-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QKW7bxCJvjnVkDpQDEUgqfvjF/1qgiCwbAaDKZnV5oq6ig1iiDH7aLwKsYjMxw2y EDxrk86FO24+wP4Y7tswig== 0000912057-97-013736.txt : 19970423 0000912057-97-013736.hdr.sgml : 19970423 ACCESSION NUMBER: 0000912057-97-013736 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 44 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970422 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SUMMO MINERALS CORP CENTRAL INDEX KEY: 0000941230 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS METAL ORES [1090] IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-27272 FILM NUMBER: 97584924 BUSINESS ADDRESS: STREET 1: 1776 LINCOLN ST STREET 2: STE 1100 CITY: ENVER STATE: CO ZIP: 80203 MAIL ADDRESS: STREET 1: 1776 LINCOLN ST STREET 2: STE 1100 CITY: DENVER STATE: CO ZIP: 80203 10-K/A 1 10K/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K/A Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 1996. Commission File Number 0-27272 SUMMO MINERALS CORPORATION (incorporated in British Columbia) 1776 Lincoln Street, Suite 900 Denver, Colorado 80203 (303) 861-5400 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock: no par value Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filer pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of 7,608,428 shares of voting stock held by non-affiliates of the Registrant, based upon the closing sale price of the Common Stock on March 14, 1997 of $1.07 U.S. per share as reported on the Toronto Stock Exchange, was $8,141,018. Shares of Common Stock held by each executive officer and director and by each person who owns 10% or more of the outstanding Common Stock have been excluded in that such persons may be deemed affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes. As of March 14, 1997, the Registrant had 20,003,160 shares of Common Stock outstanding. DOCUMENT INCORPORATED BY REFERENCE The information required by Parts I, II and III is incorporated by reference to Registrant's Form 10-K as filed with the Securities and Exchange Commission on March 31, 1997. The sole purpose of this Amendment is to file the Exhibits referenced therein. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, effective April 18, 1997. SUMMO MINERALS CORPORATION By: /s/ Gregory A. Hahn By: /s/ James D. Frank Gregory A. Hahn James D. Frank President and Chief Vice President - Finance and CFO Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934 this report has been signed below by the following persons in counterpart which taken together shall constitute execution on behalf of the registrant on the dates indicated. Date: April 18, 1997 By: /s/ Mark A. Hellerstein Mark A. Hellerstein, Chairman of the Board Date: April 18, 1997 By: /s/ Gregory A. Hahn Gregory A. Hahn, Director Date: April 18, 1997 By: /s/ John E. Robins John E. Robins, Director Date: April 18, 1997 By: /s/ Robert Mason Robert Mason, Director Date: April 18, 1997 By: /s/ John W. Ivany John W. Ivany, Director Date: April 18, 1997 By: /s/ J. Douglas Little J. Douglas Little, Director Date: April 18, 1997 By: /s/ Frank E. Shanley Frank E. Shanley, Director (c) Exhibits The following exhibits are to be filed with this Report by amendment: Exhibit Number (3) Charter and By-laws 3.1 Memorandum of No. 96 Sail View Ventures Ltd. dated July 20, 1987, filed July 23, 1987. 3.2 Certificate of Incorporation for No. 96 Sail View Ventures Ltd. dated July 23, 1987. 3.3 Articles of No. 96 Sail View Ventures Ltd. dated July 20, 1987. 3.4 Special Resolution dated September 9, 1987, filed September 11, 1987. 3.5 Certificate dated September 11, 1987. 3.6 Special Resolution dated September 29, 1993, filed October 15, 1993. 3.7 Certificate of Change of Name dated October 15, 1993. 3.8 Special Resolution dated April 24, 1995, filed May 26, 1995. (10) Material Contracts 10.1 Termination of Existing Minerals Lease, Bill of Sale, and New Minerals Lease dated April 20, 1988, among Lisbon Copper Ltd. ("Lisbon Copper"), Kelmine Corporation and MLP, as amended July 24, 1993. 10.2 Option Agreement dated April 20, 1988 between Lisbon Copper and MLP. 10.3 Utah State Lease for Metalliferous Minerals No. 20569 dated May 28, 1963, as assigned to Summo USA by assignment dated May 23, 1995, as amended by Amendment dated August 15, 1995. 10.4 Utah State Lease for Metalliferous Minerals No. 17661 dated February 20, 1959 ("ML17661"), as assigned to Summo USA by assignment dated June 7, 1995, as amended by Amendment dated August 15, 1995. 10.5 Mineral Lease dated October 26, 1992 between Steve and Mary Lou Kosanke and MLP. 10.6 Mineral Lease dated August 3, 1992 between J.F. and Joyce L. Costanza and MLP. 10.7 Special Use Lease Agreement No. 707 dated December 15, 1986. 10.8 Mining Lease dated October 15, 1973 between Tintic Uranium Company and Centennial Development Company, as ratified and amended by Ratification and Amendment dated January 5, 1993 between Tintic and MLP. 10.9 Utah State Lease for Metalliferous Minerals No. 46431 dated February 22, 1994. 10.10 Purchase Option Agreement dated May 1, 1995 between Lisbon Land & Livestock Co. and Summo USA and related Escrow Agreement of even date therewith. 10.11 Exploration and Purchase Option Agreement dated September 1, 1993 between Moretz, et al. and St. Mary, as amended April 18, 1996. 10.12 Option Agreement dated September 27, 1993 between Wanda H. Ahlstrom and Max J. Peacock as optionors and St. Mary as optionee, as amended April 17, 1996. 10.13 Exploration and Purchase Option Agreement dated August 1, 1994 between Hill, et al. and St. Mary. 10.14 Exploration and Purchase Option Agreement dated August 1, 1994 between Cook, et al. and St. Mary. 10.15 Acquisition Agreement dated November 16, 1994 among Summo, Summo USA and St. Mary and Assignment and Quitclaim Deed of even date therewith whereby St. Mary assigns its interest under the foregoing two agreements to Summo USA. 10.16 Letter Agreement dated May 20, 1994 between Applied Geologic Studies, Inc. and St. Mary setting forth the finder's fee agreement for the Champion Property. 10.17 Stock Option Agreement dated February 23, 1995 granting an option to John Ivany for 250,000 shares at an exercise price of $1.20 Cdn. per share. 10.18 Stock Option Agreements dated April 24, 1995 granting options to the following individuals at an exercise price of $1.20 Cdn. per share. a. J. Douglas Little for 40,000 shares. b. Robert A. Prescott for 100,000 shares. 10.19 Employment Letter Agreement dated April 5, 1995 from the Company to Robert Prescott. 10.20 Employment Agreement dated December 31, 1995 between the Company and Gregory A. Hahn. 10.21 Employee Incentive Stock Option Plan of the Company. 10.22 Escrow Agreement dated January 18, 1996 providing for the escrow and staged release of 8,519,987 shares of Common Stock. 10.23 Form of Stock Option Agreement dated February 1, 1996 granting options to the following individuals at an exercise price of $1.20 Cdn. per share. a. Gregory A. Hahn for 100,000 shares b. James D. Frank for 100,000 shares c. Mark A. Hellerstein for 150,000 shares d. J. Douglas Little for 110,000 shares e. Frank E. Shanley for 50,000 shares 10.24 Employment Letter Agreement dated January 29, 1996 between the Company and James D. Frank. 10.25 Master Electric Service Agreement dated October 31, 1996, between Pacificorp and Summo USA Corporation. 10.26 By-Product Sales Agreement dated December 31, 1996, between Kennecott Utah Copper Corporation and Summo USA Corporation. 10.27 Purchase Agreement dated February 29, 1996, between Michael L. Wilcox and Summo USA Corporation. 10.28 Surface Lease Agreement dated June 10, 1996 between Nelson Pacheco et al. and Summo USA Corporation. 10.29 Form of Stock Option Agreements dated March 26, 1996 granting options to the following individuals at an exercise price of $1.10 Cdn. per share. a. Gregory A. Hahn for 120,000 shares b. James D. Frank for 120,000 shares c. Robert A. Precott for 120,000 shares 10.30 Stock Option Agreement dated April 30, 1996 granting 67,500 options to Matthew J. Mason at an exercise price of $1.51 Cdn. per share. 10.31 Stock Option Agreement dated April 30, 1996 granting 82,500 options to Matthew J. Mason at an exercise price of $1.51 Cdn. per share. 10.32 Stock Option Agreement dated June 9, 1996 granting 50,000 options to Gregory A. Hahn at an exercise price of $2.10 Cdn. per share. 10.33 Stock Option Agreement dated December 24, 1996 granting 150,000 options to John Robins at an exercise price of $1.41 Cdn. per share. 10.34* Loan Commitment Agreements between the Company and ING (U.S.) Capital Corporation and Heller Financial, Inc. dated March 4, 1997 and March 5, 1997, respectively. 21.1 Subsidiaries of the Registrant * Confidential treatment requested for portions of this exhibit. EX-3.1 2 EXHIBIT 3.1 EXHIBIT 3.1 I HEREBY CERTIFY THAT THESE ARE COPIES OF DOCUMENTS FILED WITH THE REGISTRAR OF COMPANIES ON JUL 23 1987 ------------------------- ------------------------- ASSISTANT DEPUTY REGISTRAR OF COMPANIES FOR THE PROVINCE OF BRITISH COLUMBIA FORM 1 (Section 5) COMPANY ACT MEMORANDUM of NO. 96 SAIL VIEW VENTURES LTD. I wish to be formed into a company with limited liability under the Company Act in pursuance of this Memorandum. 1. The name of the Company is NO. 96 SAIL VIEW VENTURES LTD. 2. The authorized capital of the Company consists of Ten Thousand (10,000) Common shares without par value. 3. I agree to take the number and kind and class of shares in the Company set opposite my name. - -------------------------------------------------------------------------------- Full Name, Resident Address and Number (Kind and Class] of Occupation of Subscriber Shares Taken - -------------------------------------------------------------------------------- /s/ James A. Speakman - ----------------------------- JAMES A. SPEAKMAN One (1) Common share without par value #205 - 2772 Spruce Street Vancouver, B.C. V6H 2R2 Solicitor TOTAL SHARES TAKEN: One (1) Common share without par value - -------------------------------------------------------------------------------- DATED as of the 20th day of July, 1987. EX-3.2 3 EXHIBIT 3.2 - -------------------------------------------------------------------------------- EXHIBIT 3.2 CANADA NUMBER PROVINCE OF BRITISH COLUMBIA 330743 [SEAL] Province of British Columbia Ministry of Finance and Corporate Relations REGISTRAR OF COMPANIES COMPANY ACT CERTIFICATE OF INCORPORATION I HEREBY CERTIFY THAT No. 96 SAIL VIEW VENTURES LTD. HAS THIS DAY BEEN INCORPORATED UNDER THE COMPANY ACT GIVEN UNDER MY HAND AND SEAL OF OFFICE AT VICTORIA, BRITISH COLUMBIA, THIS 23RD DAY OF JULY, 1987. /s/ Roberta J. London ROBERTA J. LONDON DEPUTY REGISTRAR OF COMPANIES - -------------------------------------------------------------------------------- EX-3.3 4 EXHIBIT 3.3 EXHIBIT 3.3 ARTICLES of NO. 96 SAIL VIEW VENTURES LTD. TABLE OF CONTENTS PART ARTICLE SUBJECT - ---- ------- ------- 1 INTERPRETATION 1.1. Definition Construction of Words 1.2. Definitions same as Company Act 1.3. Interpretation Act Rules of Construction apply 2 SHARES 2.1 Member entitled to Certificate 2.2: Replacement of Lost or Defaced Certificate 2.3. Execution of Certificates 2.4. Recognition of Trusts 3 ISSUE OF SHARES 3.1. Directors Authorized 3.2. Conditions of Allotment 3.3. Commissions and Brokerage 3.4. Conditions of Issue 4 SHARE REGISTERS 4.1. Registers of Members, Transfers and Allotments 4.2 Branch Registers of Members 4.3. No Closing of Register of Members Briant, Angus, McClellan & Rubenstein PART ARTICLE SUBJECT - ---- ------- ------- 5 TRANSFER AND TRANSMISSION OF SHARES 5.1. Transfer of Shares 5.2. Execution of Instrument of Transfer 5.3. Enquiry as to Title not Required 5.4. Submission of Instruments of Transfer 5.5. Transfer Fee 5.6. Personal Representative Recognized on Death 5.7. Death or Bankruptcy 6 ALTERATION OF CAPITAL 6.1. Increase of Authorized Capital 6.2. Other Capital Alterations 6.3. Creation, Variation and Abrogation of Special Rights and Restrictions 6.4. Special Rights of Conversion or Exchange 6.5. Class Meetings of Members 7 PURCHASE AND REDEMPTION OF SHARES 7.1. Company Authorized to Purchase or Redeem its Shares 7.2. & 7.3. Redemption of Shares 8 BORROWING POWERS 8.1. Powers of Directors 8.2. Special Rights Attached to and Negotiability of Debt Obligations 8.3. Register of Debentureholders 8.4. Execution of Debt Obligations 8.5. Register of Indebtedness Briant, Angus, McClellan & Rubenstein PART ARTICLE SUBJECT - ---- ------- ------- 9 GENERAL MEETINGS 9.1. Annual General Meetings 9.2. Waiver of Annual General Meeting 9.3. Classification of General Meetings 9.4. Calling of Meetings 9.5. Advance Notice for Election of Directors 9.6. Notice for General Meeting 9.7. Waiver for General Meeting 9.8. Notice of Special Business at General Meeting 10 PROCEEDINGS AT GENERAL MEETINGS 10.1. Special Business 10.2. Requirement of Quorum 10.3. Quorum 10.4. Lack of Quorum 10.5. Chairman 10.6. Alternate Chairman 10.7. Adjournments 10.8. Motion Proposed or Seconded by Chairman 10.9. Decisions by Show of Hands or Poll 10.10. Casting Vote 10.11 Manner of Taking Poll 10.12. Retention of Ballots Cast on a Poll 10.13. Casting of Votes 10.14. Ordinary Resolution Sufficient 11 VOTES OF MEMBERS 11.1. Number of Votes Per Share of Member 11.2. Votes of Persons in Representative Capacity 11.3. Representative of a Corporate Member 11.4. Votes by Joint Holders 11.5. Vote by Committee for a Member 11.6. Appointment of Proxyholders 11.7. Execution of Form of Proxy 11.8. Deposit of Proxy 11.9. Form of Proxy 11.10. Validity of Proxy Vote 11.11. Revocation of Proxy Briant, Angus, McClellan & Rubenstein PART ARTICLE SUBJECT - ---- ------- ------- 12 DIRECTORS 12.1. Number of Directors 12.2. Remuneration and Expenses of Directors 12.3. Qualification of Directors 13 ELECTION AND REMOVAL OF DIRECTORS 13.1. Election at Annual General Meetings 13.2. Eligibility of Retiring Director 13.3. Continuance of Directors 13.4. Election of Less than Required Number of Directors 13.5. Filling a Casual Vacancy 13.6. Additional Directors 13.7. Alternate Directors 13.8. Termination of Directorship 13.9. Removal of Directors 14 POWERS AND DUTIES OF DIRECTORS 14.1. Management of Affairs and Business 14.2. Appointment of Attorney 15 DISCLOSURE OF INTEREST OF DIRECTORS 15.1. Disclosure of Conflicting Interest 15.2. Voting and Quorum re Proposed Contract 15.3. Director May Hold Office or Place of Profit with Company 15.4. Director Acting in Professional Capacity 15.5. Director Receiving Remuneration from Other Interests 16 PROCEEDINGS OF DIRECTORS 16.1. Chairman and Alternate 16.2. Meetings - Procedure 16.3. Meetings by Conference Telephone 16.4. Notice of Meeting 16.5. Waiver of Notice of Meetings 16.6. Quorum Briant, Angus, McClellan & Rubenstein PART ARTICLE SUBJECT - ---- ------- ------- 16.7. Continuing Directors may Act During Vacancy 16.8. Validity of Acts of Directors 16.9. Resolution in Writing Effective 17 EXECUTIVE AND OTHER COMMITTEES 17.1 Appointment of Executive Committee 17.2. Appointment of Committees 17.3. Procedure at Meetings 18 OFFICERS 18.1. President and Secretary Required 18.2. Persons Holding More Than One Office and Remuneration 18.3. Disclosure of Conflicting Interest 19 INDEMNITY AND PROTECTION OF DIRECTORS, OFFICERS AND EMPLOYEES 19.1. Indemnification of Directors 19.2. Indemnification of Officers, Employees, Agents 19.3. Indemnification not Invalidated by Non-Compliance 19.4. Company May Purchase Insurance 20 DIVIDENDS AND RESERVES 20.1 Declaration of Dividends 20.2. Declared Dividend Date 20.3. Proportionate to Number of Shares Held 20.4. Reserves 20.5 Receipts from Joint Holders 20.6 No Interest on Dividends 20.7 Payment of Dividends 20.8 Capitalization of Undistributed Surplus Briant, Angus, McClellan & Rubenstein PART ARTICLE SUBJECT - ---- ------- ------- 21 DOCUMENTS, RECORDS AND REPORTS 21.1. Documents to be Kept 21.2. Accounts to be Kept 21.3. Inspection of Accounts 21.4. & 21.5. Financial Statements and Reports 22 NOTICES 22.1. Method of Giving Notice 22.2. Notice to Joint Holder 22.3. Notice to Personal Representative 22.4. Persons to Receive Notice 23 RECORD DATES 23.1. Record Date 23.2. No Closure of Register of Members 24 SEAL 24.1. Affixation of Seal to Documents 24.2. Mechanical Reproduction of Signatures 24.3. Official Seal for Other Jurisdictions 25 PROHIBITIONS 25.1. No Securities to be Offered to the Public Briant, Angus, McClellan & Rubenstein PROVINCE OF BRITISH COLUMBIA COMPANY ACT ARTICLES OF NO. 96 SAIL VIEW VENTURES LTD. PART 1 INTERPRETATION 1.1. In these Articles, unless there is something in the subject or context inconsistent therewith: "Board" and "the Directors" or "the directors" mean the Directors or sole Director of the Company for the time being. "Company Act" means the Company Act of the Province of British Columbia as from time to time enacted and all amendments thereto and includes the regulations made pursuant thereto. "Memorandum" means the Memorandum of the Company. "month" means calendar month. "proxyholder" means the person duly nominated by the registered owner to represent him at the meeting and includes the duly authorized representative of a corporation which is the registered owner. "registered owner" or "registered holder" when used with respect to a share in the authorized capital of the Company means the person registered in the register of members in respect of such share. "seal" means the common seal of the Company. Expressions referring to writing shall be construed as including references to printing, lithography, typewriting, photography and other modes of representing or reproducing words in a visible form. Words importing the singular include the plural and vice versa; and words importing male persons include female persons and words importing persons shall include corporations. Briant, Angus, McClellan & Rubenstein -2- 1.2. The meaning of any words or phrases defined in the Company Act shall, if not inconsistent with the subject or context, bear the same meaning in these Articles. 1.3. The Rules of Construction contained in the Interpretation Act shall apply, mutatis mutandis, to the interpretation of these Articles. PART 2 SHARES AND SHARE CERTIFICATES 2.1. Every member is entitled, without charge, to one certificate representing the share or shares of each class held by him; provided that, in respect of a share or shares held jointly by several persons, the Company shall not be bound to issue more than one certificate, and delivery of a certificate for a share to one of several joint registered holders or to his duly authorized agent shall be sufficient delivery to all; and provided further that the Company shall not be bound to issue certificates representing redeemable shares, if such shares are to be redeemed within one month of the date on which they were allotted. Any share certificate may be sent through the mail by registered prepaid mail to the member entitled thereto at his address as recorded in the register of members, and neither the Company nor any transfer agent shall be liable for any loss occasioned to the member owing to any such share certificate so sent being lost in the mail or stolen. 2.2. If a share certificate (a) is worn out or defaced, the Directors shall, upon production to them of the said certificate and upon such other terms, if any, as they may think fit, order the said certificate to be cancelled and shall issue a new certificate in lieu thereof; (b) is lost, stolen or destroyed, then, upon proof thereof to the satisfaction of the Directors and upon such indemnity, if any, as the Directors deem adequate being given, a new share certificate in lieu thereof shall be issued to the person entitled to such lost, stolen or destroyed certificate; or (c) represents more than one share and the registered owner thereof surrenders it to the Company with a written request that the Company issue in his name two or more certificates each representing a specified number of shares and in the aggregate representing the same number of shares as the certificate so surrendered, the Company shall cancel the Certificate so surrendered and issue in lieu thereof certificates in accordance with such request. Such sum as the Directors may from time to time fix, but not greater than the amount prescribed under the Company Act from time to time, shall be paid to the Company for each certificate to be issued under this Article. Briant, Angus, McClellan & Rubenstein -3- 2.3. Every share certificate shall be signed manually by at least one officer or Director of the Company, or by or on behalf of a registrar, branch registrar, transfer agent or branch transfer agent of the Company and any additional signatures may be printed or otherwise mechanically reproduced and, in such event, a certificate so signed is as valid as if signed manually, notwithstanding that any person whose signature is so printed or mechanically reproduced shall have ceased to hold the office that he is stated on such certificate to hold at the date of the issue of a share certificate. 2.4. Except as required by law, statute or these Articles, no person shall be recognized by the Company as holding any share upon any trust, and the Company shall not be bound by or compelled in any way to recognize (even when having notice thereof) any equitable, contingent, future or partial interest in any share or in any fractional part of a share or (except only as by law, statute or these Articles provided or as ordered by a court of competent jurisdiction) any other rights in respect of any share except an absolute right to the entirety thereof in its registered holder. PART 3 ISSUE OF SHARES 3.1. Subject to these Articles and the Memorandum and to any direction to the contrary contained in a resolution passed at a general meeting authorizing any increase or alteration of capital, the shares shall be under the control of the Directors who may, subject to the rights of the holders of the shares of the Company for the time being issued, issue, allot, sell or otherwise dispose of, and/or grant options on or otherwise deal in, shares authorized but not outstanding or which, having been previously issued, have been purchased or redeemed by the Company and are available to be sold or reissued at such times, to such persons (including Directors), in such manner, upon such terms and conditions, and at such price or for such consideration, as they, in their absolute discretion, may determine. 3.2. If the Company is, or becomes, a company which is not a reporting company and the Directors are required by the Company Act before allotting any shares to offer them pro rata to the members, the Directors shall, before allotting any shares, comply with the applicable provisions of the Company Act. 3.3. Subject to the provisions of the Company Act, the Company, or the Directors on behalf of the Company, may pay a commission or allow a discount to any person in consideration of his subscribing or agreeing to subscribe, whether absolutely or conditionally, for any shares in the Company, or procuring or agreeing to procure subscriptions, whether absolutely or conditionally, for any such shares, provided that, if the Company is not a specially limited company, the rate of the commission and discount shall not in the aggregate exceed 25 per centum of the amount of the subscription price of such shares. 3.4. No share may be issued until it is fully paid and the Company shall have received the full consideration therefor in cash, property or past services actually performed for the Company. The value of property or services for the purpose of this Briant, Angus, McClellan & Rubenstein -4- Article shall be an amount set by resolution of the Directors that is, in all circumstances of the transaction, no greater than fair market value. PART 4 SHARE REGISTERS 4.1. The Company shall keep or cause to be kept a register of members, a register of transfers and a register of allotments within British Columbia, all as required by the Company Act, and may combine one or more of such registers. If the Company's capital shall consist of more than one class or series of shares, a separate register of members, register of transfers and register of allotments may be kept in respect of each class or series of shares. The Directors on behalf of the Company may appoint a trust company registered under the Trust Company Act to keep the register of members, register of transfers and register of allotments or, if there is more than one class or series of shares, the Directors may appoint a trust company, which need not be the same trust company, to keep the register of members, the register of transfers and the register of allotments for each class or series of share. The Directors on behalf of the Company may also appoint one or more trust companies, including the trust company which keeps the said registers of its shares or of a class or series thereof, as transfer agent for its shares or such class or series thereof, as the case may be, and the same or another trust company or companies as registrar for its shares or such class thereof, as the case may be. The Directors may terminate the appointment of any such trust company at any time and may appoint another trust company in its place. 4.2. Subject to the Company Act, the Company may keep or cause to be kept one or more branch registers of members at such place or places, whether within or outside the Province of British Columbia, as the Directors may from time to time determine. 4.3. The Company shall not at any time close its register of members. PART 5 TRANSFER AND TRANSMISSION OF SHARES 5.1. Subject to the provisions of the Memorandum and of these Articles that may be applicable, any member may transfer any of his shares by instrument in writing executed by or on behalf of such member. The instrument of transfer of any share of the Company shall be in the form, if any, on the back of the Company's share certificates or in such other form as the Directors may from time to time approve. Except to the extent that the Company Act may otherwise provide, the transferor shall be deemed to remain the holder of shares until the name of the transferee is entered in the register of members or branch register of members in respect thereof. 5.2. The signature of the registered owner of any shares, or of his duly authorized attorney, upon an authorized instrument of transfer shall constitute a complete and Briant, Angus, McClellan & Rubenstein -5- sufficient authority to the Company, its directors, officers and agents to register, in the name of the transferee as named in the instrument of transfer, the number of shares specified therein or, if no number is specified, all the shares of the registered owner represented by share certificates deposited with the instrument of transfer. If no transferee is named in the instrument of transfer, the instrument of transfer shall constitute a complete and sufficient authority to the Company, its directors, officers and agents to register, in the name of the person in whose behalf any certificate for the shares to be transferred is deposited with the Company for the purpose of having the transfer registered, the number of shares specified in the instrument of transfer or, if no number is specified, all the shares represented by all share certificates deposited with the instrument of transfer. 5.3. Neither the Company nor any Director, officer or agent thereof shall be bound to inquire into the title of the person named in the form of transfer as transferee, or, if no person is named therein as transferee, of the person on whose behalf the certificate is deposited with the Company for the purpose of having the transfer registered or be liable to any claim by such registered owner or by any intermediate owner or holder of the certificate or of any of the shares represented thereby or any interest therein for registering the transfer, and the transfer, when registered, shall confer upon the person in whose name the shares have been registered a valid title to such shares. 5.4. Every instrument of transfer shall be executed by the transferor and left at the registered office of the company or at the office of its transfer agent or branch transfer agent or registrar for registration together with the share certificate for the shares to be transferred and such other evidence if any, as the Directors or the transfer agent or branch transfer agent or registrar or branch registrar may require to prove the title of the transferor or his right to transfer the shares and the right of the transferee to have the transfer registered. All instruments of transfer where the transfer is registered shall be retained by the Company or its transfer agent or branch transfer agent of registrar or branch/registrar and any instrument of transfer, where the transfer is not registered, shall be returned to the person depositing the same together with the share certificate which accompanied the same when tendered for registration. 5.5. There shall be paid to the Company in respect of the registration of any transfer such sum, if any, as the Directors may from time to time determine. 5.6. In the case of the death of a member, the survivor or survivors where the deceased was a joint registered holder, and the legal personal representative of the deceased where he was the sole holder, shall be the only persons recognized by the Company as having any title to his interest in the shares. Before recognizing any legal personal representative the Directors may require him to deliver to the Company the documents required by the Company Act to be produced by a person applying to effect transmission of shares and such other evidence as the Directors may require of the personal representative's appointment, and of the payment or satisfaction of all taxes, duties, fees and other similar assessments payable to any governmental authority in any applicable jurisdiction with respect to the shares arising out of the member's death. 5.7. A guardian, committee, trustee, curator, tutor, personal representative or trustee in bankruptcy of a member, although not a member himself, shall have the same rights, privileges and obligations that attach to the shares held by the member if the Briant, Angus, McClellan & Rubenstein -6- documents required by the Company Act to be produced by a person applying to effect transmission of shares shall have been deposited with the Company together with such other evidence as the Directors may require of the person's appointment. This Article does not apply on the death of a member with respect to a share registered in his name and the name of another person in joint tenancy. PART 6 ALTERATION OF CAPITAL 6.1. The Company may by ordinary resolution filed with the Registrar alter the Memorandum to increase the authorized capital of the Company by: (a) creating shares with par value or shares without par value, or both; (b) increasing the number of shares with par value or shares without par value, or both; or (c) increasing the par value of a class of shares with par value, if no shares of that class are issued. 6.2. The Company may by special resolution alter the Memorandum to subdivide, consolidate, change from shares with par value to shares without par value, or from shares without par value to shares with par value, or change the designation of, all or any of its shares but only to such extent, in such manner and with such consents of members holding a class or series of shares which is the subject of or affected by such alteration, as the Company Act provides. 6.3. The Company may alter the Memorandum or these Articles (a) by special resolution, to create, define and attach special rights or restrictions to any shares, and (b) by special resolution and by otherwise complying with any applicable provision of its Memorandum or these Articles, to vary or abrogate any special rights and restrictions attached to any shares and in each case by filing a certified copy of such resolution with the Registrar but no right or special right attached to any issued shares shall be prejudiced or interfered with unless all members holding shares of each class or series whose right or special right is so prejudiced or interfered with consent thereto in writing, or unless a resolution consenting thereto is passed at a separate class or series meeting of the holders of the shares of each such class or series by a majority of three-fourths of the votes cast, or such greater majority as may be specified by the special rights attached to the class of shares. 6.4. If the Company is or becomes a reporting company, no resolution to create, vary or abrogate any special right of conversion or exchange attaching to any class or Briant, Angus, McClellan & Rubenstein -7- series of shares shall be submitted to any meeting of members unless, if so required by the Company Act, the Superintendent of Brokers appointed pursuant to the Securities Act of British Columbia shall have consented to the resolution. 6.5. Subject to the Company Act and unless these Articles or the Memorandum otherwise provide, the provisions of these Articles relating to general meetings shall apply, with the necessary changes and so far as they are applicable, to a class or series meeting of members holding a particular class or series of shares but the quorum at a class or series meeting shall be one person holding or representing by proxy one-third of the shares affected. PART 7 PURCHASE AND REDEMPTION OF SHARES 7.1. Subject to the special rights and restrictions attached to any class or series of shares, the Company may, by a resolution of the Directors and in compliance with the Company Act, purchase any of its shares at the price and upon the terms specified in such resolution or redeem any class or series of its shares in accordance with the special rights and restrictions attaching thereto. Unless the shares are to be purchased through a stock exchange or the Company is purchasing the shares from dissenting members pursuant to the requirements of the Company Act or from an employee or former employee of the Company or of an affiliate of the Company or from his personal representatives, the Company shall make its offer to purchase pro rata to every member who holds shares of the class or series, as the case may be, to be purchased. 7.2. If the Company proposes at its option to redeem some but not all of the shares of any class or series, the Directors may, subject to the special rights and restrictions attached to such class or series of shares, decide the manner in which the shares to be redeemed shall be selected. 7.3. Subject to the provisions of the Company Act, any shares purchased or redeemed by the Company may be sold or if cancelled, reissued by it, but, while such shares which have not been cancelled are held by the Company, it shall not exercise any vote in respect of these shares and no dividend or/other distribution shall be paid or made thereon. PART 8 BORROWING POWERS 8.1. The Directors may from time to time on behalf of the Company (a) borrow money in such manner and amount, on such security, from such sources and upon such terms, and conditions as they think fit, and may authorize the guaranteeing of any obligations of any other person, Briant, Angus, McClellan & Rubenstein -8- (b) issue bonds, debentures, and other debt obligations either outright or as security for any liability or obligation of the Company or any other person, and (c) mortgage, charge, whether by way of specific or floating charge, or give other security on the undertaking, or on the whole or any part of the property and assets, of the Company (both present and future). 8.2. Any bonds, debentures or other debt obligations of the Company may be issued at a discount, premium or otherwise, and with any special privileges as to redemption, surrender, drawing, allotment of or conversion into or exchange for shares or other securities, attending and voting at general meetings of the Company, appointment or election of Directors or otherwise and may by their terms be assignable free from any equities between the Company and the person to whom they were issued or any subsequent holder thereof, all as the Directors may determine. 8.3. The Company shall keep or cause to be kept within the Province of British Columbia in accordance with the Company Act a register of its debentures and a register of debentureholders, which registers may be combined, and, subject to the provisions of the Company Act, may keep or cause to be kept one or more branch registers of its debentureholders at such place or places as the Directors may from time to time determine and the Directors may by resolution, regulation or otherwise make such provisions as they think fit respecting the keeping of such branch registers, provided that any such branch register kept within British Columbia shall be kept by a Trust Company. 8.4. Every bond, debenture or other debt obligation of the Company shall be signed manually by at least one Director or officer of the Company or by or on behalf of a trustee, registrar, branch registrar, transfer agent or branch transfer agents for the bond, debenture or other debt obligation appointed by the Company or under any instrument under which the bond, debenture or other debt obligation is issued or by or on behalf of a trustee who certifies it in accordance with a trust indenture and any additional signatures may be printed or otherwise mechanically reproduced thereon and, in such event, a bond, debenture or other debt obligation so signed is as valid as if signed manually notwithstanding that the person whose signature is so printed or mechanically reproduced shall have ceased to hold the office that he is stated on such bond, debenture or other debt obligation to hold at the date of the issue thereof. 8.5. If the Company is or becomes, a company which is a reporting company, the Company shall keep or cause to be kept a register of its indebtedness to every Director or officer of the Company or an associate of any of them in accordance with the provisions of and to the extent required by the Company Act. Briant, Angus, McClellan & Rubenstein -9- PART 9 GENERAL MEETINGS 9.1. Subject to any extensions of time permitted pursuant to the Company Act, the first annual general meeting of the Company shall be held within fifteen months from the date of incorporation, the date of amalgamation or the effective date of a certificate of continuation, and thereafter an annual general meeting shall be held once in every calendar year at such time (not being more than thirteen months after the date that the last annual general meeting was held or deemed to have been held) and place as may be determined by the Directors. 9.2. If the Company is, or becomes, a company which is not a reporting company and all the members entitled to attend and vote at an annual general meeting consent in writing to all the business which is required or desired to be transacted at the meeting, the meeting need not be held. 9.3. All general meetings other than annual general meetings are herein referred to as and may be called extraordinary general meetings. 9.4. The Directors may, whenever they think fit, convene an extraordinary general meeting. An extraordinary general meeting, if requisitioned in accordance with the Company Act, shall be convened by the Directors or, if not convened by the Directors, may be convened by the requisitionists as provided in the Company Act. 9.5. If the Company is or becomes a reporting company, advance notice of any general meeting at which any Director is to be elected shall be published in the manner required by the Company Act. 9.6. A notice convening a general meeting specifying the place, the date, and the hour of the meeting, and, in case of special business, the general nature of that business, shall be given as provided in the Company Act and in the manner hereinafter in these Articles mentioned, or in such other manner (if any) as may be prescribed by ordinary resolution, whether previous notice thereof has been given or not, to such persons as are entitled by law or under these Articles to receive such notice from the Company. Accidental omission to give notice of a meeting to, or the non-receipt of notice of a meeting, by any member shall not invalidate the proceedings at that meeting. 9.7. All the members of the Company entitled to attend and vote at a general meeting may, by unanimous consent in writing given before, during or after the meeting, waive or reduce the period of notice of such meeting and an entry in the minute book of such waiver or reduction shall be sufficient evidence of the due convening of the meeting. 9.8. Except as otherwise provided by the Company Act, where any special business at a general meeting includes considering, approving, ratifying, adopting or authorizing any document or the execution thereof or the giving of effect thereto, the notice convening the meeting shall, with respect to such document, be sufficient if it states that a copy of the document or proposed document is or will be available for inspection by members at the registered office or records office of the Company or at some other place Briant, Angus, McClellan & Rubenstein -10- in British Columbia designated in the notice during usual business hours up to the date of such general meeting. PART 10 PROCEEDINGS AT GENERAL MEETINGS 10.1. All business shall be deemed special business which is transacted at (a) an extraordinary general meeting other than the conduct of and voting at, such meeting; and (b) an annual general meeting, with the exception of the conduct of, and voting at, such meeting, the consideration of the financial statement and of the respective reports of the Directors and Auditor, fixing or changing the number of directors, the election of Directors, the appointment of the Auditor, the fixing of the remuneration of the Auditor and of the Directors and such other business as by these Articles or the Company Act may be transacted at a general meeting without prior notice thereof being given to the members or any business which is brought under consideration by the report of the Directors. 10.2. No business, other than election of the chairman or the adjournment of the meeting, shall be transacted at any general meeting unless a quorum of members, entitled to attend and vote, is present at the commencement of the meeting, but the quorum need not be present throughout the meeting. 10.3. Save as herein otherwise provided, a quorum for the transaction of business at a general meeting shall be two persons present and being, or representing by proxy, members holding not less than one-twentieth of the issued shares entitled to be voted at the meeting. If there is only one member the quorum is one person present and being, or representing by proxy, such member. The Directors, the Secretary or, in his absence, an Assistant Secretary, and the solicitor of the Company shall be entitled to attend at any general meeting but no such person shall be counted in the quorum or be entitled to vote at any general meeting unless he shall be a member or proxyholder entitled to vote thereat. 10.4. If within half an hour from the time appointed for a general meeting, a quorum is not present, the meeting, if convened by requisition of the members, shall be dissolved; but otherwise it shall stand adjourned to a place on a date and at a time, to be fixed by the chairman of the meeting before the adjournment, which shall be not more than two weeks following the date for which the meeting was called, or failing such designation then to the same day in the second week following the meeting at the same time and place, in either case without giving further notice. If at such adjourned meeting, a quorum is not present within half an hour from the time appointed, the person or persons present and being, or representing by proxy, a member or members entitled to attend and vote at the meeting, shall be a quorum. Briant, Angus, McClellan & Rubenstein -11- 10.5. The Chairman of the Board, if any, or in his absence the President of the Company or in his absence a Vice-President of the Company, if any, shall be entitled to preside as chairman at every general meeting of the Company. 10.6. If at any general meeting neither the Chairman of the Board nor President nor a Vice-President is present within fifteen minutes after the time appointed for holding the meeting or is willing to act as chairman, the Directors present shall choose some one of their number to be chairman or if all the Directors present decline to take the chair or shall fail to so choose or if no Director be present, the members present shall choose one of their number to be chairman. 10.7. The chairman may and shall, if so directed by the meeting, adjourn the meeting from time to time and from place to place, but no business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place. When a meeting is adjourned for thirty days or more, notice, but not "advance notice", of the adjourned meeting shall be given as in the case of an original meeting or if so determined by the Directors, by an advertisement published at least once in a daily newspaper in Vancouver, British Columbia, or in the city where the meeting commenced. Save as aforesaid, it shall not be necessary to give any notice of an adjourned meeting or of the business to be transacted at an adjourned meeting. 