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Amended And Restated Net Smelter Return Royalty Agreement

Royalty Agreement

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SAGEBRUSH GOLD LTD. | BATTLE MOUNTAIN GOLD EXPLORATION LLC | FIRSTGOLD CORP | Newgold, Inc | Repadre International Corporation

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Title: AMENDED AND RESTATED NET SMELTER RETURN ROYALTY AGREEMENT
Governing Law: United States Of America     Date: 8/30/2011
Industry: Gold and Silver     Sector: Basic Materials

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THIS AMENDED AND RESTATED NET SMELTER RETURN ROYALTY AGREEMENT dated as of the 24th day of August 2011

 

B E T W E E N:

 

FIRSTGOLD CORP. (the “Owner”)

 

- and -

 

BATTLE MOUNTAIN GOLD EXPLORATION LLC (“Grantee”)

 

WITNESSES THAT:

 

WHEREAS the Owner is the legal and beneficial owner of certain mining properties located in Nevada and known as the Relief Canyon Mine;

 

WHEREAS , Newgold, Inc. (“ Newgold ”) and Repadre International Corporation (“ Repadre ”) entered into that certain Net Smelter Return Royalty dated October 3, 1996, which was recorded in the Official Records of Pershing County, Nevada on February 6, 1997, in Book 314, Page 356, Document Number 97-0362, as amended by a letter agreement dated October 21, 1998, a notice concerning which dated May 26, 1999, was recorded in the Official Records of Pershing County, Book 343, Page 366, Document Number 224405 (collectively, the “ 1996 Royalty Agreement ”);

 

AND WHEREAS , pursuant to the 1996 Royalty Agreement, Newgold granted to Repadre a 3% net smelter returns royalty (the “ 1996 Royalty ”) covering all minerals mined, produced or otherwise recovered from certain property, including but not limited to the unpatented lode mining claims located in Pershing County, Nevada, as identified in Schedule A to the 1996 Royalty Agreement (the “ Original Relief Canyon Claims ”);

 

AND WHEREAS , Newgold and Repadre entered into that certain Net Smelter Return Royalty Agreement effective as of June 19, 1997, a memorandum concerning which was recorded in the Official Records of Pershing County on July 2, 1997 in Book 320, Page 534, Document Number 214209 (the “ 1997 Royalty Agreement ”);

 

AND WHEREAS , pursuant to the 1997 Royalty Agreement, Newgold granted to Repadre a further 1% net smelter returns royalty (the “ 1997 Royalty ”) covering all minerals mined or otherwise recovered from the Original Relief Canyon Claims;

 

AND WHEREAS , the Original Relief Canyon Claims were abandoned and relocated, and the unpatented lode mining claims and millsite claims that comprise the Relief Canyon Mine on the date hereof are listed in Schedule A ;

 

AND WHEREAS , Newgold changed its name to “Firstgold Corp.” by Certificate of Amendment of Certificate of Incorporation filed with the Secretary of State of the State of Delaware on December 1, 2006, which was recorded in the Official Records of Pershing County on August 7, 2008 in Book 439, Page 26, Document Number 361242, and shall hereafter be referred to herein as the “ Owner ”;

 

 

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AND WHEREAS , pursuant to various conveyances and corporate transactions, all of the right, title and interest of Repadre in and to the 1996 Royalty Agreement, the 1996 Royalty, the 1997 Royalty Agreement, and 1997 Royalty have been transferred to and assumed by, and are owned by, Grantee; and

 

AND WHEREAS , Owner and Grantee hereby desire to amend and restate in their entirety the 1996 Royalty Agreement and the 1997 Royalty Agreement and to place of record notice of Grantee’s royalty interest in and to the Property;

 

NOW THEREFORE in consideration of the mutual covenants and agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by each of the parties hereto, it is agreed as follows:

 

1. DEFINITIONS

 

 

 

 

(a)

 “ Affiliate ” means, with respect to any person, another person that is, at any time now or hereafter, directly or indirectly controlling, controlled by or under direct or indirect common control with, such person.

 

 

 

 

(b)

business day ” means any day which is not a Saturday, Sunday or banking holiday in the United States of America.

 

 

 

 

(c)

control ” means, with respect to any person, voting securities carrying more than 50% of the votes for the election of directors of such person which, if exercised, are sufficient to elect a majority of the board of directors of such person, or any other person who has the power to direct or cause the direction of the management and policies of such person, whether through the ownership of shares or by conduct or otherwise.

