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Option To Purchase And Royalty Agreement

Royalty Agreement

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BULLFROG GOLD CORP. | SOUTHWEST EXPLORATION, INC | STANDARD GOLD CORP

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Title: OPTION TO PURCHASE AND ROYALTY AGREEMENT
Governing Law: Arizona     Date: 10/6/2011

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OPTION TO PURCHASE AND ROYALTY AGREEMENT

 

THIS OPTION TO PURCHASE AND ROYALTY AGREEMENT (this “Agreement”) is made this 28 th day of September, 2011, (the “Effective Date”) by and among SOUTHWEST EXPLORATION, INC, an Arizona corporation (“Optionor”) and STANDARD GOLD CORP., a Nevada corporation (“Optionee”).

 

RECITALS

 

A.            Optionor is the recorded and beneficial owner of an undivided 100% interest in certain unpatented mining claims and Arizona State Land Department mineral exploration permits situated in the County of Maricopa, the State of Arizona, United States, and in possession of all Data relating there to, known as the News Boy Gold Project, as detailed in the specific description of claims and permits attached hereto as Exhibit “A” (the “Property”).

 

B.            Optionor has agreed to grant, and Optionee desires to acquire, an option to earn a 100% right, title and interest in and to the Property on the terms and conditions set out herein;

 

NOW THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Optionor and Optionee agree as follows:

 

1.            DEFINITIONS

 

1.1             Definitions.   The following terms, wherever used in this Agreement, shall have the meanings set forth below:

 

(a)

“Closing” means the date to be mutually agreed upon between the parties.

 

(b)

“Data” means all information and knowledge, in whatever form, paper, electronic or otherwise, relating to the Property and Area of Interest, including but not limited to, geologic reports, drill core, assay results, geophysical reports, technical data, analysis, and compilations, feasibility reports, environmental reports, etc.

 

(c)

“Minerals” shall mean any products of value derived from the Property;

 

 

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(d)

“Mining Operations” means every kind of work done on or in respect of the Property or the product derived from the Property during the Term by, on the behalf of or under the direction of Optionee including, without limiting the generality of the foregoing, the work of assessment, geophysical, geochemical and geological surveys, studies and mapping, investigating, drilling, designing, examining, equipping, improving, surveying, bulk sampling and processing such samples, shaft-sinking, raising, cross-cutting and drifting, searching for, digging, trucking, sampling, working and procuring minerals, including stone, crushed rock or aggregate, ores and metals, surveying and bringing any mining claims to lease or patent, the construction and maintenance of necessary access roads, drill site preparation, and all other work usually considered to be prospecting, exploration, development and mining work; in paying wages and salaries of workers engaged in the work and in supplying food, lodging, transportation and other reasonable needs of the workers including the costs of creating and maintaining a camp on or near the Property; in paying assessments or premiums for workers’ compensation insurance, contributions for unemployment insurance or other pay allowances or benefits customarily paid in the district to those workers; in paying rentals, license renewal fees, taxes and other governmental charges required to keep the Property in good standing in accordance with the laws of the County of Maricopa, State of Arizona, United States, including the costs of claim renewal fees and permits; in purchasing or renting plant, buildings, machinery, tools, appliances, equipment or supplies and in installing, erecting, detaching and removing them; mining, milling, concentrating, rehabilitation, reclamation and environmental protection, including the cost of resolving any environmental problems associated with the work on the Property including from creating drill sites or access roads that may affect any grounds or waters surrounding the Property as may be required by any governmental agency or otherwise, and in the management of any work which may be done on the Property or in any other respect necessary for the due carrying out of the prospecting, exploration and development work;

 

(e)

“Net Smelter Return” means the proceeds received by Optionee from any smelter or other purchaser from the sale of any ores, concentrates or minerals produced from the Property;

 

(f)

“Option” means the right granted by Optionor to Optionee to acquire up to a 100% undivided right, title and interest in and to the Property as provided in Section 4 hereof;

 

(g)

“Royalty” means the 2% net smelter return royalty described in Exhibit “B” attached hereto;

 

(h)

“Term” means the period during the term of this Agreement from the Effective Date to and including the date of exercise of the Option;

 

1.2             Headings .  The headings of this Agreement and the exhibits are solely for convenience of reference and do not affect the interpretation of it or define, limit or construe the contents of any provision of this Agreement.

 

1.3             Number and Gender.   Words importing the singular number shall include the plural and vice versa, words importing the neuter gender shall include the masculine and feminine genders, and words importing persons shall include firms and corporations and vice versa.

 

1.4             Governing Law. This Agreement and the rights and obligations and relations of the parties shall be governed by and construed in accordance with the laws of the State of Arizona and the federal laws of the United States applicable therein (but without giving effect to any conflict of law rules). The parties agree that the courts of the State of Arizona shall have jurisdiction to entertain any action or other legal proceedings based on any provisions of this Agreement. Each party attorns to the jurisdiction of the courts of the State of Arizona.

 

 

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1.5             Currency.   All references to currency in this Agreement are references to the lawful currency of the United States unless otherwise specifically stated.