10.8. The chairman may propose or second a motion. 10.9. Subject to the provisions of the Company Act, at any meeting a resolution put to the vote of the meeting shall be decided on a show of hands, unless (before or on the declaration of the result of the show of hands) a poll is directed by the chairman or demanded by at least one member entitled to vote who is present in person or by proxy. The chairman shall declare to the meeting the decision on every question in accordance with the result of the show of hands or the poll, and such decision shall be entered in the book of proceedings of the Company. A declaration by the chairman that a resolution has been carried, or carried unanimously, or by a particular majority, or lost or not carried by a particular majority and an entry to that effect in the book of the proceedings of the Company shall be conclusive evidence of the fact, without proof of the number or proportion of the votes recorded in favour of, or against, that resolution. 10.10. In the case of an equality of votes, whether on a show of hands or on a poll, the chairman of the meeting at which the show of hands takes place or at which the poll is demanded shall not be entitled to a second or casting vote. 10.11. No poll may be demanded on the election of a chairman. A poll demanded on a question of adjournment shall be taken forthwith. A poll demanded on any other question shall be taken as soon as, in the opinion of the chairman, is reasonably convenient, but in no event later than seven days after the meeting and at such time and place and in such manner as the chairman of the meeting directs. The result of the poll shall be deemed to be the resolution of and passed at the meeting at which the poll was demanded. Any business other than that upon which the poll has been demanded may be proceeded with pending the taking of the poll. A demand for a poll may be withdrawn. In any dispute as to the admission or rejection of a vote the decision of the chairman made in good faith shall be final and conclusive. Briant, Angus, McClellan & Rubenstein -12- 10.12. Every ballot cast upon a poll and every proxy appointing a proxyholder who casts a ballot upon a poll shall be retained by the Secretary for such period and be subject to such inspection as the Company Act may provide. 10.13. On a poll a person entitled to cast more than one vote need not, if he votes, use all his votes or cast all the votes he uses in the same way. 10.14. Unless the Company Act, the Memorandum or these Articles otherwise provide, any action to be taken by a resolution of the members may be taken by an ordinary resolution. PART 11 VOTES OF MEMBERS 11.1. Subject to any special voting rights or restrictions attached to any class or series of shares and the restrictions on joint registered holders of shares, on a show of hands every member who is present in person and entitled to vote thereat shall have one vote and on a poll every member shall have one vote for each share of which he is the registered holder and may exercise such vote either in person or by proxyholder. 11.2. Any person who is not registered as a member but is entitled to vote at any general meeting in respect of a share, may vote the share in the same manner as if he were a member; but, unless the Directors have previously admitted his right to vote at that meeting in respect of the share, he shall satisfy the directors of his right to vote the share before the time for holding the meeting, or adjourned meeting, as the case may be, at which he proposes to vote. 11.3. Any corporation not being a subsidiary which is a member of the Company may by resolution of its directors or other governing body authorize such person as it thinks fit to act as its representative at any general meeting or class meeting. The person so authorized shall be entitled to exercise in respect of and at such meeting the same powers on behalf of the corporation which he represents as that corporation could exercise if it were an individual member of the Company personally present, including, without limitation, the right, unless restricted by such resolution, to appoint a proxyholder to represent such corporation, and shall, if present at the meeting, be counted for the purpose of forming a quorum and be deemed to be a member present at the meeting. Evidence of the appointment of any such representative may be sent to the Company by written instrument, telegram, telex or any method of transmitting legibly recorded messages. Notwithstanding the foregoing, a corporation being a member may appoint a proxyholder. 11.4. If a share is registered in the name of two or more persons, the vote of the senior who exercises a vote, whether in person or by proxyholder, shall be accepted to the exclusion of the votes of the other joint registered holders; and for this purpose seniority shall be determined by the order in which the names stand in the register of members. Briant, Angus, McClellan & Rubenstein -13- Several legal personal representatives of a deceased member whose shares are registered in his sole name shall for the purpose of this Article be deemed to be two or more persons, as the case may be. 11.5. A member of unsound mind entitled to attend and vote, in respect of whom an order has been made by any court having jurisdiction, may vote, whether on a show of hands or on a poll, by his committee, curator bonus, or other person in the nature of a committee or curator bonus appointed by that court, and any such committee, curator bonus, or other person may appoint a proxyholder. 11.6. Every member, including a member that is a corporation, entitled to vote at a general meeting or a class meeting of the Company may, by proxy, appoint a proxyholder as his nominee to attend and act at the meeting in the manner, to the extent and with the power conferred by the proxy. A member may also appoint one or more alternate proxyholders to act in the place and stead of an absent proxyholder. 11.7. A form of proxy shall be in writing under the hand of the appointor or of his attorney duly authorized in writing, or, if the appointor is a corporation either under the seal of the corporation or under the hand of a duly authorized officer or attorney. A proxyholder need not be a member of the Company if (a) the Company is at the time a reporting company, or (b) the member appointing the proxyholder is a corporation, or (c) the Company shall have at the time only one member, or (d) the persons present in person or by proxy and entitled to vote at the meeting by resolution permit the proxyholder to attend and vote; for the purpose of such resolution the proxyholder shall be counted in the quorum but shall not be entitled to vote and in all other cases a proxyholder must be a member. 11.8. Unless otherwise ordered by the Directors, a form of proxy and the power of attorney or other authority, if any, under which it is signed, or a notarially certified copy thereof, shall be deposited at the registered office of the Company, or at such other place as is specified for that purpose in the notice convening the meeting or in the information circular relating thereto, not less than 48 hours (excluding Saturdays, Sundays and holidays) before the time for holding the meeting in respect of which the person named in the instrument is appointed. In addition to any other method of depositing proxies provided for in these Articles, the Directors may from time to time by resolution make regulations relating to the depositing of proxies at any place or places and fixing the time or times for depositing the proxies not exceeding 48 hours (excluding Saturdays, Sundays and holidays) preceding the meeting or adjourned meeting specified in the notice calling a meeting of members or in the information circular relating thereto and providing for particulars of such proxies to be sent to the Company or any agent of the Company in writing or by letter, telegram, telex or any method of transmitting legibly recorded messages so as to arrive before the commencement of the meeting or adjourned meeting at the office of the Company or of any agent of the Company appointed for the purpose of Briant, Angus, McClellan & Rubenstein -14- receiving such particulars and providing that proxies so deposited may be acted upon as though the proxies themselves were deposited as required by this Part and votes given in accordance with such regulations shall be valid and shall be counted. 11.9. Unless the Company Act or any other statute or law which is applicable to the Company or to any class or series of its shares requires any other form of proxy, a proxy, whether for a specified meeting or otherwise shall be in the form following, but may also be in any other form that the Directors or the chairman of the meeting shall approve: (Name of Company) The undersigned, being a member of the above named Company, hereby appoints _________________ or failing him ____________________ as proxyholder for the undersigned to attend, speak and vote for and on behalf of the undersigned in respect of all (or ___________) shares registered in the name of the undersigned at the general meeting of the Company to be held on the day of _____________, 19__, and at any adjournment thereof. Signed this ___ day of _______________ 19__. ______________________________ (Signature of Member) 11.10. A vote given in accordance with the terms of a proxy is valid notwithstanding the previous death or incapacity of the member giving the proxy or the revocation of the proxy or of the authority under which the form of proxy was executed or the transfer of the share in respect of which the proxy is given, provided that no notification in writing of such death, incapacity, revocation or transfer shall have been received at the registered office of the Company or by the chairman of the meeting or adjourned meeting for which the proxy was given before the vote is taken. 11.11. Every proxy may be revoked by an instrument in writing (a) executed by the member giving the same or by his attorney authorized in writing or, where the member is a corporation, by a duly authorized officer or attorney of the corporation; and (b) delivered either at the registered office of the Company at any time up to and including the last business day preceding the day of the meeting, or any adjournment thereof at which the proxy is to be used, or to the chairman of the meeting on the day of the meeting or any adjournment thereof before any vote in respect of which the proxy is to be used shall have been taken or in any other manner provided by law. A proxy shall cease to be valid one year from its date. Briant, Angus, McClellan & Rubenstein -15- PART 12 DIRECTORS 12.1. The subscribers to the Memorandum of the Company are the first Directors. The Directors to succeed the first Directors may be appointed in writing by a majority of the subscribers to the Memorandum or at a meeting of the subscribers, or if not so appointed, they shall be elected by the members entitled to vote on the election of Directors and the number of Directors shall be the same as the number of Directors so appointed or elected. The number of Directors, excluding additional Directors, may be fixed or changed from time to time by ordinary resolution, whether previous notice thereof has been given or not, but notwithstanding anything contained in these Articles the number of Directors shall never be less than one or, if the Company is or becomes a reporting company, less than three. 12.2. The remuneration of the Directors as such may from time to time be determined by the Directors or, if the Directors shall so decide, by the members. Such remuneration may be in addition to any salary or other remuneration paid to any officer or employee of the Company as such who is also a Director. The Directors shall be repaid such reasonable travelling, hotel and other expenses as they incur in and about the business of the Company and if any Director shall perform any professional or other services for the Company that in the opinion of the Directors are outside the ordinary duties of a Director or shall otherwise be specially occupied in or about the Company's business, he may be paid a remuneration to be fixed by the Board, or, at the option of such Director, by the Company in general meeting, and such remuneration may be either in addition to, or in substitution for any other remuneration that he may be entitled to receive. The Directors on behalf of the Company, unless otherwise determined by ordinary resolution, may pay a gratuity or pension or allowance on retirement to any Director who has held any salaried office or place of profit with the Company or to his spouse or dependants and may make contributions to any fund and pay premiums for the purchase or provision of any such gratuity, pension or allowance. 12.3. A Director shall not be required to hold a share in the capital of the Company as qualification for his office but shall be qualified as required by the Company Act, to become or act as a Director. PART 13 ELECTION AND REMOVAL OF DIRECTORS 13.1. At each annual general meeting of the Company all the Directors shall retire and the members entitled to vote thereat shall elect a Board of Directors consisting of the number of Directors for the time being fixed pursuant to these Articles. If the Company is, or becomes, a company that is not a reporting company and the business to be transacted at any annual general meeting is consented to in writing by all the members who are entitled to attend and vote thereat such annual general meeting shall be deemed for the purpose of this Part to have been held on such written consent becoming effective. Briant, Angus, McClellan & Rubenstein -16- 13.2. A retiring Director shall be eligible for re-election. 13.3. Where the Company fails to hold an annual general meeting in accordance with the Company Act, the Directors then in office shall be deemed to have been elected or appointed as Directors on the last day on which the annual general meeting could have been held pursuant to these Articles and they may hold office until other Directors are appointed or elected or until the day on which the next annual general meeting is held. 13.4. If at any general meeting at which there should be an election of Directors, the places of any of the retiring Directors are not filled by such election, such of the retiring Directors who are not re-elected as may be requested by the newly-elected Directors shall, if willing to do so, continue in office to complete the number of Directors for the time being fixed pursuant to these Articles until further new Directors are elected at a general meeting convened for the purpose. If any such election or continuance of Directors does not result in the election or continuance of the number of Directors for the time being fixed pursuant to these Articles such number shall be fixed at the number of Directors actually elected or continued in office. 13.5. Any casual vacancy occurring in the Board of Directors may be filled by the remaining Directors or Director. A vacancy resulting from an increase by the members in the number of Directors may be filled by the members by ordinary resolution or by the Directors. 13.6. Between successive annual general meetings the Directors shall have power to appoint one or more additional Directors but not more than one-third of the number of Directors fixed pursuant to these Articles and in effect at the last general meeting at which Directors were elected, and the number of Directors shall be increased accordingly. Any Director so appointed shall hold office only until the next following annual general meeting of the Company, but shall be eligible for election at such meeting and so long as he is an additional Director the number of Directors shall be increased accordingly. 13.7. Any Director may by instrument in writing delivered to the Company appoint any person to be his alternate to act in his place at meetings of the Directors at which he is not present unless the Directors shall have reasonably disapproved the appointment of such person as an alternate Director and shall have given notice to that effect to the Director appointing the alternate Director within a reasonable time after delivery of such instrument to the Company. Every such alternate shall be entitled to notice of meetings of the Directors and to attend and vote as a Director at a meeting at which the person appointing him is not personally present. A person may be appointed as an alternate Director by more than one Director, and an alternate Director shall be counted separately in determining the quorum for, and having a separate vote on behalf of, each Director he is representing, in addition to being so counted and voting where he is himself a Director. Every alternate Director, if authorized by the instrument appointing them, may sign in place of the Director who appointed him resolutions submitted to the Directors to be consented to in writing as referred to in Article 16.9. Every alternate Director shall be deemed not to be the agent of a Director appointing him. An alternate Director shall be deemed to be a Director for all purposes of these Articles in the performance of any function authorized under this Article 13.7, but shall not otherwise be deemed to be a Briant, Angus, McClellan & Rubenstein -17- Director or to have power to act as a Director. A Director may at any time by instrument telegram, telex or any method of transmitting legibly recorded messages delivered to the Company revoke the appointment of an alternate appointed by him. An alternate Director may be repaid by the Company such expenses as might properly be repaid to him if he were a Director and he shall be entitled to receive from the Company such proportion, if any, of the remuneration otherwise payable to the Director appointing him as such Director may from time to time direct. 13.8. The office of Director shall be vacated if the Director: (a) resigns his office by notice in writing delivered to the registered office of the Company; or (b) is convicted of an indictable offence and the other Directors shall have resolved to remove him; or (c) ceases to be qualified to act as a Director pursuant to the Company Act. 13.9. The Company may by special resolution remove any Director before the expiration of his period of office, and may by an ordinary resolution appoint another person in his stead. PART 14 POWERS AND DUTIES OF DIRECTORS 14.1. The Directors shall manage, or supervise the management of, the affairs and business of the Company and shall have the authority to exercise all such powers of the Company as are not, by the Company Act or by the Memorandum or these Articles, required to be exercised by the company in general meeting. 14.2. The Directors may from time to time by power of attorney or other instrument under the seal, appoint any person to be the attorney of the Company for such purposes, and with such powers, authorities and discretions (not exceeding those vested in or exercisable by the Directors under these Articles and excepting the powers of the Directors relating to the constitution of the Board and of any of its committees and the appointment or removal of officers and the power to declare dividends) and for such period, with such remuneration and subject to such conditions as the Directors may think fit, and any such appointment may be made in favour of any of the Directors or any of the members of the Company or in favour of any corporation, or of any of the members, directors, nominees or managers of any corporation, firm or joint venture and any such power of attorney may contain such provisions for the protection or convenience of persons dealing with such attorney as the Directors think fit. Any such attorney may be authorized by the Directors to sub-delegate all or any of the powers, authorities and discretions for the time being vested in him. Briant, Angus, McClellan & Rubenstein -18- PART 15 DISCLOSURE OF INTEREST OF DIRECTORS 15.1. A Director who is, in any way, directly or indirectly interested in a proposed contract or transaction with the Company or who holds any office or possesses any property whereby, directly or indirectly, a duty or interest might be created to conflict with his duty or interest as a Director shall declare the nature and extent of his interest in such contract or transaction or of the conflict or potential conflict with his duty and interest as a Director, as the case may be, in accordance with the provisions of the Company Act. 15.2. A Director shall not vote in respect of any such contract or transaction with the Company in which he is interested and if he shall do so his vote shall not be counted, but he shall be counted in the quorum present at the meeting at which such vote is taken. Subject to the provisions of the Company Act, the foregoing prohibitions shall not apply to (a) any such contract or transaction relating to a loan to the Company, which a Director or a specified corporation or a specified firm in which he has an interest has guaranteed or joined in guaranteeing the (b) any contract or transaction made or to be made with, or for the benefit of an affiliated corporation of which a Director is a director or officer; (c) determining the remuneration of the Directors; (d) purchasing and maintaining insurance to cover Directors against liability incurred by them as Directors under Section 152 of the Company Act; or (e) the indemnification of any Director by the Company under Section 152 of the Company Act. These exceptions may from time to time be suspended or amended to any extent approved by the Company in general meeting and permitted by the Company Act, either generally or in respect of any particular contract or transaction or for any particular period. 15.3. A Director may hold any office or place of profit with the Company (other than the office of auditor of the Company) in conjunction with his office of Director for such period and on such terms (as to remuneration or otherwise) as the Directors may determine and no Director or intended Director shall be disqualified by his office from contracting with the Company either with regard to his tenure of any such other office or place of profit or as vendor, purchaser or otherwise, and, subject to compliance with the provisions of the Company Act, no contract or transaction entered into by or on behalf of the Company in which a Director is in any way interested shall be liable to be voided by reason thereof. Briant, Angus, McClellan & Rubenstein -19- 15.4. Subject to compliance with the provisions of the Company Act, a Director or his firm may act in a professional capacity for the Company (except as auditor of the Company) and he or his firm shall be entitled to remuneration for professional services as if he were not a Director. 15.5. A Director may be or become a director or other officer or employee of, or otherwise interested in, any corporation or firm in which the Company may be interested as a shareholder or otherwise, and, subject to compliance with the provisions of the Company Act, such Director shall not be accountable to the Company for any remuneration or other benefits received by him as director, officer or employee of, or from his interest in, such other corporation or firm, unless the Company in general meeting otherwise directs. PART 16 PROCEEDINGS OF DIRECTORS 16.1. The Chairman of the Board, if any, or in his absence, the Vice-Chairman or in his absence, the President shall preside as chairman at every meeting of the Directors, or if neither the Chairman of the Board nor the Vice-Chairman nor the President is present within fifteen minutes of the time appointed for holding the meeting or is willing to act as chairman, or, if the Chairman of the Board, the Vice-Chairman, and the President have advised the secretary that they will not be present at the meeting, the Directors present shall choose one of their number to be chairman of the meeting. 16.2. The Directors may meet together for the dispatch of business, adjourn and otherwise regulate their meetings, as they think fit. Questions arising at any meeting shall be decided by a majority of votes. In case of an equality of votes the chairman shall not have a second or casting vote. Meetings of the Board held at regular intervals may be held at such place, at such time and upon such notice (if any) as the Board may by resolution from time to time determine. 16.3. A meeting of the Directors or of any committee of the Directors may take place by means of conference telephones or other communications facilities by which means all Directors participating in the meeting can hear each other and provided that all such Directors agree to such meeting being held in such manner. Directors participating in a meeting in accordance with this Article shall be deemed to be present at the meeting and to have so agreed and shall be counted in the quorum therefor and be entitled to speak and vote thereat. 16.4. A Director may, and the Secretary or an Assistant Secretary upon request of a Director shall, call a meeting of the Board at any time. Reasonable notice of such meeting specifying the place, day and hour of such meeting shall be given by mail, postage pre-paid, addressed to each of the Directors and alternate Directors at his address as it appears on the books of the Company or by leaving it at his usual business or residential address or by telephone, telegram, telex, or any method of transmitting legibly recorded messages. It shall not be necessary to give notice of a meeting of Directors to any Director or alternate Directors (a) who is at the time not in the Province of British Briant, Angus, McClellan & Rubenstein -20- Columbia or (b) if such meeting is to be held immediately following a general meeting at which such Director shall have been elected or is the meeting of Directors at which such Director is appointed. Accidental omission to give notice of a meeting to or the nonreceipt of notice of a meeting by, any Director or alternate Director shall not invalidate the proceedings at the meeting. 16.5. Any Director of the Company may file with the Secretary a document executed by him waiving notice of any past, present or future meeting or meetings of the Directors being, or required to have been, sent to him and may at any time withdraw such waiver with respect to meetings held thereafter. After filing such waiver with respect to future meetings and until such waiver is withdrawn no notice need be given to such Director and, unless the Director otherwise requires in writing to the Secretary, to his alternate Director of any meeting of Directors and all meetings of the Directors so held shall be deemed not to be improperly called or constituted by reason of notice not having been given to such Director or alternate Director. 16.6. The quorum necessary for the transaction of the business of the Directors may be fixed by the Directors and if not so fixed shall be two Directors or, if the number of Directors is fixed at one, shall be one Director. 16.7. The continuing Directors may act notwithstanding any vacancy in their body, but, if and so long as their number is reduced below the number fixed pursuant to these Articles as the necessary quorum of Directors, the continuing Directors may act for the purpose of increasing the number of Directors to that number, or of summoning a general meeting of the Company, but for no other purpose. 16.8. Subject to the provisions of the Company Act, all acts done by any meeting of the Directors or of a committee of Directors, or by any person acting as a Director, shall, notwithstanding that it be afterwards discovered that there was some defect in the qualification, election or appointment of any such Directors or of the members of such committee or person acting as aforesaid, or that they or any of them were disqualified, be as valid as if every such person had been duly elected or appointed and was qualified to be a Director. 16.9. A resolution consented to in writing, whether by document, telegram, telex or any method of transmitting legibly recorded messages or other means, by all of the Directors shall be as valid and effectual as if it had been passed at a meeting of the Directors duly called and held. Such resolution may be in two or more counterparts which together shall be deemed to constitute one resolution in writing. Such resolution shall be filed with the minutes of the proceedings of the Directors and shall be effective on the date stated thereon or on the latest date stated on any counterpart. PART 17 EXECUTIVE AND OTHER COMMITTEES 17.1. The Directors may by resolution appoint an Executive Committee to consist of such member or members of their body as they think fit, which Committee shall have, and Briant, Angus, McClellan & Rubenstein -21- may exercise during the intervals between the meetings of the Board, all the powers vested in the Board except the power to fill vacancies in the Board, the power to change the membership of, or fill vacancies in, said Committee or any other committee of the Board and such other powers, if any, as may be specified in the resolution. The said Committee shall keep regular minutes of its transactions and shall cause them to be recorded in books kept for that purpose, and shall report the same to the Board of Directors at such times as the Board of Directors may from time to time require. The Board shall have the power at any time to revoke or override the authority given to or acts done by the Executive Committee except as to acts done before such revocation or overriding and to terminate the appointment or change the membership of such Committee and to fill vacancies in it. The Executive Committee may make rules for the conduct of its business and may appoint such assistants as it may deem necessary. A majority of the members of said Committee shall constitute a quorum thereof. 17.2. The Directors may from time to time by resolution constitute, dissolve or reconstitute standing committees and other committees consisting of such persons as the Board may determine. Every committee constituted by the Board shall have the powers, authorities and discretions delegated to it by the Board (which shall not include the power to fill vacancies in the Board and the power to change the membership of or fill vacancies in any committee constituted by the Board or the power to appoint or remove officers appointed by the Board) and shall conform to the regulations which may from time to time be imposed upon it by the Board. 17.3. The Executive Committee and any other committee may meet and adjourn as it thinks proper. Questions arising at any meeting shall be determined by a majority of votes of the members of the committee present, and in case of an equality of votes the chairman shall not have a second or casting vote. A resolution approved in writing by all the members of the Executive Committee or any other committee shall be as valid and effective as if it had been passed at a meeting of such Committee duly called and constituted. Such resolution may be in two or more counterparts which together shall be deemed to constitute one resolution in writing. Such resolution shall be filed with the minutes of the proceedings of the committee and shall be effective on the date stated thereon or on the latest date stated in any counterpart. PART 18 OFFICERS 18.1. The Directors shall, from time to time, appoint a President and a Secretary and such other officers, if any as the directors shall determine and the Directors may, at any time, terminate any such appointment. No officer shall be appointed unless he is qualified in accordance with the provisions of the Company Act. 18.2. One person may hold more than one of such offices except that the offices of President and Secretary must be held by different persons unless the Company has only one member. Any person appointed as the Chairman of the Board, the President or the Managing Director shall be a Director. The other officers need not be Directors. The remuneration of the officers of the Company as such and the terms and conditions of their Briant, Angus, McClellan & Rubenstein -22- tenure of office or employment shall from time to time be determined by the Directors; such remuneration may be by way of salary, fees, wages, commission or participation in profits or any other means or all of these modes and an officer may in addition to such remuneration be entitled to receive after he ceases to hold such office or leaves the employment of the Company a pension or gratuity. The Directors may decide what functions and duties each officer shall perform and may entrust to and confer upon him any of the powers exercisable by them upon such terms and conditions and with such restrictions as they think fit and may from time to time revoke, withdraw, alter or vary all or any of such functions, duties and powers. The Secretary shall, inter alia, perform the functions of the Secretary specified in the Company Act. 18.3. Every officer of the Company who holds any office or possesses any property whereby, whether directly or indirectly, duties or interests might be created in conflict with his duties or interests as an officer of the Company shall, in writing, disclose to the President the fact and the nature, character and extent of the conflict. PART 19 INDEMNITY AND PROTECTION OF DIRECTORS, OFFICERS AND EMPLOYEES 19.1. Subject to the provisions of the Company Act, the Directors shall cause the Company to indemnify a Director or former Director of the Company and the Directors may cause the Company to indemnify a director or former director of a corporation of which the Company is or was a shareholder and the heirs and personal representatives of any such person against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, actually and reasonably incurred by him or them including an amount paid to settle an action or satisfy a judgment in a civil, criminal or administrative action or proceeding to which he is or they are made a party by reason of his being or having been a Director of the Company or a director of such corporation, including any action brought by the Company or any such corporation. The Company shall apply to the court for all approvals of the court which may be required to make any indemnity referred to in this Part effective and enforceable. Each Director of the Company on being elected or appointed shall be deemed to have contracted with the Company on the terms of the foregoing indemnity. 19.2. Subject to the provisions of the Company Act, the Directors may cause the Company to indemnify any officer, employee or agent of the Company or of a corporation of which the Company is or was a shareholder (notwithstanding that he is also a Director) and his heirs and personal representatives against all costs, charges and expenses whatsoever incurred by him or them and resulting from his acting as an officer, employee or agent of the Company or such corporation. In addition the Company shall indemnify the Secretary or an Assistant Secretary of the Company (if he shall not be a full time employee of the Company and notwithstanding that he is also a Director) and his respective heirs and legal representatives against all costs, charges and expenses whatsoever incurred by him or then; and arising out of the functions assigned to the Secretary by the Company Act or these Articles and each such Secretary and Assistant Secretary shall on being appointed be deemed to have contracted with the Company on the terms of the foregoing indemnity. Briant, Angus, McClellan & Rubenstein -23- 19.3. The failure of a Director or officer of the Company to comply with the provisions of the Company Act or of the Memorandum or these Articles shall not invalidate any indemnity to which he is entitled under this Part. 19.4. The Directors may cause the Company to purchase and maintain insurance for the benefit of any person who is or was serving as a Director, officer, employee or agent of the Company or as a director, officer, employee or agent of any corporation of which the Company is or was a shareholder and his heirs or personal representatives against any liability incurred by him as such Director, director, officer, employee or agent. PART 20 DIVIDENDS AND RESERVE 20.1. The Directors may from time to time declare and authorize payment of such dividends, if any, as they may deem advisable and need not give notice of such declaration to any member. No dividend shall be paid otherwise than out of funds and/or assets properly available for the payment of dividends and a declaration by the Directors as to the amount of such funds or assets available for dividends shall be conclusive. The Company may pay any such dividend wholly or in part by the distribution of specific assets and in particular by paid up shares, bonds, debentures or other securities of the Company or any other corporation or in any one or more such ways as may be authorized by the Company or the Directors and where any difficulty arises with regard to such a distribution the Directors may settle the same as they think expedient, and in particular may fix the value for distribution of such specific assets or any part thereof, and may determine that cash payments in substitution for all or any part of the specific assets to which any members are entitled shall be made to any members on the basis of the value so fixed in order to adjust the rights of all parties and may vest any such specific assets in trustees for the persons entitled to the dividend as may seem expedient to the Directors. 20.2. Any dividend declared on shares of any class or series by the Directors may be made payable on such date as is fixed by the Directors. 20.3. Subject to the rights of members (if any) holding shares with special rights as to dividends, all dividends on shares of any class or series shall be declared and paid according to the number of such shares held. 20.4. The Directors may, before declaring any dividend, set aside out of the funds properly available for the payment of dividends such sums as they think proper as a reserve or reserves, which shall, at the discretion of the Directors, be applicable for meeting contingencies, or for equalizing dividends, or for any other purpose to which such funds of the Company may be properly applied, and pending such application may, at the like discretion, either be employed in the business of the Company or be invested in such investments as the Directors may from time to time think fit. The Directors may also, without placing the same in reserve, carry forward such funds, which they think prudent not to divide. Briant, Angus, McClellan & Rubenstein -24- 20.5. If several persons are registered as joint holders of any share, any one of them may given an effective receipt for any dividend, bonuses or other moneys payable in respect of the share. 20.6. No dividend shall bear interest against the Company. Where the dividend to which a member is entitled includes a fraction of a cent, such fraction shall be disregarded in making payment thereof and such payment shall be deemed to be payment in full. 20.7. Any dividend, bonuses or other moneys payable in cash in respect of shares may be paid by cheque or warrant sent through the post directed to the registered address of the holder, or in the case of joint holders, to the registered address of that one of the joint holders who is first named on the register, or to such person and to such address as the holder or joint holders may direct in writing. Every such cheque or warrant shall be made payable to the order of the person to whom it is sent. The mailing of such cheque or warrant shall, to the extent of the sum represented thereby (plus the amount of any tax required by law to be deducted) discharge all liability for the dividend, unless such cheque or warrant shall not be paid on presentation or the amount of tax so deducted shall not be paid to the appropriate taxing authority. 20.8. Notwithstanding anything contained in these Articles the Directors may from time to time capitalize any undistributed surplus on hand of the Company and may from time to time issue as fully paid and non-assessable any unissued shares, or any bonds, debentures or debt obligations of the Company as a dividend representing such undistributed surplus on hand or any part thereof. PART 21 DOCUMENTS, RECORDS AND REPORTS 21.1. The Company shall keep at its records office at such other place as the Company Act may permit, the documents, copies registers, minutes, and records which the Company is required by the Company Act to keep at its records office or such other place, as the case may be. 21.2. The Company shall cause to be kept proper books of account and accounting records in respect of all financial and other transactions of the Company in order properly to record the financial affairs and condition of the Company and to comply with the Company Act. 21.3. Unless the Directors determine otherwise, or unless otherwise determined by an ordinary resolution, no member of the Company shall be entitled to inspect the accounting records of the Company. 21.4. The Directors shall from time to time at the expense of the Company cause to be prepared and laid before the Company in general meeting such financial statements and reports as are required by the Company Act. Briant, Angus, McClellan & Rubenstein -25- 21.5. Every member shall be entitled to be furnished once gratis on demand with a copy of the latest annual financial statement of the Company and, if so required by the Company Act, a copy of each such annual financial statement and interim financial statement shall be mailed to each member. PART 22 NOTICES 22.1. A notice, statement or report may be given or delivered by the Company to any member either by delivery to him personally or by sending it by mail to him to his address as recorded in the register of members. Where a notice, statement or report is sent by mail, service or delivery of the notice, statement or report shall be deemed to be effected by properly addressing, prepaying and mailing the notice, statement or report and to have been given on the day, Saturdays, Sundays and holidays excepted, following the date of mailing. A certificate signed by the Secretary or other officer of the Company or of any other corporation acting in that behalf for the Company that the letter, envelope or wrapper containing the notice, statement or report was so addressed, prepaid and mailed shall be conclusive evidence thereof. 22.2. A notice, statement or report may be given or delivered by the Company to the joint holders of a share by giving the notice to the joint holder first named in the register of members in respect of the share. 22.3. A notice, statement or report may be given or delivered by the Company to the persons entitled to a share in consequence of the death, bankruptcy or incapacity of a member by sending it through the mail prepaid addressed to them by name or by the title of representatives of the deceased or incapacitated person or trusted of the bankrupt, or by any like description, at the address (if any) supplied to the Company for the purpose by the persons claiming to be so entitled, or (until such address has been so supplied) by giving the notice in a manner in which the same might have been given if the death, bankruptcy or incapacity had not occurred. 22.4. Notice of every general meeting or meeting of members holding a class or series of shares shall be given in a manner hereinbefore authorized to every member holding at the time of the issue of the notice or the date fixed for determining the members entitled to such notice, whichever is the earlier, shares which confer the right to notice of and to attend and vote at any such meeting. No other person except the auditor of the Company and the Directors of the Company shall be entitled to receive notices of any such meeting. Briant, Angus, McClellan & Rubenstein -26- PART 23 RECORD DATES 23.1. The Directors may fix in advance a date, which shall not be more than the maximum number of days permitted by the Company Act preceding the date of any meeting of members or any class or series thereof or of the payment of any dividend or of the proposed taking of any other proper action requiring the determination of members as the record date for the determination of the members entitled to notice of, or to attend and vote at, any such meeting and any adjournment thereof, or entitled to receive payment of any such dividend or for any other proper purpose and, in such case, notwithstanding anything elsewhere contained in these Articles, only members of record on the date so fixed shall be deemed to be members for the purposes aforesaid. 