 

 

 

 

(d)

Encumbrances ” means any mortgage, charge, pledge, lien, license, privilege, security interest, royalty or other encumbrance.

 

 

 

 

(e)

Expenses ” means the following expenses (if actually paid by the Owner):

 

 

 

 

 

 

(i)

sales, production and severance taxes and all mining taxes, payable by the Owner or operator of the Property or required pursuant to applicable laws to be paid by the Owner on behalf of Grantee, that are based directly upon, and actually assessed against, the value or quantity of Minerals sold or otherwise disposed of from the Property; but excluding any and all taxes based upon the net or gross income of the Owner or operator of the Property, the value of the Property or the privilege of doing business, and other taxes assessed on a similar basis;

 

 

 

 

 

 

(ii)

costs and expenses, if any, for transportation (including, but not limited to, direct insurance costs while in transit) of Minerals from the Property to places where such Minerals are smelted, refined and/or sold or otherwise disposed of; and

 

 

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(iii)

costs and expenses (including assaying, sampling and sales costs) and all penalties, if any, charged by any off-site arm’s length  smelter or refiner of the Minerals; but, if smelting and/or refining are carried out in facilities owned or controlled, in whole or in part, by the Owner or any Affiliate of Owner, then the charges and costs for such smelting or refining of such Minerals shall be the lesser of:  (A) the charges and costs the Owner would have incurred if such smelting or refining was carried out at facilities that are not owned or controlled by the Owner or its Affiliate and that are offering comparable services for comparable products; and (B) the actual charges and costs incurred by the Owner with respect to such smelting and refining.

 

For greater certainty, any royalty payable in respect of production of mineral products from the Property other than the Royalty granted and conveyed herein shall not constitute an Expense.

 

 

(f)

Gross Proceeds ” means either: (i) the value of all consideration, monetary or otherwise (including insurance proceeds), received by, or owing to, the Owner from the sale or other disposition of Minerals to a third party that is not an Affiliate of Owner; or (ii) the amount obtained by multiplying the Spot Price by the quantity of Minerals (A) sold or otherwise disposed of to an Affiliate of Owner, or (B) returned to Owner by a Processor; provided, however and without limiting the foregoing, Gross Proceeds shall not include the value of any Minerals utilized by the Owner on the Property for purposes of building roads, mitigation and reclamation activities and other similar activities.

 

 

(g)

Mineral(s) ” means all naturally occurring metallic and non-metallic elements that are mined, produced or otherwise recovered from the Property, whether in the form of doré, concentrates, tailings or otherwise; provided, however, that Minerals shall not include naturally occurring metallic and non-metallic elements mined, produced or otherwise recovered from mining claims or millsites outside of the boundaries of the Property.

 

 

(h)

Net Smelter Returns ” means Gross Proceeds less Expenses.

 

 

(i)

Permitted Encumbrances ” means the Royalty and the Encumbrances disclosed on Schedule B hereto.

 

 

(j)

Prime ” means the “Prime rate” published by the Wall Street Journal .

 

 

(k)

Processor ” means any smelter, refiner or other processor of the Minerals.

 

 

(l)

Property ” means the unpatented lode mining claims and millsite claims described in Schedule A, and any future amendments, abandonments and relocations thereof to the extent lying within the exterior boundary of such mining and millsite claims.

 

 

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(m)

Purchase Price ” means the amounts previously paid by Repadre to Owner for the 1996 Royalty and the 1997 Royalty pursuant to the 1996 Royalty Agreement and the 1997 Royalty Agreement, respectively.

 

 

 

 

(n)

Royalty ” means the real property interest conveyed by Owner to Grantee pursuant to Section 2 of this Agreement, entitling Grantee to payment of the amounts determined and paid in accordance with Sections 2 and 3 of this Agreement.