 

2.            REPRESENTATIONS AND WARRANTIES

 

2.1             Optionor Representations and Warranties .  Optionor represents and warrants to Optionee that:

 

(a)

Optionor has been duly incorporated under the laws of the State of Arizona and validly exists as a corporation in good standing under the laws of that jurisdiction of incorporation;

 

(b)

Optionor is the registered and beneficial owner and, at the time of transfer to Optionee of an interest in the unpatented mining claims and mineral exploration permits comprising the Property, they will be the registered and beneficial owners of all of the unpatented mining claims and mineral exploration permits comprising the Property free and clear of all liens, charges and claims of others, save and except the Royalty, and no taxes or rentals are due in respect of any thereof;

 

(c)

the unpatented mining claims and mineral exploration permits comprised in the Property have been duly and validly located and recorded, and are in good standing in the office of the mining recorder or such other applicable regulatory agency having jurisdiction over the Property;

 

(d)

there are no known adverse claims or challenges against or to the ownership of or title to any of the unpatented mining claims and mineral exploration permits comprising the Property, nor to the knowledge of Optionor is there any basis therefore, and there are no outstanding agreements or options to acquire or purchase the Property or any portion thereof, and no known person having any royalty or other interest whatsoever in production from any of the unpatented mining claims and mineral exploration permits comprising the Property;

 

(e)

Optionor has duly obtained all corporate authorizations for the execution of this Agreement and for the performance of this Agreement by it, and the consummation of the transaction herein contemplated will not conflict with or result in any breach of any covenants or agreements contained in, or constitute a default under, or result in the creation of any encumbrance under the provisions of, the Articles, By-laws or the constating documents of Optionor or any shareholders’ or directors’ resolution, indenture, agreement or other instrument whatsoever to which Optionor is a party or by which it is bound or to which it may be subject, nor does it conflict with any applicable law by which Optionor is bound;

 

(f)

Optionor has duly obtained all authorizations for the execution of this Agreement and for the performance of this Agreement by it, and the consummation of the transaction herein contemplated will not conflict with or result in any breach of any covenants or agreements contained in, or constitute a default under, or result in the creation of any encumbrance under the provisions of any indenture, agreement or other instrument whatsoever to which Optionor is a party or by which it is bound or to which it may be subject nor does it conflict with any applicable law by which Optionor is bound;

 

 

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(g)

no proceedings are pending for, and Optionor is unaware of any basis for the institution of any proceedings leading to, the dissolution or winding up, or the placing of Optionor in bankruptcy or subject to any other laws governing the affairs of insolvent persons.

 

2.2             Waiver and Survival.   The representations and warranties contained in Section 2.1 are provided for the exclusive benefit of Optionee, have been relied upon by Optionee in entering into this Agreement and a breach of any one or more thereof may be waived by Optionee in whole or in part at any time without prejudice to its rights in respect of any other breach of the same or any other representation or warranty; and the representations and warranties contained in Section 2.1 will survive Closing hereunder.

 

2.3             Optionee’s Representations, Warranties and Covenants.   Optionee represents and warrants to Optionor that:

 

(a)

Optionee has been duly incorporated and validly exists as a corporation in good standing under the laws of the State of Nevada;

 

(b)

it has duly obtained all corporate authorizations for the execution of this Agreement and for the performance of this Agreement by it, and the consummation of the transaction herein contemplated will not conflict with or result in any breach of any covenants or agreements contained in, or constitute a default under, or result in the creation of any encumbrance under the provisions of, the Articles or the constating documents of Optionee or any shareholders’ or directors’ resolution, indenture, agreement or other instrument whatsoever to which Optionee is a party or by which it is bound or to which it may be subject, nor does it conflict with any applicable law by which Optionee is bound; and

 

(c)

no proceedings are pending for, and Optionee is unaware of any basis for the institution of any proceedings leading to, the dissolution or winding up of Optionee or the placing of Optionee in bankruptcy or subject to any other laws governing the affairs of insolvent persons.

 

2.4             Waiver and Survival. The representations and warranties contained in Section 2.3 are provided for the exclusive benefit of Optionor, have been relied upon by Optionor in entering into this Agreement and a breach of any one or more thereof may be waived by Optionor in whole or in part at any time without prejudice to it rights in respect of any other breach of the same or any other representation or warranty; and the representations and warranties contained in Section 2.3 will survive Closing hereunder.

 

 

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3.            ACQUISITION AND EXERCISE OF THE OPTION

 

3.1             Grant of Option.   Optionor hereby grants to Optionee the sole and immediate working right and option with respect to the Property, for the period from the date of this Agreement until June 30, 2017, to earn a One Hundred Percent (100%) interest in and to the Property (the “Option”) free and clear of all charges encumbrances and claims, save and except for the Royalty.