23.2. Where no record date is so fixed for the determination of members as provided in the preceding Article the date on which the notice is mailed or on which the resolution declaring the dividend is adopted, as the case may be, shall be the record date for such determination. PART 24 SEAL 24.1. The Directors may provide a seal for the Company and, if they do so, shall provide for the safe custody of the seal which shall not be affixed to any instrument except in the presence of the following persons, namely, (a) any two Directors, or (b) one of the Chairman of the Board, the President, the Managing Director, a Director and a Vice-President together with one of the Secretary, the Treasurer, the Secretary-Treasurer, an Assistant Secretary, an Assistant Treasurer and an Assistant Secretary-Treasurer, or (c) if the Company shall have only one member, the President or the Secretary, or (d) subject to Article 8.4., such person or persons as the Directors may from time to time by resolution appoint and the said Directors, officers, person or persons in whose presence the seal is so affixed to an instrument shall sign such instrument. For the purpose of certifying under seal true copies of any document or resolution the seal may be affixed in the presence of any one of the foregoing persons. 24.2. To enable the seal of the Company to be affixed to any bonds, debentures, share certificates, or other securities of the Company, whether in definitive or interim Briant, Angus, McClellan & Rubenstein -27- form, on which facsimiles of any of the signatures of the Directors or officers of the Company are, in accordance with the Company Act and/or these Articles, printed or otherwise mechanically reproduced there may be delivered to the firm or company employed to engrave, lithograph or print such definitive or interim bonds, debentures, share certificates or other securities one or more unmounted dies reproducing the Company's seal and the Chairman of the Board, the President, the Managing Director or a Vice-President and the Secretary, Treasurer, Secretary-Treasurer, an Assistant Secretary, an Assistant Treasurer or an Assistant Secretary-Treasurer may by a document authorize such firm or company to cause the Company's seal to be affixed to such definitive or interim bonds, debentures, share certificates or other securities by the use of such dies. Bonds, debentures, share certificates or other securities to which the Company's seal has been so affixed shall for all be deemed to be under and to bear the Company's seal lawfully affixed thereto. 24.3. The Company may have for use in any other province, state, territory or country an official seal and all of the powers conferred by the Company Act with respect thereto may be exercised by the Directors or by a duly authorized agent of the Company. PART 25 PROHIBITIONS 25.1. As long as the Company is a company which is not a reporting issuer (as defined under the British Columbia Securities Act), no shares shall be transferred without the previous consent of the Directors expressed by a resolution of the Board and the Directors shall not be required to give any reason for refusing to consent to any such proposed transfer. Briant, Angus, McClellan & Rubenstein -28- - -------------------------------------------------------------------------------- Full Name, Resident Address, and Occupation of Subscriber - -------------------------------------------------------------------------------- /s/ James A. Speakman - ---------------------------------- JAMES A. SPEAKMAN #205 - 2772 Spruce Street Vancouver, B.C. V6H 2R2 --------------------------------- Solicitor --------------------------------- - -------------------------------------------------------------------------------- DATED as of the 20th day of July, 1987 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Briant, Angus, McClellan & Rubenstein EX-3.4 5 EXHIBIT 3.4 EXHIBIT 3.4 I HEREBY CERTIFY THAT THIS IS A COPY OF A DOCUMENT FILED WITH THE REGISTRAR OF COMPANIES ON SEP 11 1987 19 --------------- ----- /s/ illegible ------------------------------------ ASSISTANT DEPUTY REGISTRAR OF COMPANIES FOR THE PROVINCE OF BRITISH COLUMBIA FORM 21 (Section 371) PROVINCE OF BRITISH COLUMBIA COMPANY ACT Cert. of Incorp. 330743 SPECIAL RESOLUTION The following special resolutions were passed by the undermentioned Company on the date stated: Name of Company: NO. 96 SAIL VIEW VENTURES LTD. Date resolutions passed: September 9, 1987 Resolution: "RESOLVED, as special resolutions, that: 1. The name of the Company be changed from "NO. 96 SAIL VIEW VENTURES LTD." to "EAST COAST EXPLORATIONS LTD." 2. Item 1 of the Memorandum of the Company be changed to read: The name of the Company is "EAST COAST EXPLORATIONS LTD." 3. The capital of the Company be altered by increasing the authorized capital of the Company from 10,000 Common shares without par value to 20,000,000 Common shares without par value. 4. The Memorandum as altered by these resolutions be in the form attached hereto and marked Schedule "A", so that the Memorandum as altered shall at the time of filing comply with the Company Act." CERTIFIED a true copy the 9th day of September, 1987. /s/ illegible ----------------------------- Solicitor ----------------------------- SCHEDULE "A" MEMORANDUM (As altered by special resolutions dated the 9th day of September, 1987) of EAST COAST EXPLORATIONS LTD. 1. The name of the Company is "EAST COAST EXPLORATIONS LTD." 2. The authorized capital of the Company consists of Twenty Million (20,000,000) Common shares without par value. EX-3.5 6 EXHIBIT 3.5 EXHIBIT 3.5 CANADA NUMBER PROVINCE OF BRITISH COLUMBIA 330743 [Logo] PROVINCE OF BRITISH COLUMBIA Ministry of Finance and Corporate Relations REGISTRAR OF COMPANIES COMPANY ACT CERTIFICATE I HEREBY CERTIFY THAT NO. 96 SAIL VIEW VENTURES LTD. HAS THIS DAY CHANGED ITS NAME TO THE NAME EAST COAST EXPLORATIONS LTD. GIVEN UNDER MY HAND AND SEAL OF OFFICE VICTORIA, BRITISH COLUMBIA THIS 11TH DAY OF SEPTEMBER, 1987 B. BECKWITH ASST. DEPUTY REGISTRAR OF COMPANIES EX-3.6 7 EXHIBIT 3.6 EXHIBIT 3.6 I HEREBY CERTIFY THAT THIS IS A COPY OF A DOCUMENT FILED WITH THE REGISTRAR 0F COMPANIES 0CT 15 1993 ------------------------------------ (illegible) ------------------------------------ FOR REGISTRAR OF COMPANIES FOR THE PROVINCE OF BRITISH COLUMBIA FORM 21 (SECTION 371) PROVINCE OF BRITISH COLUMBIA COMPANY ACT Certificate of Incorporation No. 330743 SPECIAL RESOLUTI0N -------------------------------- The following special resolutions were passed by the undermentioned Company on the date stated: Name of Company: EAST COAST EXPLORATIONS LTD. Date resolutions passed: September 29, 1993 RESOLUTION: "RESOLVED, AS A SPECIAL RESOLUTION THAT: 1. The name of the Company be changed from "EAST COAST EXPLORATIONS LTD." to "SUMMO MINERALS CORPORATION". 2. Item 1 of the Memorandum of the Company be changed to read: The name of the Company is "Summo Minerals Corporation". 3. The Memorandum as altered by these resolutions be in the form attached hereto as Schedule "A", so that the Memorandum as altered shall at the time of filing comply with the Company Act." CERTIFIED a true copy this 4th day of October, 1993. --------------------------- (signature) SCHEDULE "A" MEMORANDUM (As altered by special resolutions dated the 29th day of September, 1993) of SUMMO MINERALS CORPORATION 1. The name of the Company is "SUMMO MINERALS CORPORATION". 2. The authorized capital of the Company consists of Twenty Million (20,000,000) Common shares without par value. EX-3.7 8 EXHIBIT 3.7 EXHIBIT 3.7 NUMBER: 330743 [Logo] CERTIFICATE OF CHANGE OF NAME COMPANY ACT CANADA PROVINCE OF BRITISH COLUMBIA I HEREBY CERTIFY THAT EAST COAST EXPLORATIONS LTD. has this day changed its name to SUMMO MINERALS CORPORATION ISSUED UNDER MY HAND AT VICTORIA, BRITISH COLUMBIA ON OCTOBER 15, 1993 /s/ John S. Powell JOHN S. POWELL REGISTRAR OF COMPANIES EX-3.8 9 EXHIBIT 3.8 EXHIBIT 3.8 I HEREBY CERTIFY THAT THIS IS A COPY OF A DOCUMENT FILED WITH THE REGISTRAR OF COMPANIES ON MAY 26 1995 - -------------------------------------- /s/ Illegible - -------------------------------------- FOR THE REGISTRAR OF COMPANIES FOR THE PROVINCE OF BRITISH COLUMBIA FORM 21 (Section 371) PROVINCE OF BRITISH COLUMBIA COMPANY ACT Certificate of Incorporation No. 330743 SPECIAL RESOLUTION The following special resolutions were passed by the undermentioned Company on the date stated: Name of Company: SUMMO MINERALS CORPORATION Date resolutions passed: April 24, 1995 RESOLUTION: "RESOLVED, AS A SPECIAL RESOLUTION THAT the authorized capital of the Company be altered by: (a) increasing from 20,000,000 Common Shares without par value to 500,000,000 Common Shares without par value pursuant to Section 254(1)(b) of the COMPANY ACT (British Columbia); (b) by the creation of 100,000,000 Preferred Shares without par value pursuant to Section 254(1)(a) of the Company Act (British Columbia); and (c) by the creation, definition and attachment of special rights and restrictions to the Preferred Shares in the form attached hereto as Schedule "B" and the inclusion of such Special Rights and Restrictions in the Articles of the Company, so that the authorized capital of the Company is increased from 20,000,000 Common Shares without par value to 600,000,000 Shares divided into 500,000,000 Common Shares without par value and 100,000,000 Preferred Shares without par value, having attached thereto the Special Rights and Restrictions as set forth in the Articles of the Company. The Memorandum, as altered, is attached as Schedule "A". CERTIFIED a true copy this 27th day of April, 1995. (signature) SCHEDULE A MEMORANDUM (As altered by special resolutions dated: April 24, 1995) of SUMMO MINERALS CORPORATION 1. The name of the Company is SUMMO MINERALS CORPORATION. 2. The authorized capital of the Company consists of 600,000,000 shares divided into: 500,000,000 Common shares without par value; and 100,000,000 Preferred Shares without par value There be attached to the shares the special rights and restrictions set forth in the Articles of the Company. SCHEDULE B SUMMO MINERALS CORPORATION (the "Company") PART 26 SPECIAL RIGHTS AND ACTIONS ATTACHING TO PREFERRED SHARES The preferred shares without par value of the Company (the "Preferred Shares") shall have attached thereto the following special rights and restrictions: 26.1 The directors of the Company may at any time and from time to time issued the Preferred Shares in one or more Series, each Series to consist of such number of shares as may before issuance of any thereof be determined by the directors. 26.2 The directors of the Company shall, subject as hereinafter provided, by resolution duly passed before the first issue of the Preferred Shares of any Series, alter the Memorandum of the Company to fix the number of Preferred Shares in, and to determine the designation of the Preferred Shares of such Series and alter the Articles to create, define and attach the preferences, privileges, rights, restrictions, conditions, and limitations to be attached to the Preferred Shares of such Series. 26.3 The Preferred Shares of any Series may have attached thereto preferences, privileges, rights, restrictions, conditions or limitations with regard to dividends (which, in the case of fixed dividends, shall in all cases be cumulative), whether in cash or otherwise, voting, the right to convert such shares into common shares or otherwise including, without limiting the generality of the foregoing, preferences, privileges, rights, restrictions, conditions, or limitations with respect to (a) the redemption or purchase of Preferred Shares by the Company; (b) retraction privileges; (c) sinking funds or funds for the purchase or redemption of Preferred Shares; (d) payment of dividends on any other shares of the Company; (e) redemption, purchase or other retirement of any shares of the Company or of any subsidiary of the Company; (f) the exercise by the Company of any right to elect that any one or more dividends are to be paid out of one or more special surplus accounts recognized for tax purposes; (g) subdivision, consolidation or reclassification of any shares of the Company; (h) borrowing by the Company or any subsidiary of the Company; (i) the creation or issue of any debt or equity securities by the Company or any subsidiary of the Company including the issue of any Preferred Shares in addition to the Preferred Shares at any time outstanding; (j) reduction of capital by the Company or any subsidiary of the Company; (k) retirement of notes, bonds or debentures or other indebtedness of the Company or any subsidiary of the Company; (l) conduct of the business of the Company or investment of its funds; (m) meetings of holders of Preferred Shares; and (n) the right of holders of Preferred Shares to convert or exchange such shares into shares of any class of the Company or into or for any other securities of the Company or into or for shares or securities of any other corporation. 26.4 The holders of Preferred Shares shall be entitled to (a) preference with respect to payment of dividends over the common shares and over any other shares ranking junior to the Preferred Shares with respect to payments of dividends; (b) preference with respect to distribution of assets in the event of liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, or any other distribution of the assets of the Company among its shareholders for the purpose of winding-up its affairs over the common shares and over any other shares ranking junior to the Preferred Shares with respect to the repayment of capital; and (c) with respect to each Series such other preferences over the common shares and over any other shares ranking junior to the Preferred Shares in any respect, as are not inconsistent with the provisions of this Part 26 and as may be determined for that Series. 26.5 The Preferred Shares of each Series shall rank rateably with the Preferred Shares of every other Series on the return of capital and in the distribution of assets in the event of liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, or any other distribution of the assets of the Company among its shareholders for the purpose of winding-up it affairs. When fixed cumulative dividends that are due on any Series of Preferred Shares are not paid in full, the shares of all Series of Preferred Shares participate rateably in respect of accumulated dividends in accordance with the amounts that would be payable on those shares if all the accumulated dividends were paid in full. 26.6 Subject to such rights relating to the election of directors on a default in payment of dividends as may be attached to any Series of the Preferred Shares by the directors, holders of the Preferred Shares shall not be entitled as such to receive notice of, or to attend or vote at, any general meeting of members of the Company. 26.7 The Company shall not without, but may from time to time with, the authorization of the holders of the Preferred Shares required by the Company Act, increase the authorized number of Preferred Shares or create any class of shares ranking in priority to or on a parity with the Preferred Shares. EX-10.1 10 EXHIBIT 10.1 EXHIBIT 10.1 TERMINATION OF EXISTING MINERALS LEASE, BILL OF SALE, AND NEW MINERALS LEASE This Termination of Existing Minerals Lease, Bill of Sale and New Minerals Lease made and entered into as of the 20th day of April, 1988, by and between Lisbon Copper Ltd., a Utah limited partnership ("LESSOR"), whose mailing address is c/o Raymond E. Kunkel, 33 Holiday Haven, Moab, Utah 84532; Kelmine Corporation ("KELMINE"), also known as Kelmine Corp., a Colorado corporation, whose mailing address is 11930 West 44th Avenue, Wheatridge, Colorado 80033; and MLP Associates Ltd. ("LESSEE") a Colorado limited partnership, whose address is 2801 Youngfield St., Suite 221, Golden, Colorado 80401. WITNESSETH: I. TERMINATION OF MINERALS LEASE. I.A. Recitals. I.A.1. Raymond E. Kunkel ("RAY") and Paul B. Clemons ("CLEMONS"), as lessors, and KELMINE, as lessee, entered into a Minerals Lease (the "KUNKEL-KELMINE LEASE") dated February 15, 1985, covering an interest in the following: I.A.1.a. The hereinafter named unpatented lode mining claims situated in San Juan County, State of Utah, which are more particularly described in the notice of location and amended notice of location for each claim, a copy of which is recorded in the Recorder's office of San Juan County, State of Utah (the "RECORDER'S OFFICE"), and the Bureau of Land Management Serial Number (the "BLM NO.") of which are as follows: BLM NO. Name of Claim Book Page (UMC) ------------- ---- ---- ------- Camel 25 453 (amended) 231 261 129728 Cow 25 454 (amended) 231 262 129732 Cat 25 454 (amended) 231 262 129729 Colt 25 455 (amended) 231 263 129730 Cougar 25 455 (amended) 231 263 129731 Cub 25 456 (amended) 231 264 129734 Coyote 25 456 (amended) 231 264 129733 Sentinal 1 47 44 (amended) 231 256 129718 Sentinal 2 47 45 (amended) 231 257 129719 Sentinal 3 47 45 (amended) 231 257 129720 Sentinal 4 47 46 (amended) 231 258 129721 Sentinal 5 47 46 (amended) 231 258 129722 Sentinal 6 47 47 (amended) 231 259 129723 Sentinal 7 47 47 (amended) 231 259 129724 Sentinal 8 47 48 (amended) 231 260 129725 Sentinal 9 47 48 (amended) 231 260 129726 Sentinal 10 47 49 (amended) 231 261 129727 Security 3 377 402 140827 Security 5 377 403 140607 Security 7 377 404 140608 2 BLM NO. Name of Claim Book Page (UMC) ------------- ---- ---- ------- Security 9 377 405 140609 Security 11 377 406 140610 Security 14 377 407 140611 Security 15 377 408 140612 Security 16 377 409 140613 Security 18 377 410 140614 Security 19 377 411 140615 Security 20 377 412 140616 Security 25 377 413 140617 Security 26 377 414 140618 Security 27 377 415 140619 Security 28 377 416 140620 Security 29 377 417 140621 Security 30 377 418 140622 Security 31 377 419 140623 Security 32 377 420 140624 Security 33 377 421 140625 Security 34 377 422 140626 Security 35 377 423 140627 Security 36 377 424 140628 Security 37 377 425 140629 Security 38 377 426 140630 Security 39 377 427 140631 Security 40 377 428 140632 Security 41 377 429 140633 Security 42 377 430 140634 Security 43 377 431 140635 Security 44 377 432 140636 Security 45 377 433 140637 Security 46 377 434 140638 Security 47 377 435 140639 Security 48 377 436 140640 Security 49 378 341 140641 Security 50 378 342 140642 Security 51 378 343 140643 Security 52 378 344 140644 Security 53 378 345 140645 Security 54 378 346 140646 Security 55 378 347 140647 Security 56 378 348 140648 Climax No. 1 R-2 382 Climax No. 2 R-2 382 Alpha No. 1 63 96 3 BLM NO. Name of Claim Book Page (UMC) ------------- ---- ---- ------- (amended) 169 463 (amended) 270 83 129765 Alpha No. 2 63 96 (amended) 169 463 (amended 270 83 129766 Alpha No. 3 63 97 (amended) 169 464 (amended) 270 84 129767 Alpha No. 4 63 97 (amended) 169 464 (amended) 270 84 129768 Alpha No. 5 63 98 (amended) 169 465 (amended) 270 85 129769 Alpha No. 6 63 98 (amended) 169 465 (amended) 270 85 129770 Alpha No. 7 63 99 (amended) 169 466 (amended) 270 86 129771 Alpha No. 8 63 99 (amended) 169 466 (amended) 270 86 127992 CW 1 510 62 129811 CW 2 510 63 129812 CW 3 510 64 129813 CW 4 510 65 129814 CW 5 510 66 129815 CW 6 510 67 129816 CW 7 510 68 129817 CW 8 510 69 129818 CW 9 510 70 129819 CW 10 510 71 129820 CW 11 510 72 129821 CW 12 510 73 129822 CW 13 510 74 129823 CW 14 510 75 129824 CW 15 511 596 129825 CW 16 511 597 129826 CW 19 511 598 (amended) 521 8 129827 CW 22 511 599 (amended) 521 9 129828 4 BLM NO. Name of Claim Book Page (UMC) ------------- ---- ---- ------- KWR 1 487 130 129789 KWR 2 487 131 129790 KWR 3 487 132 129791 KWR 4 487 133 129792 KWR 5 487 134 129793 KWR 6 487 135 129794 KWR 7 487 136 129795 KWR 8 487 137 129796 KWR 9 Fraction 501 345 129797 KWR 10 501 346 129798 KWR Fraction 501 347 129799 KWR 11 Fraction 521 469 129802 KWR 12 Fraction 501 348 129800 KWR 13 Fraction 501 349 129801 CWG Fraction 517 275 129786 CWG Fraction #1 517 276 129787 CWG Fraction #2 517 277 129788 CD 1 509 508 129773 CD 2 Fraction 509 509 129778 CD 3 Fraction 509 510 129779 CD 4 Fraction 509 511 129780 CD 5 Fraction 509 512 129781 CD 6 Fraction 509 550 129737 Globe #1 486 16 (amended) 489 392 129782 Globe #2 486 17 (amended) 489 393 129783 Globe #9 486 24 (amended) 489 400 129784 Globe #10 486 25 (amended) 489 401 129785 I.A.1.b. The following described fee land (the "FEE LAND") situated in San Juan County, State of Utah, to-wit: PATTERSON RANCH TOWNSHIP 31 SOUTH, RANGE 25 EAST, SLM Section 1: Lots 1, 2, 3 and 4 5 I.A.1.c. Water and water rights for use upon the property covered by the KUNKEL-KELMINE LEASE. I.A.1.d. The stockpile of mixed oxide-sulphide copper ore (the "STOCKPILE") estimated to contain 35,000 to 40,000 tons containing approximately 2% copper which is situated on the following described tract of land situated in San Juan County, State of Utah, to-wit: TOWNSHIP 30 SOUTH, RANGE 25 East, SLM Section 36: SE 1/4 I.A.1.e. All mining claims and other property acquired by the parties to the KUNKEL-KELMINE LEASE within one (1) mile of any part of the property above described which is covered by the KUNKEL-KELMINE LEASE, except State of Utah Metalliferous Lease Number 20569 (the "STATE LEASE"), covering the following described tracts of land situated in San Juan County, State of Utah, to-wit: TOWNSHIP 30 SOUTH, RANGE 25 EAST, SLM Section 36: NW 1/4, E 1/2 I.A.2. On the date of the KUNKEL-KELMINE LEASE, the interest of the lessors in that lease and in the property covered by that lease, was divided between the individual lessors as follows: 6 Name of Lessor Undivided Interest Owned -------------- ------------------------ RAY 95% CLEMONS 5% I.A.3. Since the date of the KUNKEL-KELMINE LEASE, the following transfers affecting the interest of the lessors in that lease have occurred, to-wit: I.A.3.a. By Deed and Assignment dated December 17, 1985, and recorded in the RECORDER'S OFFICE on December 18, 1985, in Book 673 at pages 479-484, RAY conveyed the undivided interest set opposite the names of the persons hereinafter set forth in and to the property covered by the KUNKEL-KELMINE LEASE and the interest of the lessors in that lease as follows: Name of Grantee Undivided Interest Conveyed --------------- --------------------------- Albert S. Gilles ("GILLES") 5% Burton F. Kunkel ("BURTON") 10% A. E. Dearth ("DEARTH") 10% I.A.3.b. By Deed and Assignment dated November 20, 1986, and recorded in the RECORDER'S OFFICE on December 15, 1986, in Book 682 at pages 615-619, CLEMONS conveyed his interest in the KUNKEL-KELMINE LEASE and the property covered by that lease to Nancy Brown ("BROWN"). I.A.4. By Deed and Assignment dated as of 7 April 1, 1988, RAY, BROWN, GILLES, BURTON and DEARTH conveyed their interest in the KUNKEL-KELMINE LEASE and the property covered thereby to LESSOR so that LESSOR now owns the interest of the lessors in that lease and the property covered thereby. I.A.5. KELMINE continues to hold all of the interest of the lessee in the KUNKEL-KELMINE LEASE and such interest is not encumbered in any way. I.A.6. LESSOR asserts that the KUNKEL-KELMINE LEASE has been terminated for failure of KELMINE to pay the monthly minimum royalty of $5,000.00 under Section II.G. of the KUNKEL-KELMINE LEASE and KELMINE denies that the lease has terminated. I.A.7. Since the execution of the KUNKEL-KELMINE LEASE, RAY has delivered to KELMINE certain information relating to the property covered by the lease. In addition, KELMINE, from its own operations, has accumulated data which should be made available to LESSOR under Section II.R. of the KUNKEL-KELMINE LEASE. The information and data provided by RAY to KELMINE and the information and data accumulated by KELMINE with respect to which LESSOR is entitled to access is hereinafter collectively referred to as the "DATA". The DATA is presently located at the office (the "KELMINE OFFICE") of KELMINE in Moab, Utah. 8 I.A.8. LESSOR and KELMINE desire to compromise and resolve their differences and terminate the KUNKEL-KELMINE LEASE by agreement and provide for the preservation and accessibility to LESSOR and LESSEE of the DATA. I.B. AGREEMENT. In consideration of the premises and particularly in consideration of the acts and undertakings of the parties hereinafter set forth, the execution of the BILL OF SALE and the execution of the NEW MINERALS LEASE, and for other good and valuable consideration, the receipt of which is hereby acknowledged by LESSOR and KELMINE, LESSOR and KELMINE hereby agree and do as follows: I.B.1. The KUNKEL-KELMINE LEASE is terminated effective as of the date of this instrument and is of no further force and effect. I.B.2. LESSOR and KELMINE release all claims against each other under the KUNKEL-KELMINE LEASE and acknowledge that each has no claim against the other with respect to that lease. I.B.3. KELMINE agrees to maintain the DATA at the KELMINE OFFICE and to deliver the same to LESSEE as soon as LESSEE is willing to take possession of the same. I.B.4. Irrespective of anything else set 9 forth herein, the termination provided herein shall not operate to relieve LESSOR and KELMINE from their obligation to pay their respective share of taxes under the KUNKEL-KELMINE LEASE and the obligation of KELMINE to perform the reclamation work under the KUNKEL-KELMINE LEASE. II. BILL OF SALE II.A. RECITALS. II.A.1. Under the KUNKEL-KELMINE LEASE, KELMINE acquired equipment and machinery (the "SX-EW") described as follows: Four Solvent Extraction Tanks Two 350 Kilowatt Rectifiers Approximately Thirty Concrete Electro-Winning Cells for the processing of the copper bearing ores produced from the property covered by the KUNKEL-KELMINE LEASE. The SX-EW is presently stored near the entrance of the Cub uranium mine which is also on the land with respect to which the copper mining rights are subject to the KUNKEL-KELMINE LEASE. II.A.2. Section II.Q. of the KUNKEL-KELMINE LEASE makes provision that upon termination of that lease the SX-EW can become the property of the LESSOR if it accepts the same. II.A.3. LESSOR and KELMINE desire to implement the provisions of the KUNKEL-KELMINE LEASE by providing that LESSOR shall acquire SX-EW from KELMINE. 10 II.B. BILL OF SALE II.B.1. KELMINE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by KELMINE, and in further consideration of the termination of the KUNKEL-KELMINE LEASE as above set forth and the execution of the NEW MINERALS LEASE, hereby sells, conveys, sets over and delivers to the LESSOR the SX-EW. II.B.2. LESSOR hereby accepts the Bill of Sale set forth herein. III. NEW MINERALS LEASE. III.A. RECITALS. III.A.1. RAY and CLEMONS are the Grantees in the following described deeds (the "DEEDS"): III.A.1.a. Quit-Claim Deed from G. M. Wallace & Co. dated September 30, 1976, which was recorded in the RECORDER'S OFFICE on April 27, 1977, in Book 577 at pages 391-398. III.A.1.b. Quit-Claim Deed from Wallace Resources Inc. dated May 29, 1980, which was recorded in the RECORDER'S OFFICE on July 22, 1980, in Book 618 at page 891. III.A.1.c. Deed (the "COSTANZA-KUNKEL DEED") from Joseph F. Costanza and Joyce L. Costanza (collectively "COSTANZA") dated January 5, 1983, which was 11 recorded in the RECORDER'S OFFICE on July 17, 1984, in Book 661 at pages 294-296. III.A.2. LESSOR believes, but does not warrant or represent, that under the foregoing deeds it has the following rights, to-wit: III.A.2.a. The right to mine and process the copper bearing ores down to a depth of 500 feet from the hereinafter named unpatented lode mining claims situated in San Juan County, State of Utah, which are more particularly described in the notice of location and amended notice of location for each claim, a copy of which is recorded in the RECORDER'S OFFICE and the BLM NO. of which is as follows: BLM NO. Name of Claim Book Page (UMC) ------------- ---- ---- ------- Camel 25 453 (amended) 231 261 129728 Cow 25 454 (amended) 231 262 129732 Cat 25 454 (amended) 231 262 129729 Colt 25 455 (amended) 231 263 129730 Cougar 25 455 (amended) 231 263 129731 Cub 25 456 (amended) 231 264 129734 Coyote 35 456 (amended) 231 264 129733 Sentinal 1 47 44 12 BLM NO. Name of Claim Book Page (UMC) ------------- ---- ---- ------- (amended) 231 256 129718 Sentinal 2 47 45 (amended) 231 257 129719 Sentinal 3 47 45 (amended) 231 257 129720 Sentinal 4 47 46 (amended) 231 258 129721 Sentinal 5 47 46 (amended) 231 258 129722 Sentinal 6 47 47 (amended) 231 259 129723 Sentinal 7 47 47 (amended) 231 259 129724 Sentinal 8 47 48 (amended) 231 260 129725 Sentinal 9 47 48 (amended) 231 260 129726 Sentinal 10 47 49 (amended) 231 261 129727 Gamma 1 71 490 (amended) 85 499 Gamma 2 71 490 (amended) 85 499 CD #6 Fraction 509 550 Security 3 377 402 140827 Security 5 377 403 140607 Security 7 377 404 140608 Security 9 377 405 140609 Security 11 377 406 140610 Security 14 377 407 140611 Security 15 377 408 140612 Security 16 377 409 140613 Security 18 377 410 140614 Security 19 377 411 140615 Security 20 377 412 140616 Security 25 377 413 140617 Security 26 377 414 140618 Security 27 377 415 140619 Security 28 377 416 140620 Security 29 377 417 140621 Security 30 377 418 140622 Security 31 377 419 140623 Security 32 377 420 140624 13 BLM NO. Name of Claim Book Page (UMC) ------------- ---- ---- ------- Security 33 377 421 140625 Security 34 377 422 140626 Security 35 377 423 140627 Security 36 377 424 140628 Security 37 377 425 140629 Security 38 377 426 140630 Security 39 377 427 140631 Security 40 377 428 140632 Security 41 377 429 140633 Security 42 377 430 140634 Security 43 377 431 140635 Security 44 377 432 140636 Security 45 377 433 140637 Security 46 377 434 140638 Security 47 377 435 140639 Security 48 377 436 140640 Security 49 378 341 140641 Security 50 378 342 140642 Security 51 378 343 140643 Security 52 378 344 140644 Security 53 378 345 140645 Security 54 378 346 140646 Security 55 378 347 140647 Security 56 378 348 140648 III.A.2.b. The right to mine and process the ores bearing copper and some other minerals from the following: III.A.2.b.(1) The hereinafter named unpatented lode mining claims situated in San Juan County, state of Utah, which are more particularly described in the notice of location and amended notice of location for each claim which is recorded in the RECORDER'S OFFICE and the BLM NO. of which is as follows: 14 BLM NO. Name of Claim Book Page (UMC) ------------- ---- ---- ------- Climax No. 1 R-2 382 (amended) 487 185 129763 Climax No. 2 R-2 382 (amended) 487 186 129764 Alpha No. 1 63 96 (amended) 169 463 (amended) 270 83 129765 Alpha No. 2 63 96 (amended) 169 463 (amended) 270 83 129766 Alpha No. 3 63 97 (amended) 169 464 (amended) 270 84 129767 Alpha No. 4 63 97 (amended) 169 464 (amended) 270 84 129768 Alpha No. 5 63 98 (amended) 169 465 (amended) 270 85 129769 Alpha No. 6 63 98 (amended) 169 465 (amended) 270 85 129770 Alpha No. 7 63 99 (amended) 169 466 (amended) 270 86 129771 Alpha No. 8 63 99 (amended) 169 466 (amended) 270 86 129772 G. M. Wallace Fraction (amended) 487 129 129829 CW 1 510 62 129811 CW 2 510 63 129812 CW 3 510 64 129813 CW 4 510 65 129814 CW 5 510 66 129815 CW 6 510 67 129816 CW 7 510 68 129817 CW 8 510 69 129818 CW 9 510 70 129819 CW 10 510 71 129820 CW 11 510 72 129821 CW 12 510 73 129822 CW 13 510 74 129823 15 BLM NO. Name of Claim Book Page (UMC) ------------- ---- ---- ------- CW 14 510 75 129824 CW 15 511 596 129825 CW 16 511 597 129826 CW 19 511 598 (amended) 521 8 129827 CW 22 511 599 (amended) 521 9 129828 KWR 1 487 130 129789 KWR 2 487 131 129790 KWR 3 487 132 129791 KWR 4 487 133 129792 KWR 5 487 134 129793 KWR 6 487 135 129794 KWR 7 487 136 129795 KWR 8 487 137 129796 KWR 9 Fraction 501 345 129797 KWR 10 501 346 129798 KWR Fraction 501 347 129799 KWR 11 Fraction 521 469 129802 KWR 12 Fraction 501 348 129800 KWR 13 Fraction 501 349 129801 CWG Fraction 517 275 129786 CWG Fraction #1 517 276 129787 CWG Fraction #2 517 277 129788 CD 1 509 508 129773 CD 2 Fraction 509 509 129778 CD 3 Fraction 509 510 129779 CD 4 Fraction 509 511 129780 CD 5 Fraction 509 512 129781 CD 6 Fraction 509 550 129737 Globe #1 486 16 (amended) 489 392 129782 Globe #2 486 17 (amended) 489 393 129783 Globe #9 486 24 (amended) 489 400 129784 Globe #10 486 25 (amended) 489 401 129785 III.A.2.b.(2) The FEE LAND. III.A.2.b.(3) The STOCKPILE. 16 III.A.3. Such rights as LESSOR has in all the above described unpatented lode mining claims are hereinafter referred to as the "MINING CLAIMS." III.A.4. Such right to water available for use in processing copper bearing ores from the property above described as the LESSOR has is hereinafter referred to as the "WATER RIGHT". III.A.5. LESSOR has acquired the rights of KELMINE in the SX-EW under the BILL OF SALE. III.A.6. COSTANZAS hold the STATE LEASE. COSTANZAS, in the COSTANZA-KUNKEL DEED, intended to convey to RAY and CLEMONS the right to mine copper on the STATE LEASE to a depth of 500 feet. The State of Utah did not accept that deed and required that COSTANZAS make a separate assignment to RAY and CLEMONS. Such an assignment was made by COSTANZAS and approved by the State of Utah. LESSOR believes that it can acquire the interest of RAY, CLEMONS, BROWN, GILLES, BURTON and DEARTH in the STATE LEASE. III.A.7. All of the right, title, interest and expectancy of the LESSOR in the MINING CLAIMS, the FEE LAND, the WATER RIGHT, the SX-EW, the STATE LEASE, the STOCKPILE and all mining claims and other property (the "OTHER PROPERTY") acquired by LESSOR and/or LESSEE within one mile of any part of 17 the MINING CLAIMS, the FEE LAND and the STATE LEASE are hereinafter collectively referred to as the "LEASED PREMISES". III.A.8. LESSOR desires to lease the LEASED PREMISES to LESSEE and LESSEE desires to lease the LEASED PREMISES from LESSORS. III.B. LEASE. III.B.1. For and in consideration of the mutual covenants and agreements hereinafter set forth, in further consideration of the termination of the KUNKEL-KELMINE LEASE and the execution of the BILL OF SALE, and for other good and valuable consideration received by LESSOR from LESSEE, LESSOR does hereby lease, let and demise exclusively to LESSEE all of the right, title and interest of the LESSOR in and to the LEASED PREMISES and LESSOR hereby grants exclusively to LESSEE any and all rights of LESSOR to occupy, use, enjoy and possess the LEASED PREMISES, including, but not limited to, the following: III.B.1.a. To explore for minerals. III.B.1.b. To mine or otherwise extract, to mill, treat or otherwise process, and to store, stockpile, remove, market, sell or otherwise dispose of ore and minerals. III.B.1.c. To dispose of or deposit waste material and tailings on the LEASED PREMISES. 18 III.B.1.d. To construct, use, maintain, repair, replace and relocate in or upon the LEASED PREMISES buildings, shops, plants, machinery, mills, facilities, ore bins and structures of all kinds, roads, shafts, inclines, tunnels, drifts, open pits, pipelines, telephone lines, electric transmission lines and transportation facilities and other utilities. III.B.1.e. To use any underground water now existing or subsequently discovered or developed in or upon the LEASED PREMISES. III.B.1.f. To exercise any and all other rights and privileges which are incidental to or which may be useful, desirable or convenient in LESSEE's exercise of any or all of the rights hereinabove specified which are not in conflict with applicable state and federal laws and regulations. III.B.1.g. LESSEE may use and enjoy the LEASED PREMISES and exercise any of the rights granted hereunder by any methods now or heretofore known or hereafter developed. III.B.2. This NEW MINERALS LEASE is conditioned upon: III.B.2.a. LESSEE proceeding diligently and with all reasonable dispatch to secure the necessary state and federal approval of mining and operating plans. 19 III.B.2.b. LESSEE diligently commencing and continuing to work on a copper processing facility to process copper ores from the LEASED PREMISES. III.B.2.c. LESSEE commencing production from the LEASED PREMISES in commercial quantities within five (5) years after such approval is secured. III.B.2.d. LESSOR using its best efforts to acquire all the right, title and interest of RAY, CLEMONS, BROWN, GILLES, BURTON and/or DEARTH in the STATE LEASE, including, but not limited to, the securing of the approval of the state of Utah to the transfer to LESSOR. III.B.3. Upon the execution of this NEW MINERALS LEASE by the LESSOR, LESSEE shall immediately pay to LESSOR the sum of $1,500.00 which shall not be recoverable by LESSEE out of the production royalty hereinafter provided. III.B.4. LESSOR and LESSEE agrees to execute such additional documents as are reasonably necessary to insure and confirm that the OTHER PROPERTY is covered by this NEW MINERALS LEASE. Without limiting the foregoing, LESSOR agrees that, promptly upon the request of LESSEE, LESSOR shall make, execute, acknowledge and deliver to LESSEE, in recordable form, an amendment or amendments to this MINERALS LEASE or any other documents which better describe the LEASED PREMISES. 20 III.B.5. The rights of LESSOR as to some of the LEASED PREMISES are in the form of an ownership of the copper and some other minerals and in other parts of the LEASED PREMISES the rights are in the form of leases and subleases so that while this instrument is characterized as a "lease" it is a lease as to some portions of the LEASED PREMISES and a sublease as to the balance. III.B.6. This NEW MINERALS LEASE shall commence on the date first above set forth in this instrument, run thereafter for a primary term of ten (10) years and continue thereafter as long as minerals are being produced from the LEASED PREMISES in commercial quantities, unless sooner terminated or surrendered as hereinafter set forth; provided, however, that in the event production of minerals in commercial quantities occurred during the primary term and thereafter ceases because it is no longer commercially feasible to continue the production of minerals from the LEASED PREMISES, this NEW MINERALS LEASE shall continue beyond the expiration of the primary term without the necessity of production of minerals and/or metals in commercial quantities as long as it is not commercially feasible to continue production and as long as LESSEE performs all the covenants it is obligated to perform hereunder including, but not limited to, the covenant to pay the monthly minimum advance royalty hereinafter 21 provided. III.B.7. LESSEE shall pay LESSOR a royalty equal to the percentage (hereinafter set forth) of the NET PROCEEDS (hereinafter defined) received for all mineral, and/or metals, mined and removed from the LEASED PREMISES and processed and sold in any chemical, mineral or metallic form, hereinafter referred to as the "PRODUCT." The percent of the royalty shall be determined by the amount of NET PROCEEDS per pound of PRODUCT sold during the calendar month. If the NET PROCEEDS per pound of PRODUCT sold during the calendar month is less than $1.00, the royalty percentage shall be five percent (5%). If the NET PROCEEDS per pound of PRODUCT sold during the calendar month is from $1.00 up to and including $1.20, the royalty percentage shall be five and one-half percent (5 1/2%). If the NET PROCEEDS per pound of PRODUCT sold during the calendar month is more than $1.20, the royalty percentage shall be six percent (6%). The term "NET PROCEEDS" means the gross amount received by LESSEE, after deducting freight and handling charges from the point of final treatment to the point of final sale, from an arms-length bona fide sale of PRODUCT to a purchaser which has no financial interest of any kind in the LESSEE or its operations on the LEASED PREMISES or to a purchaser in which the LESSEE has no financial interest of any kind. If the LESSEE makes a sale which 22 is not arms-length and bona fide and/or to a purchaser which has a financial interest in the LESSEE or its operations on the LEASED PREMISES Or to a purchaser in which the LESSEE has a financial interest, the NET PROCEEDS shall be based upon the MARKET VALUE of the contained metals and/or minerals in the PRODUCT. The term MARKET VALUE of contained metals and/or minerals shall mean the average of U.S. Producer or major Suppliers prices, as quoted in Metals Week and as published in Engineering and Mining Journal (E&MJ) for the month in which the metals and/or minerals are sold. III.B.8. LESSEE shall pay all royalties previously reserved and all royalties due and owing on the underlying leases and subleases with respect to the LEASED PREMISES. LESSEE shall perform all other obligations which LESSOR and RAY, BROWN, GILLES, BURTON and DEARTH, and/or any of them, are obligated to perform in those leases and subleases. Without in any way limiting the foregoing, LESSEE shall pay all royalty on the STOCKPILE which may be owing the State of Utah or any other person or entity. III.B.9. LESSEE shall be entitled to deduct the royalty which it pays under Section III.B.8 (other than the royalty which it pays on the STOCKPILE for which it shall not be entitled to any deduction) on a particular PRODUCT from the 23 royalty due LESSOR under Section III.B.7. on that same PRODUCT, provided that the percentage of the royalty due LESSORS on that particular PRODUCT shall not, in any event, be reduced to less than one and one-half percent (1 1/2%) so that irrespective of the amount of the underlying royalty paid by LESSEE on a particular PRODUCT, LESSOR shall always receive a royalty of at least one and one-half percent (1 1/2%) on that PRODUCT. As an example and by way of illustration, the percentage of the underlying royalty on the FEE LAND is six percent (6%) and based on net smelter returns. If the NET PROCEEDS from PRODUCT from the FEE LAND for a calendar month is such that the underlying royalty under Section III.B.S. is more than the amount of royalty due LESSOR under Section III.B.7., LESSEE would be obligated to pay LESSOR on that PRODUCT, in addition to the underlying royalty to be paid to the persons or entities entitled thereto, a royalty of one and one-half percent (1 1/2%) under Section III.B.7. III.B.10. LESSEE shall prepare and maintain such records as are reasonably necessary to calculate the royalty due LESSORS hereunder and the royalty due on the underlying leases and subleases. LESSEE shall, on written request of LESSORS, furnish copies of such records to LESSOR. III.B.11. Commencing with the month of April, 1988, LESSEE shall pay LESSOR a monthly minimum advance 24 royalty, which shall be due and payable on the first day of each month, as follows: For the months commencing with the month of April, 1988, and continuing through the month of March, 1989, the sum of $1,250.00 per month; For the months commencing with the month of April, 1989, and continuing through the month of March, 1990, the sum of $1,500.00 per month; For the months commencing with the Month of April, 1990, and continuing through the month of March, 1991, the sum of $2,000.00 per month; For the months commencing with the month of April, 1991, and continuing through the month of March 1992, the sum of $2,500.00 per month; and For each and every month after March, 1992, and continuing as long as this NEW MINERALS LEASE remains in effect, the sum of $3,000.00 per month. LESSEE shall be entitled to credit this monthly minimum advance royalty against the production royalty to which the LESSOR is entitled as set forth above. LESSEE shall not be entitled to any credit for the minimum payments made by KELMINE under the KUNKEL-KELMINE LEASE. III.B.12. The following provisions shall be applicable to "WASTE MATERIAL" which is defined as material mined or extracted from the LEASED PREMISES which LESSEE in its sole discretion determines not to sell because of its mineral content, and LESSEE'S determination shall be final and conclusive: III.B.12.a. LESSOR agrees that WASTE MATERIAL may be mined or otherwise extracted without obligation upon LESSEE to replace the same. At no time during the term of 25 this NEW MINERALS LEASE or at any time thereafter shall LESSEE be required to remove any WASTE MATERIAL deposited by LESSEE on the LEASED PREMISES, except as otherwise provided by applicable governmental laws, rules and regulations in full force and effect on or before the termination of this NEW MINERALS LEASE. III.B.12.b. All WASTE MATERIAL on the LEASED PREMISES prior to surrender or termination of this MINERALS LEASE shall be the property of LESSEE, and LESSOR shall have no right, title or interest whatsoever therein and thereto until this NEW MINERALS LEASE is surrendered or terminated. III.B.12.c. All WASTE MATERIAL on the LEASED PREMISES after surrender or termination of this NEW MINERALS LEASE shall be the property of LESSOR, and LESSEE shall have no right, title or interest whatsoever therein or thereto after this MINING LEASE is surrendered or terminated. III.B.13. With respect to taxes: III.B.13.a. LESSEE agrees to pay all taxes levied and assessed against the SX-EW, all equipment of LESSEE on the LEASED PREMISES, and any improvements placed on the LEASED PREMISES by LESSEE. III.B.13.b. The relationship (in terms of percentage) which the total royalty which LESSOR receives hereunder during a given taxing period bears to the total NET 26 PROCEEDS for the same period shall be established by dividing the total royalty received by LESSOR by the total NET PROCEEDS. LESSOR agrees to pay that established percentage and LESSEE agrees to pay the balance of such taxes, assessments, or other governmental levies which are assessed, levied or imposed: III.B.13.b.