 

 

 

 

(o)

Spot Price ” means, with respect to a particular Mineral, the price determined for such Mineral on the date on which payment for such Mineral is delivered or credited to the account of the Owner and, for such purposes, the “spot price” of gold shall be determined using the price of gold in U.S. dollars on the London Bullion Market Afternoon Fix on such day, and the “spot price” of any other Mineral shall be determined using the price of such Mineral quoted at the close of business on such day by the New York Commodity Exchange; and if, for any reason the London Bullion Market or the New York Commodity Exchange is no longer in operation or the “spot price” of a particular Mineral is not quoted on the London Bullion Market or the New York Commodity Exchange, the “spot price” of such Mineral shall be determined by reference to the price of such Mineral on another similar commercial exchange entity having the largest volume of trading in such Mineral on such day; and the exchange rate used to convert a “spot price” to U.S. Dollars from any other currency on a particular date shall be the exchange rate for such other currency on such date published by the Wall Street Journal .

 

 

 

 

(p)

Tailings ” means all mineral-bearing materials (including, without limitation, gold and silver) located in or on the Property on or after October 3, 1996, resulting from the extraction and recovery of Minerals.

 

 

 

2. RESERVATION, PURCHASE AND GRANT OF ROYALTY

 

(a) Subject to the terms of this Agreement, the Owner, for good and valuable consideration, hereby grants, sells, assigns, transfers and conveys to Grantee a royalty on all Minerals, calculated at the rate of 2.0% of Net Smelter Returns. Owner and Grantee acknowledge, agree and declare that: (i) they intend, by the foregoing grant, sale, transfer and conveyance of the Royalty, to create a real property interest in and to the Property that is a covenant running with the Property, enforceable against the Owner, or any Affiliate of Owner or third party that is the successor, acquirer, assignee or transferee of all or any portion of the Property; (ii) the Royalty shall burden the Property and the interest of Owner and its successors, acquirers, assignees and transferees therein, and shall constitute a benefit to the interest of Grantee, its successors, acquirers, assignees and transferees in and to the Property, and as such shall touch and concern the Property; and (iii) the interests of Owner and Grantee in and to the Minerals and the Property are in privity with one another.

 

 

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(b) Owner acknowledges the receipt and sufficiency of the Purchase Price, paid previously in accordance with the terms and conditions of the 1996 Royalty Agreement and the 1997 Royalty Agreement, as full and final consideration for the Royalty granted herein.

 

3. TIME AND MANNER OF ROYALTY PAYMENTS

 

(a) The Royalty shall be calculated and paid quarterly by Owner to Grantee within 15 calendar days following the end of each calendar quarter during which the Owner receives Gross Proceeds.

 

(b) That portion of any Royalty payment relating to the sale or other disposition of gold shall be paid to Grantee in cash unless Grantee elects, in accordance with this Section 3(b), to receive such payment in gold bullion. Grantee shall provide the Owner with written notice of its election to receive payment in gold bullion not less than 15 business days prior to the date on which the next Royalty payment is to be paid to Grantee. Grantee’s notice electing payment of Royalty in gold bullion shall include directions to either credit Grantee’s account at the Processor or deliver refined gold to the location or account specified by Grantee in its notice. Any Royalty payment payable in cash shall be paid by wire transfer of immediately available funds in accordance with Grantee’s written instructions.

 

(c) Concurrently with each Royalty payment, the Owner shall prepare and deliver to Grantee a detailed statement of the manner in which such Royalty payment was calculated, including: (i) the quantity of Minerals to which such Royalty payment is applicable; (ii) the Expenses and the calculation of the applicable Net Smelter Returns; and (iii) the sale price(s) in respect of the Minerals sold or disposed of for value. Upon written request from Grantee, within 6 months after the end of any calendar year, the Owner shall prepare and deliver to Grantee a statement for such calendar year indicating: (i) the quantities of Minerals sold or otherwise disposed of by the Owner; (ii) the quantities of Minerals produced by the Owner; (iii) the Net Smelter Returns; and (iv) the sale price(s) in respect of the Minerals sold or disposed of for value.

 

(d) Grantee may object in writing to any statement and payment amount within 12 months after receipt of the relevant statement or payment. If the amount of any adjustment to the aggregate Royalty payments required to be paid to Grantee during a calendar year is more than $10,000, the Owner shall pay a penalty to Grantee equal to the amount of the adjustment multiplied by Prime plus 2%.

