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Option To Purchase And Royalty Agreement

Royalty Agreement

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BULLFROG GOLD CORP. | STANDARD GOLD CORP

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Title: OPTION TO PURCHASE AND ROYALTY AGREEMENT
Governing Law: Nevada     Date: 8/3/2012
Industry: Gold and Silver     Sector: Basic Materials

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OPTION TO PURCHASE AND ROYALTY AGREEMENT

 

THIS OPTION TO PURCHASE AND ROYALTY AGREEMENT (this “Agreement”) is made this 11 th day of June, 2012, (the “Effective Date”) by and among ARDEN LARSON (“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 in the County of Eureka, the State of Nevada, United States, and in possession of all Data relating there to, known as the Klondike Project, as detailed in the specific description of 64 claims attached hereto and made a part hereof 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, geochemical reports, technical data, analysis, and compilations, feasibility reports, environmental reports, etc.

 

(c)

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

 

(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 Eureka, State of Nevada, 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;

 

 

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(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 net smelter return royalty schedule 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 Nevada  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 Nevada 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 Nevada.

 

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

 

 

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2.            REPRESENTATIONS AND WARRANTIES

 

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

 

(a)

Optionor is the registered and beneficial owner and, at the time of transfer to Optionee of an interest in the unpatented mining claims comprising the Property, they will be the registered and beneficial owners of all of the unpatented mining claims 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;

 

(b)

the unpatented mining claims 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;

 

(c)

there are no known adverse claims or challenges against or to the ownership of or title to any of the unpatented mining claims 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 comprising the Property;

 

(d)

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 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; and

 

(e)

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;

 

 

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(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.

 

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 Effective Date of this Agreement until the 10 th anniversary of the Effective Date, 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:

 

Pay to Optionor a total sum of United States FIVE HUNDERED SEVENTY FIVE THOUSAND AND NO/100 DOLLARS (US $575,000.00) in cash in the amounts on or before the dates as set forth below:

 

Payment Date:

Payment Amount:

Effective Date

US $25,000.00

Six (6) Months after Effective Date

US $25,000.00

1 st Anniversary of Effective Date

US $30,000.00

2 nd Anniversary of Effective Date

US $35,000.00

3 rd Anniversary of Effective Date

US $40,000.00

4 th Anniversary of Effective Date

US $45,000.00

5 th Anniversary of Effective Date

US $50,000.00

6 th Anniversary of Effective Date

US $55,000.00

7 th Anniversary of Effective Date

US $60,000.00

8 th Anniversary of Effective Date

US $65,000.00

9 th Anniversary of Effective Date

US $70,000.00

10 th Anniversary of Effective Date

US $75,000.00

 

 

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In the event commercial production is achieved prior to completion of the payment schedule as described above, the balance due shall become payable upon such event.  For purposes herein, the date that commercial production is achieved shall be the first day of the first full month after no less than 90% sustained material throughput of processing plant nameplate capacity has been achieved for a period of not less than three continuous months.

 

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”).

 

3.4             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 prior to the commencement of commercial production, Optionee shall have the right at any time to purchase or buy-down up to one half of any, each or all of the three Royalty components from Optionor by making payments of US $500,000.00 per 0.25% of base net smelter return royalties for Gold, Silver and/or Other Products to Optionor, which shall be exercised only in one-half increments of percentage points.  In the event that Optionee exercises the right to purchase or buy-down the Royalty, Optionor shall deliver to Optionee any documents as Optionee may require, in its sole and absolute discretion, evidencing such reduction 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 may not be credited toward the purchase or buy-down price.

 

 

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Base Net Smelter Return Royalty (%)

 

 

 

 

 

Average Market Price

 

Maximum Buy-Down Net Smelter Return Royalty (%)

 

GOLD:

1.00

less than $1,200/troy oz.

0.50

 

1.50

$1,201 to $1,600/troy oz.<

0.75

 

2.00

$1,601 to $2,000/troy oz.<

1.00

 

2.50

$2,001 to $2,400/troy oz.<

1.25

 

3.00

$2,401 to $2,800/troy oz.<

1.50

 

3.50

$2,801 to $3,200/troy oz.<

1.75

 

4.00

greater than $3,200/toy oz.<

2.00

 

 

 

 

SILVER:

1.00

less than $15/troy oz.

0.50

 

1.50

$15.01 to $30/troy oz.<

0.75

 

2.00

$30.01 to $45/troy oz.<

1.00

 

2.50

$45.01 to $60/troy oz.<

1.25

 

3.00

$60.01 to $75/troy oz.<

1.50

 

3.50

$75.01 to $90/troy oz.<

1.75

 

4.00

greater than $90/toy oz.<

2.00

 

 

 

 

OTHER PRODUCTS:

 

2.00

 

As determined by products

 

1.00

 

At the option of Optionor, the royalty due from commercial production of gold and/or silver during any given calendar quarter may be paid to Optionor in cash or in kind based on the average prevailing market prices during such calendar quarter; provided however, if payment is made in kind, Optionor shall be responsible for all transaction costs, including insurance and transportation charges, incurred to deliver in kind gold and/or silver as designated by Optionor.

 

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 and absolute discretion.  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 and absolute 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 Eureka, the State of Nevada 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 reasonable costs incurred by Optionee shall be deducted from any cash payments due Optionor pursuant to Section 3.2(a) hereunder.

 

 

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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 one and one-half miles of the outermost boundary of each of the unpatented mining claims which constitute the Property (the “Area of Interest”) as at the date of this Agreement.

 

(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, fee land or other mineral property located wholly or partly within the Area of Interest, the Acquiring Party shall forthwith give notice to the other parties of that staking or acquiring, the costs thereof and all details in possession of that party with respect to the nature of the property and the known mineralization.