(1) Against the LEASED PREMISES solely by reason of LESSEE's operations on the LEASED PREMISES. III.B.13.b.(2) Against the minerals in or on the LEASED PREMISES in an unsevered state. III.B.13.b.(3) Any occupation, severance, production or net proceeds of mines taxes, if any, imposed for, resulting from or measured by reference to the removal of ore and or minerals by the LESSEE. III.B.13.c. LESSEE shall not be obligated to pay any taxes levied, imposed or assessed against, or measured by reference to operations upon the LEASED PREMISES which are not conducted by or on behalf of LESSEE under the terms of this NEW MINERALS LEASE. In the event LESSOR fails to pay when due any taxes, assessments or other governmental levy against the LEASED PREMISES (which LESSOR is obligated to pay under this NEW MINERALS LEASE) LESSEE may, but shall not be obligated to, pay such taxes, assessments or levies, together 27 with any penalty that may be imposed for failure to pay such when due. LESSOR agrees to reimburse LESSEE for any payments made for LESSOR hereunder, together with interest at the rate of 10% per annum from the date such payment is made by LESSEE, which reimbursement shall be made within ten (10) days after LESSEE has given written notice to LESSOR that LESSEE has paid such taxes, assessments or levies. LESSEE shall specify the amount of such taxes, assessments or levies in its notice to LESSOR. If such reimbursement is not made as provided herein, LESSEE shall have the right to withhold payment of and retain as its sole property any and all royalty (including the monthly minimum advance royalty provided above) thereafter due and payable to LESSOR until the amount of royalty withheld equals the reimbursement due LESSEE. III.B.14. LESSOR shall have the right to claim the depletion allowance applicable to the royalty paid LESSORS hereunder. III.B.15. With respect to liens, damages, liability and insurance: III.B.15.a. LESSEE agrees to indemnify LESSORS against, and hold LESSOR harmless from any and all claims or liability for injury to or death of persons or for damages to property other than the LEASED PREMISES, resulting from LESSEE's 28 ations hereunder. LESSEE further agrees to indemnify LESSOR nst and hold LESSOR harmless from any and all claims or ility for materials or labor resulting from LESSEE's ations hereunder on the LEASED PREMISES. LESSEE's gations hereunder shall not apply to any claim unless LESSOR fy LESSEE of the existence of such claim as soon as it mes known to LESSOR, and further notifies LESSEE of the itution of any action, suit or legal proceeding on such claim oon as the institution of such action, suit, or other eedings become known to LESSOR and LESSEE is given the sole t to defend and/or settle any such claim with attorneys of own selection. III.B.15.b. LESSEE further agrees to tain workmen's compensation and tenant liability insurance ed by a company or companies acceptable to LESSOR, covering operations by LESSEE under this NEW MINERALS LEASE, showing limits of the insurers liability to be not less than: BODILY INJURY: Each Person $500,000 Each Accident $1,000,000 Property Damage $500,000 Combined Limit $1,000,000 or to the commencement of any work upon the LEASED PREMISES, 29 LESSEE shall deliver to LESSOR certificates of all insurance required under this insurance clause. III.B.15.c. If LESSOR shall fail to pay any and all amounts due hereunder, or duly to satisfy and discharge any mortgage or lien on the LEASED PREMISES, or shall suffer or permit any lien or encumbrance to be imposed upon the LEASED PREMISES, LESSEE may, at its own option, but shall not be obligated to, pay any or all unpaid amounts due and payable under, or satisfy and discharge any such mortgage, lien or encumbrance which is unpaid and payable and LESSEE may reimburse itself for any such payment of any such amount so paid or for payments and costs of paying, satisfying and discharging any such mortgage, lien or encumbrance, by withholding and retaining as its sole property from royalties (including the monthly minimum advance royalty) due and payable hereunder the amounts paid by LESSEE. In case of payment, discharge or satisfaction of a mortgage, lien or encumbrance LESSEE shall have all the rights and remedies against LESSOR which the mortgagee or lienor or the holder of such encumbrance had against the LESSOR immediately prior to the time of such payment, satisfaction or discharge. Upon the request of LESSEE, LESSOR shall promptly make, execute, acknowledge and deliver to LESSEE any and all instruments which LESSEE in its sole judgment shall deem necessary or desirable to 30 effectuate fully the provisions of this Section. III.B.16. LESSOR, or their representative, at their sole risk and at their sole cost and expense, and subject to such reasonable safety regulations as may be prescribed by LESSEE, may have access to the LEASED PREMISES during regular business hours solely for the purpose of inspection of LESSEE's operations on the LEASED PREMISES. III.B.17. LESSEE will conduct its operations on the LEASED PREMISES in accordance with applicable governmental laws, rules and regulations. Without in any way limiting the foregoing, LESSEE will strictly comply with all reclamation requirements and all MSHA requirements now in effect or which may later become applicable and particularly those relating to safety training and record keeping. LESSEE makes no express or implied warranty, covenant or agreement relating to the exploration, development, mining or other operation of or upon the LEASED PREMISES or the marketing of any ore or mineral therefrom. The conduct of any such exploration, development, mining or other operations, or marketing, and the nature, manner or extent thereof, shall be matters to be determined within the sole discretion of LESSEE. LESSEE shall have no obligation, liability or responsibility whatsoever to LESSOR for damages or injury to the LEASED PREMISES arising out of, or caused by or in any way 31 connected with the operations conducted by LESSEE upon, in and through the LEASED PREMISES. III.B.18. LESSEE may, at any time and from time to time during the term of this Lease, execute and deliver to LESSORS, in accordance with the notice provisions hereinafter set forth, or deliver for recording to the RECORDER'S OFFICE a quitclaim deed, quitclaiming to LESSOR or its successors in interest all or any part of the LEASED PREMISES and immediately upon such delivery this NEW MINERALS LEASE shall terminate with respect to such part or all, as the case may be, of the LEASED PREMISES, and LESSEE shall be relieved of all obligations, liability or responsibility of every character whatsoever thereafter accruing with respect to that part of all, as the case may be, of the LEASED PREMISES. If such delivery is to the RECORDER'S OFFICE, LESSEE shall deliver a copy of such quitclaim deed to LESSORS. III.B.19. LESSOR shall have no right to terminate this NEW MINERALS LEASE unless LESSEE shall fail to perform according to the terms of this NEW MINERALS LEASE and LESSOR shall give written to LESSEE specifying the nature of the default. If LESSEE shall not correct such default within thirty (30) days after said notice is given, this NEW MINERALS LEASE shall terminate. 32 III.B.20. Surrender or termination of this NEW MINERALS LEASE as provided herein shall not relieve the LESSEE of its obligations hereunder which remain unperformed at the time of the surrender or termination including, but not limited to, the obligation to pay all accrued royalties (including the monthly minimum advance royalty) , to pay its share of the taxes as above provided and to perform the reclamation work as above provided. III.B.21. LESSEE shall make every reasonable effort to care for the SX-EW and particularly to protect the electrical parts. In the event LESSEE does not use the SX-EW, or any part thereof, for the purpose for which it was acquired, that is, to process leach solutions from the LEASED PREMISES, within five years of the date of this NEW MINERALS LEASE, at the sole discretion of LESSOR the unused part shall no longer be a part of the LEASED PREMISES and LESSOR may, at its sole discretion, remove and dispose of the same upon written notice to the LESSEE. Subject to the above, LESSEE shall have the right at any time within sixty (60) days following the surrender or termination of this NEW MINERALS LEASE, with respect to all or any parts of the LEASED PREMISES to remove any and all buildings, structures, plants, shops, mills, machinery equipment, lines and facilities. III.B.22. LESSEE will maintain the DATA and 33 make available for examination and copying by LESSOR, or its duly authorized representatives, the DATA, all additional survey maps, drill hole data, including drill hole chip boards, ore reserve calculations, mining plans, reclamation plans and supporting data used to obtain state and/or federal environmental and operating or mining permits, assay, metallurgical and feasibility reports relating to the LEASED PREMISES and any maps or diagrams or mine workings upon the LEASED PREMISES which LESSEE has in its possession or-control. III.B.23. Any notice or communication to the parties hereto, or quitclaim deed shall be deemed to have been sufficiently given for all purposes hereof if mailed by U. S. Registered or Certified mail, postage prepaid, return receipt requested, addressed as follows, and the date on the U. S. Post office receipt shall be deemed to be the date of mailing: To LESSOR: To LESSEE: Lisbon Copper Ltd. MLP Associates, Ltd. c/o Raymond E. Kunkel 2801 Youngfield Street, Suite 221 33 Holiday Haven Golden, Colorado 80401 Moab, Utah 84532 III.B.24. LESSEE agrees that it will not assign, sublease or transfer all or any of its rights under this lease without first obtaining the written consent of LESSOR. LESSOR agrees that it will not unreasonably withhold that 34 consent. III.B.25. LESSEE's failure to perform or comply with a particular provision of this NEW MINERALS LEASE shall be excused if such failure to perform or comply with that particular provision is caused by circumstances or conditions beyond the reasonable control of LESSEE, including but not limited to the following: severe weather, unusual mining casualty, civil or military orders, regulations or authority, insurrections, riots, strikes, acts of God, war or hostilities between any nations, embargoes, governmental orders or regulations, fire accident, explosion, flood, lockouts, differences with workman, delays of carriers, lack of transportation facilities, commandeering or requisitioning by the government, inability to obtain raw materials or the insurance required hereon, curtailment of or failure in obtaining sufficient electrical power. Circumstances or conditions which prevent the performance of a particular provision herein shall only excuse performance of the particular provision, the performance of which is prevented by those circumstances or conditions, and shall not excuse the performance of any of the other provisions of this NEW MINERALS LEASE. No circumstances or conditions shall excuse LESSEE from its obligation to pay the monthly minimum advance royalty under Section III.B.11. 35 III.B.26. LESSOR hereby grants to LESSEE an irrevocable exclusive option to purchase the property comprising the LEASED PREMISES at the time the option is exercised, without warranty or representation of any kind, at any time while this NEW MINERALS LEASE is in full force and effect, all as set forth in a separate instrument. III.B.27. This NEW MINERALS LEASE shall be governed by and construed and enforced in accordance with the laws of the State of Utah. III.B.28. This NEW MINERALS LEASE contains the entire agreement by and between LESSOR and LESSEE and no oral agreement, promise, statement or representation which is not contained herein shall be binding on LESSOR or LESSEE. No amendment or modification of this NEW MINERALS LEASE shall become effective unless and until the same shall have been reduced to writing and duly signed, executed and acknowledged by the parties hereto. III.B.29. This NEW MINERALS LEASE may be executed in counterpart. IN WITNESS WHEREOF, the parties hereto have executed this Termination of Existing Minerals Lease, Bill of Sale and New Minerals Lease as of the day and year first above written. 36 LESSOR LISBON COPPER LTD. By /s/ Raymond E. Kunkel ------------------------------------------ Raymond E. Kunkel, General Partner By /s/ Burton F. Kunkel ------------------------------------------ Burton F. Kunkel, General Partner KELMINE KELMINE CORPORATION By /s/ C. O. Keller ------------------------------------------ C. O. Keller, President LESSEE MLP ASSOCIATES, LTD. By /s/ Charles E. Carlson ------------------------------------------ Charles E. Carlson, General Partner STATE OF UTAH ) : ss. County of San Juan ) On this 12th day of April, 1988, personally appeared before me Raymond E. Kunkel, one of the signers of the foregoing instrument, who duly acknowledged to me that he executed the same on behalf of Lisbon Copper Ltd., a 37 limited partnership, as one of the general partners in said limited partnership. /s/ illegible --------------------------------------- Notary Public Residing at Monticello, Utah --------------------------- My Commission Expires: March 26, 1989 - ----------------------- STATE OF UTAH ) : ss. County of Box Elder ) ---------- On this 14 day of April, 1988, personally appeared before me Burton F. Kunkel, one of the signers of the foregoing instrument, who duly acknowledged to me that he executed the same on behalf of Lisbon copper Ltd., a limited partnership, as one of the general partners in said limited partnership. /s/ illegible --------------------------------------- Notary Public Residing at illegible --------------------------- My Commission Expires: 1 June 1991 - ----------------------- 38 STATE OF COLORADO ) : ss. County of Jefferson ) ---------- On this 20th day of April, 1988, personally appeared before me C. 0. Keller, who being first duly sworn, deposes and says that he is the President of Kelmine Corporation, a Colorado corporation, and that he executed the foregoing instrument in behalf of said corporation by authority of a resolution of its board of directors; and said C. 0. Keller duly acknowledged to me that said corporation executed same. /s/ illegible --------------------------------------- Notary Public Residing at 2801 Youngfield --------------------------- Golden, CO 80401 My Commission Expires: Aug. 16, 1998 - ----------------------- STATE OF COLORADO ) : ss. County of Jefferson ) On this 20th day of April, 1988, personally appeared before me Charles E. Carlson, one of the signers of the foregoing instrument, who duly acknowledged to me that he executed the same in behalf of MLP Associates, Ltd., a 39 Colorado limited partnership, as one of the general partners in said limited partnership. /s/ illegible --------------------------------------- Notary Public Residing at 2801 Youngfield --------------------------- Golden, CO 80401 My Commission Expires: Aug. 16, 1998 - ----------------------- TERM.RLK 40 MLP ASSOCIATES LTD. 12936 NORTH 60TH STREET PHOENIX AZ, 85254 602-443-0284 July 23, 1993 JULY, 1993 AMENDMENT TO NEW MINERAL LEASE DATED APRIL 20, 1988 RECITALS: The parties Desire to amend the NEW MINERAL LEASE dated April 20, 1988, by and between Lisbon Copper, Ltd. (LESSOR) and MLP Associates, (LESSEE). AMENDMENT: Section 111.B.11 is hereby amended only as to the amount of monthly minimum advanced royalty that shall be paid by LESSEE, which amount shall be one thousand five hundred dollars ($1,500.00) per month for each of 12 months beginning July 1, 1993 and running through June 1, 1994; then $2,500.00 per month for 12 months beginning July 1, 1994 and running through June 1, 1995. Commencing July 1,1995 and thereafter the monthly minimum advanced royalties shall revert to $3,000.00 as provided for in the NEW MINERAL LEASE. Except as provided for herein, all provisions of the NEW MINERAL LEASE dated April 20, 1986, as amended, shall remain and are in full force and effect. Agreed this 24th day of July, 1993, by: LESSOR: LISB0N COPPER, LTD. By /s/ Raymond E. Kunkel ------------------------------------ Raymond E. Kunkel, General Partner LESSEE: MLP ASSOCIATES, LTD. BY /s/ Charles E. Carlson ------------------------------------ Charles E. Carlson, General Manager EX-10.2 11 EXHIBIT 10.2 EXHIBIT 10.2 OPTION AGREEMENT This Option Agreement made and entered into this 20TH day of April 1988, by and between Lisbon Copper Ltd. ("OPTIONOR"), a Utah limited partnership, whose mailing address is c/o Raymond E. Kunkel, 33 Holiday Haven, Moab, Utah 84532, and MLP Associates Ltd. ("OPTIONEE"), a Colorado limited partnership, whose address is 2801 Youngfield St., Suite 221, Golden, Colorado 80401. WITNESSETH: I. RECITALS. I.A. OPTIONOR, as lessor, and OPTIONEE, as lessee, executed an instrument entitled "NEW MINERALS LEASE" dated the 20th day of April 1988, wherein OPTIONOR leased to OPTIONEE all of the right, title and interest and expectancy of OPTIONOR in and to the following (the "LEASED PREMISES"), to-wit: I.A.1. The right to mine and process the copper bearing ores down to a depth of 500 feet from the hereinafter named unpatented lode mining claims situated in San Juan County, State of Utah, which are more particularly described in the notice of location and amended notice of location for each claim, a copy of which is recorded in the RECORDERS OFFICE and the BLM NO. of which is as follows: Charles E. Carlson 2801 Youngfield #221 BLM NO. Name of Claim Book Page (UMC) ------------- ---- ---- ------ - -Camel 25 453 (amended) 231 261 129728 - -Cow 25 454 (amended) 231 262 125732 - -Cat 25 454 (amended) 231 262 129729 - -Colt 25 455 (amended) 231 263 129730 - -Cougar 25 455 (amended) 231 263 129731 - -Cub 25 456 (amended) 231 264 129734 - -Coyote 35 456 (amended) 231 264 129733 - -Sentinel 1 47 44 (amended) 231 256 129718 - -Sentinel 2 47 45 (amended) 231 257 129719 - -Sentinel 3 47 45 (amended) 231 257 129720 - -Sentinel 4 47 46 (amended) 231 258 129721 - -Sentinel 5 47 46 (amended) 231 258 129722 - -Sentinel 6 47 47 (amended) 231 259 129723 - -Sentinel 7 47 47 (amended) 231 259 129724 - -Sentinel 8 47 48 (amended) 231 260 129725 - -Sentinel 9 47 48 (amended) 231 260 129726 - -Sentinel 10 47 49 (amended) 231 261 129727 - -Gamma 1 71 490 (amended) 85 499 - -Gamma 2 71 490 (amended) 85 499 - --CD #6 Fraction 509 550 - -Security 3 377 402 140827 - -Security 5 377 403 140607 - -Security 7 377 404 140608 - -Security 9 377 405 140609 2 BLM NO. Name of Claim Book Page (UMC) ------------- ---- ---- ------- - -Security 11 377 406 140610 - -Security 14 377 407 140611 - -Security 15 377 408 140612 - -Security 16 377 409 140613 - -Security 18 377 410 140614 - -Security 19 377 411 140615 - -Security 20 377 412 140616 - -Security 25 377 413 140617 - -Security 26 377 414 140618 - -Security 27 377 415 140619 - -Security 28 377 416 140620 - -Security 29 377 417 140621 - -Security 30 377 418 140622 - -Security 31 377 419 140623 - -Security 32 377 420 140624 - -Security 33 377 421 140625 - -Security 34 377 422 140626 - -Security 35 377 423 140627 - -Security 36 377 424 140628 - -Security 37 377 425 140629 - -Security 38 377 426 140630 - -Security 39 377 427 140631 - -Security 40 377 428 140632 - -Security 41 377 429 140633 - -Security 42 377 430 140634 - -Security 43 377 431 140635 - -Security 44 377 432 140636 - -Security 45 377 433 140637 - -Security 46 377 434 140638 - -Security 47 377 435 140639 - -Security 48 377 436 140640 - -Security 49 378 341 140641 - -Security 50 378 342 140642 - -Security 51 378 343 140643 - -Security 52 378 344 140644 - -Security 53 378 345 140645 - -Security 54 378 346 140646 - -Security 55 378 347 140647 - -Security 56 378 348 140648 I.A.2. The right to mine and process the ores bearing copper and some other minerals from the following: 3 The hereinafter named unpatented lode mining claims situated in San Juan County, State of Utah, which are more particularly described in the notice of location and amended notice of location for each claim which is recorded in the RECORDER'S OFFICE and the BLM NO. of which is as follows: BLM NO. Name of Claim Book Page (UMC) ------------- ---- ---- ------- - -Climax No. 1 R-2 382 (amended) 487 185 129763 - -Climax No. 2 R-2 382 (amended) 487 186 129764 - -Alpha No. 1 63 96 (amended) 169 463 (amended) 270 83 129765 - -Alpha No. 2 63 96 (amended) 169 463 (amended) 270 83 129766 - -Alpha No. 3 63 97 (amended) 169 464 (amended) 270 84 129767 - -Alpha No. 4 63 97 (amended) 169 464 (amended) 270 84 129768 - -Alpha No. 5 63 98 (amended) 169 465 (amended) 270 85 129769 - -Alpha No. 6 63 98 (amended) 169 465 (amended) 270 85 129770 - -Alpha No. 7 63 99 (amended) 169 466 (amended) 270 86 129771 - -Alpha No. 8 63 99 (amended) 169 466 (amended) 270 86 129772 - -G. M. Wallace Fraction (amended) 487 129 129829 - -CW 1 510 62 129811 4 BLM NO. Name of Claim Book Page (UMC) ------------- ---- ---- ------- - -CW 2 510 63 129812 - -CW 3 510 64 129813 - -CW 4 510 65 129814 - -CW 5 510 66 129815 - -CW 6 510 67 129816 - -CW 7 510 68 129817 - -CW 8 510 69 129818 - -CW 9 510 70 129819 - -CW 10 510 71 129820 - -CW 11 510 72 129821 - -CW 12 510 73 129822 - -CW 13 510 74 129823 - -CW 14 510 75 129824 - -CW 15 511 596 129825 - -CW 16 511 597 129826 - -CW 19 511 598 (amended) 521 8 129827 - -CW 22 511 599 (amended) 521 9 129828 - -KWR 1 487 130 129789 - -KWR 2 487 131 129790 - -KWR 3 487 132 129791 - -KWR 4 487 133 129792 - -KWR 5 487 134 129793 - -KWR 6 487 135 129794 - -KWR 7 487 136 129795 - -KWR 8 487 137 129796 - -KWR 9 Fraction 501 345 129797 - -KWR 10 501 346 129798 - -KWR Fraction 501 347 129799 - -MIR 11 Fraction 521 469 129802 - -KWR 12 Fraction 501 348 129800 - -KWR 13 Fraction 501 349 129801 - -CWG Fraction 517 275 129786 - -CWG Fraction #1 517 276 129787 - -CWG Fraction #2 517 277 129788 - -CD 1 509 508 129773 - -CD 2 Fraction 509 509 129778 - -CD 3 Fraction 509 510 129779 - -CD 4 Fraction 509 511 129780 - -CD 5 Fraction 509 512 129781 - -CD 6 Fraction 509 550 129737 - -Globe #1 486 16 5 BLM NO. Name of Claim Book Page (UMC) ------------- ---- ---- ------- (amended) 489 392 129782 - -Globe #2 486 17 (amended) 489 393 129783 - -Globe #9 486 24 (amended) 489 400 129784 - -Globe #10 486 25 (amended) 489 401 129785 I.A.3. The leasehold rights to mine and process ores from the following described tracts of land situated in San Juan County, State of Utah, to-wit: PATTERSON RANCH TOWNSHIP 31 SOUTH, RANGE 25 EAST, SLM Section 1: Lots 1, 2, 3 and 4 I.A.4. The stockpile of mixed oxide-sulphide copper ore estimated to contain 35,000 to 40,000 tons containing approximately 2% copper which is situated on the following described tract of land situated in San Juan County, State of Utah, to-wit: TOWNSHIP 30 SOUTH, RANGE 25 EAST, SLM Section 36: SE 1/4 I.A.5. The right to mine copper down to a depth of 500 feet on State of Utah Metalliferous Lease Number 20569 covering the following described tracts of land situated in San Juan County, State of Utah, to-wit: 6 TOWNSHIP 30 SOUTH, RANGE 25 EAST, SLM Section 36: NW 1/4, E 1/2 as assigned by Joseph F. Costanza and Joyce L. Costanza to Raymond E. Kunkel and Paul B. Clemons, which assignment has been approved the the State of Utah. I.A.6. The equipment and machinery described as follows: Four Solvent Extraction Tanks Two 350 kilowatt Rectifiers Approximately Thirty Concrete Electro-Winning Cells which are presently stored near the entrance of the Cub uranium mine. I.A.7. All mining claims and other property acquired by OPTIONOR and/or OPTIONEE within one mile of any part of the property above described. I.A.8. Water and water rights for use upon the above property. I.B. Section III.B.26. of the NEW MINERALS LEASE reads as follows: LESSOR hereby grants to LESSEE an irrevocable exclusive option to purchase the property comprising the LEASED PREMISES at the time the option is exercised, without warranty or representation of any kind, at any time while this NEW MINERALS LEASE is in full force and effect, all as set forth in a separate instrument. 7 II. OPTION. In consideration of the execution of the NEW MINERALS LEASE by OPTIONOR and OPTIONEE and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by OPTIONOR and OPTIONEE, OPTIONOR hereby grants to OPTIONEE, without warranty or representation of any kind, the irrevocable and exclusive option to purchase the property comprising the LEASED PREMISES at the time the option is exercised, at any time while the NEW MINERALS LEASE is in full force and effect, on the following terms, to-wit: II.A. The purchase price shall be determined as follows: II.A.1. Five Hundred Thousand Dollars ($500,000.00) if the option is exercised within one (1) year from the first sale of commercial production from the LEASED PREMISES. II.A.2. $50,000.00 shall be added to the purchase price specified above for each and every year that elapses subsequent to one (1) year from the first sale of commercial production from the LEASED PREMISES. II.A.3. The purchase price shall not be reduced by the bonus, the monthly minimum advance royalty or by the production royalty paid by OPTIONEE to OPTIONOR under the NEW MINERALS LEASE. II.B. The option shall be exercised by OPTIONEE 8 paying to OPTIONOR the specified purchase price in cash or certified funds. II.C. Simultaneous with the exercise of the option, OPTIONOR shall execute and deliver to OPTIONEE such deeds, assignments and other instruments, all without warranty or representation, as are necessary to convey the LEASED PREMISES to OPTIONEE. WITNESSETH the hands of OPTIONOR and OPTIONEE as of the day and year first above set forth. OPTIONOR LISBON COPPER LTD. By /s/ Raymond E. Kunkel ------------------------------------- Raymond E. Kunkel, General Partner By /s/ Burton F. Kunkel ------------------------------------- Burton F. Kunkel, General Partner OPTIONEE MLP ASSOCIATES, LTD. By /s/ Charles E. Carlson ------------------------------------- Charles E. Carlson, General Partner STATE OF UTAH ) : SS. County of San Juan ) On this 12th day of April, 1988, personally appeared before me Raymond E. Kunkel, one of the 9 signers of the foregoing instrument, who duly acknowledged to me that he executed the same on behalf of Lisbon Copper, Ltd., a limited partnership, as one of the general partners in said limited partnership. /s/ Doris G. Calvert ----------------------------------- Notary Public [SEAL] Residing at Monticello, Utah ----------------------- My Commission Expires: March 26, 1989 - ---------------------- STATE OF UTAH ) : SS. County of Box Elder ) On this 14th day of April, 1988, personally appeared before me Burton F. Kunkel, one of the signers of the foregoing instrument, who duly acknowledged to me that he executed the same on behalf of Lisbon Copper Ltd., a limited partnership, as one of the general partners in said limited partnership. /s/ Lorin C. Facer ----------------------------------- Notary Public Residing at Willard, Utah ----------------------- [SEAL] My Commission Expires: 1 June 1991 - --------------------- 10 STATE OF COLORADO ) : SS. County of [Illegible] ) On this 20th day of April, 1988, personally appeared before me Charles E. Carlson, one of the signers of the foregoing instrument, who duly acknowledged to me that he executed the same in behalf of MLP Associates, Ltd., a Colorado limited partnership, as one of the general partners in said limited partnership. /s/ Patricia P. Ortiz ----------------------------------- Notary Public Residing at 2801 Youngfield ----------------------- Golden, CO 80401 [SEAL] My Commission Expires: Aug. 16, 1988 - --------------------- Lisbon.OPT 11 EX-10.3 12 EXHIBIT 10.3 EXHIBIT 10.3 Met. Min. - 1281d Form Approved July 23, 1984 PROOF READ JG - EB MINERAL LEASE NO. 20569 --------- ------------ MINERAL LEASE APPLICATION NO. 20569 GRANT: SCH ------- UTAH STATE LEASE FOR METALLIFEROUS MINERALS (Amendment) THIS UTAH STATE MINERAL LEASE AND AGREEMENT entered into and executed in duplicate as of the 28th day of May, 1963, by and between the STATE OF UTAH, acting by and through the BOARD OF STATE LANDS & FORESTRY and DIVISION OF STATE LANDS & FORESTRY, DEPARTMENT OF NATURAL RESOURCES, with the office located at 3100 State Office Building, Salt Lake City, Utah 84114, hereinafter called the "LESSOR," and Atlas Corp P. 0. Box 1207 Moab, UT 84532 (whether one or more individuals, corporation, or other entities) with business office or address as shown above, hereinafter called the "LESSEE," WITNESSETH: That the State of Utah as Lessor, for and in consideration of the fees, rents, royalties, and any other financial consideration paid or required to be paid by Lessee, and the terms and conditions to be performed by Lessee as hereinafter set forth, does hereby GRANT AND LEASE to the Lessee the exclusive right and privilege to explore for, drill for, mine, remove, and dispose of the particular mineral or minerals described in Article I hereof, herinafter called the "leased substances," situated within the boundaries of the following-described tract of land (extending vertically downward from the surface) in San Juan County, State of Utah, to-wit: Township 30 South, Range 25 East, SLB&M - --------------------------------------- Section 36: NW 1/4, E 1/2 containing 480.00 acres, more or less. ------ This Mineral Lease is granted for and in consideration of and subject to all of the terms, provisions, and conditions hereinafter set forth: Met Min. - 1281d -2- ARTICLE 1. MINERALS COVERED BY THIS LEASE This Mineral Lease covers the following-described leased mineral substances with the boundaries of the above-described lands, to-wit: METALLIFEROUS MINERALS "Metalliferous Minerals" are herein defined to include any ore containing any of the following minerals: Aluminum, Antimony, Arsenic, Beryllium, Bismuth, Cadmium, Chromium, Cecium, Columbium, Cobalt, Copper, Flourspar, Gallium, Gold, Germanium, Hafium, Iron, Indium, Lead, Mercury, Manganese, Molybdenum, Nickel, Platinum, Group Metals, Radium, Selenium, Scandium, Silver, Rare Earth Metals, Rhenium, Tantalium, Tin, Thorium, Tungsten, Thallium, Tellurium, Vanadium, Uranium, Zinc, together with other minerals which are found in association with said specified minerals in such a manner that they cannot be mined separately. In the event Lessee, or the operator or any contractor for Lessee, shall discover within said lands some mineral or minerals other than the mineral or leased substances covered by this lease, Lessee shall promptly notify the Lessor of the kind or nature of such mineral or minerals not included in this lease. ARTICLE II. PRIMARY TERM AND POSSIBLE EXTENSION OF TERM OF LEASE This lease is granted for a primary term of TEN (10) years commencing on the first day of January next succeeding the date hereinabove first written and as long thereafter as the leased substances shall be produced in commercial quantities from the above-described lands, on condition that Lessee shall perform the terms and provisions required to be performed by Lessee including payment of rents and royalties within the times required herein; provided however, that it is expressly agreed that at the end of each period of ten (10) years following the effective date of this lease, the State of Utah as Lessor shall have the right to readjust the terms and conditions of this lease as may then be determined to be in the best interest of the State of Utah as trustee- owner of the mineral estate. In the event of failure or refusal of the Lessee to accept and agree to the readjustment of the terms and conditions submitted by Lessor at the end of such ten (10)-year period, such failure or refusal to accept such readjustment of terms, conditions, or royalty shall operate to forfeit any right to extension of the term of this Mineral Lease and terminate this lease except for the rights of the State of Utah to recover any royalties then owing the State and/or any damages for which Lessee may be liable. This lease will not be extended beyond the end of the thirtieth year-except by the production of the leased substances in commercial quantities from the leased lands. If Lessee ceases production of leased substances in commercial quantities this lease will terminate one (1) year from the date of last commercial production, unless Lessee commences commercial production at least three (3) months prior to the end of such year and such commercial production then continues for at least six (6) months. ARTICLE III. APPLICABLE LAWS AND REGULATIONS This lease is issued pursuant to the provisions of Title 65, Utah Code Annotated, 1953, as amended, and subject to all valid Rules and Regulations and requirements adopted by the Board of State Lands & Forestry, and of the Board of Oil, Gas, and Met Min. - 1281d -3- Mining, applicable to the subject matter of this lease, together with all requirements of the Utah Mined Land Reclamation Act, all requirements of the State Antiquities Act, Title 63, Chapter 18, and all valid rules and regulations relating to safety, sanitation, and health whether under the jurisdiction of the Division of Oil, Gas, and Mining with respect to operations under this lease or under the jurisdiction of some other State agency. ARTICLE IV. RIGHTS TO THE SURFACE ESTATE If the surface estate of all or sane portion of the hereinabove-described lands is owned by the Lessor, Lessee shall be entitled to use reasonably and prudently such portions of the surface estate owned by Lessor as shall be reasonably necessary to explore and prospect for, mine, drill, remove, and dispose of the leased mineral substances, including permission to establish and maintain in, a safe condition on the surface estate owned by Lessor, access roads, communication lines, tanks, pipelines, reservoirs, mills, processing plants, reduction works, dumps, and other essential structures, facilities, machinery, and equipment, reasonably necessary and expedient for the economic operation of the leasehold and in furtherance of production, treatment, and disposition of the leased substances under this lease. Such surface uses shall be exercised subject to the rights reserved to the State of Utah as provided in Article V hereof, and without unreasonable interference with the rights of any prior or subsequent lessee of the State of Utah under the program of multiple use. If the surface estate of any portion of the described lands is not owned by the State of Utah, except for a reserved right of entry to the mineral estate or mineral estates, the Lessee may exercise such right of entry to the mineral estate covered by this lease, at the sole cost and expense of Lessee herein and without cost to the State of Utah. If any damage is caused directly or indirectly to the surface estate by the Lessee or by the contractor or operator for Lessee, Lessee shall make proper restitution and indemnify the surface owner or owners. Lessee also shall make proper rehabilitation as required by the Utah Mined Land Reclamation Act and as required by all lawful rules and regulations adopted thereunder. Lessor will require a bond to be posted or other security given to the State to be filed with Lessor or any other State agency or officer in a principal amount determined by Lessor to be adequate to assure appropriate reclamation and restitution for and damage to the surface estate. ARTICLE V. EXCEPTIONS AND EXCLUSIONS FROM LEASE Lessor hereby excepts and reserves from the operation of this lease the following rights and privileges: First: The right to establish rights of way and easements on, through or over the land above described, for utility corridors and for joint or Joint and several uses as may be necessary and appropriate for the management of the above-described lands and other lands of Lessor or lands administered by Lessor, and for the working of other deposits within said lands under mineral leases granted to others under the program on multiple use. Met Min. - 1281d -4- SECOND: The right to issue mineral Leases to other lessees covering minerals not included in this lease, under such terms and conditions which will not unreasonably interfere with operations under this lease in accordance with the principle of multiple use provided by Law. THIRD: In the event Lessor owns the surface estate in said lands or portion of said lands above described, Lessor retains the right to use, lease, sell, or otherwise dispose of the surface estate in said lands or any part thereof, under existing State laws or laws subsequently enacted, insofar as such surface is not essential for the Lessee herein in exploration, prospecting for, mining, drilling, removal, or disposal of the leased substances covered by this lease, to the extent that such use, lease, or sale of the surface estate does not unreasonably interfere with the rights granted to the Lessee herein. Lessor shall notify Lessee herein of any such sale, lease, use, or other disposition of the surface estate. ARTICLE VI. PAYMENT OF RENTALS AND ROYALTIES For and in consideration of the leasehold rights granted to the Lessee, in addition to all other terms and conditions required to be performed by the Lessee, the Lessee hereby covenants and agrees with Lessor to pay rentals and royalties as follows: FIRST: Lessee agrees to pay Lessor as rental for the Land covered by this lease the sum of One Dollar ($1.00) per acre and for each fractional part of an acre, each year in advance on or before January lst of each year except the rental for the first year which has been paid with the application for this lease. All rentals paid shall be credited against actual Production Royalties for the lease year in which they shall accrue, but such rentals shall not be credited against the Minimum Royalties under subparagraph "Fourth" of this ARTICLE VI. SECOND: "Lessee shall pay lessor a production royalty on the basis of 8% in tax case of fissionable Metalliferous Minerals and 4% in the case of non-fissionable Metalliferous Minerals of the market price, including all bonuses and allowance received by Lessee, f.o.b. the nearest point of sale of the first marketable product or products produced from the leased substances and sold under a bonafide contract of sale, whether or not such product or products are produced through chemical or mechanical treating or processing of the leased substances raw material. It is expressly understood and agreed that none of Lessee's mining or product cost, including but not limited, to material costs, labor costs, overhead costs, distribution costs, or general and administrative costs may be deducted from market price f.o.b. the point of sale in computing Lessor's royalty. All such costs shall entirely be borne by Lessee and anticipated by the rate of royalty assigned in his agreement." THIRD: Payment of Production Royalty shall be made by Lessee to Lessor, as herein required, on or before the last day of the month next succeeding the month during which the minerals or leased substances shall have been shipped or sold or used. In connection with such payment of Production Royalty, the Lessee shall submit a certified statement of the production of all leased substances mined or extracted from the hereinabove-described lands, according to the foregoing royalty schedule together with such information required by the Board of State Lands & Forestry to verify production and disposition of mineral substances produced and disposed of from the leased premises. Met Min. - 1281d -5- FOURTH: Lessee may maintain this lease in force beyond the primary term of ten (10) years from the effective date of the original lease by paying Lessor, in addition to rentals and production royalties as hereinabove required, an annual minimum royalty of three (3) times the annual rental, providing the lessee is engaged in diligent operations, exploration, research, or development activity which is reasonably calculated to advance development or production of the mineral covered by the lease from the leased premises or lands pooled or unitized with or constituting an approved mining or drilling unit in respect to the leased premises. Said annual minimum royalty shall be paid each year in advance, commencing with the eleventh year of the lease, along with the regular annual rental required to be paid under the terms of this lease. Said rental per acre and said Minimum Royalty shall be paid on each and every acre in this lease to extend the term of this lease and to keep this lease in force and effect. Rentals and Minimum Royalties paid annually shall be credited against actual Production Royalties for the year in which they accrue during the original term, or any extension thereof; but annual rentals shall not be credited against Minimum Royalties. ARTICLE VII. MINERAL TITLE OF LESSOR Lessor claims title to the mineral estate covered by this lease. Lessor does not warrant title nor represent that no one will dispute the title asserted by Lessor. It is expressly agreed that Lessor shall not be liable to Lessee for any alleged deficiency in title to the mineral estate, nor shall Lessee or any assigns of the Lessee become entitled to any refund for any rentals, bonuses, or royalties paid under this lease. ARTICLE VIII. WATER RIGHTS In the event Lessee shall initiate any water rights on the leased premises, such right shall become an appurtenance to the leased premises; and upon surrender, cancellation, or termination of this lease, Lessee or assigns of Lessee shall assign and convey such water rights and any application for appropriation of water to beneficial use relating to the land or the mineral estate covered by this lease to Lessor. If the Lessee shall purchase or otherwise acquire any water rights on some other land and file with the State Engineer appropriate application for change of use onto the premises covered by this lease, the Lessor herein shall have an option for 45 days after the expiration, surrender, or termination of this lease to purchase said otherwise acquired water rights at the acquisition costs of the Lessee. Such option shall begin to run from the date of termination, surrender or expiration of this lease or from the date when Lessee shall specify in writing the acquisition costs of such other water rights, whichever date is the later date. Unless Lessor accepts such written offer to convey such rights at the actual acquisition costs within said period of 45 days, Lessor shall be deemed to have rejected the offer. Upon payment of the said acquisition costs by the Lessor, Lessee herein shall assign and transfer such acquired water rights to the Lessor. ARTICLE IX. WRITTEN CONSENT REQUIRED FOR ASSIGNMENT OR SUBLEASE Lessee shall not assign this lease nor any portion thereof, nor any rights or privileges herein granted, without the prior written consent of Lessor. Nor shall the Met Min.