 

(e) If any Royalty payment has not been paid in full as provided herein, Grantee may give written notice of such default to Owner, and the Owner must cure such default within five business days after receipt of Grantee’s written notice. Unless Grantee has received all payments required to cure such default within such period, the Owner shall pay interest on the delinquent payment at a rate of Prime plus 3%, calculated daily and compounded monthly, commencing on the date on which such delinquent amount was due and continuing until Grantee receives payment in full of such delinquent amount and all interest accrued thereon. For the purposes of this Section 3(d), Prime shall be determined as of the date on which such delinquent amount was due.

 

 

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(f) All Royalty payments, including interest and penalties, if any, will be made without withholding of or deduction for, or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature (collectively, “ Withholdings ”), unless such Withholdings are imposed or levied, and are required, by or on behalf of the Government of the United States of America or any political subdivision thereof, or any department, authority or agency therein or thereof having power to tax.

 

4. PRE-EMPTIVE RIGHTS IN RESPECT OF ADDITIONAL ROYALTIES

 

(a) If the Owner receives a bona fide offer (an “ Offer ”) from a third party (the “ Purchaser ”) to purchase or acquire from the Owner, or if the Owner otherwise intends to reserve, grant or create, any additional royalty or other non-equity participation in respect of any Minerals (an “ Additional Royalty ”), the Owner shall not reserve, create, grant, sell, assign, transfer or convey any such Additional Royalty unless the Grantee has been given the first right to purchase such Additional Royalty in accordance with this Section 4.

 

(b) If the Owner wishes to accept or make an Offer, then a copy of such Offer shall be delivered to Grantee. In addition to a copy of such Offer, the Owner shall provide Grantee:

 

 

(i)

written notification of the identity of the Purchaser;

 

 

(ii)

a written description of each type of cash and non-cash consideration (including, without limitation, tangible or intangible assets, property, negotiable instruments, securities or other benefits) included in the Offer, together with a statement of the monetary value as of the date of such Offer of any non-cash consideration;

 

 

(iii)

written confirmation that there is no other direct or indirect supplementary cash or non-cash consideration to be received by the Owner, the Purchaser or any other person in connection with such Offer, other than is disclosed in Section 4(b)(ii) above, and that such Offer is not made as part of, or in connection with, any other transaction; and

 

 

(iv)

a certificate of a senior officer of the Purchaser, or a certificate of the Purchaser’s external auditor, confirming that the monetary value of the non-cash consideration receivable by the Owner pursuant to the Offer is not less than the monetary value thereof described to Grantee pursuant to Section 4(b)(ii) above.

 

(c) Grantee may notify the Owner of Grantee’s intention to purchase such Additional Royalty at any time within the 45 day period commencing on the date on which Grantee has received all information referred to in Section 4(b) above. If Grantee does not agree to purchase such Additional Royalty within such 45 day period, the Owner may thereafter reserve, create, grant, assign, transfer or convey such Additional Royalty to the Purchaser, provided that:

 

 

(i)

the terms and conditions offered to such Purchaser are the same as the terms and conditions stated in the Offer and described in the information provided pursuant to paragraphs 4(b)(i), (ii) and (iii);

 

 

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(ii)

such Purchaser purchases the Additional Royalty within 90 days after the above-noted 45 day period has expired or 90 days after Grantee notified the Owner of its intention not to buy the Additional Royalty, whichever is earlier; and

 

 

(iii)

the Owner complies with the terms and conditions specified in Section 19 of this Agreement.

 

If the Additional Royalty is not purchased by the Purchaser within such 90-day period, then the terms of this Section 4 shall again, and from time to time, apply; and Grantee shall be entitled to the pre-emptive rights set forth in this Section 4.

 

(d) The Owner shall not reserve, create, grant, sell, assign, transfer or convey any Additional Royalty except in accordance with this Section 4 and Section 19.

 

5. REPRESENTATIONS AND WARRANTIES OF THE OWNER

 

The Owner hereby represents and warrants as follows:

 

(a) The Owner is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware.

 

(b) The Owner has all necessary corporate power and authority to enter into and perform its obligations under this Agreement and to carry on its business as now conducted and as currently proposed to be conducted.

 

(c) Neither the execution nor delivery of this Agreement nor the consummation of the transactions contemplated herein nor compliance with the terms, conditions and provisions of this Agreement will conflict with or result in a breach of any terms, conditions or provisions of the charter documents or by-laws of the Owner, any law, rule or regulation having the force of law, any contractual restrictions that are binding upon the Owner, or the Property, or any writ, judgement, injunction, determination or award that is binding upon the Owner.