 

(c)

Each party may, within 30 days of the receipt of the Acquiring Party’s notice, elect by notice to the Acquiring Party, to require any such mineral properties and the right or interest acquired be included in the Property and thereafter form part of the Property for all purposes of this Agreement.

 

(d)

In the event that Optionee is the Acquiring Party, and Optionor elects to require such mineral properties and rights or interests acquired by Optionee be included in the Property, Optionor shall within 30 days of submission of its election notice to Optionee reimburse Optionee for all acquisition and reasonable transaction costs related to such acquisition.

 

(e)

In the event that any such mineral properties or rights acquired and included in the Property as set forth herein are burdened by any form of royalty, such royalty shall be deducted from the Royalty due Optionor hereunder, provided however, that in no event shall Optionor’s Royalty be reduced to less than 0.50% net smelter return for gold, silver and/or other products.

 

3.10             Transfer of Title on Exercise. Within thirty (30) days following the exercise of the Option, Optionor will prepare, execute and deliver to Optionee all transfer documents necessary to effect the transfer and registration of an undivided one hundred percent (100%) interest in and to the Property into the name of Optionee.

 

 

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3.11             Survival. The provisions of this Agreement are written for the benefit of Optionor and have been relied upon by Optionor in granting the Option to Purchase hereunder and shall survive the expiry of the Term of this Agreement and for a period of ten years thereafter.

 

4.            OBLIGATIONS OF OPTIONEE DURING OPTION PERIOD

 

4.1             Optionor Access to Property.   During the Term, and prior to the exercise of the Option by Optionee, Optionee will permit the directors, officers, employees and designated consultants of Optionor, at their own risk, access to the Property at all reasonable times, provided that Optionor agrees to indemnify Optionee against, and to save it harmless from, all costs, claims, liabilities and expenses that Optionee may incur or suffer as a result of any injury (including injury causing death) to any director, officer, employee or designated consultant of Optionor while on the Property.

 

4.2             Annual Report of Results. During the Term, Optionee will deliver to Optionor within three (3) months after the anniversary of each calendar year a full report (including up-to-date maps if there are any) describing the results of work done in the last completed calendar year.

 

4.3             Workmanship, Reclamation. During the Term, Optionee will do all work on the Property in a good and workmanlike fashion and in accordance with all applicable laws, regulations, orders and ordinances of any applicable governmental authority including conducting all reclamation required by the applicable regulatory authorities with respect to the work conducted by Optionee on the Property.

 

4.4             Indemnity. Optionee shall indemnify and save Optionor harmless from and against all losses, liabilities, claims, demands, damages, expenses, suits, injury or death in any way referable to Mining Operations conducted; provided, that Optionor shall not be indemnified for any loss, liability, claim, demand, damage, expense, injury or death resulting from the negligence or willful misconduct of Optionor, or its employees, agents or contractors. Optionee shall cause to be paid all workers and wage earners employed by it or its contractors on the Property and all materials purchased in connection with it.

 

4.5             Reports on Assays. During the Term, Optionee will deliver to Optionor forthwith after receipt by Optionee any and all assay results for samples taken from the Property, together with reports showing the location from which the samples were taken, the type of samples and any geological interpretation or analysis thereof obtained or performed by Optionee.

 

4.6             Abandonment.   Optionee may at any time during the Term, abandon any one or more of the unpatented mining claims (the “Abandoned Claims”) which comprise the Property.  Optionee shall give Optionor notice in writing Sixty (60) days prior to any abandonment (the “Notice of Abandonment”).  If requested by Optionor following receipt of Notice of Abandonment, Optionee shall transfer to Optionor, or its nominee, any or all of the claims proposed to be abandoned by Optionee. Upon delivery of the Notice of Abandonment to Optionor, the Abandoned Claims will for all purposes of this Agreement cease to form part of the Property and any of the Abandoned Claims transferred to Optionor shall cease to be part of the Area of Interest pursuant to this Agreement.

 

 

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4.7             Assessment Work. Optionee shall, with the assistance of and in consultation with Optionor, file the necessary documentation for maintenance of claims, thirty (30) days prior to the due date.

 

4.8             Project Work Commitments.   Optionee shall expend no less than a total sum of EIGHT HUNDRED FIFTY THOUSAND AND N0/100 DOLLARS ($850,000.00) as a minimum work commitment for the benefit of the Property prior to the 5 th anniversary of the Effective Date as set forth below:

 

 

(i)

US $100,000.00 prior to the 1 st anniversary of the Effective Date;

 

(ii)

an additional US $150,000.00 prior to the 2 nd anniversary of the Effective Date;

 

 

(iii)

an additional US $200,000.00 prior to the 3 rd anniversary of the Effective Date;

 

(iv)

an additional US $200,000.00 prior to the 4 th anniversary of the Effective Date; and

 

 

(v)

an additional US $200,000.00 prior to the 5 th anniversary of the Effective Date.

 

Any amount expended by Optionee in any given year in excess of the amounts as set forth above shall be credited toward the minimum work commitment expenditures for the following years.  In the event that Optionee does not meet the minimum work commitment in any given year as set forth above, then Optionee shall make cash payments to Optionor equal to the difference between the minimum amount required and the amount actually expended multiplied by 50%, provided however, that such payment shall not be due for each of the 12-month periods from the effective in which Optionee terminates this Agreement.

 

5.            COVENANTS OF OPTIONEE AND OPTIONOR

 

5.1             Covenants of Optionee. Optionee covenants and agrees with Optionor that so long as Optionee is the Operator of the work carried out on the Property:

 

(a)

It will maintain the Property in good standing and will pay all rentals, rates, duties, royalties, assessments, fees, taxes or other governmen


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