- 1281d -6- Lessee issue any sublease without the prior written consent of Lessor. Any assignment of lease and any sublease issued without prior written consent of Lessor shall be void ab initio. In the event Lessor shall approve an assignment of this lease or of any part hereof, such assignment shall be subject to all of the terms, conditions, and obligations of the Lessee herein set forth. All of the terms, covenants, conditions, and obligations of the Lessee shall be binding upon the heirs, executors, administrators, successors, and assigns of the Lessee. This provision also shall apply to any sublease issued by Lessee and approved by Lessor. ARTICLE X. OVERRIDING ROYALTY LIMITATION Neither the Lessee nor the assignee of Lessee shall create or grant any overriding royalty except as permitted by law and by the Rules and Regulations of the Board of State Lands & Forestry. Overriding royalty assignments shall not become effective, even if otherwise valid, until filed with the Lessor. ARTICLE XI. SURRENDER OR RELINQUISHMENT OF LEASE Lessee may surrender this lease for cancellation by Lessor as to all or any part of the leased lands, but not for less than a quarter-quarter section or surveyed lot, upon payment of all rentals, royalties, and other amounts then due and owing to the Lessor, by filing with Lessor a written relinquishment. As to rental, such relinquishment shall be effective on the date of filing, but otherwise on the date of cancellation by the Lessor. ARTICLE XII. NOTICE OF COMMENCEMENT OF OPERATIONS, PLANS, PLATS, BOND Not less than sixty (60) days before commencement of exploration, drilling, or mining operations, Lessee shall give written notice hereof to the Division of State Lands & Forestry and the Division of Oil, Gas, and Mining, together with a plan of operation and a topographic map showing every proposed shaft, tunnel, open pit, drill site, and access road to be used. Lessor shall make an assessment of such plan of operation and either endorse or stipulate changes in Lessee's plan of operation, or request additional information within the sixty (60) day notification period. Lessee shall not proceed with the execution of any such plan of operation without first receiving the written approval of Lessor. Lessee shall maintain at the mine office clear, accurate,, and detailed maps of all actual and planned operations on a scale of not more than 50 feet to the inch, with points coordinated with public land surveys showing distance to the nearest public survey monument or reestablished survey corner. Such maps and plats shall be on tracing cloth or other material which is substantially permanent and of which clear and distinct photo copies or blue prints can be readily made without unreasonable delay. Such maps or plats shall show the workings from time to time, as the same are extended. In the event that the operations on the above-described leasehold are intended to be conducted in conjunction with adjacent lands, whether Federal, State, or privately-owned lands, the map and plats shall clearly show how the operations are to be coordinated. All surveys shall be conducted by a licensed surveyor or engineer qualified to practice in Utah. All such maps or plats shall be certified by the surveyor or engineer Met Min. - 1281d -7- preparing the same. The State or any agency of the State of Utah, including the Division of Oil, Gas, and Mining, shall be entitled to a true and correct copy thereof, together with the proposed plans of operation. After Lessor receives notice of intent to commence mining operations, upon request of the Lessor, the Lessee shall furnish a bond with an approved corporate surety company authorized to transact business in the State of Utah, or such other security acceptable to the Lessor, in an amount to be determined by Lessor, after taking into account the value of the land and the amount of potential damage which likely will result from such proposed mining operations, and which bond or other security shall be conditioned upon payment of all rentals and royalties from the leasehold and other sums which may become payable to the Lessor, and to assure full compliance with the terms and conditions of this lease and compliance with all Rules and Regulations of the Board of State Lands & Forestry and all Rules and Regulations of any other State agency having jurisdiction over mining operations, and also conditioned upon payment of all damages to the surface and improvements thereon if this lease covers surface estate or some portion of the surface estate which has been sold or otherwise leased, and any damage caused by Lessee to any other lessee of the State of Utah with respect to said land. Such bond or other security furnished prior to commencement of development of the leasehold may be increased in such reasonable amounts as the Lessor may require after discovery of any of the leased substances. If the plan of mining development or mining operations includes core-drilling, the plan of operations shall disclose the locations of core-drilling operations. ARTICLE XIII. ALL OPERATIONS TO BE CONDUCTED IN A LAWFUL, PRUDENT MANNER Lessee shall conduct all operations under this lease in a lawful, prudent, and good workmanlike manner for the effective and safe production of the mineral substances covered by this lease, and to avoid unnecessary damage and injury to the leasehold estate, and also to avoid damage and wastage of other natural resources not covered by this lease. All operations of Lessee, whether conducted directly by Lessee or by operators or contractors, shall be at the sole cost and expense of Lessee. It is expressly covenanted and agreed that Lessor does not grant Lessee or any person dealing with Lessee any right to subject the property hereinabove described, nor any leased substances, to any lien-rights for labor or mechanic's liens, nor to any materialmen's liens, nor to any other lien for any act, omission, neglect, or performance of Lessee or its agents, employees, and contractors. In the event any one shall file any notice or claim of lien against said property or any estate in said property, Lessee shall take all necessary steps expeditiously to have such notice or claim released of record. Lessee shall save Lessor harmless from any and all lien notices and claims against said land arising from any act or neglect of Lessee and any contractor or operator of Lessee in any operations on or relating to the hereinabove described lands. Lessee shall not fence off or otherwise make inaccessible to livestock lawfully on the surface of said premises any watering place without the written consent of Lessor; provided, that Lessee shall not permit any livestock to come upon any portion of the leasehold to pollute any surface or subsurface water available or capable of being made available for domestic use or irrigation. In the operations of Lessee, Lessee shall comply with all laws and regulations for control of water which might be Met Min. - 1281d -8- encountered or which might seep into any formation, to avoid pollution of surface and underground waters as required by Chapter 14, Title 73, Utah Code Annotated, 1953, as amended. Lessee shall comply with all valid laws and regulations relating to prevention and suppression of fires, make all necessary provisions for sanitary disposal of wastes, and in all operations connected with said leasehold take appropriate measures for protection of human life and prevention of injuries and disease. ARTICLE XIV. RIGHTS OF LESSOR FOR INSPECTIONS OF LEASEHOLD AND RECORDS Lessor, its officers, and agents have the right at all reasonable times to enter upon the leased lands and premises to inspect the conditions of the leasehold, the work done under the terms of this lease, and the production obtained from the leasehold, such entry and inspections to be done in such a manner as shall not unreasonably interfere with the lawful operations by the Lessee in performance of the terms and conditions of this lease. Lessor also shall have the right to examine all books and records pertaining to operations under this lease whether such books and records are located within a building on the leased premises or located in an office elsewhere and to make copies and abstracts of such records if desired by Lessor. Lessor, its officers, and agents shall have the right to post upon or within the leasehold such notices deemed proper or expedient by Lessor. If Lessee maintains an office in another state or in a foreign country, Lessee nevertheless shall maintain within the State of Utah proper and adequate records relating to operations on this leasehold and also relating to production of leased substances and payment of rentals and royalties. Lessee also shall have a resident agent in the State of Utah to whom any and all notices may be sent by Lessor and on whom process may be served. In the event of any change in the address of Lessee's office in the State of Utah, Lessee shall promptly furnish Lessor with written notice of such change of address within the State of Utah. Examinations of records of Lessee by the Lessor shall be conducted at reasonable times. In the event Lessee conducts core-drilling operations within the leasehold, or by directional drilling from adjacent land, Lessor shall have a right of inspection of core samples and any analysis made thereof and any assay; provided, that any report obtained by Lessor of any core-drilling operations may be declared confidential information by Lessee, in which event Lessor shall keep such information in a separate confidential information file. Such Information shall not be disclosed to any competitor nor to any one except to a representative of the Attorney General of the State of Utah until Lessee waives confidentiality or upon surrender, expiration, or termination of this lease. After completion of any core drilling, Lessee shall notify Lessor; and Lessee shall cause all core holes to be plugged or sealed as expeditiously as possible after the need for keeping such core holes unplugged ceases, in accordance with regulations and requirements of the Division of Oil, Gas, and Mining. ARTICLE XV. OPERATIONS IN CONJUNCTION WITH MINING ON OTHER LANDS In the event Lessee, in the interest of economy in mining operations, desires to conduct mining operations on or within the above-described lands in conjunction with mining operations on or within any adjacent Federal, State, or privately-owned land by Met Min. - 1281d -9- utilization of shafts, inclines, or tunnels within either the above-described lands, or within adjacent lands, Lessee shall make application in writing to the Board of State Lands & Forestry and submit with such application a detailed plan of operations illustrating how leased substances mined from the above- described lands can and will be mined, segregated, and separately accounted for from leased substances mined from some adjacent land. No such operations shall be conducted without written approval of the Board. Any approval granted by the Board shall be conditioned upon proper segregation and proper accounting and record keeping of leased substances mined from each property. Separate records shall be required for accounting for leased substances mined from the above- described lands. In the event Lessee desires to process or mill leased substances from the above-described land in conjunction with processing or milling of leased substances from adjacent or some other lands, whether such processing or milling is intended to be performed on the above-described land or on some other land, Lessee shall submit to the Board a written application detailing how the leased substances mined from the above-described lands shall be segregated and separately accounted for in computation of royalty payments from leased substances mined from other lands. Any Board approval for any such arrangements shall be conditioned upon segregation of leased substances produced from the above described lands from mineral substances produced from other lands with adequate safeguards to assure proper accounting for determination of royalty. If application is granted for either type of operation or for both, all procedures for either production or milling of minerals shall be subjected to examination by the Division of State Lands & Forestry and by the Division of Oil, Gas, and Mining to determine whether either type of arrangement functions satisfactorily without detriment to the State of Utah. If such inspection results in an adverse report with recommendations for modification or discontinuance of such operations, a copy of the report with recommendations shall be submitted as expeditiously as possible to the Lessee. If any objectionable condition is not promptly remedied to safeguard the rights of the State as Lessor, the Board of State Lands & Forestry shall have the right to order discontinuance of such arrangement; and failure to comply with such order of the Board shall constitute a breach of this Lease Agreement. ARTICLE XVI. SPECIAL REQUIREMENTS IN EVENT OF STRIP-MINING In the event Lessee desires to conduct any strip-mining or open-pit mining or operations which will materially disturb the surface of the above-described lands or some portion thereof, at least sixty (60) days before commencing such type of mining activities, Lessee shall submit to the Division of State Lands & Forestry the proposed plan of operations together with a proposed plan of surface rehabilitation in compliance with the Rules and Regulations adopted thereunder. A copy of such proposed plan of operations and proposed plan of surface rehabilitation also shall be submitted to the Division of Oil, Gas, and Mining. No such operations shall be commenced until the Division of Oil, Gas, and Mining approves the plan of operations and approves a program of rehabilitation. Security may be required of Lessee to assure appropriate rehabilitation in accordance with the said statute and rules and regulations adopted thereunder. Met Min. - 1281d -10- ARTICLE XVII. EQUIPMENT OR FACILITIES TO REMAIN WITH THE LAND Upon surrender, forfeiture, expiration, or termination of this lease, any and all underground timbering supports, shaft linings, rails, and other installations necessary for the support of underground tunnels, shafts, inclines, or other underground mine supports, together with all rails or head frames and all other underground construction and safety equipment annexed to the ground (excluding detachable motor-driven machinery) which cannot be removed without creating a danger to any shaft, tunnel, incline, or other underground improvement annexed to the mine, and including equipment installed underground to provide for ventilation of the mine or some portion thereof, shall be left within said land above described by the Lessee, operator, and contractor of Lessee and shall remain a part of the realty. Lessor shall acquire all rights thereto without indemnification of Lessee or operator or contractor for Lessee. Except as herein specifically excepted, all personal property of Lessee, including removable machinery, equipment, tools, and stockpiles of leased substances for which royalty has been paid shall remain the property of Lessee or operator or contractor for Lessee and Lessee or operator or contractor for Lessee may remove the same at the sole expense of Lessee or operator or contractor within two (2) months following expiration, forfeiture, surrender, or termination of this lease, except that the Board of State Lands & Forestry for good cause shown shall have the right to grant a reasonable extension of time beyond the period of two (2) months for removal of any and all equipment which may be removed by Lessee or operator or contractor as herein provided. At the end of such period, Lessor may consider abandoned and lay claim to any or all equipment or stockpiles remaining on the premises. Upon expiration, surrender, forfeiture, or termination of this lease or abandonment of the leasehold by Lessee, the Lessee shall cause to be sealed or properly shut off all or parts of the mine openings including shafts and tunnels in the manner and method required by the Director of the Division of Oil, Gas, and Mining, and to abate any hazardous condition which may have been left by Lessee, such abatement of hazardous condition to be performed in accordance with reasonable requirements of the Director of the Division of Oil, Gas, and Mining. ARTICLE XVIII. CONSENT TO SUIT IN STATE DISTRICT COURT It is agreed that if there arises any controversy between lessor and Lessee or any successor in interest of Lessee which needs to be litigated, Lessee or any one claiming by or under the Lessee shall bring such action in the District Court of Salt Lake County, State of Utah, after compliance with the requirements of State statutes for bringing suit, including compliance with the requirements of the State Governmental Immunity Act, Title 63, Chapter 30, Utah Code Annotated, 1953, as amended. Neither Lessee nor any assignee of lessee nor any one claiming under, by, or through the Lessee shall bring any suit against the State of Utah or against any State agency in the United States District Court for the District of Utah, nor in any other United States District Court in some other state, nor in the District 'of Columbia. ARTICLE XIX. REMEDIES FOR DEFAULT BY LESSEE OR ASSIGNS This Mineral Lease and the terms and conditions of this lease agreement issued by the State of Utah are made with the Lessee herein on condition that Lessee and any lawful successor in interest to Lessee shall perform all covenants and terms and conditions herein set forth to be performed by Lessee or its lawful assigns including Met Min. - 1281d -11- payment of rentals and royalties as herein provided; and if at any time there shall be default on the part of lessee or breach of any of the terms or conditions hereof on the part of Lessee or by the successor in interest to the Lessee; and if such default or breach shall continue for a period of thirty (30) days after written notice from Lessor of such default or breach given to Lessee or successor in interest addressed to Lessee or successor in interest at the last address furnished by Lessee or successor in interest by United States mail, then at the expiration of said period of thirty (30) days immediately following such notice if the default or breach has not been remedied, then at the expiration of said period of thirty (30) days, at the option of the Lessor, Lessor may issue written notice of termination and cancellation of this lease and forfeiture declaring that the leased premises and each and every part thereof have thereby reverted to the Lessor, including any and all fixtures and improvements required to be left with the property upon expiration, termination, or cancellation of this lease. In the event that the leasehold estate shall have been damaged or injured by the acts or neglect of the Lessee or operator, contractor, or assigns of Lessee, Lessor also shall have a right of action for damages and for restitution for any failure or refusal to comply with the terms and conditions of any statute of this State relating to reclamation or rehabilitation, or for abatement of pollution, together with rights for injunctive relief. Lessor also shall have the right to recover on any bond or other security deposited with the State of Utah in accordance with the terms or conditions hereinabove set forth for indemnification. ARTICLE XX. DISPOSITION OF ROCK TAILINGS Rock, tailings, and waste materials resulting from the operation of the Lessee on this land which contain the metalliferous minerals enumerated in Article I hereof are covered by this mineral lease, unless and until such time as Lessee renounces in writing the leasehold interest in such materials. In the event Lessee sells or otherwise disposes of any such rock, tailing, or waste materials, Lessee agrees to pay Lessor a Production Royalty on the materials consistent with the prevailing State of Utah royalty for materials or minerals of like kind. Met Min. - 1281d -12- ARTICLE XXI CLARIFICATION OF LEASE AMENDMENT This mineral lease in the above form is an amendment of the original lease which was issued on the date hereinabove first written. The effective date of this present lease amendment is January 1, 1985. All fees, rentals, and royalties paid heretofore shall remain in effect as payments required theretofore. Readjusted payment rates required under this present lease amendment shall not be retroactive, but shall commence with the effective date of this lease amendment. IN WITNESS WHEREOF, the parties have executed this lease as of the date hereinabove first written. THE STATE OF UTAH, acting by and through the BOARD OF STATE LANDS & FORESTRY and DIVISION OF STATE LANDS & FORESTRY By /s/ Ralph A. Miles ----------------------------------------------- Director, Div. Of State Lands & Forestry - LESSOR ----------------------------------------------- /s/ Richard R. Weaver ----------------------------------------------- Richard R. Weaver, President LESSEE Atlas Minerals Division of Atlas Corporation Met Min. - 1281d -13- STATE OF UTAH ) COUNTY OF SALT LAKE ) On the _____ day of ___________, 19__, personally appeared before me RALPH MILES, who being by me duly sworn did say that he is the Director of the Division of Lands of the State of Utah; and said instrument was signed in behalf of the State of Utah authority of a resolution of the Board of State Lands; and said RALPH A. MILES acknowledged to me that the State of Utah executed the same. Given under my hand and seal this 20th day of November, 1984. /s/ JoAnn Garcia -------------------------------------- NOTARY PUBLIC, residing at: SLC, UT My Commission Expires: 5-31-88 STATE OF UTAH ) COUNTY OF ) On the ____ day of ____________, 19__, personally appeared before me ______________________________, signer of the above instrument, who duly acknowledged to me that _________________________ executed the same. Given under my hand and seal this ______ day of _____________, 19__. -------------------------------------- NOTARY PUBLIC, residing at: My Commission Expires: STATE OF COLORADO ) COUNTY OF MESA ) On the 12th day of September, 1984, personally appeared before me Richard R. Weaver, who being duly sworn did say that he is President of Atlas Minerals Div. of Atlas Corp. and that said instrument was signed in behalf of said corporation by resolution of its Board of Directors, and said Richard R. Weaver acknowledged to me that said corporation executed the same. Given under my hand and seal this 12th day of September, 1984. /s/ Jane B. Nichols -------------------------------------- NOTARY PUBLIC, residing at: My Commission Expires: 9-23-85 3453 1/2 G Road Clifton, CO 81520 INSTRUCTIONS: ASSIGNMENT MUST BE SUBMITTED IN DUPLICATE. TOTAL ASSIGNMENT-$30, INTEREST, OPERATING RIGHTS, AND OVERRIDING ROYALTY ASSIGNMENTS-$30, AND PARTIAL ASSIGNMENT-$50. INDIVIDUAL'S ACCEPTANCE OF ASSIGNMENT (ASSIGNEE) AFFIDAVIT OF CITIZENSHIP OF ASSIGNEE I, (we) _______________________ on oath, do solemnly swear that I am (we are) at the present time (a)*____________________ Citizen(s) of the United States of America and of legal age, and I (we) hereby assume and agree to perform all of the covenants and obligations of said lease on the part of lessee(s) to be kept and performed, and accept the foregoing instrument. BY: --------------------------------- Subscribed and sworn to before me this ____ day of ___________, 19__. My Commission Expires: ----------- --------------------------- NOTARY PUBLIC, residing at: ACCEPTANCE OF ASSIGNMENT-CORPORATE (ASSIGNEE) Comes now Summo USA Corporation, a corporation of Colorado and hereby accepts the assignment from Lisbon Copper Ltd., of Utah ML No. 20569, which assignment is dated May 23, 1995, subject to all of the covenants and obligations of said Lessee. IN WITNESS WHEREOF, Gregory A. Hahn has executed this acceptance this 13th day of June, 1995. BY: /s/ Gregory A. Hahn ---------------------------------- (Assignee) Summo USA Corporation ---------------------------------- (Officer, Agent, Attorney-in-Fact) ASSIGNEES ACKNOWLEDGEMENT (CORPORATE) STATE OF COLORADO ) :ss COUNTY OF DENVER ) On the 13th day of June, 1995, personally appeared before me Gregory A. Hahn, who being by me duly sworn did say, each for himself, that (he, she, or they) is an officer, agent or Attorney-in-Fact for the assignee and is authorized to accept this assignment and has executed the same and the seal affixed is the seal of said corporation. JAMES C. ROBERTSON NOTARY PUBLIC STATE OF COLORADO My Commission Expires: Feb 14, 1997 /s/ James C. Robertson ----------------------------- NOTARY PUBLIC, residing at: 1776 Lincoln St. #1100 Denver, CO 80203 NOTE: A* INSERT HERE WHETHER NATIVE BORN OR NATURALIZED. IF NATURALIZED, IT WILL BE NECESSARY TO FILE WITH THIS OFFICE PROOF OF CITIZENSHIP OR DECLARATION OF INTENTION TO BECOME A CITIZEN IN THE FORM OF A LETTER OF CERTIFICATE OF VERIFICATION FROM COURT OF ISSUANCE, AND REGISTRATION FEE OF $1.00. AMENDMENT TO LEASE AGREEMENT ML 20569 WHEREAS, the State Land Board, acting in behalf of the State of Utah, Lessor, and Joseph F. Costanza, Lessee, entered into that certain Metalliferous Minerals Lease dated May 28, 1963, as amended by that certain agreement dated November 5, 1984 ("ML 20569"); and WHEREAS, the School and Institutional Trust Lands Administration (hereinafter referred to as "Lessee') is the successor in interest to the State Land Board; and WHEREAS Summo USA Corporation (hereinafter referred to as "Lessee") is now the Lessee of record and the record title owner as to ML 20569; and WHEREAS, Lessor and Lessee desire to supplement certain terms, conditions and obligations under ML 20596. NOW THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby mutually acknowledged, Lessor and Lessee do hereby agree as follows: 1. Lessor will extend the term of ML 20596 for ten (10) years from January 1, 1995, and for so long thereafter as leased substances are being produced in commercial quantities. 2. To maintain ML 20596 in force during such ten (10) year extension, Lessee shall pay to Lessor an annual rental of one dollar ($1.00) per acre, and for each fractional part of an acre, on or before January 1 of each year. Rental payments may be credited against actual production royalties only for the year in which they accrue. 3. In furtherance of Lessee's obligation for diligent operations or development activity under the terms of ML 20596, and to maintain ML 20596 in force during such ten (10) year extension, Lessee shall also tender to Lessor an additional payment of Seven Thousand Eight Hundred Seventy-five and No/100 dollars ($7,875.00), due annually on or before January 1 of each year beginning January 1, 1996. Such payment shall be considered evidence of Lessee's commitment to diligent operations for the next ensuing year. Diligence payments may be credited against actual production royalties only for the year in which they accrue. 4. Lessee shall pay Lessor a royalty of eight percent (8.0%) for fissionable metalliferous minerals and four percent (4.0%) for non-fissionable metalliferous minerals. The royalty shall be based on the gross value of the ores produced from the leased lands and sold by the lessee under an arms-length contract, except that if there is not an arms-length contract for the ore the royalty shall be based on the gross value received by the lessee under an arms- length contract for the processed product(s) produced from the leased lands less actual processing and refining costs. Processing and refining deductions will not include mining, transportation, administrative, or depreciation costs, or deductions for property taxes. Should the processed products be sold under a non-arms-length contract the royalty shall be based on the amount received under the non-arms-length or the fair market value of the products whichever is greater, less the allowable deductions as set forth above. 5. Lessor shall have the right to readjust any provision, term or condition of ML 20596 at any time after January 1, 2005. 6. All terms, conditions and rights as to ML 20596 shall be subject to current and all future State Statutes, Regulations and Rules governing the management and use of school and institutional trust lands, and rules promulgated by other governmental agencies, as appropriate. 7. This Amendment Agreement is supplemental to ML 20596 and does not amend or supersede nor is it intended as an abrogation or waiver of any rights Lessor may have under ML 20596, except those terms and conditions specifically listed above. IN WITNESS WHEREOF, this Agreement is made and entered into this 15 day of August, 1995. SCHOOL AND INSTITUTIONAL TRUST LANDS ADMINISTRATION /s/ Scott Hirschi - ------------------------------ Scott Hirschi Director APPROVED AS TO FORM: JAN GRAHAM ATTORNEY GENERAL SUMMO USA CORPORATION By /s/ Steven F. Alder ------------------------- By:/s/ Gregory A. Hahn --------------------------- Title: VICE PRESIDENT Page 2 State of Utah County of Salt Lake On this 15th day of AUGUST, A.D. 1995, personally appeared Scott Hirschi who being by me duly sworn, did say that he is the Director of the School and Institutional Trust Lands Administration of the State of Utah and the signer of the above instrument, who duly acknowledged that he executed same. Witness my hand and seal this 15th day of AUGUST, A.D. 1995. My Commission expires 5-5-99 /s/ Teresa Wilhelmsen -------- -------------------------- Notary Public NOTARY PUBLIC TERESA WILHELMSEN 355 W. NORTH TEMPLE #400 SALT LAKE CITY, UTAH 84180 MY COMMISSION EXPIRES MAY 5, 1999 STATE OF UTAH State of COLORADO ) --------------- County of DENVER ) --------------- On this 8th day of May, A.D. 1995, personally appeared before me Gregory A. Hahn, who, being duly sworn, did say that (s)he is an officer of Summo USA Corporation and that said instrument was signed in behalf of said corporation by resolution of its Board of Directors, and said ______________ acknowledged to me that said corporate executed the same. Witness my hand and seal this 8th day of May, A.D. 1995. My Commission expires 2/14/97 /s/ James C. Robertson ---------- ---------------------- Notary Public JAMES C. ROBERTSON NOTARY PUBLIC STATE OF COLORADO EX-10.4 13 EXHIBIT 10.4 EXHIBIT 10.4 Met. Min. - 1282d -2- ARTICLE I. MINERALS COVERED BY THIS LEASE This Mineral Lease covers the following-described leased mineral substances with the boundaries of the above-described lands, to-wit: METALLIFEROUS MINERALS "Metalliferous Minerals" are herein defined to include any ore containing any of the following minerals: Aluminum, Antimony, Arsenic, Beryllium, Bismuth, Cadmium, Chromium, Cecium, Columbium, Cobalt, Copper, Flourspar, Gallium, Gold, Germanium, Hafium, Iron, Indium, Lead, Mercury, Manganese, Molybdenum, Nickel, Platinum, Group Metals, Radium, Selenium, Scandium, Silver, Rare Earth Metals, Rhenium, Tantalium, Tin, Thorium, Tungsten, Thallium, Tellurium, Vanadium, Uranium, Zinc, together with other minerals which are found in association with said specified minerals in such a manner that they cannot be mined separately. In the event Lessee, or the operator or any contractor for Lessee, shall discover within said lands some mineral or minerals other than the mineral or leased substances covered by this lease, Lessee shall promptly notify the Lessor of the kind or nature of such mineral or minerals not included in this lease. ARTICLE II. PRIMARY TERM AND POSSIBLE EXTENSION OF TERM OF LEASE This lease is granted for a primary term of TEN (10) years commencing on the first day of January next succeeding the date hereinabove first written and as long thereafter as the leased substances shall be produced in commercial quantities from the above-described lands, on condition that Lessee shall perform the terms and provisions required to be performed by Lessee including payment of rents and royalties within the times required herein; provided however, that it is expressly agreed that at the end of each period of ten (10) years following the effective date of this lease, the State of Utah as Lessor shall have the right to readjust the terms and conditions of this lease as may then be determined to be in the best interest of the State of Utah as trustee- owner of the mineral estate. In the event of failure or refusal of the Lessee to accept and agree to the readjustment of the terms and conditions submitted by Lessor at the end of such ten (10)-year period, such failure or refusal to accept such readjustment of terms, conditions, or royalty shall operate to forfeit any right to extension of the term of this Mineral Lease and terminate this lease except for the rights of the State of Utah to recover any royalties then owing the State and/or any damages for which Lessee may be liable. This lease will not be extended beyond the end of the fortieth year except by the production of the leased substances in commercial quantities from the leased lands. If Lessee ceases production of leased substances in commercial quantities this lease will terminate one (1) year from the date of last commercial production, unless Lessee commences commercial production at least three (3) months prior to the end of such year and such commercial production then continues for at least six (6) months. ARTICLE III. APPLICABLE LAWS AND REGULATIONS This lease is issued pursuant to the provisions of Title 65, Utah Code Annotated, 1953, as amended, and subject to all valid Rules and Regulations and requirements adopted by the Board of State Lands & Forestry, and of the Board of Oil, Gas, and Met. Min. 1282d -3- Mining, applicable to the subject matter of this lease, together with all requirements of the Utah Mined Land Reclamation Act, all requirements of the State Antiquities Act, Title 63, Chapter 18, and all valid rules and regulations relating to safety, sanitation, and health whether under the jurisdiction of the Division of Oil, Gas, and Mining with respect to operations under this lease or under the jurisdiction of some other State agency. ARTICLE IV. RIGHTS TO THE SURFACE ESTATE If the surface estate of all or some portion of the hereinabove-described lands is owned by the Lessor, Lessee shall be entitled to use reasonably and prudently such portions of the surface estate owned by Lessor as shall be reasonably necessary to explore and prospect for, mine, drill, remove, and dispose of the leased mineral substances, including permission to establish and maintain in a safe condition on the surface estate owned by Lessor, access roads, communication lines, tanks, pipelines, reservoirs, mills, processing plants, reduction works, dumps, and other essential structures, facilities, machinery, and equipment, reasonably necessary and expedient for the economic operation of the leasehold and in furtherance of production, treatment, and disposition of the leased substances under this lease. Such surface uses shall be exercised subject to the rights reserved to the State of Utah as provided in Article V hereof, and without unreasonable interference with the rights of any prior or subsequent lessee of the State of Utah under the program of multiple use. If the surface estate of any portion of the described lands is not owned by the State of Utah, except for a reserved right of entry to the mineral estate or mineral estates, the Lessee may exercise such right of entry to the mineral estate covered by this lease, at the sole cost and expense of Lessee herein and without cost to the State of Utah. If any damage is caused directly or indirectly to the surface estate by the Lessee or by the contractor or operator for Lessee, Lessee shall make proper restitution and indemnify the surface owner or owners. Lessee also shall make proper rehabilitation as required by the Utah Mined Land Reclamation Act and as required by all lawful rules and regulations adopted thereunder. Lessor will require a bond to be posted or other security given to the State to be filed with Lessor or any other State agency or officer in a principal amount determined by Lessor to be adequate to assure appropriate reclamation and restitution for any damage to the surface estate. ARTICLE V. EXCEPTIONS AND EXCLUSIONS FROM LEASE Lessor hereby excepts and reserves from the operation of this lease the following rights and privileges: FIRST: The right to establish rights of way and easements on, through, or over the land above described, for utility corridors and for joint or joint and several uses, as may be necessary and appropriate for the management of the above-described lands and other lands of Lessor or lands administered by Lessor, and for the working of other deposits within said lands under mineral leases granted to others under the program of multiple use. Met. Min. - 1282d -4- SECOND: The right to issue mineral leases to other lessees covering minerals not included in this lease, under such terms and conditions which will not unreasonably interfere with operations under this lease in accordance with the principle of multiple use provided by law. THIRD: In the event Lessor owns the surface estate in said lands or portions of said lands above described, Lessor retains the right to use, lease, sell, or otherwise dispose of the surface estate in said lands or any part thereof, under existing State laws or laws subsequently enacted, insofar as such surface is not essential for the Lessee herein in exploration, prospecting for, mining, drilling, removal, or disposal of the leased substances covered by this lease, to the extent that such use, lease, or sale of the surface estate does not unreasonably interfere with the rights granted to the Lessee herein. Lessor shall notify Lessee herein of any such sale, lease, use, or other disposition of the surface estate. ARTICLE VI. PAYING OF RENTALS AND ROYALTIES For and in consideration of the leasehold rights granted to the Lessee, in addition to all other terms and conditions required to be performed by the Lessee, the Lessee hereby covenants and agrees with Lessor to pay rentals and royalties as follows: FIRST: Lessee agrees to pay Lessor as rental for the land covered by this lease the sum of One Dollar ($1.00) per acre and for each fractional part of an acre, each year in advance on or before January 1st of each year except the rental for the first year which has been paid with the application for this lease. All rentals paid shall be credited against actual Production Royalties for the lease year in which they shall accrue, but such rentals shall not be credited against the Minimum Royalties under subparagraph "Fourth" of this ARTICLE VI. SECOND: "Lessee shall pay lessor a production royalty on the basis of 8% in the case of fissionable Metalliferous Minerals and 4% in the case of non-fissionable Metalliferous Minerals of the market price, including all bonuses and allowances received by Lessee, f.o.b. the nearest point of sale of the first marketable product or products produced from the leased substances and sold under a bonafide contract of sale, whether or not such product or products are produced through chemical or mechanical treating or processing of the leased substances raw material. It is expressly understood and agreed that none of Lessee's mining or product cost, including but not limited, to material costs, labor costs, overhead costs, distribution costs, or general and administrative costs may be deducted from marketprice f.o.b. the point of sale in computing Lessor's royalty. All such costs shall be entirely borne by Lessee and are anticipated by the rate of royalty assigned in his agreement." THIRD: Payment of Production Royalty shall be made by Lessee to Lessor, as herein required, on or before the last day of the month next succeeding the month during which the minerals or leased substances shall have been shipped or sold or used. In connection with such payment of Production Royalty, the Lessee shall submit a certified statement of the production of all leased substances mined or extracted from the hereinabove-described lands, according to the foregoing royalty schedule together with such information required by the Board of State Lands & Forestry to verify production and disposition of mineral substances produced and disposed of from the leased premises. Met. Min. - 1282d -5- FOURTH: Lessee may maintain this lease in force beyond the primary term of ten (10) years from the effective date of the original lease by paying Lessor, in addition to rentals and production royalties as hereinabove required, an annual minimum royalty of three (3) times the annual rental, providing the lessee is engaged in diligent operations, exploration, research, or development activity which is reasonably calculated to advance development or production of the mineral covered by the lease from the leased premises or lands pooled or unitized with or constituting an approved mining or drilling unit in respect to the leased premises. Said annual minimum royalty shall be paid each year in advance, commencing with the eleventh year of the lease, along with the regular annual rental required to be paid under the terms of this lease. Said rental per acre and said Minimum Royalty shall be paid on each and every acre in this lease to extend the term of this lease and to keep this lease in force and effect. Rentals and Minimum Royalties paid annually shall be credited against actual Production Royalties for the year in which they accrue during the original term, or any extension thereof; but annual rentals shall not be credited against Minimum Royalties. ARTICLE VII. MINERAL TITLE OF LESSOR Lessor claims title to the mineral estate covered by this lease. Lessor does not warrant title nor represent that no one will dispute the title asserted by Lessor. It is expressly agreed that Lessor shall not be liable to Lessee for any alleged deficiency in title to the mineral estate, nor shall Lessee or any assigns of the Lessee become entitled to any refund for any rentals, bonuses, or royalties paid under this lease. ARTICLE VIII. WATER RIGHTS In the event Lessee shall initiate any water rights on the leased premises, such right shall become an appurtenance to the leased premises; and upon surrender, cancellation, or termination of this lease, Lessee or assigns of Lessee shall assign and convey such water rights and any application for appropriation of water to beneficial use relating to the land or the mineral estate covered by this lease to Lessor. If the Lessee shall purchase or otherwise acquire any water rights on some other land and file with the State Engineer appropriate application for change of use onto the premises covered by this lease, the Lessor herein shall have an option for 45 days after the expiration, surrender, or termination of this lease to purchase said otherwise acquired water rights at the acquisition costs of the Lessee. Such option shall begin to run from the date of termination, surrender, or expiration of this lease or from the date when Lessee shall specify in writing the acquisition costs of such other water rights, whichever date is the later date. Unless Lessor accepts such written offer to convey such rights at the actual acquisition costs within said period of 45 days, Lessor shall be deemed to have rejected the offer. Upon payment of the said acquisition costs by the Lessor, Lessee herein shall assign and transfer such acquired water rights to the Lessor. ARTICLE IX. WRITTEN CONSENT REQUIRED FOR ASSIGNMENT OR SUBLEASE Lessee shall not assign this lease nor any portion thereof, nor any rights or privileges herein granted, without the prior written consent of Lessor. Nor shall the Met. Min. - 1282d -6- Lessee issue any sublease without the prior written consent of Lessor. Any assignment of lease and any sublease issued without prior written consent of Lessor shall be void ab initio. In the event Lessor shall approve an assignment of this lease or of any part hereof, such assignment shall be subject to all of the terms, conditions, and obligations of the Lessee herein set forth. All of the terms, covenants, conditions, and obligations of the Lessee shall be binding upon the heirs, executors, administrators, successors, and assigns of the Lessee. This provision also shall apply to any sublease issued by Lessee and approved by Lessor. ARTICLE X. OVERRIDING ROYALTY LIMITATION Neither the Lessee nor the assignee of Lessee shall create or grant any overriding royalty except as permitted by law and by the Rules and Regulations of the Board of State Lands & Forestry. Overriding royalty assignments shall not become effective, even if otherwise valid, until filed with the Lessor. ARTICLE XI. SURRENDER OR RELINQUISHMENT OF LEASE Lessee may surrender this lease for cancellation by Lessor as to all or any part of the leased lands, but not for less than a quarter-quarter section or surveyed lot, upon payment of all rentals, royalties, and other amounts then due and owing to the Lessor, by filing with Lessor a written relinquishment. As to rental, such relinquishment shall be effective on the date of filing, but otherwise on the date of cancellation by the Lessor. ARTICLE XII. NOTICE OF COMMENCEMENT OF OPERATIONS, PLANS, PLATS, BOND Not less than sixty (60) days before commencement of exploration, drilling, or mining operations, Lessee shall give written notice hereof to the Division of State Lands & Forestry and the Division of Oil, Gas, and Mining, together with a plan of operation and a topographic map showing every proposed shaft, tunnel, open pit, drill site, and access road to be used. Lessor shall make an assessment of such plan of operation and either endorse or stipulate changes in Lessee's plan of operation, or request additional information within the sixty (60) day notification period. Lessee shall not proceed with the execution of any such plan of operation without first receiving the written approval of Lessor. Lessee shall maintain at the mine office clear, accurate, and detailed maps of all actual and planned operations on a scale of not more than 50 feet to the inch, with points coordinated with public land surveys showing distance to the nearest public survey monument or reestablished survey corner. Such maps and plats shall be on tracing cloth or other material which is substantially permanent and of which clear and distinct photo copies or blueprints can be readily made without unreasonable delay. Such maps or plats shall show the workings from time to time, as the same are extended. In the event that the operations on the above-described leasehold are intended to be conducted in conjunction with adjacent lands, whether Federal, State, or privately-owned lands, the map and plats shall clearly show how the operations are to be coordinated. All surveys shall be conducted by a licensed surveyor or engineer qualified to practice in Utah. All such maps or plats shall be certified by the surveyor or engineer Met. Min. 1282d -7- preparing the same. The State or any agency of the State of Utah, including the Division of Oil, Gas, and Mining, shall be entitled to a true and correct copy thereof, together with the proposed plans of operation. After Lessor receives notice of intent to commence mining operations, upon request of the Lessor, the Lessee shall furnish a bond with an approved corporate surety company authorized to transact business in the State of Utah, or such other security acceptable to the Lessor, in an