable water well and pressure tank for use in its
operations, Buckeye shall have the right to connect to the water
line leaving the pressure tank so that it can use the potable water
at its office and quality control facilities. There shall be no
cost to Buckeye for the use of the water and there shall be no cost
to RMI and additional tenants for Buckeye’s connection and
extension of water lines to its facilities. If RMI proceeds with
the installation of the potable water well and it is sufficient to
support two batch plants, Buckeye will require the second user to
reimburse RMI for 1 / 2
(one half) of the development and
construction costs of the potable water well, if and when they
connect to the well water.
2.
ACCESS . During the term of this Agreement, RMI and
its customers shall have the nonexclusive use of the existing
private roads on the Property for ingress and egress in connection
with its activities hereunder provided such use does not
unreasonably interfere with Buckeye’s operations on the
Property.
3.1 Term .
The term of this Agreement shall commence on May 5, 2008 (the
“Effective Date”) and shall continue for seven
(7) years unless extended (the “Term”). In the
event Buckeye is not able to continue operations or extend its
mining permit for any reason beyond the control of Buckeye, the
conditions set forth in Section 9 “Force Majeure”
shall apply.
3.2 Renewal
Term . RMI shall have the right to renew and extend this
Agreement for five (5) additional one (1) year terms subject
to negotiating annual material purchase agreements with Buckeye
prior to the expiration of the Term. Buckeye may terminate the
lease after the expiration of the 7th year if a development plan is
submitted and approved by the Town of Buckeye or Governing Agency
to convert the upland part of the property owned by the Company to
another use. Buckeye shall give RMI six months written notice and
pay the actual costs incurred by RMI to relocate its concrete plant
not to exceed $250,000. The maximum amount of the relocation cost
will be reduced by $50,000 for each one year option exercised by
RMI.
4.
PRODUCT REQUIREMENTS .
4.1 Minimum
Tonnage . In partial consideration of the rights granted by
Buckeye hereunder, RMI agrees to purchase from Buckeye all of its
requirements for fine and coarse aggregates for use in the
manufacture of ready mix concrete at the RMC Plant (the
“Products”). On or before January 1 of each calendar
year during the term of this Agreement, RMI shall notify Buckeye of
its expected requirements for the next calendar year, including
those requirements for Products for use in an RMC Plant (the
“Annual Minimum Quantities”).
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RMI agrees that,
commencing on January 1, 2009 and for each year thereafter as
long as this Agreement remains in effect, the annual payment
Buckeye receives (the sum total of the twelve monthly payments due
and paid for each year of the Agreement) shall not be less than an
amount (the “Annual Minimum Payment”) calculated on the
basis of the minimum annual combined sales of fine and coarse
aggregate and the price of Washed Fine and Coarse Aggregate during
the year pursuant to Exhibit C. Beginning on January 1,
2010 and thereafter as long as this Agreement remains in effect,
the Annual Minimum Payment shall be adjusted January 1 of each
calendar year of this Agreement based on the Adjusted Price for
fine and coarse aggregate determined in accordance with
Exhibit C, Paragraph 2 hereof, provided, however,
effective January 1, 2009, the Annual Minimum Quantities shall
not be less than 100,000 tons for the first 12 months of this
agreement, 150,000 tons for the second 12 months of this
Agreement and 200,000 tons for each 12 months
thereafter.
RMI agrees that
commencing on January 1, 2009 and for each month thereafter as
long as this Agreement remains in effect, the Minimum Monthly
Payment Buckeye receives shall not be less than an amount
calculated on the basis of the Monthly Minimum Quantity (as defined
herein) and the price of Washed Coarse and Fine Aggregate
determined in accordance with Exhibit C, Paragraph 2
hereof. Effective January 1, 2009, the Monthly Minimum
Quantity shall not be less than 6,250 tons per month for the first
12 months of this Agreement, 9,375 tons per month for the
second 12 months of this Agreement, and 12,500 tons per month
for each 12 months thereafter. If in any month RMI’s
payment due is less than the Minimum Monthly Payment
(“Monthly Overpayment”), RMI shall be given a credit
(“Monthly Overpayment Credit”) equal to the amount of
the Monthly Overpayment and Monthly Overpayment Credits may
accumulate except that each Monthly Overpayment Credit shall have a
term of 12 months. RMI may use any portion of accumulated
unexpired Monthly Overpayment Credits to reduce the amount of any
future Minimum Monthly Payment, provided RMI’s purchases
exceed the Minimum Monthly Payment by an amount equal to or greater
than the credit taken.