 

(d) The execution and delivery of this Agreement and the consummation by the Owner of the transactions contemplated herein have been duly authorized by all necessary corporate action, and all necessary third party consents have been obtained.

 

(e) This Agreement has been duly executed and delivered by the Owner and constitutes a valid and legally binding obligation of the Owner, enforceable in accordance with its terms by Grantee against the Owner.

 

(f) Except as set forth in Schedule C, there are no actions, suits or proceedings pending or, to the best knowledge of the Owner, threatened against or affecting the Owner, the Property or the Minerals, before any court, arbitrator or governmental administrative body or agency, that might materially adversely affect the Property or the Owner’s interest therein or challenge the validity or propriety of the transactions contemplated herein.  The Owner is not in default in any material respect under any applicable statute, rule, order, decree or regulation of any court, arbitrator or governmental body or agency having jurisdiction over the Owner.

 

 

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(g) The Owner has filed all tax returns that are required to be filed and has paid all taxes that have become due pursuant to such returns or pursuant to any assessment received by the Owner.

 

(h) There is no Encumbrance upon or with respect to the Property, the Royalty, the Minerals, receivables derived from the sale or other disposition of the Minerals or the income of the Owner, other than Permitted Encumbrances.

 

(i) To the best of the Owner’s knowledge, information and belief, the Owner has good and marketable title to, and is in exclusive possession of all right, title and interest in and to, the Property either as owner or lessee, as the case may be, subject only to Permitted Encumbrances and, with respect to the unpatented lode mining claims and millsite claims, the paramount title of the United States of America.

 

(j) To the best of the Owner’s knowledge, information and belief, each unpatented lode mining claim and millsite claim constituting the Property is fully and accurately disclosed on Schedule A to this Agreement, is in good standing, has been properly located and recorded in accordance with all applicable laws, and all assessment work has been done and all annual claim maintenance fees and other amounts required to be paid to maintain the same have been paid to the date hereof.

 

(k) To the best of the Owner’s knowledge, information and belief, the Owner is the sole registered and beneficial owner of, or the sole lessee of, all right, title and interest in and to the Property, subject to the paramount title of the United States of America in and to the unpatented lode mining claims and millsite claims comprising the Property, and there are no outstanding rights, agreements or options in favor of any third party to acquire any interest in the Property.

 

(l) The Royalty shall constitute a real property interest in the Property that will run with the Property and will be enforceable against the Owner and against any Affiliate of Owner or third party acquiror, assignee or transferee of all, or any portion of, the Property.

 

(m) The lands and interests in lands described in Schedule A comprise all of the mining claims, millsite claims, mining leases, surface rights and mineral rights relating to the Relief Canyon Mine.

 

6. REPRESENTATIONS AND WARRANTIES OF GRANTEE

 

Grantee hereby represents and warrants as follows:

 

(a) Grantee is a limited liability company organized, validly existing and in good standing under the laws of the State of Nevada.

 

(b) Grantee has full corporate right, power and authority to enter into and perform its obligations under this Agreement.

 

 

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(c) This Agreement has been duly executed and delivered by Grantee and constitutes a valid and legally binding obligation of Grantee, enforceable in accordance with its terms by the Owner against Grantee.

 

(d) Grantee has all necessary regulatory approvals and consents to enter into this Agreement and to acquire the Royalty.

 

7. SURVIVAL

 

All representations and warranties of the Owner and Grantee set forth in this Agreement shall survive the execution of this Agreement for a period of one year.  All covenants and agreements of the Owner and Grantee shall continue in perpetuity in full force and effect for the benefit of the Owner and Grantee (and their respective successors and assigns).

 

8. TERM

 

The Royalty shall constitute a real property interest in the Property and a covenant running with the Property, binding upon Owner and its successors, acquirers, assigns and transferees. The parties to this Agreement do not intend that this Agreement or any provision set forth herein shall violate any statutory or common law formulation of the Rule Against Perpetuities, the Rule Against Unreasonable Restraints on the Alienation of Property, or any similar rule.  Accordingly, if any right or option to acquire any interest in the Property or in any other real property exists under this Agreement, such right or option must be exercised, if at all, so as to vest such interest within time periods permitted by applicable rules.  If, however, any such violation should occur inadvertently, the parties here


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