amount to be determined by Lessor, after taking into account the value of the land and the amount of potential damage which likely will result from such proposed mining operations, and which bond or other security shall be conditioned upon payment of all rentals and royalties from the leasehold and other sums which may become payable to the Lessor, and to assure full compliance with the terms and conditions of this lease and compliance with all Rules and Regulations of the Board of State Lands & Forestry and all Rules and Regulations of any other State agency having jurisdiction over mining operations, and also conditioned upon payment of all damages to the surface and improvements thereon if this lease covers surface estate or some portion of the surface estate which has been sold or otherwise leased, and any damage caused by Lessee to any other lessee of the State of Utah with respect to said land. Such bond or other security furnished prior to commencement of development of the leasehold may be increased in such reasonable amounts as the Lessor may require after discovery of any of the leased substances. If the plan of mining development or mining operations includes core-drilling, the plan of operations shall disclose the locations of core-drilling operations. ARTICLE XIII. ALL OPERATIONS TO BE CONDUCTED IN A LAWFUL, PRUDENT MANNER Lessee shall conduct all operations under this lease in a lawful, prudent, and good workmanlike manner for the effective and safe production of the mineral substances covered by this lease, and to avoid unnecessary damage and injury to the leasehold estate, and also to avoid damage and wastage of other natural resources not covered by this lease. All operations of Lessee, whether conducted directly by Lessee or by operators or contractors, shall be at the sale cost and expense of Lessee. It is expressly covenanted and agreed that Lessor does not grant Lessee or any person dealing with Lessee any right to subject the property hereinabove described, nor any leased substances, to any lien-rights for labor or mechanic's liens, nor to any materialmen's liens, nor to any other lien for any act, omission, neglect, or performance of Lessee or its agents, employees, and contractors. In the event any one shall file any notice or claim of lien against said property or any estate in said property, Lessee shall take all necessary steps expeditiously to have such notice or claim released of record. Lessee shall save Lessor harmless from any and all lien notices and claims against said land arising from any act or neglect of Lessee and any contractor or operator of Lessee in any operations on or relating to the hereinabove described lands. Lessee shall not fence off or otherwise make inaccessible to livestock lawfully on the surface of said premises any watering place without the written consent of Lessor; provided, that Lessee shall not permit any livestock to come upon any portion of the leasehold to pollute any surface or subsurface water available or capable of being made available for domestic use or irrigation. In the operations of Lessee, Lessee shall comply with all laws and regulations for control of water which might be Met. Min. - 1282d -8- encountered or which might seep into any formation, to avoid pollution of surface and underground waters as required by Chapter 14, Title 73, Utah Code Annotated, 1953, as amended. Lessee shall comply with all valid laws and regulations relating to prevention and suppression of fires, make all necessary provisions for sanitary disposal of wastes, and in all operations connected with said leasehold take appropriate measures for protection of human life and prevention of injuries and disease. ARTICLE XIV. RIGHTS OF LESSOR FOR INSPECTIONS OF LEASEHOLD AND RECORDS Lessor, its officers, and agents have the right at all reasonable times to enter upon the leased lands and premises to inspect the conditions of the leasehold, the work done under the terms of this lease, and the production obtained from the leasehold, such entry and inspections to be done in such a manner as shall not unreasonably interfere with the lawful operations by the Lessee in performance of the terms and conditions of this lease. Lessor also shall have the right to examine all books and records pertaining to operations under this lease whether such books and records are located within a building on the leased premises or located in an office elsewhere and to make copies and abstracts of such records if desired by Lessor. Lessor, its officers, and agents shall have the right to post upon or within the leasehold such notices deemed proper or expedient by Lessor. If Lessee maintains an office in another State or in a foreign country, Lessee nevertheless shall maintain within the State of Utah proper and adequate records relating to operations on this leasehold and also relating to production of leased substances and payment of rentals and royalties. Lessee also shall have a resident agent in the State of Utah to whom any and all notices may be sent by Lessor and on whom process may be served. In the event of any change in the address of Lessee's office in the State of Utah, Lessee shall promptly furnish Lessor with written notice of such change of address within the State of Utah. Examinations of records of Lessee by the Lessor shall be conducted at reasonable times. In the event Lessee conducts core-drilling operations within the leasehold, or by directional drilling from adjacent land, Lessor shall have a right of inspection of core samples and any analysis made thereof and any assay; provided, that any report obtained by Lessor of any core-drilling operations may be declared confidential information by Lessee, in which event Lessor shall keep such information in a separate confidential information file. Such information shall not be disclosed to any competitor nor to any one except to a representative of the Attorney General of the State of Utah until Lessee waives confidentiality or upon surrender, expiration, or termination of this lease. After completion of any core drilling, Lessee shall notify Lessor; and Lessee shall cause all core holes to be plugged or sealed as expeditiously as possible after the need for keeping such core holes unplugged ceases, in accordance with regulations and requirements of the Division of Oil, Gas, and Mining. ARTICLE XV. OPERATIONS IN CONJUNCTION WITH MINING ON OTHER LANDS In the event Lessee, in the interest of economy in mining operations, desires to conduct mining operations on or within the above-described lands in conjunction with mining operations on or within any adjacent Federal, State, or privately-owned land by Met. Min. 1282d -9- utilization of shafts, inclines, or tunnels within either the above-described lands or within adjacent lands, Lessee shall make application in writing to the Board of State Lands & Forestry and submit with such application a detailed plan of operations illustrating how leased substances mined from the above- described lands can and will be mined, segregated, and separately accounted for from leased substances mined from some adjacent land. No such operations shall be conducted without written approval of the Board. Any approval granted by the Board shall be conditioned upon proper segregation and proper accounting and record keeping of leased substances mined from each property. Separate records shall be required for accounting for leased substances mined from the above-described lands. In the event Lessee desires to process or mill leased substances from the above-described land in conjunction with processing or milling of leased substances from adjacent or some other lands, whether such processing or milling is intended to be performed on the above-described land or on some other land, Lessee shall submit to the Board a written application detailing how the leased substances mined from the above-described lands shall be segregated and separately accounted for in computation of royalty payments from leased substances mined from other lands. Any Board approval for any such arrangements shall be conditioned upon segregation of leased substances produced from the above-described lands from mineral substances produced from other lands with adequate safeguards to assure proper accounting for determination of royalty. If application is granted for either type of operation or for both, all procedures for either production or milling of minerals shall be subjected to examination by the Division of State Lands & Forestry and by the Division of Oil, Gas, and Mining to determine whether either type of arrangement functions satisfactorily without detriment to the State of Utah. If such inspection results in an adverse report with recommendations for modification or discontinuance of such operations, a copy of the report with recommendations shall be submitted as expeditiously as possible to the Lessee. If any objectionable condition is not promptly remedied to safeguard the rights of the State as Lessor, the Board of State Lands & Forestry shall have the right to order discontinuance of such arrangement; and failure to comply with such order of the Board shall constitute a breach of this Lease Agreement. ARTICLE XVI. SPECIAL REQUIREMENTS IN EVENT OF STRIP-MINING In the event Lessee desires to conduct any strip-mining or open-pit mining or operations which will materially disturb the surface of the above-described lands or some portion thereof, at least sixty (60) days before commencing such type of mining activities, Lessee shall submit to the Division of State Lands & Forestry the proposed plan of operations together with a proposed plan of surface rehabilitation in compliance with the Utah Mined Land Reclamation Act and in compliance with the Rules and Regulations adopted hereunder. A copy of such proposed plan of operations and proposed plan of surface rehabilitation also shall be submitted to the Division of Oil, Gas, and Mining. No such operations shall be commenced until the Division of Oil, Gas, and Mining approves the plan of operations and approves a program of rehabilitation. Security may be required of Lessee to assure appropriate rehabilitation in accordance with the said statute and rules and regulations adopted thereunder. Met. Min. - 1282d -10- ARTICLE XVII. EQUIPMENT OR FACILITIES TO REMAIN WITH THE LAND Upon surrender, forfeiture, expiration, or termination of this lease, any and all underground timbering supports, shaft linings, rails, and other installations necessary for the support of underground tunnels, shafts, inclines, or other underground mine supports, together with all rails or head frames and all other underground construction and safety equipment annexed to the ground (excluding detachable motor-driven machinery) which cannot be removed without creating a danger to any shaft, tunnel, incline, or other underground improvements annexed to the mine, and including equipment installed underground to provide for ventilation of the mine or some portion thereof, shall be left within said land above described by the Lessee, operator, and contractor of Lessee and shall remain a part of the realty. Lessor shall acquire all rights thereto without indemnification of Lessee or operator or contractor for Lessee. Except as herein specifically excepted, all personal property of Lessee, including removable machinery, equipment, tools, and stockpiles of leased substances for which royalty has been paid shall remain the property of Lessee or operator or contractor for Lessee and Lessee or operator or contractor for Lessee may remove the same at the sole expense of Lessee or operator or contractor within two (2) months following expiration, forfeiture, surrender, or termination of this lease, except that the Board of State Lands & Forestry for good cause shown shall have the right to grant a reasonable extension of time beyond the period of two (2) months for removal of any and all equipment which may be removed by Lessee or operator or contractor as herein provided. At the end of such period, Lessor may consider abandoned and lay claim to any or all equipment or stockpiles remaining on the premises. Upon expiration, surrender, forfeiture, or termination of this lease or abandonment of the leasehold by Lessee, the Lessee shall cause to be sealed or properly shut off all or parts of the mine openings including shafts and tunnels in the manner and method required by the Director of the Division of Oil, Gas, and Mining, and to abate any hazardous condition which may have been left by Lessee, such abatement of hazardous condition to be performed in accordance with reasonable requirements of the Director of the Division of Oil, Gas, and Mining. ARTICLE XVIII. CONSENT TO SUIT IN STATE DISTRICT COURT It is agreed that if there arises any controversy between lessor and Lessee or any successor in interest of Lessee which needs to be litigated, Lessee or any one claiming by or under the Lessee shall bring such action in the District Court of Salt Lake County, State of Utah, after compliance with the requirements of State statutes for bringing suit, including compliance with the requirements of the State Governmental Immunity Act, Title 63, Chapter 30, Utah Code Annotated, 1953, as amended. Neither Lessee nor any assignee of lessee nor any one claiming under, by, or through the Lessee shall bring any suit against the State of Utah or against any State agency in the United States District Court for the District of Utah, nor in any other United States District Court in some other state, nor in the District of Columbia. ARTICLE XIX. REMEDIES FOR DEFAULT BY LESSEE OR ASSIGNS This Mineral Lease and the terms and conditions of this lease agreement issued by the State of Utah are made with the Lessee herein on condition that Lessee and any lawful successor in interest to Lessee shall perform all covenants and terms and conditions herein set forth to be performed by Lessee or its lawful assigns including -11- Met. Min. - 1282d payment of rentals and royalties as herein provided; and if at any time there shall be default on the part of lessee or breach of any of the terms or conditions hereof on the part of Lessee or by the successor in interest to the Lessee; and if such default or breach shall continue for a period of thirty (30) days after written notice from Lessor of such default or breach given to Lessee or successor in interest addressed to Lessee or successor in interest at the last address furnished by Lessee or successor in interest by United States mail, then at the expiration of said period of thirty (30) days immediately following such notice if the default or breach has not been remedied, then at the expiration of said period of thirty (30) days, at the option of the Lessor, Lessor may issue written notice of termination and cancellation of this lease and forfeiture declaring that the leased premises and each and every part thereof have thereby reverted to the Lessor, including any and all fixtures and improvements required to be left with the property upon expiration, termination, or cancellation of this Lease. In the event that the leasehold estate shall have been damaged or injured by the acts or neglect of the Lessee or operator, contractor, or assigns of Lessee, Lessor also shall have a right of action for damages and for restitution for any failure or refusal to comply with the terms and conditions of any statute of this State relating to reclamation or rehabilitation, or for abatement of pollution, together with rights for injunctive relief. Lessor also shall have the right to recover on any bond or other security deposited with the State of Utah in accordance with the terms or conditions hereinabove set forth for indemnification. ARTICLE XX. DISPOSITION OF ROCK TAILINGS Rock, tailings, and waste materials resulting from the operation of the Lessee on this land which contain the metalliferous minerals enumerated in Article I herein are covered by this mineral lease, unless and until such time as Lessee renounces in writing the leasehold interest in such materials. In the event Lessee sells or otherwise disposes of any such rock, tailing, or waste materials, Lessee agrees to pay Lessor a Production Royalty on the materials consistent with the prevailing State of Utah royalty for materials or minerals of like kind. Met Min. - I281d -12- ARTICLE XXI. CLARIFICATION OF LEASE AMENDMENT This mineral lease in the above form is an amendment of the original lease which was issued on the date hereinabove first written. The effective date of this present lease amendment is January 1, 1985. All fees, rentals, and royalties paid theretofore shall remain in effect as payments required theretofore. Readjusted payment rates required under this present lease amendment shall not be retroactive, but shall commence with the effective date of this lease amendment. IN WITNESS WHEREOF, the parties have executed this lease as of the date hereinabove first written. THE STATE OF UTAH, acting by and through the BOARD OF STATE LANDS & FORESTRY and DIVISION OF STATE LANDS & FORESTRY By /s/ Ralph A. Miles ------------------------------------------------- Director, Div. of State Lands & Forestry -- LESSOR ------------------------------------------------- /s/ Richard R. Weaver ------------------------------------------------- Richard R. Weaver, President LESSEE Atlas Minerals Division of Atlas Corporation Met Min. - 1281c -13- STATE OF UTAH ) COUNTY OF SALT LAKE ) On the 20th day of November, 1984, personally appeared before me RAI MILES, who being by me duly sworn did say that he is the Director of the Division of Lands of the State of Utah; and said instrument was signed in behalf of the State of U authority of a resolution, of the Board of State Lands; and said RALPH A. MILES acknowledged to me that the State of Utah executed the same. Given under my hand and seal this 20th day of November, 1984. /s/ JoAnn Garcia --------------------------------------- NOTARY PUBLIC, residing at: My Commission Expires: 5-31-88 STATE OF UTAH ) COUNTY OF ) On the _______ day of ____________, 19___, personally appeared before me _________________________, signer of the above instrument, who duly acknowledge to me that _____________________________ executed the same. Given under my hand and seal this______ day of ___________________, 19___. ---------------------------------------- NOTARY PUBLIC, residing at: My Commission Expires: STATE OF COLORADO ) COUNTY OF MESA ) On the 12th day of September, 1984, personally appeared before Richard R. Weaver, who being duly sworn did say that he is Pres of Atlas Minerals Div. of Atlas Corp. and that said instrument was signed in behalf said corporation by resolution of its Board of Directors, and said Richard R. Weaver acknowledged to me that said corporation executed the same. Given under my hand and seal this 12th day of September, 1984. /s/ [illegible] ------------------------------------ NOTARY PUBLIC, residing at: 3453 1/2 G Road My Commission Expires: 9-23-85 Clifton, Co 81520 State of Utah School & Institutional Trust Lands Administration MINERAL LEASE ASSIGNMENT FORM MINERAL LEASE NO. 17661 RECORD TITLE ASSIGNMENTS: /X/ TOTAL INTEREST PARTIAL OVERRIDING ROYALTY OPERATING RIGHTS ASSN. The undersigned, as owner of interest as hereinafter specified in and to ML 17661 as designated, for good and valuable consideration and $10.00 DOLLARS does hereby apply for approval of this assignment and hereby assigns to Summo USA Corporation ADDRESS: 1776 Lincoln Street, Suite 1100, Denver, CO 80203 the rights, title, and interest in rights and privileges as lessee in such lands, to the extent indicated subject to the reservation of overriding royalties as herein noted: 1. Land affected by this assignment in County of San Juan, State of Utah, as described herein: Township 30 South, Range 25 East, SLB&M --------------------------------------- Section 36: SW 1/4 160 ACRES 2. Interest of assignor in such lands (Note % of 100%) 100% 3. Extent of such interest conveyed to Assignee (Note % of 100%) 100% 4. Extent of interest retained by Assignor after assignment (Note % of 100%) 0% 5. Overriding royalty reserved herein to Assignor (Note percentage only) 0% 6. Overriding royalty previously reserved (Note percentage only) It is hereby certified that the statements made herein are true, complete, and correct to the best of the undersigned's knowledge and belief and are made in good faith. Approval of this application and assignment should be considered approval only under such rights, interests, and title as held by assignor. Executed this 7th day of June, 1995. URANIUM KING CORPORATION /s/ Karl F. Meyers ------------------------- by Karl(Lessee-Assignor)F. Meyers, President LESSEE-ASSIGNOR'S ACKNOWLEDGEMENT STATE OF NEVADA ) :ss COUNTY OF CLARK ) On the 7th day of June personally appeared before me Karl F. Meyers, Pres., Uranium King Corp., signer(s) of the above instrument duly acknowledged to me that _______ executed the same. [SEAL] Given under my hand and seal this 7th day of June, 1995. /s/ [illegible] My Commission Expires: 4/13/97 -------------------------- NOTARY PUBLIC, residing at JEANNIE C. WILLARSON [SEAL] Notary Public - Nevada Clark County My appt. exp. Apr. 13,1997 * THIS DOCUMENT MAY BE DUPLICATED INSTRUCTIONS. ASSIGNMENT MUST BE SUBMITTED IN DUPLICATE. TOTAL ASSIGNMENT-$30, INTEREST, OPERATING RIGHTS, AND OVERRIDING ROYALTY ASSIGNMENTS-$30, AND PARTIAL ASSIGNMENT-$50. INDIVIDUAL'S ACCEPTANCE OF ASSIGNMENT (ASSIGNEE) AFFIDAVIT OF CITIZENSHIP OF ASSIGNEE I, (we) __________________________________________ on oath, do solemnly swear that I am (we are) at the present time (a) * _______________ Citizen(s) of the United States of America and of legal age, and I (we) hereby assume and agree to perform all of the covenants and obligations of said lease on the part of lessee(s) to be kept and performed, and accept the foregoing instrument. BY: ------------------------------------- Subscribed and sworn to before me this ________________ day of _____________, 19___. My Commission Expires: ________ _______________________________ NOTARY PUBLIC, residing at: ACCEPTANCE OF ASSIGNMENT-CORPORATE (Assignee) Comes now Summo USA Corporation a corporation of Colorado and hereby accepts the assignment from Uranium King Corporation of New Mexico ML No.17661 which assignment is dated June 7, 1995, subject to all of covenants and obligations of said Lessee. IN WITNESS WHEREOF, Gregory A. Hahn has executed this acceptance this 13th day of June, 1995. BY: /s/ [illegible] ---------------------------------------- (Assignee) SUMMO USA CORPORATION ----------------------------------- (Officer, Agent, Attorney-in-Fact) ASSIGNEES ACKNOWLEDGMENT (Corporate) STATE OF COLORADO ) :ss COUNTY OF DENVER ) On the 13th day of June, 1995, personally appeared before me Gregory A. Hahn who being by me duly sworn did say, each for himself, that (he, she, or they) is an officer, agent or Attomey-in-Fact for the assignee and is authorized to accept this assignment and has executed the same and the seal affixed is the seal of said corporation. My Commission Expires: Feb. 14, 1997 /s/ [illegible] ----------------------------- NOTARY PUBLIC, residing at: 1776 Lincoln St. #1100 Denver, CO 80203 NOTE: A* INSERT HERE WHETHER NATIVE BORN OR NATURALIZED. IF NATURALIZED, IT WILL BE NECESSARY TO FILE WITH THIS OFFICE PROOF OF CITIZENSHIP OR DECLARATION OF INTENTION TO BECOME A CITIZEN IN THE FORM OF A LETTER OF CERTIFICATE OF VERIFICATION FROM COURT OF ISSUANCE, AND REGISTRATION FEE OF $1.00. AMENDMENT TO LEASE AGREEMENT ML 17661 WHEREAS, the State Land Board, acting in behalf of the State of Utah, Lessor, and Maxwell Bentley, Lessee, entered into that certain metalliferous Mineral Lease dated February 20, 1959, as amended by those certain agreements dated October 28, 1970, October 22, 1979 and November 5, 1984, ("ML 17661"); and WHEREAS, the School and Institutional Trust Lands Administration (hereinafter referred to as "Lessor") is the successor in interest to the State Land Board; and WHEREAS Summo USA Corporation (hereinafter referred to as "Lessee") is now the Lessee of record and the record title owner as to ML 17661; and WHEREAS, Lessor and Lessee desire to supplement certain terms, conditions and obligations under ML 17661. NOW THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby mutually acknowledged, Lessor and Lessee do hereby agree as follows: 1. Lessor will extend the term of ML 17661 for ten (10) years from January 1, 1995, and for so long thereafter as leased substances are being produced in commercial quantities. 2. To maintain ML 17661 in force during such ten (10) year extension, Lessee shall pay to Lessor an annual rental of one dollar ($1.00) per acre, and for each fractional part of an acre, on or before January 1 of each year. Rental payments may be credited against actual production royalties only for the year in which they accrue. 3. In furtherance of Lessee's obligation for diligent operations or development activity under the terms of ML 17661, and to maintain ML 17661 in force during such ten (10) year extension, Lessee shall also tender to Lessor an additional payment of Two Thousand Six Hundred Twenty-five and No/100 dollars ($2,625.00). due annually on or before January 1 of each year beginning Jan. 1, 1994. Such payment shall be considered evidence of Lessee's commitment to diligent operations for the next ensuing year. Diligence payments may be credited against actual production royalties only for the year in which they accrue. 4. Lessee shall pay Lessor a royalty of eight percent (8.0%) for fissionable metalliferous minerals and four percent (4.0%) for non-fissionable metalliferous minerals. The royalty shall be based on the gross value of the ores produced from the leased lands and sold by the lessee under an arms-length contract, except that if there is not an arms-length contract for the ore the royalty shall be based on the gross value received by the lessee under an arms-length contract for the processed product(s) produced from the leased lands less actual processing and refining costs. Processing and refining deductions will not include mining, transportation, administrative, or depreciation costs, or deductions for property taxes. Should the processed products be sold under a non-arms length contract the royalty shall be based on the amount received under the non-arms-length or the fair market value of the products whichever is greater, less the allowable deductions as set forth above. 5. Lessor shall have the right to readjust any provision, term or condition of ML 17661 at any time after January 1, 2005. 6. All terms, conditions and rights as to ML 17661 shall be subject to current and all State Statutes, Regulations and Rules governing the management and use of school and institutional trust lands, and rules promulgated by other governmental agencies, as appropriate. 7. This Amendment Agreement is supplemental to ML 17661 and does not amend or supersede nor is it intended as an abrogation or waiver of any rights Lessor may have under ML 17661, except those terms and conditions specifically listed above. IN WITNESS WHEREOF, this Agreement is made and entered into this 15 day of August, 1995. SCHOOL AND INSTITUTIONAL TRUST LANDS ADMINISTRATION /s/ Scott Hirschi - ----------------------------------- Scott Hirschi Director APPROVED AS TO FORM: JAN GRAHAM ATTORNEY GENERAL SUMMO USA CORPORATION By /s/ [illegible] --------------------------- By: /s/ [illegible] -------------------------------- Title: Vice President ----------------------------- Page 2 State of Utah ) County of Salt Lake ) On this 15th day of August, A.D. 1995, personally appeared Scott Hirschi who being by me duly sworn, did say that he is the Director of the School and Institutional Trust Lands Administration of the State of Utah and the signer of the above instrument, who duly acknowledged that he executed same. Witness my hand and seal this 15th day of August, A.D. 1995. My Commission expires 5-5-99 /s/ [illegible] --------- ------------------------------ Notary Public [SEAL] State of Colorado ) County of Denver ) On this 8th day of May, A.D. 1995, personally appeared before me Gregory Hahn, who, being duly sworn, did say that (s)he is an officer of Summo USA Corporation and that said instrument was signed in behalf of said corporation by resolution of its Board of Directors, and said________________ acknowledged to me that said corporation executed the same. Witness my hand and seal this 8th day of May, A.D. 1995. My Commission expires 2/14/97 /s/ [illegible] --------- ------------------------------ Notary Public [SEAL] Page 3 EX-10.5 14 EXHIBIT 10.5 EXHIBIT 10.5 MINERAL LEASE This Mineral Lease, entered into as of the of 26th day of October, 1992, by and between Steve Kosanke and Mary Lou Kosanke ("LESSOR"), whose mailing address is P.O. Box 193, La Sal, Utah, 84530, and MLP Associates, A Colorado Limited Partnership ("LESSEE"), whose mailing address is 12836 N. 60th Street, Scottsdale, Arizona 85254. MINERAL LEASE The "LEASED PREMISES are described in APPENDIX A hereto, and a part hereof. 1. For and in consideration of the mutual covenants and agreements hereinafter set forth, in further consideration of good and valuable consideration received by LESSOR from LESSEE, LESSOR does hereby lease to LESSEE all of the right, title and interest of LESSOR in and to the LEASED PREMISES and LESSOR hereby grants exclusively to LESSEE all rights of LESSOR to occupy, use, and enjoy the LEASED PREMISES, including, but not limited to, the following: 1.a. To explore for minerals. 1.b. To mine or otherwise extract, to mill, treat or otherwise process, and to store, stockpile, remove, market, sell or otherwise dispose of ore and minerals. 1.c. To dispose of or deposit waste material and or tailings on the LEASED PREMISES but only if mining is being done on the LEASED PREMISES. Reasonable industry accepted precautions shall be taken to determine that no such waste material or tailings are place on unmined ore. 1.d. To construct, use, maintain, repair, replace and relocate in or upon the LEASED PREMISES buildings, shops, plants, machinery, mills, facilities, ore bins and structure of all kinds, roads, shafts, inclines, tunnels, drifts, open pits, pipelines, telephone lines, electric transmission lines and transportation facilities and other utilities. 1.e. To exercise any and all other rights and privileges which are incidental to or which may be useful, desirable or convenient in LESSEE'S exercise of any or all of the rights hereinabove specified which are not in conflict with applicable state and federal laws and regulations. 1.f. LESSEE may use and enjoy the LEASED PREMISES and exercise any of the rights granted hereunder by any methods now or heretofore known or hereafter developed which are not in conflict with applicable state and federal laws and regulations. 1.g. LESSEE may freely bargain, assign and transfer its rights titles and interest hereunder, provided however that Asignee complies with all covenants and agreements of this Lease. 1 2. This MINERALS LEASE is conditioned upon LESSEE proceeding diligently and with all reasonable dispatch to explore and develop minerals on the LEASED PREMISES, and to seek to place the subject property in production. with a minimum requirement that LESSEE cause to be drilled no less than 300 feet of core hole or reverse circulation hole within the first 18 months of this Mineral Lease. 3. LESSOR and LESSEE agrees to execute such additional documents as are reasonable and necessary in recordable form, and amendment or amendments to this MINERALS LEASE or any other documents which better describe the LEASED PREMISES. 4. This MINERALS LEASE shall commence on the date first above set forth in this instrument, run thereafter for a primary term of six (6) years and continue thereafter as long as production royalties are being paid provided, however, that in the event production of minerals in commercial quantities occurred during the primary term and thereafter ceases because it is no longer commercially feasible to continue the production of minerals from the LEASED PREMISES, this MINERAL LEASE shall continue beyond the expiration of the primary term without the necessity of production of minerals and/or metals in commercial quantities as long as it is not commercially feasible to continue production and as long as LESSEE performs all the covenants it is obligated to perform hereunder including, but not limited to, the covenant to pay the minimum advance royalty hereinafter provided. 5. LESSEE shall pay LESSOR a royalty equal to the percentage (hereinafter set forth) of the NET PROCEEDS (hereinafter defined) received for all ores, mineral, and/or metals, mined and removed from the LEASED PREMISES and processed and sold in any chemical, mineral or metallic form, hereinafter referred to as the "PRODUCT." The percent of the royalty shall be determined by the amount of NET PROCEEDS per pound of PRODUCT sold during the calendar month. The royalty percentage shall be two and one half percent (2.5%). The term "NET PROCEEDS" means the gross amount received by LESSEE, after deducting freight and handling charges from the point of final treatment to the point of final sale. The term MARKET VALUE of contained metals and/or minerals shall mean the average of U.S. Producer or major Suppliers prices, as quoted in Metals Week and as published in Engineering and Mining Journal (E&MJ) for the month in which the metals and/or minerals are sold. 6. LESSEE shall prepare and maintain such records as are reasonable necessary to calculate the royalty due LESSOR hereunder and LESSEE shall, on written request of LESSOR, furnish copies of such records to LESSOR. 7. Commencing with the date of this Mineral Lease, and on each anniversary thereafter, LESSEE shall pay LESSOR an annual minimum advance royalty. The amount of said royalty shall be seven hundred dollars ($700.00) upon execution and $700.00 upon the first anniversary thereof, then $1400.00 on the 2nd anniversary, $2100.00 on the 3rd anniversary, and $2800.00 on the 4th and subsequent anniversaries so long as this lease shall remain in effect. LESSEE shall be entitled to 2 credit this minimum advance royalty against the production royalty to which the LESSOR is entitled as set forth above. 8. The following provisions shall be applicable to "WASTE MATERIAL" which is defined as material mined or extracted from the LEASED PREMISES which LESSEE in its sole discretion determines not to sell because of its mineral content, and LESSEE'S determination shall be final and conclusive: 8.a. LESSOR agrees that WASTE MATERIAL may be mined or otherwise extracted without obligation upon LESSEE to return same to the place from which extracted. At no time during the term of this MINERAL LEASE or at any time thereafter shall LESSEE be required to remove any WASTE MATERIAL deposited by LESSEE on the LEASED PREMISES, except as otherwise provided by applicable governmental laws, rules and regulations, including those governing toxic or hazardous waste, in full force and effect on or before the termination of this MINERAL LEASE. 8.b. All WASTE MATERIAL on the LEASED PREMISES prior to surrender or termination of this MINERALS LEASE shall be the property of LESSEE, and LESSOR shall have no right, title or interest whatsoever therein and thereto until this MINERAL LEASE is surrendered or terminated. 9. With respect to taxes on the LEASED PREMISES: 9.a. LESSEE agrees to pay all taxes levied and assessed against any improvements placed on the LEASED PREMISES by LESSEE. 9.b. The relationship (in terms of percentage) which the total royalty which LESSOR receives hereunder during a given taxing period bears to the total NET PROCEEDS for the same period shall be established by dividing the total royalty received by LESSOR by the total NET PROCEEDS. LESSOR agrees to pay that established percentage and LESSEE agrees to pay the balance of such taxes, assessments, or other governmental levies which are assessed, levied or imposed on sales or production, as per paragraph 5. LESSEE shall not be obligated to pay any taxes levied, imposed or assessed against, or measured by reference to operations upon the LEASED PREMISES which are not conducted by or on behalf of LESSEE under the terms of this MINERALS LEASE. In the event LESSOR fails to pay when due any taxes, assessments or other governmental levy against the LEASED PREMISES (which LESSOR is obligated to pay under this MINERALS LEASE) LESSEE may, but shall not be obligated to, pay such taxes, assessments or levies, together with any penalty that may be imposed for failure to pay such when due. LESSOR agrees to reimburse LESSEE for any payments made for LESSOR hereunder, together with interest at the rate of 10% per annum from the date such payment is made by LESSEE, which reimbursement shall be made within ten (10) days after LESSEE has given written notice to LESSOR that LESSEE has paid such taxes, assessments or levies. LESSEE shall specify the amount of such taxes, assessments or levies in its notice to LESSOR. IF 3 SUCH REIMBURSEMENT IS NOT MADE AS PROVIDED HEREIN, lessee SHALL HAVE THE RIGHT TO WITHHOLD PAYMENT OF AND RETAIN AS ITS SOLE PROPERTY ANY AND ALL ROYALTY (including the minimum advance royalty provided above) thereafter due and payable to LESSOR until the amount of royalty withheld equals the reimbursement due LESSEE. 10. LESSOR shall have the right to claim the depletion allowance applicable to the royalty paid LESSOR hereunder. 11. With respect to liens, damages, liability and insurance: 11.a. LESSEE agrees to indemnify LESSOR against, and hold LESSOR harmless from any and all claims or liability for injury to or death of persons or for damages to property resulting from LESSEE'S operations hereunder. LESSEE further agrees to indemnify LESSOR against and hold LESSOR harmless from any and all claims or liability for materials or labor resulting from LESSEE'S operations hereunder on the LEASED PREMISES. LESSOR agrees to notify LESSEE of the existence of such claim as soon as it becomes known to LESSOR, and further to notifies LESSEE of the institution of any action, suit or legal proceeding on such claim as soon as the institution of such action, suit, or other proceedings become known to LESSOR and LESSEE is given the sole right to defend and/or settle any such claim with attorneys of its own selection. 11.b. LESSEE further agrees to maintain workman's compensation as required by Utah State law. 11.c. If LESSOR shall fail to pay any and all amounts due hereunder, or duly to satisfy and discharge any mortgage or lien on the LEASED PREMISES, or shall suffer or permit any lien or encumbrance to be imposed upon the LEASED PREMISES, LESSEE may, at its own option, but shall not be obligated to, pay any or all unpaid amounts due and payable under, or satisfy and discharge any such amount so paid or for payments and costs of paying, satisfying and discharging any such mortgage, lien or encumbrance, by withholding and retaining as its sole property from royalties (including the monthly minimum advance royalty) due and payable hereunder the amounts paid by LESSEE. In case of payment, discharge or satisfaction of a mortgage, lien or encumbrance LESSEE shall have all the rights and remedies against LESSOR which the mortgage or lien or the holder of such encumbrance had against the LESSOR immediately prior to the time of such payment, satisfaction or discharge. 12. LESSOR, or their representative, at their sole risk and at their sole cost and expense, and subject to such reasonable safety regulations as may be prescribed by LESSEE, may have access to the LEASED PREMISES during regular business hours solely for the purpose of inspection of LESSEE'S operations on the LEASED PREMISES. 13. LESSEE will conduct its operations on the LEASED PREMISES in accordance with applicable governmental laws, rules and regulations LESSEE makes no express or implied warranty, covenant or agreement relating to the exploration, development, mining or other 4 operation of or upon the LEASED PREMISES or the marketing of any ore or mineral therefrom. The conduct of any such exploration, development, mining or other operations, or marketing, and the nature, manner or extent thereof, shall be matters to be determined within the sole discretion of LESSEE. 14. LESSEE may, at any time and from time to time during the term of this Lease terminate with respect the LEASED PREMISES, and LESSEE shall be relieved of all obligations, liability or responsibility of every character whatsoever thereafter accruing with respect to the LEASED PREMISES by providing thirty days written notice to LESSOR. 15. LESSOR shall have no right to terminate this MINERALS LEASE unless LESSEE shall fail to perform according to the terms of this MINERAL LEASE and LESSOR shall give written notice to LESSEE specifying the nature of the default. If LESSEE shall not correct such default within thirty (30) days after said notice is given, this MINERAL LEASE shall terminate. In the event this lease is terminated, LESSEE shall provide recordable notice of termination to LESSOR 16. Surrender or termination of this MINERALS LEASE as provided herein shall not relieve the LESSEE of its obligations hereunder which remain unperformed at the time of the surrender or termination including, but not limited to, the obligation to pay all accrued royalties (including the minimum advance royalty), to pay its share of the taxes as above provided and to perform the reclamation work as above provided. 17. LESSEE shall have the right at any time within sixty (60) days following the surrender or termination of this MINERALS LEASE, with respect to all or any parts of the LEASED PREMISES to remove any and all buildings, structures, plants, shops, mills, machinery equipment, lines and facilities. 18. LESSEE will maintain the DATA and supply for examination and copying to LESSOR, or its duly authorized representatives, the DATA, all additional survey maps, drill hole data, including drill hole chip boards, ore reserve calculations, mining plans, reclamation plans and supporting data used to obtain state and/or federal environmental and operating or mining permits, assay, metallurgical and feasibility reports relating to the LEASED PREMISES and any maps or diagrams or mine workings upon the LEASED PREMISES which LESSEE has in its possession or control. 19. Any notice or communication to the parties hereto, or quitclaim deed shall be deemed to have been sufficiently given for all purposes hereof if mailed by U.S. Registered or Certified mail, postage prepaid, return receipt requested, addressed as follows, and the date on the U.S. Post Office receipt shall be deemed to be the date of mailing: To LESSOR: Steve Kosanke and 5 Mary Lou Kosanke P.O. Box 193 La Sal Utah 84530 To LESSEE: MLP /Associates % Charles E. Carlson 12836 N. 60th Street Scottsdale, AZ 85254 20. LESSEE'S failure to perform or comply with a particular provision of this MINERAL LEASE shall be excused if such failure to perform or comply with that particular provision is caused by circumstances or conditions beyond the reasonable control of LESSEE, including but not limited to the following: severe weather, unusual mining casualty, civil or military orders, regulations or authority, insurrections, riots, strikes, acts of God, war or hostilities between any nations, governmental orders or regulations, fire accident, explosion, flood, lockouts, differences with workman, delays of carriers, commandeering or requisitioning by the government. Circumstances or conditions which prevent the performance of a particular provision herein shall only excuse performance of the particular provision, the performance of which is prevented by those circumstances or conditions, and shall not excuse the performance of any of the other provisions of this MINERALS LEASE. No circumstances or conditions shall excuse LESSEE from its obligation to pay minimum advance royalty under Section 9. 21. LESSOR ("OPTIONOR") hereby grants to LESSEE ("OPTIONEE") an irrevocable exclusive option to purchase all of the OPTIONOR'S rights, titles and interest in and to the property comprising the LEASED PREMISES: 21.a. The option is exercised at any time while this MINERALS LEASE is in full force and effect, for the sum of one hundred thousand dollars ($100,000.00) in cash or certified funds. 21.b. Simultaneous with the exercise of the option, OPTIONOR shall execute and deliver to OPTIONEE such deeds, assignments and other instruments, as are necessary to convey the LEASED PREMISES to OPTIONEE. 21.c. The purchase price shall be reduced by sum of all royalties paid under section (5.) of this lease. 22. This MINERALS LEASE shall be governed by and construed and enforced in accordance with the laws of the State of Utah. 23. LESSEE shall comply and conform with all requirements of federal, local and state government relating to annual assessment work and fees in effect as of the date of this lease. Additionally, LESSEE agrees to perform the Sept. 1, 1992-1993 assessment work and Federal Fees of $100.00 per claim for the Sept. 1, 1992-1293, year, and LESSEE will perform said assessments and pay said $100.00 per claim fees for each subsequent year in which the lease continues in effect. 