RMI shall be
obligated to purchase and Buckeye shall be obligated to sell and
deliver to RMI the Annual Minimum Quantities during the calendar
year. In the event RMI fails to purchase the Annual Minimum
Quantities during such calendar year (other than due to
Buckeye’s failure or inability to supply such Products or due
to a Force Majeure as provided in Section 9 below), RMI shall
pay to Buckeye, as liquidated damages, an amount equal to 25% of
the price of each ton of the Annual Minimum Quantity not purchased
by RMI in such calendar year.
RMI may at its
option request Aggregates deliveries in any calendar year in excess
of the applicable Annual Minimum Quantity and Buckeye shall, if and
to the extent it has the capacity to do so, supply such aggregates
to RMI; provided, however, that Buckeye’s obligation to
supply aggregates in excess of the applicable Annual Minimum
Quantities shall be subject to any contracts or commitments to
third parties entered into by Buckeye with third parties following
RMI’s notice of Proposed Annual
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Quantities for
such year. Subject to the Annual Minimum Quantity, Buckeye shall
not be obligated to provide RMI more than 40% of the total concrete
aggregate and washed concrete sand produced by Buckeye.
4.2 Price.
The price for the Products shall be as listed on Exhibit C
hereto, subject to escalation as provided in said Exhibit and
payment shall be made on the payment terms as set forth in said
Exhibit.
4.3 Delivery
and Weights . The Products shall be delivered by Buckeye to
stockpiles at locations near the Plant. Measurement of materials
used by RMI for payment purposes shall be made by RMI. For material
used in the production of ready mix concrete measurement shall be
based upon the quantities of coarse and fine aggregate as shown on
the RMI’s computer printouts for the plant located on the RMC
Plant site.
4.4 Quality
. The Products sold and delivered under this Agreement to RMI shall
satisfy those specifications set out in Exhibit C
hereto
5.
FINANCIAL ASSURANCE . RMI hereby acknowledges that
Buckeye has provided financial assurance to the State Mine
Inspector in connection with an approved Reclamation Plan for
mining and ancillary uses on the Property. If additional financial
assurance is required by the State Mine Inspector due to
RMI’s operation of a RMC plant on the Property, RMI will be
responsible to provide a bond or other form of financial guarantee
satisfactory to the State Mine Inspector, at no cost to
Buckeye.
6.
COMPLIANCE WITH LAWS . RMI shall comply with all
applicable laws in the conduct of its operations hereunder,
including without limitation those relating to environmental
protection. RMI hereby acknowledges that the Leased Premises are
within the floodplain and/or floodway of the Gila River and further
acknowledges receipt of a copy of the mining permit from the
Maricopa County Flood Plain District.
7.
TAXES AND UTILITIES . Buckeye agrees to make payment
for all real estate taxes on the Property. However, RMI shall pay
that portion of the real estate taxes attributable to the Leased
Premises when billed for same by Buckeye. RMI shall also pay when
due all ad valorem taxes assessed on any improvements or
personal property located on or used in its operation of the Plants
on the Leased Premises. RMI shall pay all utilities, including but
not limited to, electricity, gas, and water, consumed by RMI on the
Leased Premises in the operation of the Plants. If such utility
costs are not separately identified and billed to RMI, but are
charged to Buckeye together with those for the Property generally,
RMI shall promptly reimburse Buckeye for those utility costs
attributable to RMI’s operations on the Leased Property. In
addition, RMI shall reimburse Buckeye for that portion of the cost
of extending electrical service to the Property based on the
percentage of amperage allocated to the Plant.
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9.1 Force
Majeure . Neither party shall be liable for damages for any
delay or failure in performance of this Agreement, other than to
make payments due hereunder, resulting from acts of God, including,
but not limited to floods, storms, earthquakes, hurricanes,
tornadoes, or other severe weather or climatic conditions, acts of
public enemy, war, blockades, insurrection, vandalism or sabotage,
fire, accident, wreck, explosion, strike or labor dispute,
embargoes, governmental laws, orders, regulations, or third-party
transportation disruptions, which cause interruption in the
production of Products at Buckeye’s operations on the
Property, the receipt, use or consumption of Products by RMI at any
Plant or the manufacture and sale of ready-mix concrete by RMI from
the Plant.
9.2 Notice
. The party experiencing an event of Force Majeure will send
written notice to the other party describing the nature of the
Force Majeure, the estimated volume of Products expected to be
effected thereby and its expected duration. This notice shall be
sent within 5 days of the beginning of the event of Force
Majeure and within 10 days of the end of such
event.
9.3 Duties.
The party whose performance is affected by such Force Majeure
shall, to the extent practical through commercially reasonable
efforts, remedy such condition with all reasonabl
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