 

3.2             Exercise of the Option. In order to maintain in force the working right and Option granted to it, and to exercise the Option, Optionee must:

 

(a)

pay to Optionor a sum total of Three Million Four Hundred Twenty-Five Thousand Dollars US (3,425.000.00), in cash, as follows:

 

 

(i)

on January 1, 2012, the sum of US $150,000.00; July 1, 2012 the sum of US $150,000.00;

 

(ii)

on January 1, 2013, the sum of US $200,000.00; July 1, 2013 the sum of US $200,000.00;

 

 

(iii)

on January 1, 2014, the sum of US $250,000.00; July 1, 2014 the sum of US $250,000.00;

 

(iv)

on January 1, 2015, the sum of US $300,000.00; July 1, 2015 the sum of US $300,000.00;

 

 

(v)

on January 1, 2016, the sum of US $350,000.00; July 1, 2016 the sum of US $350,000.00; and

 

(vi)

on January 1, 2017, the sum of US $425,000.00.

 

Upon Optionee making all cash payments to Optionor as set forth above, Optionee shall have exercised the Option and shall have earned a one hundred percent (100%) interest in and to the Property free and clear of all charges encumbrances and claims, save and except for the Royalty.  Upon exercise of the Option, Optionor shall deliver to Optionee, or such designee as Optionee may designate, within thirty (30) days an executed and recorded version of the Quitclaim Deed and Reservation of Royalty Interest in substantially the same form as set forth in Exhibit “B” (the “Recorded Quitclaim Deed”).

 

3.3             Acknowledgment of Prior Cash Payment Received by Optionor. Optionor acknowledges receipt of cash payments totaling $500,000.00 paid on June 30, 2011 by an affiliate of Aurum pursuant to the terms of the Original Option Agreement, as amended by that certain First Amendment to Option to Purchase and Royalty Agreement, dated June 30, 2011.

 

3.4             Royalty. Upon Optionor’s delivery of the Recorded Quitclaim to Optionee, Optionee shall pay to Optionor a Royalty as set forth in the Recorded Quitclaim Deed.  Notwithstanding the forgoing, at Optionee’s sole and absolute discretion, Optionee shall have the right at any time to purchase all or part of the Royalty from Optionor by making payments of $1,000,000.00 per 1% of royalty to Optionor but to be exercised only in whole percentage points.  In the event that Optionee exercises the right to purchase the Royalty, Optionor shall deliver to Optionee any documents as Optionee may require, in its sole and absolute discretion, evidencing such reduction or termination of Optionor’s Royalty interest.  For clarification, the parties understand that any royalty payments made by Optionee to Optionor prior to the election to purchase the Royalty do not count toward this purchase price.

 

 

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3.5             Working Right.   During the Term, Optionee shall have the sole and exclusive working right to enter on and conduct the Mining Operations on the Property as Optionee in its sole discretion may decide. Optionee shall have quiet and exclusive possession from the date of this agreement and thereafter during the currency of the working right and option, with full power and authority to Optionee, its servants, agents, workers or contractors, to carry on Mining Operations in searching for minerals in such manner as Optionee in its discretion may determine, including the right to erect, bring and install on the Property all buildings, plant, machinery, equipment, tools, appliances or supplies as Optionee shall deem necessary and proper and the right to remove therefrom reasonable quantities of rocks, ores and minerals and to transport them for the purposes of sampling, metallurgical testing and assaying. All Mining Operations conducted by Optionee shall be in accordance with good exploration, development and mining practice, and in compliance with all applicable legislation.

 

3.6             Operator.   During the Term, Optionee shall be the Operator of the work to be carried out on the Property and shall be free to contract out such parts of the work as it should choose in its sole discretion.

 

3.7             Maintaining the Property. During the Term, Optionee shall pay all of the applicable property taxes and fees necessary to keep the Property in good standing and file such assessment material as may be required under the laws of the County of Maricopa, the State of Arizona and the United States.  Notwithstanding the forgoing, and in acknowledgement that record title of the Property shall remain in the name of Optionor until such time as exercise of the Option, Optionor shall cooperate with and assist Optionee with the preparation of documentation required for the payment of such taxes and fees, and assessment filings.  In the event that Optionor fails to cooperate with and assist Optionee with the preparation of documentation required for the payment of such taxes and fees, and assessment filings, Optionor hereby grants Optionee the full power of attorney to make all such payments and take all actions necessary or prudent, in Optionee’s sole and absolute discretion, to preserve the property, and any such payments made as well any reasonable costs incurred by Optionee shall be deducted from any cash payments due Optionor pursuant to Section 3.2(a) hereunder.

 

3.8             Option to Purchase Property Only.   This Agreement is an option to purchase only.  Optionee shall not earn any interest in the Property until it has completed all of the payments in Section 3.2 herein.

 

3.9           Area of Interest.

 

(a)

There shall be an area of mutual interest which shall comprise that area which is within ten kilometres of the outermost boundary of each of the unpatented mining claims and mineral exploration permits which constitute the Property (the “Area of Interest”) as at the date of this Agreement.

 

 

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(b)

If at any time during the Term, any party (in this section only called the “Acquiring Party”) stakes, locates or otherwise acquires, directly or indirectly, any right to or interest in any unpatented mining claim, license, lease, grant, concession, permit, patent or other mineral property located wholly or partly


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