6 24. This MINERAL LEASE contains the entire agreement by and between LESSOR and LESSEE and no oral agreement, promise, statement or representation which is not contained herein shall be binding on LESSOR or LESSEE. No amendment or modification of this MINERALS LEASE shall become effective unless and until the same shall have been reduced to writing and duly signed, executed and acknowledged by the parties hereto. 25. This MINERAL LEASE may be executed in counterpart. IN WITNESS WHEREOF, the parties hereto have executed this Minerals Lease as of the day and year first above written. LESSOR Steve Kosanke and Mary Lou Kosanke /s/ Steve Kosanke ------------------------------------- /s/ Mary Lou Kosanke ------------------------------------- LESSEE MLP ASSOCIATES, LTD. By /s/ Charles E. Carlson ----------------------------------- Charles E. Carlson, General Partner STATE OF UTAH ) : ss. County of San Juan ) On this 28th day of October, 1992, personally appeared before me Steve Kosanke and Mary Lou Kosanke, signer of the foregoing instrument. /s/ Jacque Bane [SEAL] ------------------------------------- Notary Public Residing at La Sal, Utah ------------------------- My Commission Expires: March 4, 1996 - ---------------- 7 STATE OF ARIZONA ) : ss. County of Maracopa ) On this 2 day of November, 1992, personally appeared before me Charles E. Carlson, one of the signers of the foregoing instrument, who duly acknowledged to me that he executed the same on behalf of MLP Associates, A Colorado Limited Partnership. /s/ Melanie Konski -------------------------------------- Notary Public Residing at Phoenix, AZ -------------------------- My Commission Expires: [SEAL] 7-27-95 - ------- 8 MINERAL LEASE APPENDIX A Leased Premises The following unpatented mining claims are located in San Juan County Utah, and duly recorded on the books of the County Recorder, San Juan County, Utah Claim name Book Page UMC# Oxide I 707 734 330928 Oxide 2 707 735 330929 Oxide 3 705 119 327778 Oxide 4 705 120 327779 Oxide 5 705 121 327780 Oxide 6 705 122 327781 Oxide Fraction 708 345 331632 9 EX-10.6 15 EXHIBIT 10.6 EXHIBIT 10.6 MINERAL LEASE RECITALS WHEREAS J. F. Costanza and Joyce L. Costanza are holder of valid unpatented mineral claims known as the "Security" claims, located in San Juan County, Utah, and Costanzas are LESSEES under Utah State Metalliferous Lease ML 20569, and Costanzas did, on the 5th day of January, 1983 grant, bargain and quit claim unto Raymond E. Kunkel and Paul B. Clemons, the right to mine copper on and under the parts of said claims within 500 feet of surface, said quit claim being recorded on book 661, page 294-295, and Costanzas and MLP Associates now desire to enter into a lease for the remaining rights to mine copper and other metals, excluding vanadium and Uranium on said Security Claims, and additionally to grant MLP Associates a option to purchase the remaining vanadium and uranium rights retained by Costanzas, and additionally to assign all of Costanza's rights under the Utah State Metalliferous Lease ML 20569 unto MLP Associates, THEREFORE: This Mineral Lease is entered into as of the 3ed days of August, 1992, by and between J. F. Costanza and Joyce L. Costanza ("LESSOR"), whose mailing address is P.O. Box 813, Mazatalon, Sinoloa, Mexico, and MLP Associates, A Colorado Limited Partnership ("LESSEE"), whose mailing address is 12836 N. 60th Street, Scottsdale, Arizona 85254. 1. The "LEASED PREMISES shall include of the rights, titles, interests and expectancy of the LESSOR, in and to the "SECURITY" CLAIMS located in San Juan County, Utah, as described in APPENDIX "A" hereto and a part hereof, as defined and Limited herein, l.a. For and in consideration of the mutual covenants and agreements hereinafter set forth, in further consideration of good and valuable consideration received by LESSOR from LESSEE, 1 LESSOR does hereby lease, let and demise exclusively to LESSEE all of the right, title and interest of the LESSOR in and to the LEASED PREMISES, except the right, titles and interest in and to vanadium and uranium contained therein, and LESSOR hereby grants exclusively to LESSEE said rights titles and interests of LESSOR, to occupy, use, enjoy and possess the LEASED PREMISES, including, but not limited to, the following: 1.b. To explore for, mine or otherwise extract, to mill, treat or otherwise process, and to store, stockpile, remove, market, sell or otherwise dispose of ore and minerals, except vanadium and uranium. 1.c. To dispose of or deposit waste material and tailings on the LEASED PREMISES. 1.d. To construct, use, maintain, repair, replace and relocate in or upon the LEASED PREMISES buildings, shops, plants, machinery, mills, facilities, ore bins and structure of all kinds, roads, shafts, inclines, tunnels, drifts, open pits, pipelines, telephone lines, electric transmission lines and transportation facilities and other utilities. 1.e. To use any underground water now existing or subsequently discovered or developed in or upon the LEASED PREMISES. 1.f. To exercise any and all other rights and privileges which are incidental to or which may be useful, desirable or convenient in LESSEE'S exercise of any or all of the rights hereinabove specified which are not in conflict with applicable state and federal laws and regulations. 1.g. LESSEE may use and enjoy the LEASED PREMISES and exercise any of the rights granted hereunder by any methods now or heretofore known or hereafter developed. 1.h. Notwithstanding the above, LESSEE SHALL CONDUCT ALL EXPLORATION AND MINING ACTIVITIES IN SUCH A MANNER AS NOT TO INTERFERE WITH ANY VANADIUM OR URANIUM MINING, EXPLORATION OR PROCESSING FACILITY EXISTING OR TECHNICALLY PLANNED FOR AT THE TIME OF said activities is commenced, 2 3. LESSOR and LESSEE agree to execute such additional documents as are reasonable and necessary to insure and confirm that the OTHER PROPERTY is covered by this MINERALS LEASE. Without limiting the foregoing, LESSOR agrees that, promptly upon the request of LESSEE, LESSOR shall make, execute, acknowledge and deliver to LESSEE, in recordable form, and amendment or amendments to this MINERALS LEASE or any other documents which better describe the LEASED PREMISES. 4. This MINERALS LEASE shall commence on the date first above set forth in this instrument, run thereafter for a primary term of six (6) years and continue thereafter as long as minerals are being produced from the LEASED PREMISES in commercial quantities, unless sooner terminated or surrendered as hereinafter set forth; provided, however, that in the event production of minerals in commercial quantities occurred during the primary term and thereafter ceases because it is no longer commercially feasible to continue the production of minerals from the LEASED PREMISES, this MINERAL LEASE shall continue beyond the expiration of the primary term without the necessity of production of minerals and/or metals in commercial quantities as long as it is not commercially feasible to continue production and as long as LESSEE performs all the covenants it is obligated to perform hereunder including, but not limited to, the covenant to pay the monthly minimum advance royalty hereinafter provided. 5. LESSEE shall pay LESSOR a royalty equal to the percentage (hereinafter set forth) of the NET PROCEEDS (hereinafter defined) received for all mineral, and/or metals, mined and removed from the LEASED PREMISES and processed and sold in any chemical, mineral or metallic form, hereinafter referred to as the "PRODUCT." The percent of the royalty shall be determined by the amount of NET PROCEEDS per pound of PRODUCT sold during the calendar month. The royalty percentage shall be two percent (2%). The term "NET PROCEEDS" means the gross amount received by LESSEE, after deducting freight and handling charges from the point of final treatment to the point of final sale, from an arms-length bona fide sale of PRODUCT to a purchaser. The term MARKET VALUE of contained metals and/or minerals shall mean the average of U.S. Producer or major Suppliers prices, as quoted in Metals Week and as published in Engineering and Mining Journal (E&MJ) for the month in which the metals and/or minerals are sold. 3 6. LESSEE shall pay all royalties previously reserved and all royalties due and owing on the underlying leases and subleases with respect to the LEASED PREMISES. 7. LESSEE shall prepare and maintain such records as are reasonably necessary to calculate the royalty due LESSOR hereunder and the royalty due on the underlying leases and subleases. LESSEE shall, on written request of LESSOR, furnish copies of such records to LESSOR. 8. The following provisions shall be applicable to "WASTE MATERIAL" which is defined as material mined or extracted from the LEASED PREMISES which LESSEE in its sole discretion determines not to sell because of its mineral content, and LESSEE'S determination shall be final and conclusive: 8.a. LESSOR agrees that WASTE MATERIAL may be mined or otherwise extracted without obligation upon LESSEE to replace the same. At no time during the term of this MINERALS LEASE or at any time thereafter shall LESSEE be required to remove any WASTE MATERIAL deposited by LESSEE on the LEASED PREMISES, except as otherwise provided by applicable governmental laws, rules and regulations in full force and effect on or before the termination of this MINERALS LEASE. 8.b. All WASTE MATERIAL on the LEASED PREMISES prior to surrender or termination of this MINERALS LEASE shall be the property of LESSEE, and LESSOR shall have no right, title or interest whatsoever therein and thereto until this MINERALS LEASE is surrendered or terminated. 8.c. All WASTE MATERIAL on the LEASED PREMISES after surrender or termination of this MINERALS LEASE shall be the property of LESSOR, and LESSEE shall have no right, title or interest whatsoever therein or thereto after this MINING LEASE is surrendered or terminated. 9. With respect to taxes and fees and assessments: 4 9.a. LESSEE agrees to pay all taxes levied and assessed against LESSEE on the LEASED PREMISES, and any improvements placed on the LEASED PREMISES by LESSEE. 9.b. The relationship (in terms of percentage) which the total royalty which LESSOR receives hereunder during a given taxing period bears to the total NET PROCEEDS for the same period shall be established by dividing the total royalty received by LESSOR by the total NET PROCEEDS. LESSOR agrees to pay that established percentage and LESSEE agrees to pay the balance of such taxes, assessments, or other governmental levies which are assessed, levied or imposed: 9.b.(l) Against the LEASED PREMISES solely by reason of LESSEE'S operations on the LEASED PREMISES. 9.b.(2) Against the minerals in or on the LEASED PREMISES in all unsevered state. 9.b.(3) Any occupation, severance, production or net proceeds of mines taxes, if any, imposed for, resulting from or measured by reference to the removal of ore and or minerals by the LESSEE. 9.c. LESSEE shall not be obligated to pay any taxes levied, imposed or assessed against, or measured by reference to operations upon the LEASED PREMISES which are not conducted by or on behalf of LESSEE under the terms of this MINERALS LEASE. In the event LESSOR fails to pay when due any taxes, assessments or other governmental levy against the LEASED PREMISES (which LESSOR is obligated to pay under this MINERALS LEASE) LESSEE may, but shall not be obligated to, pay such taxes, assessments or levies, together with any penalty that may be imposed for failure to pay such when due. LESSOR agrees to reimburse LESSEE for any payments made for LESSOR hereunder, together with interest at the rate of 10% per annum from the date such payment is made by LESSEE, which reimbursement shall be made within ten (10) days after LESSEE has given written notice to LESSOR that LESSEE has paid such taxes, assessments or levies. LESSEE shall specify the amount of such taxes, assessments or levies in its notice to LESSOR. IF SUCH REIMBURSEMENT IS NOT MADE AS PROVIDED HEREIN, lessee SHALL HAVE THE RIGHT TO WITHHOLD PAYMENT OF AND RETAIN AS ITS SOLE 5 PROPERTY ANY AND ALL ROYALTY (including the monthly minimum advance royalty provided above) thereafter due and payable to LESSOR until the amount of royalty withheld equals the reimbursement due LESSEE. 10. LESSOR shall have the right to claim the depletion allowance applicable to the royalty paid LESSOR hereunder. 11. With respect to liens, damages, liability and insurance: 11.a. LESSEE agrees to indemnify LESSOR against, and hold LESSOR harmless from any and all claims or liability for injury to or death of persons or for damages to property other than the LEASED PREMISES, resulting from LESSEE'S operations hereunder. LESSEE further agrees to indemnify LESSOR against and hold LESSOR harmless from any and all claims or liability for materials or labor resulting from LESSEE'S operations hereunder on the LEASED PREMISES. LESSEE'S obligations hereunder shall not apply to any claim unless LESSOR notify LESSEE of the existence of such claim as soon as it becomes known to LESSOR, and further notifies LESSEE of the institution of any action, suit or legal proceeding on such claim as soon as the institution of such action, suit, or other proceedings become known to LESSOR and LESSEE is given the sole right to defend and/or settle any such claim with attorneys of its own selection. 11.b. LESSEE further agrees to maintain workman's compensation as required by Utah State law. 11.c. If LESSOR shall fail to pay any and all amounts due hereunder, or duly to satisfy and discharge any mortgage or lien on the LEASED PREMISES, or shall suffer or permit any lien or encumbrance to be imposed upon the LEASED PREMISES, LESSEE may, at its own option, but shall not be obligated to, pay any or all unpaid amounts due and payable under, or satisfy and discharge any such amount so paid or for payments and costs of paying, satisfying and discharging any such mortgage, lien or encumbrance, by withholding and retaining as its sole property from royalties (including the monthly minimum advance royalty) due and payable hereunder the amounts paid by LESSEE. In case of payment, discharge or satisfaction of a mortgage, lien or encumbrance LESSEE shall have all the rights and remedies against LESSOR which the 6 mortgage or lien or the holder of such encumbrance had against the LESSOR immediately prior to the time of such payment, satisfaction or discharge. Upon the request of LESSEE, LESSOR shall promptly make, execute, acknowledge and deliver to LESSEE any and all instruments which LESSEE in its sole judgment shall deem necessary or desirable to effectuate fully the provisions of this Section. 12. LESSOR, or their representative, at their sole risk and at their sole cost and expense and subject to such reasonable safety regulations as may be prescribed by LESSEE, may have access to the LEASED PREMISES during regular business hours solely for the purpose of inspection of LESSEE'S operations on the LEASED PREMISES. 13. LESSEE will conduct its operations on the LEASED PREMISES in accordance with applicable governmental laws, rules and regulations. LESSEE makes no express or implied warranty, covenant or agreement relating to the exploration, development, mining or other operation of or upon the LEASED PREMISES or the marketing of any ore or mineral therefrom. The conduct of any such exploration, development, mining or other operations, or marketing, and the nature, manner or extent thereof, shall be matters to be determined within the sole discretion of LESSEE. LESSEE shall have no obligation, liability or responsibility whatsoever to LESSOR for damages or injury to the LEASED PREMISES arising out of, or caused by, or in any way connected with the operations conducted by LESSEE upon, in and through the LEASED PREMISES. 14. LESSEE may, at any time and from time to time during the term of this Lease, execute and deliver to LESSOR, in accordance with the notice provisions hereinafter set forth, or deliver for recording to the RECORDER'S OFFICE a quitclaim deed, quitclaiming to LESSOR or its successors in interest all or any part of the LEASED PREMISES and immediately upon such delivery this MINERAL LEASE shall terminate with respect to such part or all, as the case may be, of the LEASED PREMISES, and LESSEE shall be relieved of all obligations, liability or responsibility of every character whatsoever thereafter accruing with respect to that part of all, as the case may be, of the LEASED PREMISES. If such delivery is to the RECORDER'S OFFICE, LESSEE shall deliver a copy of such quitclaim deed to LESSOR. 15. LESSOR shall have no right to terminate this 7 MINERALS LEASE unless LESSEE shall fail to perform according to the terms of this MINERALS LEASE and LESSOR shall give written to LESSEE specifying the nature of the default. If LESSEE shall not correct such default within thirty (30) days after said notice is given, this NEW MINERAL LEASE shall terminate. 16. Surrender or termination of this MINERALS LEASE as provided herein shall not relieve the LESSEE of its obligations hereunder which remain unperformed at the time of the surrender or termination including, but not limited to, the obligation to pay all accrued royalties (including the monthly minimum advance royalty), to pay its share of the taxes as above provided, to perform assessment work, pay fees and to perform the reclamation work as above provided. 17. LESSEE shall have the right at any time within sixty (60) days following the surrender or termination of this MINERALS LEASE, with respect to all or any parts of the LEASED PREMISES to remove any and all buildings, structures, plants, shops, mills, machinery equipment, lines and facilities. 18. LESSEE will maintain the DATA and make available for examination and copying by LESSOR, or its duly authorized representatives, the DATA, all additional survey maps, drill hole data, including drill hole chip boards, ore reserve calculations, mining plans, reclamation plans and supporting data used to obtain state and/or federal environmental and operating or mining permits, assay, metallurgical and feasibility reports relating to the LEASED PREMISES and any maps or diagrams or mine workings upon the LEASED PREMISES which LESSEE has in its possession or control. 19. Any notice or communication to the parties hereto, or quitclaim deed shall be deemed to have been sufficiently given for all purposes hereof if mailed by U.S. Registered or Certified mail, postage prepaid, return receipt requested, addressed as follows, and the date on the U.S. Post Office receipt shall be deemed to be the date of mailing: 8 To LESSOR: J. F. Costanza and Joyce L. Costanza 484 Sundial Moab, Utah 84532 TO LESSEE: MLP /Associates % Charles E. Carlson 12836 N. 60th Street Scottsdale, AZ 85254 20. LESSEE'S failure to perform or comply with a particular provision of this MINERAL LEASE shall be excused if such failure to perform or comply with that particular provision is caused by circumstances or conditions beyond the reasonable control of LESSEE, including but not limited to the following: severe weather, unusual mining casualty, civil or military orders, regulations or authority, insurrections, riots, strikes, acts of God, war or hostilities between any nations, embargoes, governmental orders or regulations, fire accident, explosion, flood, lockouts, differences with workman, delays of carriers, lack of transportation facilities, commandeering or requisitioning by the government, inability to obtain raw materials or the insurance required hereon, curtailment of or failure in obtaining sufficient electrical power. Circumstances or conditions which prevent the performance of a particular provision herein shall only excuse performance of the particular provision, the performance of which is prevented by those circumstances or conditions, and shall not excuse the performance of any of the other provisions of this MINERALS LEASE. 21. LESSOR ("OPTIONOR") hereby grants to LESSEE ("OPTIONEE") an irrevocable exclusive option to purchase all of the OPTIONOR'S rights, titles and interest in and to the property comprising the LEASED PREMISES, including but not limited to, all rights to vanadium and uranium, under the following terms: 21.a. The option is exercised at any time while this 9 MINERALS LEASE is in full force and effect, for the sum of two million dollars ($2,000,000.00) in cash or certified funds. 21.b. Simultaneous with the exercise of the option, OPTIONOR shall execute and deliver to OPTIONEE such deeds, assignments and other instruments, as are necessary to convey the LEASED PREMISES to OPTIONEE. 21.c. The purchase price shall be reduced by the sum of all royalties paid under section 5. of this lease. 22. This MINERALS LEASE shall be governed by and construed and enforced in accordance with the laws of the State of Utah. 23. As further consideration for this lease LESSOR agree to assign all their right, titles and interest in and to UTAH STATE METALLIFEROUS LEASE ML 20569 unto MLP Associates, and to execute such documents as are required to carry our such assignment. 24. This MINERALS LEASE contains the entire agreement by and between LESSOR and LESSEE and no oral agreement, promise, statement or representation which is not contained herein shall be binding on LESSOR or LESSEE. No amendment or modification of this MINERALS LEASE shall become effective unless and until the same shall have been reduced to writing and duly signed, executed and acknowledged by the parties hereto. 25. This MINERALS LEASE may be executed in counterpart. IN WITNESS WHEREOF, the parties hereto have executed this Termination of Existing Minerals Lease, Bill of Sale and New Minerals as of the day and year first above written. LESSOR J. F. Costanza and Joyce L Costanza /s/ J. F. Costanza /s/ Joyce L. Costanza - ----------------------------------- ---------------------------------------- 10 LESSEE MLP ASSOCIATES, LTD. By ------------------------------------ Charles E. Carlson, General Partner STATE OF UTAH ) : ss. County of Grand ) On this 25 day of August, 1992, personally appeared before me J. F. Costanza an Joyce L Costanza signer of the foregoing instrument. /s/ J. L. McDorman ---------------------------------------- Notary Public Residing at Moab My Commission Expires: 6-20-96 STATE OF AZ ) : ss. County of Maracopa) On this 3 day of August, 1992 personally appeared before me Charles E. Carlson, one of the signers of the foregoing instrument, who duly acknowledged to me that he executed the same on behalf of MLP Associates, A Colorado Limited Partnership. /s/ Melanie Konski ---------------------------------------- Notary Public Residing at Phoenix, AZ My Commission Expires: 7-27-95 11 MINERAL LEASE APPENDIX A "SECURITY" CLAIMS LISBON VALLEY PROSPECT SAN JUAN COUNTY, UTAH TOWNSHIP 30 SOUTH, RANGE 26 EAST, S.L.M. SECTION 31 TOWNSHIP 31 SOUTH, RANGE 26 EAST, S.L.M. SECTIONS 5, 6 Date Recorded Date BLM Claim Name Located in County Book/Page Filing BLM UMC No. - ---------- ------- --------- --------- ------ ----------- Security #3 12/22/65 1/18/66 377/402 10/15/79 UMC 140827 Security #5 12/22/65 1/18/66 377/403 10/15/79 UMC 140607 Security #7 12/22/65 1/18/66 377/404 10/15/79 UMC 140608 Security #9 12/22/65 1/18/66 377/405 10/15/79 UMC 140609 Security #11 12/22/65 1/18/66 377/406 10/15/79 UMC 140610 Security #14 12/22/65 1/18/66 377/407 10/15/79 UMC 140611 Security #15 12/22/65 1/18/66 377/408 10/15/79 UMC 140612 Security #16 12/22/65 1/18/66 377/409 10/15/79 UMC 140613 Security #18 12/22/65 1/18/66 377/410 10/15/79 UMC 140614 Security #19 12/22/65 1/18/66 377/411 10/15/79 UMC 140615 Security #20 12/22/65 1/18/66 377/412 10/15/79 UMC 140616 Security #25 12/22/65 1/18/66 377/413 10/15/79 UMC 140617 Security #26 12/22/65 1/18/66 377/414 10/15/79 UMC 140618 Security #27 12/22/65 1/18/66 377/415 10/15/79 UMC 140619 Security #28 12/22/65 1/18/66 377/416 10/15/79 UMC 140620 Security #29 12/22/65 1/18/66 377/417 10/15/79 UMC 140621 Security #30 12/22/65 1/18/66 377/418 10/15/79 UMC 140622 Security #31 12/22/65 1/18/66 377/419 10/15/79 UMC 140623 Security #32 12/22/65 1/18/66 377/420 10/15/79 UMC 140624 Security #33 12/22/65 1/18/66 377/421 10/15/79 UMC 140625 Security #34 12/22/65 1/18/66 377/422 10/15/79 UMC 140626 Security #35 12/22/65 1/18/66 377/423 10/15/79 UMC 140627 Security #36 12/22/65 1/18/66 377/424 10/15/79 UMC 140628 Security #37 12/22/65 1/18/66 377/425 10/15/79 UMC 140629 Security #38 12/22/65 1/18/66 377/426 10/15/79 UMC 140630 Security #39 12/22/65 1/18/66 377/427 10/15/79 UMC 140631 Security #40 12/22/65 1/18/66 377/428 10/15/79 UMC 140632 Security #41 12/22/65 1/18/66 377/429 10/15/79 UMC 140633 Security #42 12/22/65 1/18/66 377/430 10/15/79 UMC 140634 Security #43 12/22/65 1/18/66 377/431 10/15/79 UMC 140635 Security #44 12/22/65 1/18/66 377/432 10/15/79 UMC 140636 Security #45 12/22/65 1/18/66 377/433 10/15/79 UMC 140637 Security #46 12/22/65 1/18/66 377/434 10/15/79 UMC 140638 Security #47 12/22/65 1/18/66 377/435 10/15/79 UMC 140639 Security #48 12/22/65 1/18/66 377/436 10/15/79 UMC 140640 Security #49 1/28/66 2/24/66 378/341 10/15/79 UMC 140641 Security #50 1/28/66 2/24/66 378/342 10/15/79 UMC 140642 Security #51 1/28/66 2/24/66 378/343 10/15/79 UMC 140643 Security #52 1/28/66 2/24/66 378/344 10/15/79 UMC 140644 Security #53 1/28/66 2/24/66 378/345 10/15/79 UMC 140645 Security #54 1/28/66 2/24/66 378/346 10/15/79 UMC 140646 Security #55 1/28/66 2/24/66 378/347 10/15/79 UMC 140647 Security #56 1/28/66 2/24/66 378/348 10/15/79 UMC 140648 EX-10.7 16 EXHIBIT 10.7 EXHIBIT 10.7 Form Approved 8/16/85 SPECIAL USE LEASE AGREEMENT NO. 707 Fund: School The STATE OF UTAH, acting by and through the DIVISION OF STATE LANDS & FORESTRY, LESSOR, hereby leases to Kelmine Corporation, LESSEE, P.O. Box 1383, Moab, UT 84532, the following described tract of State land in San Juan County, Utah, to-wit: T30S, R25E SLB&M San Juan ---------------- Sec. 36: NW4 (portions within, NE4SW4 (portions within) Containing 55.25 acres TO HAVE AND TO HOLD for a term of Sixteen (16) years, beginning as of August 1, 1986, subject to any and all existing valid rights in said land and subject also to the following terms and conditions. LESSOR and LESSEE enter into this Special Use Lease Agreement for the purpose that LESSEE develop the land in the manner hereinafter described and consistent with the principles and objectives of land development expressed and implicit in the Enabling Act of Utah (Act of July 16, 1894, Ch. 138, 28 Stat. 107) and Article X of the Constitution of the State of Utah. 1. The subject tract shall be used by LESSEE for the purpose of a copper ore processing plant. All improvements constructed on the subject tract shall comply with the applicable provisions of the Uniform Building Code, Current Edition, International Conference of Building Officials. 2. LESSEE shall pay, to the LESSOR as rental, for the subject tract the sum of $1000.00 per annum for the first year period of this lease. LESSOR acknowledges the receipt of $1000.00 which is payment of this rental for the year August 1, 1986 through July 31, 1987, plus the $50.00 application fee. Failure to pay the rental for a period of one month from the date such rent is due, and upon expiration of a written notice from LESSOR to LESSEE requiring performance within thirty (30) days, shall work a forfeiture of this lease. SULA 707 Page No. 2 3. LESSEE agrees that LESSOR shall have the right to adjust the annual rentals as provided for in PARAGRAPH 2 at the end of each one (1) year period as LESSOR shall deem to be reasonably necessary in the best interest of the State. LESSEE also agrees that at the end of five (5) years from the date of this lease, and, if necessary, for each two (2) year period thereafter, LESSEE has not developed the land as proposed in Paragraph (1), LESSEE shall then be required to appear before the Board of State Lands and show that it has exercised due diligence toward development of the land. If LESSEE fails to show due diligence, then LESSEE agrees that LESSOR may at its option, terminate this lease agreement as to any or all the land leased hereunder. In the event LESSOR so terminates, LESSEE's interest in the land shall revert to the State. 4. LESSEE, in exercising the privileges granted by this lease, shall comply with the provisions of all valid Federal, State, County, and Municipal laws, ordinances, and regulations which are applicable to the subject tract and operations covered by this lease. 5. The acquisition or assumption by another party under an agreement with the LESSEE of any right or obligation of the LESSEE under this lease shall be ineffective as to the LESSOR unless and until LESSOR shall have been notified of such agreement and shall have recognized and approved the same in writing, and in no case shall such recognition or approval: (i) operate to relieve the LESSEE of the responsibilities or liabilities assumed to LESSOR as hereunder; or (ii) be given unless such other party is acceptable to LESSOR as a lessee, and assumes in writing all of the obligations of the LESSEE under the terms of this lease as to the balance of the term thereof, or acquires the rights in trust as security and subject to such conditions as be necessary for protection of the public interests. 6. LESSEE shall be bound by all of the provisions, conditions, and prohibitions of Chapter 14 of Title 73, Utah Code Annotated (1953) as amended. No waste or by-products shall be discharged which contain any substance in concentrations which will result in substantial harm to fish and wildlife, or to human water supplies. Storage facilities for materials capable of causing water pollution, if accidentally discharged, shall be located so as to prevent any spillage into waters, or channels leading into water, that would result in substantial harm to fish and wildlife or to human water supplies. 7. LESSEE shall take reasonable precautions to protect, in place, all public land survey monuments and private property corners. SULA NO. 707 Page No. 3 8. LESSEE agrees to permit LESSOR free and unrestricted access to and upon the subject tract at all reasonable times for all lawful and proper purposes not inconsistent with the intent of this lease or with the reasonable exercise and enjoyment by the LESSEE of the rights and privileges granted herein. 9. It is hereby understood and agreed that all treasure-trove and all articles of antiquity in or upon the subject lands are and shall remain the property of the of Utah. LESSEE shall report any discovery of a "site" or "specimen" to the Division of State History in compliance with the provisions of Section 63-18-27, Utah Code Annotated (1953), as amended. 10. This lease may be terminatee by LESSOR upon breach of any conditions hereof. If LESSOR determines that the LESSOR, its assigns or successors in interest have breached any conditions of this lease, LESSOR shall notify the breaching party (parties) in writing by certified mail, return receipt requested, specifying the particular breach. The breaching party (parties) shall have thirty, (30) days from the date of such notice, or such longer period as may be required under the circumstances as approved by the Division to correct such breach. If breaching party (parties) fails (fail) to correct such breach within such period, LESSOR may terminate this lease upon thirty (30) days notice; provided, however, such termination shall not release breaching party (parties) from liability for damage prior to such termination. 11. This lease is made pursuant to the provisions of all applicable laws and subject to the rules and regulations of the departments and agencies of the State of Utah presently in effect and to such laws, rules and regulations as may be hereafter promulgated by the State. 12. LESSEE agrees at the time of commencement of construction to furnish a bond with an approved corporate surety company authorized to transact business in the State of Utah, or such other surety as may be acceptable to the LESSOR, in the penal sum of not more than Five Thousand Dollars ($5,000.00) conditioned upon full compliance with all terms and conditions of this lease and the Rules and Regulations relating hereto. 13. LESSEE shall permit any authorized representative cf the LESSOR to examine all books and records pertaining to its operations and royalties payable to LESSOR under the lease at their regular place of business with reasonable notice, and to make copies of and extracts from such books and records if desired. SULA 707 Page No. 4 14. LESSEE shall neither commit nor permit any waste on the said leased lands. LESSEE shall maintain said lands in good condition and at its own expense, free from any nuisance. Surface areas will be cleaned of all trash and debris to the satisfaction of the LESSOR. LESSEE shall maintain the leased premises to standards of repair, orderliness, neatness, sanitation, and safety as required by law and applicable regulations. 15. LESSEE shall have the right to remove any improvements and any personal property placed on the lands by LESSEE, provided that the same shall be removed within sixty (60) days after the expiration of the term of this lease, provided that the LESSEE shall properly restore any damage caused thereby to the subject tract or any improvements remaining thereof; provided further, that LESSOR shall also have the right to retain without compensation to LESSEE, but with costs of removal and disposal chargeable to LESSEE, those improvements and items of personal property left upon the leased premises beyond sixty (60) days after the expiration of this lease. 16. LESSEE assumes liability for and agrees to indemnify LESSOR for and against any and all liability, including attorney's fees, of any nature imposed upon, incurred by, or asserted against LESSOR which in any way relates to or arises out of the activity or presence upon the premises of LESSEE, its servants, employees, agents, sublessees, assignees or invitees. 17. LESSEE shall not assign this lease, in whole or in part, nor sublease the leased premises, nor allow unauthorized or commercial use of the premises without obtaining the prior written consent of LESSOR. 18. LESSEE expressly reserves the right to lease said lands to third parties for mineral exploration and/or development purposes together with the right to grant the mineral lessee reasonable access by ingress and egress to and from the mineral estate through the surface estate in connection with mineral exploration and/or develonment, but without damage to improvements made by LESSEE. 19. LESSOR claims titlia in fee simple, but does not warrant to LESSEE the validity of title to the leased premises. LESSEE shall have no claim from damages or refund against the LESSOR for any claimed failure or deficiency of LESSOR's title to said lands or for interference by any third party. 20. If LESSEE shall initiate or establish any water rights on the leased premises, such right shall become an appurtenance of the leased premises. LESSEE agrees that any existing application to appropriate water on said State land shall be transferred to the Division of State Lands after the application has been completed, SULA NO. 707 Page No. 5 without any cost to the State. It is expressly understood and agreed that this lease does not confer any rights upon LESSEE to use any water presently developed on the subject lands. 21. LESSEE shall at all times observe reasonable precautions to prevent fire on the leased premises and shall comply with all applicable laws and regulations of any governmental agency having jurisdiction. In the event of a fire on the leased premises proximately caused by LESSEE, its servants, employees, agents, sublessees, assignees or licensees which necessitates suppression action by the State Forester, LESSEE agrees to reimburse LESSOR for the cost of such fire suppression action. 22. LESSEE shall comply with any and all valid sanitation and pollution regulations prescribed by any governmental agency having jurisdiction; and the LESSEE agrees to indemnify LESSOR for any damage which LESSOR may suffer which arises out of the improper or unlawful disposal of refuse associated with said land. 23. LESSEE may fence the leased premises at his own expense, but if there is no fence erected, LESSEE shall have no right of action against any other State grazing permittee by reason of a trespass upon the leased premises. 24. In the event of any breach of this agreement, the party at fault shall pay all costs of enforcing the same, including reasonable attorney's fees. 25. Any notice contemplated herein to be served upon LESSEE shall be in writing and shall be deemed sufficient if deposited in the United State mail, postage prepaid and certified or registered, and addressed as follows: Kelmine Corporation P.O. Box 1383 Moab, UT 84532 or at any such other address as LESSEE may from time to time designate by written notice to LESSOR. 26. The provisions hereof shall inure to and be binding upon the successors and assigns of LESSEE. SULA NO. 707 Page No. 6 27. IN WITNESS WHEREOF, the Director of the Utah Division of State Lands and Forestry has executed this instrument as of the 15th day of December, 1986, by authority of a resolution of the Board of State Lands, dated January 20, 1982. LESSOR: STATE OF UTAH DIVISION OF STATE LANDS AND FORESTRY 355 West North Temple 3 Triad Center, Suite 400 Salt Lake City, UT 84180 By: /s/ Ralph A. Miles ------------------------ LESSEE: Kelmine Corporation P.O. Box 1383 Moab, UT 84532 By: /s/ [Illegible] ------------------------ STATE OF UTAH ) : SS. ) COUNTY OF SALE LAKE On the 15th day of December, 1986, personally appeared before me Ralph A. Miles, who being by me duly sworn did say that he is the Director of the Division of State Lands and Forestry of the State of Utah, and that said instrument was signed in behalf of said Board by resolution of the Board, and said Ralph A. Miles acknowledged to me that said Board executed the same in behalf of the State of Utah. Given under my hand and seal this 15th of December, 1986. /s/ Cherrie Clay ---------------------------------- Notary Public, residing at: [Illegible] My Commission Expires: 6/26/88 APPROVED AS TO FORM: UTAH ATTORNEY GENERAL DAVID L. WILKINSON BY: /S/ David S. Christensen ------------------------------- SULA NO. 707 Page No. 7 28. STATE OF UTAH ) : SS COUNTY OF ) On the 5th day of December, 1986, personally appeared before me Charles 0. Keller who being duly sworn did say that he is the President of Kelmine Corporation, and said Charles 0. Keller acknowledge to me that said company executed the same. Given under my hand and seal this 5th day of December, 1986. /s/ [Illegible] ------------------------------- Notary Public, residing at: My Commission Expires: EX-10.8 17 EXHIBIT 10.8 EXHIBIT 10.8 MINING LEASE THIS MINING LEASE made and entered into this 15th day of October, 1973, by and between TINTIC URANIUM COMPANY, a Utah corporation, having its principal office at 1112 Walker Bank Building, Salt Lake City, Utah (hereinafter referred to as "Lessor") and CENTENNIAL DEVELOPMENT COMPANY, a Utah corporation, whose principal office and place of business is located at 34 Century Park-Way, Salt Lake City, Utah (hereinafter referred to as "Lessee"), W I T N E S S E T H : 1. LEASED PREMISES AND TERM. Lessor, in consideration of the royalties hereinafter reserved and the performance of the duties and agreements hereinafter expressed, does hereby lease to Lessee the mineral rights, exclusive of oil and gas, and such surface rights as Lessor owns, to the following described lands located in San Juan County, State of Utah, to wit: Lots One, Two, Three and Four of Section 1, in Township 31 South, of Range 25 East, of the Salt Lake Meridian. which mineral rights and such surface rights are hereinafter referred to as the "Leased Premises". It is the responsibility of the Lessee to obtain from the surface owners, permission for surface use not clearly granted to Lessor. Documents establishing Lessor's rights in the Leased Premises are attached hereto and by reference are made a part hereof, to wit: 1. Conveyance and Agreement dated April 3, 1954, between G. 0. Patterson and Edna L. Patterson, and T-U Uranium Company. 2. Agreement dated April 3, 1954, between G. 0. Patterson and Edna L. Patterson and T-U Uranium Company. 3. Conveyance, dated January 10, 1955, by T-U Uranium Company to Tintic Uranium Company. 4. Letter of opinion, dated October 28, 1959, by Ray, Rawlings, Jones & Henderson to Tintic Uranium Company. TO HAVE AND TO HOLD the Leased Premises unto the Lessee for mining purposes, including prospecting, development, mining, extraction, benefication, milling, processing, removal and sale of ores, metals and other materials of commercial value, except oil and gas, and for all uses reasonably incidental thereto, for a term commencing on the date hereof for a period of ten (10) years, with the right of renewal for like TERMS THEREAFTER, upon written -2- notice to Lessor 90 days before the lease expiration date, as long as minimum work requirements or better or minimum royalties or better, as specified below are satisfied. 2. WORK REQUIREMENTS AND MINIMUM ROYALTIES. Lessee shall have two (2) years from the date hereof to enter upon the Leased Premises to explore, drill, conduct geological, geophysical and geochemical surveys, and otherwise investigate the property, with the requirement that at least $12,000.00 be expended on such work during the two-year period. Thereafter, Lessee shall continue diligently to explore, develop and mine the Leased Premises, with an annual minimum expenditure of $3,000.00. Expenditures to be credited against minimum work requirements shall include all expenditures made by Lessee in connection with any and all investigations, exploration, development, mining, extraction, benefication, milling, processing, removal and sale of ores, metals-minerals and other materials within and from the Leased Premises, except royalties paid to Lessor, income and franchise taxes, home office expenses and supervisory salaries not directly related to operations on the Leased Premises, the acquisition costs of depreciable items and allowance for depletion. Beginning with the third year of the lease, Lessee shall pay a minimum royalty of $250.00 per month. At the option of the Lessee, the minimum royalty may be paid in an annual sum at the end of said lease year. Minimum royalties paid shall be applied as a credit against actual royalties becoming due and payable under this lease. 3. ROYALTIES. Lessor reserves to itself a royalty of six percent (6%) of net smelter returns for all minerals, exclusive of uranium ores, thorium ores and other ores containing fissionable materials, in recoverable amounts of 0.01% or more. For the purposes of computation of the royalty hereunder, "net smelter returns" shall mean all sums received by Lessee for ores or other products from the Leased Premises, less all transportation and treatment charges not deducted by the purchaser. In the event that the mill or smelter to which such ores or products are delivered is owned, operated or controlled by Lessee or its assigns, the charges of such mill or smelter shall not be greater than those of comparable mills or smelters for milling or smelting similar materials. Haulage from the mine to the mill site is to be part of the mining cost and not part of the transportation cost. The term "net smelter return per ton", as used in this lease, shall mean, as to any shipment, the net smelter return for that shipment divided by the number of dry tons of ore in the shipment or the number of tons of ore yielding the concentrate in that shipment. On uranium ores, thorium ores, and ores containing fissionable materials, Lessee shall pay a twenty-five percent (25%) royalty or a twenty-five percent (25%) -3- net profit, as the case may be, from such ores sold or marketed, to the Grantors or their assigns of the Conveyance and Agreement dated April 3, 1954, and the Agreement dated April 3, 1954, copies of both of which are attached hereto and by reference made a part hereof. A six percent (6%) royalty shall be paid to Lessor on the proceeds from the sale of uranium ore, thorium ore, and ores containing fissionable materials, containing a recoverable 0.01% or more of U3O8 or other fissionable materials, free of all development, mining and operating costs. 4. ORES FROM THE LEASED PREMISES. Ores from the Leased Premises shall not be co-mingled with ores from other operations without permission of Lessor. Engineering, sampling and assaying procedures used in the determination of grades and tonnages shall be established by agreement between Lessor and Lessee. 5. PAYMENT OF AND REPORTS RELATING TO ROYALTIES. Before the end of each month following a month in which any net smelter returns or other proceeds have been received, or as soon thereafter as possible, Lessee shall pay the royalties due hereunder and furnish to Lessor a report of the net smelter returns or other proceeds received, which report shall be accompanied by copies of the mill or smelter settlement sheets. 6. REPORTS TO LESSOR. Lessee shall furnish to Lessor within thirty (30) days after the end of each calendar quarter, while this lease is in force: a. A report describing Lessee's operations or activities on the Leased Premises for the quarterly period. b. Copies of the results of geological, geophysical and geochemical surveys including maps, drill logs, and assays pertaining thereto. c. Copies of mine maps showing the current status of mine workings on the Leased Premises. d. In all drilling and sampling on the Leased Premises, the Lessee shall check for the presence and content of uranium, vanadium, thorium, and other fissionable materials, regardless of whether or not such material is mined and sold. Assay and sampling data on these materials shall be included in the quarterly reports. 7. INSPECTION BY LESSOR. Lessee shall permit duly authorized representatives of Lessor at all reasonable times to enter into the workings in the Leased Premises for the purpose of examining, inspecting, surveying or taking such samples as such representatives may desire and for the purpose of ascertaining whether the terms and conditions of this lease are being performed by Lessee. Lessee's agent may accompany such representative of Lessor, but such representative shall enter upon the premises -4- at his own risk. Lessor or its representatives authorized in writing, shall at all reasonable times have access to all records as will show compliance on the part of Lessee with the provisions of this Lease. 8. LESSEE - INDEPENDENT OPERATOR. The Lessee hereunder is an independent operator and all partners and employees of the Lessee, whether on a wage or profit sharing basis, shall be selected, controlled and paid by the Lessee and Lessee shall, at Lessee's expense, carry workmen's compensation insurance and occupational disease compensation insurance covering all of Lessee's employees, and Lessee shall pay any taxes required and/or make any deductions required under the Federal Social Security Act and/or the Utah Employment Security Act for which Lessee may become obligated and shall comply with all Utah laws, rules and regulations or any governmental authority affecting Lessee's operations on the Leased Premises and shall furnish to Lessor evidence of such compliance. 9. INSURANCE. Lessee will maintain public liability and property damage insurance, with an endorsement in favor of Lessor, covering the working of the said premises with limits of not less than $100,000 as to any claim of any one person, not less than $300,000 for total claims for any one occurrence and not less than $25,000 for property damage. 10. POSTING ON LEASED PREMISES. The Lessee shall forthwith post and thereafter keep posted in conspicuous places on the Leased Premises as many written notices as may be necessary to adequately notify all persons who may come within or upon the Leased Premises that the same are held by Lessee under lease from Lessor and that Lessee, and not Lessor, is liable for the payment of all labor performed and supplies and/or materials furnished to or used by Lessee in and upon the Leased Premises, and that Lessee, and not Lessor, shall be responsible for all debts and expenses incurred in mining operations in or upon the Leased Premises. 11. INDEMNITY. The Lessee shall hold Lessor harmless and fully indemnify Lessor against all claims and demands of every kind and nature which may be made upon Lessor or against the above described premises for or on account of any debts or expenses contracted or incurred by the Lessee, as well as from and against all acts, transactions or omissions by Lessee, his agents and servants, including claims, demands, causes of action, costs and expenses arising during the continuance of the agreement from or on account of injury to any person, whether occasioned by any unsafe or dangerous condition of any part of the above described premises or any workings thereon or therein by Lessee, or otherwise, and to defend Lessor at Lessee's own cost and expense from any such liability or asserted liability. 12. LEASE NOT TO BE ASSIGNED OR SUBLET. The Lessee shall not assign or sublet this lease or any interest therein, or the premises affected thereby, or any portion -5- thereof, without the written consent of the Lessor, which consent shall not unreasonably be withheld, nor allow any person not in privity with the parties hereto to take or hold said premises, or any part thereof, under any pretense whatsoever. 13. PROPER OPERATIONS REQUIRED. Lessee shall conduct all operations and work on the Leased Premises in good miner-like fashion and in such a manner as to develop the premises for the realization of the maximum economical return therefrom and shall comply with all of the applicable mining laws and regulations of federal, state and local authorities. 14. TAX PAYMENTS. a. Lessor's Taxes. Lessor shall pay all Federal, state and county taxes of any kind assessed against it on account of the receipt of royalties paid to it by Lessee hereunder. b. Personal Property Tax. Lessee shall pay all state and county taxes assessed to it or to Lessor upon any improvements, machinery, equipment, tools, supplies and other property placed in or upon the Leased Premises by Lessee. c. Property Tax. Lessee shall pay all state and county property tax assessments upon the Leased Premises, except as provided in Paragraph 13e hereof. d. Severence Tax. "Severence" or "Production" taxes, if any, shall be prorated among and shall be paid by Lessee and Lessor in proportion to their respective participation in the proceeds thereof. The words "severence" or "production" taxes, as used herein, shall not be construed as including the tax referred to in Paragraph 13e or any tax resulting from a valuation based upon "net annual proceeds", nor the "mining occupation tax" referred to in Paragraph 13f. e. Net Proceeds Tax. Taxes resulting from assessed valuation of the Leased Premises based upon "net annual proceeds", as provided in Section 59-5-57, U.C.A. 1953, as amended, or any valuation method which may be substituted therefor, shall, except as otherwise provided in this paragraph, be prorated among and be paid by Lessee and Lessor in proportion to their respective participation in such "net annual proceeds". If for any calendar year after the termination of this lease (including the calendar year during which the lease is terminated) the assessed valuation of the Leased Premises based upon "net annual proceeds", shall exceed the assessed valuation which would otherwise have resulted -6- but for "net annual proceeds" from Lessee's operations conducted upon this lease, then notwithstanding the termination of this lease, any additional taxes which result from such difference (increase) in assessed valuation shall be prorated among and shall be paid by Lessee and Lessor in proportion to their respective participation in such "net annual proceeds" which resulted in such increased valuation. f. Mining Occupation Tax. Lessee shall be solely responsible for and agrees to pay any operations conducted under this lease. 15. TERMINATION BY LESSOR FOR CAUSE. If there shall be a violation by Lessee of any covenant or agreement herein contained, and Lessor shall send by registered mail to Lessee written notice specifying such violation and demanding possession of the premises covered by the Lease, and if at the expiration of 90 days after the date of mailing said notice of demand, the violation still continues, the term of this lease shall then at the option of Lessor terminate and expire and the leasehold rights of Lessee in the Leased Premises shall become forfeited, and this agreement shall be terminated in its entirety; and without further demand or notice, Lessor, by its agents or attorneys, may enter upon and into the Leased Premises and dispossess all persons occupying the same, with or without force, and with or without process of law, or at Lessor's option, Lessee and all persons found in occupation of such leased premises may be proceeded against as guilty of unlawful detainer. Failure of Lessor to exercise for any length of time any right of forfeiture for such cause shall in no event operate as a waiver of such right of forfeiture for such cause still continuing, or for any reoccurrence thereof or for any different cause. 16. SURRENDER OF PREMISES ON TERMINATION. Lessee will deliver to Lessor the premises leased herein, with the appurtenances and improvements, in good order and condition, reasonable wear and tear and damage by natural causes and the mining operations herein authorized except, without demand or further notice, on the last day of the term hereof, or of any extended term, or at any time previous upon termination hereof, provided however: a. BROKEN ORES. That all broken ores on or in the leased premises not shipped prior to such expiration or earlier termination may be removed by Lessee within 90 days after termination and accounted for as herein provided as if shipped and sold prior to termination, but if not so removed within said 90-day period such ores shall become the property of Lessor. b. TRACK, PIPE, ETC. All tracks, pipe and ventilating tubing on or in the leased premises shall remain in place at the termination of the lease and become the property of Lessor. -7- c. REMOVAL OF EQUIPMENT. Upon termination of this lease and agreement, Lessee shall have the right, within 120 days from the date of such termination, to remove from the Leased Premises and sell sufficient fixtures and equipment (other than track, pipe and ventilating tubing) constructed or installed by it either on the surface or underground and not necessary for access to shafts, main levels and adits and main haulageways as will fully reimburse it for any undepreciated portion of the cost of such fixtures and equipment, provided that Lessor shall have the option to purchase, at as favorable a price and upon as favorable terms as can be obtained by Lessee from any other person, by giving Lessee written notice of its election to purchase such fixtures or equipment within 30 days after the date of such termination. All such fixtures and equipment not required to be disposed of to so reimburse Lessee and any such equipment remaining on the Leased Premises 120 days after the date of termination of the lease shall become the property of Lessor. 17. DELAY DUE TO CAUSES BEYOND CONTROL OF LESSEE. If Lessee shall be delayed, or interrupted in, or prevented from, performing its obligations as herein provided, by acts of God, fires, floods, strikes, insurrection or mob violence, injunction, regulations or orders or requirements of government, then and in all such cases Lessee shall for the time being, and without liability, be excused from performance of its obligations as herein provided, for the period of such prevention, delay or interruption; and all provisions of this lease and agreement shall again come into full force and effect immediately upon the termination of the period of prevention, delay or disability resulting from any of the causes aforesaid. 18. TERMINATION BY LESSEE. Notwithstanding anything herein to the contrary, continuance of this lease and agreement shall be optional with Lessee, and no penalty shall accrue or be asserted against Lessee by reason of termination by Lessee or for failure thereafter to perform any of the conditions, terms and agreements hereof; and Lessee may terminate this lease and agreement at any time upon giving to Lessor 60 days written notice of intention to terminate. Thereupon any liability of Lessee hereunder shall immediately cease and terminate, except liability on account of any obligation arising out of its operations in the Leased Premises incurred and owing at the time of such termination. 19. MANNER OF GIVING NOTICE. Any written notice or other writing contemplated herein shall be sufficiently served when the same has been deposited in the United States Mail, postage prepaid, registered and addressed as follows: To Lessor: Tintic Uranium Company 1112 Walker Bank Building Salt Lake City, Utah 84111 -8- To Lessee: Centennial Development Company 34 Century Park-Way Salt Lake City, Utah or to such other addresses as Lessee and Lessor or either of them may from time to time designate in writing. This lease and agreement shall inure to the benefit of and be binding upon the heirs, executors, administrators, legal representatives, successors and assigns of the respective parties. IN WITNESS WHEREOF, the parties hereto have caused these presents to be signed by their respective corporate officers thereunto duly authorized and their corporate seals to be hereunto affixed, duly attested, all as of the day and year first hereinabove written. TINTIC URANIUM COMPANY ATTEST: [SEAL] By ILLEGIBLE ILLEGIBLE -------------------------------- - ------------------------------ Its President Secretary LESSOR CENTENNIAL DEVELOPMENT COMPANY ATTEST [SEAL] By ILLEGIBLE ILLEGIBLE -------------------------------- - ------------------------------ Its Chairman Secretary LESSEE -9- STATE OF UTAH ) ) ss. COUNTY OF SALT LAKE ) On the 15th day of October, 1973, personally appeared before me H. E. Raddatz who being by me duly sworn did say that he is the president of Tintic Uranium Company, and that said instrument was signed in behalf of said corporation by authority of a resolution of its Board of Directors, and said H. E. Raddatz duly acknowledged to me that said corporation executed the same. /s/ [ILLEGIBLE] --------------------------------- NOTARY PUBLIC Residing at Salt Lake City, Utah [SEAL] My Commission Expires: /s/ [ILLEGIBLE] - ------------------------------ STATE OF UTAH ) ) ss. COUNTY OF SALT LAKE ) On the 15th day of October, 1973, personally appeared before me J. C. Bennett who being by me duly sworn did say that he is the Chairman of Centennial Development Company, and that said instrument was signed in behalf of said corporation by authority of a resolution of its Board of Directors, and said J. C. Bennett duly acknowledged to me that said corporation executed the same. Portia Williams --------------------------------- NOTARY PUBLIC Residing at Salt Lake City, Utah My Commission Expires: January 19, 1976 - ------------------------------ RATIFICATION AND AMENDMENT This Ratification and Amendment is made effective this 5 day of January 1993 by and between Tintic Uranium Company, a Utah corporation (hereinafter referred to as "Lessor") and MLP Associates, a Colorado limited partnership (hereinafter referred to as "MLP"). RECITALS Lessor and Centennial Development Company, a Utah corporation, entered into a mining lease, (hereafter referred to as "Lease") dated effective the 15th day of October 1973 covering lands located in Township 31 South, Range 25 East, SLM and described as Lots 1, 2, 3 and 4 of Section 1 (hereinafter referred to as the "Premises") which Lease is of record in Book 515, Page 220-228 in the records of San Juan County, Utah. The Lease and all rights and privileges thereunder are currently held under an option agreement between Lisbon Copper Ltd and MLP which agreement is dated April 20, 1988 and recorded in Book 701, Page 720 in the records of San Juan County, Utah. Lessor and MLP desire to adopt, ratify and confirm the Lease and to further amend the terms as set forth in this Ratification and Amendment. Lessor hereby ratifies the Lease, any and all amendments, assignments, subleases or any other transfer of interest of any nature whatsoever occurring between October 15, 1973 and the date of this agreement (of record or not of record) and confirms that all requirements of the Lease, including but not limited to, payments, royalties, work requirements and approvals have been complied with and satisfied as of the date of this Ratification and Amendment. In consideration of the payments, obligations and mutual agreements set forth herein, Lessor and MLP agree as follows: 1. The annual minimum royalty referenced in Section 2, as amended by letter dated June 10, 1982 shall be increased from $300.00 per year to $1,000.00 per year which payment shall be due on the anniversary of the effective date of the Lease. MLP further agrees to pay Lessor the royalty increase of $700.00 retroactive to the October 15, 1992 anniversary date. 2. The annual work requirement of $3,000.00 referenced in Section 2 is hereby deleted in its entirety. 3. The net smelter return royalty of 6% for all minerals exclusive of uranium ores, thorium ores and other ores containing fissionable materials referenced in Section 3 shall be reduced to 3%. The royalty applicable to fissionable ores will remain unchanged. Except to the extent specifically amended in this Ratification and Amendment, the Lease is and shall remain in full force and effect in accordance with its terms. LESSOR TINTIC URANIUM CO. MLP /s/ Thomas A. Henry ILLEGIBLE - ------------------------------ ------------------------------ BY: Thomas A. Henry, JR. BY: President STATE OF CALIFORNIA ) :SS. County of SAN DIEGO ) On this 7 day of December, 1992, personally appeared before me Thomas A. Henry JR., signer of the foregoing instrument who acknowledges to me he has executed same in behalf of the Tintic Uranium Company. /s/ Alison D. Marquardt [SEAL] ------------------------------ Notary Public Residing at San Diego, CA My Commission Expires: 9/23/94 ---------- STATE OF ARIZONA ) : SS. County of Maracopa ) On this 5th day of January, 1993 personally appeared before me Charles E. Carlson, one of the signers of the foregoing instrument, who duly acknowledged to me that he executed the same on behalf of MLP Associates, A Colorado Limited Partnership. /s/ Sara J. Briggs [SEAL] ------------------------------ Notary Public Residing at 12221 N. Tatum Phoenix, AZ 85032 My Commission Expires: Nov. 23, 1994 ------------- EX-10.9 18 EXHIBIT 10.9 EXHIBIT 10.9 LESSEE'S PARTICULAR ATTENTION IS CALLED TO ARTICLE VII OF THIS LEASE Form Approved August 14, 1992 PROOF READ TDW BP MINERAL LEASE NO. 46431 ----------------- ----------- MINERAL LEASE APPLICATION NO. 46431 GRANT: SCH ---------- UTAH STATE LEASE FOR METALLIFEROUS MINERALS THIS UTAH STATE MINERAL LEASE AND AGREEMENT entered into and executed in duplicate as of the 22nd day of February, 1994, by and between the STATE OF UTAH, acting by and through the BOARD OF STATE LANDS & FORESTRY and DIVISION OF STATE LANDS & FORESTRY, DEPARTMENT OF NATURAL RESOURCES, with the office located at 355 West North Temple, 3 Triad Center, Suite 400, Salt Lake City, Utah 84180-1204, hereinafter called the "LESSOR," and Summo USA Corporation c/o St. Mary Minerals Inc. 1776 Lincoln Street, Suite 1100 Denver, CO 80203 (whether one or more individuals, corporation, or other entities) with business office or address as shown above, hereinafter called the "LESSEE," WITNESSETH: That the State of Utah as Lessor, for and in consideration of the fees, rents, royalties, and any other financial consideration paid or required to be paid by Lessee, and the terms and conditions to be performed by Lessee as hereinafter set forth, does hereby GRANT AND LEASE to the Lessee the exclusive right and privilege to explore for, drill for, mine, remove, and dispose of the particular mineral or minerals described in Article I hereof, hereinafter called the "leased substances," situated within the boundaries of the following-described tract of land (extending vertically downward from the surface) in San Juan County, State of Utah, to-wit: TOWNSHIP 30 SOUTH, RANGE 26 EAST, SLB&M. Section 32: W 1/2 containing 320,00 acres, more or less. This Mineral Lease is granted for and in consideration of and subject to all of the terms, provisions, and conditions hereinafter set forth: -2- ARTICLE I. MINERALS COVERED BY THIS LEASE This Mineral Lease covers the following-described leased mineral substances with the boundaries of the above-described lands, to-wit: METALLIFEROUS MINERALS "Metalliferous Minerals" are herein defined to include any ore containing any of the following minerals: Aluminum, Antimony, Arsenic, Beryllium, Bismuth, Cadmium, Chromium, Cecium, Columbium, Cobalt, Copper, Flourspar, Gallium, Gold, Germanium, Hafium, Iron, Indium, Lead, Mercury, Manganese, Molybdenum, Nickel, Platinum, Group Metals, Radium, Selenium, Scandium, Silver, Rare Earth Metals, Rhenium, Tantalium, Tin, Thorium, Tungsten, Thallium, Tellurium, Vanadium, Uranium, Zinc, together with other minerals which are found in association with said specified minerals in such a manner that they cannot be mined separately. In the event Lessee, or the operator or any contractor for Lessee, shall discover within said lands some mineral or minerals other than the mineral or leased substances covered by this lease, Lessee shall promptly notify the Lessor of the kind or nature of such mineral or minerals not included in this lease. ARTICLE II. PRIMARY TERM AND POSSIBLE EXTENSION OF TERM OF LEASE This lease is granted for a primary term of TEN (10) years commencing on the first day of the month following the date hereinabove first written and as long thereafter as the leased substances shall be produced in commercial quantities from the abovedescribed lands, on condition that Lessee shall perform the terms and provisions required to be performed by Lessee including payment of rents and royalties within the times required herein; provided however, that it is expressly agreed that at the end of each period of ten (10) years following the effective date of this lease, the State of Utah as Lessor shall have the right to readjust the terms and conditions of this lease as may then be determined to be in the best interest of the State of Utah as trustee-owner of the mineral estate. In the event of failure or refusal of the Lessee to accept and agree to the readjustment of the terms and conditions submitted by Lessor at the end of such ten (10)-year period, such failure or refusal to accept such readjustment of terms, conditions, or royalty shall operate to forfeit any right to extension of the term of this Mineral Lease and terminate this lease except for the rights of the State of Utah to recover any royalties then owing the State and/or any damages for which Lessee may be liable. This lease will not be extended beyond the end of the twentieth year except by the production of the leased substances in commercial quantities from the leased lands. If Lessee ceases production of leased substances in commercial quantities this lease will terminate one (1) year from the date of last commercial production, unless Lessee commences commercial production at least three (3) months prior to the end of such year and such commercial production then continues for at least six (6) months. -3- ARTICLE III. APPLICABLE LAWS AND REGULATIONS This lease is issued pursuant to the provisions of Title 65, Utah Code Annotated, 1953, as amended, and subject to all valid Rules and Regulations and requirements adopted by the Board of State Lands & Forestry, and of the Board of Oil, Gas, and Mining, applicable to the subject matter of this lease, together with all requirements of the Utah Mined Land Reclamation Act, all requirements of the State Antiquities Act, Title 63, Chapter 18, and all valid rules and regulations relating to safety, sanitation, and health whether under the jurisdiction of the Division of Oil, Gas, and Mining with respect to operations under this lease or under the jurisdiction of some other State agency. ARTICLE IV. RIGHTS TO THE SURFACE ESTATE If the surface estate of all or some portion of the hereinabove-described lands is owned by the Lessor, Lessee shall be entitled to use reasonably and prudently such portions of the surface estate owned by Lessor as shall be reasonably necessary to explore and prospect for, mine, drill, remove, and dispose of the leased mineral substances, including permission to establish and maintain in a safe condition on the surface estate owned by Lessor, access roads, communication lines, tanks, pipelines, reservoirs, mills, processing plants, reduction works, dumps, and other essential structures, facilities, machinery, and equipment, reasonably necessary and expedient for the economic operation of the leasehold and in furtherance of production, treatment, and disposition of the leased substances under this lease. Such surface uses shall be exercised subject to the rights reserved to the State of Utah as provided in Article V hereof, and without unreasonable interference with the rights of any prior or subsequent lessee of the State of Utah under the program of multiple use. If the surface estate of any portion of the described lands is not owned by the State of Utah, except for a reserved right of entry to the mineral estate or mineral estates, the Lessee may exercise such right of entry to the mineral estate covered by this lease, at the sole cost and expense of Lessee herein and without cost to the State of Utah. If any damage is caused directly or indirectly to the surface estate by the Lessee or by the contractor or operator for Lessee, Lessee shall make proper restitution and indemnify the surface owner or owners. Lessee also shall make proper rehabilitation as required by the Utah Mined Land Reclamation Act and as required by all lawful rules and regulations adopted thereunder. Lessor will require a bond to be posted or other security given to the State to be filed with Lessor or any other State agency or officer in a principal amount determined by Lessor to be adequate to assure appropriate reclamation and restitution for any damage to the surface estate. -4- ARTICLE V. EXCEPTIONS AND EXCLUSIONS FROM LEASE Lessor hereby excepts and reserves from the operation of this lease the following rights and privileges: FIRST: The right to establish rights of way and easements on, through, or over the land above described, for utility corridors and for joint or joint and several uses, as may be necessary and appropriate for the management of the above-described lands and other lands of Lessor or lands administered by Lessor, and for the working of other deposits within said lands under mineral leases granted to others under the program of multiple use. SECOND: The right to issue mineral leases to other lessees covering minerals not included in this lease, under such terms and conditions which will not unreasonably interfere with operations under this lease in accordance with the principle of multiple use provided by law. THIRD: In the event Lessor owns the surface estate in said lands or portions of said lands above described, Lessor retains the right to use, lease, sell, or otherwise dispose of the surface estate in said lands or any part thereof, under existing State laws or laws subsequently enacted, insofar as such surface is not essential for the Lessee herein in exploration, prospecting for, mining, drilling, removal, or disposal of the leased substances covered by this lease, to the extent that such use, lease, or sale of the surface estate does not unreasonably interfere with the rights granted to the Lessee herein. Lessor shall notify Lessee herein of any such sale, lease, use, or other disposition of the surface estate. ARTICLE VI. PAYMENT OF RENTALS AND ROYALTIES For and in consideration of the leasehold rights granted to the Lessee, in addition to all other terms and conditions required to be performed by the Lessee, the Lessee hereby covenants and agrees with Lessor to pay rentals and royalties as follows: FIRST: Lessee agrees to pay Lessor as rental for the land covered by this lease the sum of One Dollar ($1.00) per acre and for each fractional part of an acre, each year in advance on or before the first day of the month following the anniversary date of this lease, except the rental for the first year which has been paid with the application for this lease. All rentals paid shall be credited against actual Production Royalties for the lease year in which they shall accrue, but such rentals shall not be credited against the Minimum Royalties under subparagraph "Fourth" of this ARTICLE VI. SECOND: Lessee shall pay lessor a royalty of eight percent for fissionable metalliferous minerals and four percent for non-fissionable metalliferous minerals. The royalty shall be based on the gross value of the ores produced from the leased lands and sold by the lessee under an arms-length contract, except that if there is not an arms-length contract for the ore the royalty shall be based on the gross value received by the lessee under an arms-length contract for the processed product(s) produced from the leased lands less actual processing and refining costs. Processing and refining deductions will not include mining, administrative, or depreciation costs, or deductions for property taxes. Should the processed products be sold under a non-arms-length contract the royalty shall be based on the amount received under the non-arms-length contract or the fair market value of the products whichever is greater, less the allowable deductions as set forth above. -5- THIRD: Payment of Production Royalty shall be made by Lessee to Lessor, as herein required, on or before the last day of the month next succeeding the month during which the minerals or leased substances shall have been shipped or sold or used. In connection with such payment of Production Royalty, the Lessee shall submit a certified statement of the production of all leased substances mined or extracted from the hereinabove-described lands, according to the foregoing royalty schedule together with such information required by the Board of State Lands & Forestry to verify production and disposition of mineral substances produced and disposed of from the leased premises. FOURTH: Lessee may maintain this lease in force beyond the primary term of ten (10) years from the effective date of the lease by paying Lessor, in addition to rentals and production royalties as hereinabove required, an annual minimum royalty of three (3) times the annual rental, providing the lessee is engaged in diligent operations, exploration, research, or development activity which is reasonably calculated to advance development or production of the mineral covered by the lease from the leased premises or lands pooled or unitized with or constituting an approved mining or drilling unit in respect to the leased premises. Said annual minimum royalty shall be paid each year in advance, commencing with the eleventh year of the lease, along with the regular annual rental required to be paid under the terms of this lease. Said rental per acre and said Minimum Royalty shall be paid on each and every acre in this lease to extend the term of this lease and to keep this lease in force and effect. Rentals and Minimum Royalties paid annually shall be credited against actual Production Royalties for the year in which they accrue during the original term, or any extension thereof, but annual rentals shall not be credited against Minimum Royalties. ARTICLE VII. MINERAL TITLE OF LESSOR Lessor claims title to the mineral estate covered by this lease. Lessor does not warrant title nor represent that no one will dispute the title asserted by Lessor. It is expressly agreed that Lessor shall not be liable to Lessee for any alleged deficiency in title to the mineral estate, nor shall Lessee or any assigns of the Lessee become entitled to any refund for any rentals, bonuses, or royalties paid under this lease. ARTICLE VIII. WATER RIGHTS In the event Lessee shall initiate any water rights on the leased premises, such right shall become an appurtenance to the leased premises; and upon surrender, cancellation, or termination of this lease, Lessee or assigns of Lessee shall assign and convey such water rights and any application for appropriation of water to beneficial use relating to the land or the mineral estate covered by this lease to Lessor. -6- If the Lessee shall purchase or otherwise acquire any water rights on some other land and file with the State Engineer appropriate application for change of use onto the premises covered by this lease, the Lessor herein shall have an option for 45 days after the expiration, surrender, or termination of this lease to purchase said otherwise acquired water rights at the acquisition costs of the Lessee. Such option shall begin to run from the date of termination, surrender, or expiration of this lease or from the date when Lessee shall specify in writing the acquisition costs of such other water rights, whichever date is the later date. Unless Lessor accepts such written offer to convey such rights at the actual acquisition costs within said period of 45 days, Lessor shall be deemed to have rejected the offer. Upon payment of the said acquisition costs by the Lessor, Lessee herein shall assign and transfer such acquired water rights to the Lessor. ARTICLE IX. WRITTEN CONSENT REQUIRED FOR ASSIGNMENT OR SUBLEASE Lessee shall not assign this lease nor any portion thereof, nor any rights or privileges herein granted, without the prior written consent of Lessor. Nor shall the Lessee issue any sublease without the prior written consent of Lessor. Any assignment of lease and any sublease issued without prior written consent of Lessor shall be void ab initio. In the event Lessor shall approve an assignment of this lease or of any part hereof, such assignment shall be subject to all of the terms, conditions, and obligations of the Lessee herein set forth. All of the terms, covenants, conditions, and obligations of the Lessee shall be binding upon the heirs, executors, administrators, successors, and assigns of the Lessee. This provision also shall apply to any sublease issued by Lessee and approved by Lessor. ARTICLE X. OVERRIDING ROYALTY LOCATION Neither the Lessee nor the assignee of Lessee shall create or grant any overriding royalty except as permitted by law and by the Rules and Regulations of the Board of State Lands & Forestry. Overriding royalty assignments shall not become effective, even if otherwise valid, until filed with the Lessor. ARTICLE XI. SURRENDER OR RELINQUISHMENT OF LEASE Lessee may surrender this lease for cancellation by Lessor as to all or any part of the leased lands, but not for less than a quarter-quarter section or surveyed lot, upon payment of all rentals, royalties, and other amounts then due and owing to the Lessor, by filing with Lessor a written relinquishment. As to rental, such relinquishment shall be effective on the date of filing, but otherwise on the date of cancellation by the Lessor. -7- ARTICLE XII. NOTICE OF COMMENCEMENT OF OPERATIONS, PLANS, PLATS, BOND Not less than sixty (60) days before commencement of exploration, drilling, or mining operations, Lessee shall give written notice hereof to the Division of State Lands & Forestry and the Division of Oil, Gas, and Mining, together with a plan of operation and a topographic map showing every proposed shaft, tunnel, open pit, drill site, and access road to be used. Lessor shall make an assessment of such plan of operation and either endorse or stipulate changes in Lessee's plan of operation, or request additional information within the sixty (60) day notification period. Lessee shall not proceed with the execution of any such plan of operation without first receiving the written approval of Lessor. Lessee shall maintain at the mine office clear, accurate, and detailed maps of all actual and planned operations on a scale of not more than 50 feet to the inch, with points coordinated with public land surveys showing distance to the nearest public survey monument or reestablished survey corner. Such maps and plats shall be on tracing cloth or other material which is substantially permanent and of which clear and distinct photo copies or blueprints can be readily made without unreasonable delay. Such maps or plats shall show the workings from time to time, as the same are extended. In the event that the operations on the above-described leasehold are intended to be conducted in conjunction with adjacent lands, whether Federal, State, or privately-owned lands, the map and plats shall clearly show how the operations are to be coordinated. All surveys shall be conducted by a licensed surveyor or engineer qualified to practice in Utah. All such maps or plats shall be certified by the surveyor or engineer preparing the same. The State or any agency of the State of Utah, including the Division of Oil, Gas, and Mining, shall be entitled to a true and correct copy thereof, together with the proposed plans of operation. After Lessor receives notice of intent to commence mining operations, upon request of the Lessor, the Lessee shall furnish a bond with an approved corporate surety company authorized to transact business in the State of Utah, or such other security acceptable to the Lessor, in an amount to be determined by Lessor, after taking into account the value of the land and the amount of potential damage which likely will result from such proposed mining operations, and which bond or other security shall be conditioned upon payment of all rentals and royalties from the leasehold and other sums which may become payable to the Lessor, and to assure full compliance with the terms and conditions of this lease and compliance with all Rules and Regulations of the Board of State Lands & Forestry and all Rules and Regulations of any other State agency having jurisdiction over mining operations, and also conditioned upon payment of all damages to the surface and improvements thereon if this lease covers surface estate or some portion of the surface estate which has been sold or otherwise leased, and any damage caused by Lessee to any other lessee of the State of Utah with respect to said land. Such bond or other security furnished prior to commencement of development of the leasehold may be increased in such reasonable amounts as the Lessor may require after discovery of any of the leased substances. If the plan of mining development or mining operations includes core-drilling, the plan of operations shall disclose the locations of core-drilling operations. -8- ARTICLE XIII. ALL OPERATIONS TO BE CONDUCTED IN A LAWFUL, PRUDENT MANNER Lessee shall conduct all operations under this lease in a lawful, prudent, and good workmanlike manner for the effective and safe production of the mineral substances covered by this lease, and to avoid unnecessary damage and injury to the leasehold estate, and also to avoid damage and wastage of other natural resources not covered by this lease. All operations of Lessee, whether conducted directly by Lessee or by operators or contractors, shall be at the sole cost and expense of Lessee. It is expressly covenanted and agreed that Lessor does not grant Lessee or any person dealing with Lessee any right to subject the property hereinabove described, nor any leased substances, to any lien-rights for labor or mechanic's liens, nor to any materialmen's liens, nor to any other lien for any act, omission, neglect, or performance of Lessee or its agents, employees, and contractors. In the event any one shall file any notice or claim of lien against said property or any estate in said property, Lessee shall take all necessary steps expeditiously to have such notice or claim released of record. Lessee shall save Lessor harmless from any and all lien notices and claims against said land arising from any act or neglect of Lessee and any contractor or operator of Lessee in any operations on or relating to the hereinabove described lands. Lessee shall not fence off or otherwise make inaccessible to livestock lawfully on the surface of said premises any watering place without the written consent of Lessor; provided, that Lessee shall not permit any livestock to come upon any portion of the leasehold to pollute any surface or subsurface water available or capable of being made available for domestic use or irrigation. In the operations of Lessee, Lessee shall comply with all laws and regulations for control of water which might be encountered or which might seep into any formation, to avoid pollution of surface and underground waters as required by Chapter 14, Title 73, Utah Code Annotated, 1953, as amended. Lessee shall comply with all valid laws and regulations relating to prevention and suppression of fires, make all necessary provisions for sanitary disposal of wastes, and in all operations connected with said leasehold take appropriate measures for protection of human life and prevention of injuries and disease. ARTICLE XIV. RIGHTS OF LESSOR FOR INSPECTIONS OF LEASEHOLD AND RECORDS Lessor, its officers, and agents have the right at all reasonable times to enter upon the leased lands and premises to inspect the conditions of the leasehold, the work done under the terms of this lease, and the production obtained from the leasehold, such entry and inspections to be done in such a manner as shall not unreasonably interfere with the lawful operations by the Lessee in performance of the terms and conditions of this lease. Lessor also shall have the right to examine all books and records pertaining to operations under this lease whether such books and records are located within a building on the leased premises or located in an office elsewhere and to make copies and abstracts of such records if desired by Lessor. Lessor, its officers, and agents shall have the right to post upon or within the leasehold such notices deemed proper or expedient by Lessor. -9- If Lessee maintains an office in another State or in a foreign country, Lessee nevertheless shall maintain within the State of Utah proper and adequate records relating to operations on this leasehold and also relating to production of leased substances and payment of rentals and royalties. Lessee also shall have a resident agent in the State of Utah to whom any and all notices may be sent by Lessor and on whom process may be served. In the event of any change in the address of Lessee's office in the State of Utah, Lessee shall promptly furnish Lessor with written notice of such change of address within the State of Utah. Examinations of records of Lessee by the Lessor shall be conducted at reasonable times. In the event Lessee conducts core-drilling operations within the leasehold, or by directional drilling from adjacent land, Lessor shall have a right of inspection of core samples and any analysis made thereof and any assay; provided, that any report obtained by Lessor of any core-drilling operations may be declared confidential information by Lessee, in which event Lessor shall keep such information in a separate confidential information file. Such information shall not be disclosed to any competitor nor to any one except to a representative of the Attorney General of the State of Utah until Lessee waives confidentiality or upon surrender, expiration, or termination of this lease. After completion of any core drilling, Lessee shall notify Lessor; and Lessee shall cause all core holes to be plugged or sealed as expeditiously as possible after the need for keeping such core holes unplugged ceases, in accordance with regulations and requirements of the Division of Oil, Gas, and Mining. ARTICLE XV. OPERATIONS IN CONJUNCTION WITH MINING ON OTHER LANDS In the event Lessee, in the interest of economy in mining operations, desires to conduct mining operations on or within the above-described lands in conjunction with mining operations on or within any adjacent Federal, State, or privately-owned land by utilization of shafts, inclines, or tunnels within either the above-described lands or within adjacent lands, Lessee shall make application in writing to the Board of State Lands & Forestry and submit with such application a detailed plan of operations illustrating how leased substances mined from the above-described lands can and will be mined, segregated, and separately accounted for from leased substances mined from some adjacent land. No such operations shall be conducted without written approval of the Board. Any approval granted by the Board shall be conditioned upon proper segregation and proper accounting and record keeping of leased substances mined from each property. Separate records shall be required for accounting for leased substances mined from the above-described lands. In the event Lessee desires to process or mill leased substances from the abovedescribed land in conjunction with processing or milling of leased substances from adjacent or some other lands, whether such processing or milling is intended to be performed on the above-described land or on some other land, Lessee shall submit to the Board a written application detailing how the leased substances mined from the above-described lands shall be segregated and separately accounted for in computation of royalty payments from leased substances mined from other lands. Any Board approval for any such arrangements shall be conditioned upon segregation of leased substances produced from the above-described lands from mineral substances produced from other lands with adequate safeguards to assure proper accounting for determination of royalty. -10- If application is granted for either type of operation or for both, all procedures for either production or milling of minerals shall be subjected to examination by the Division of State Lands & Forestry and by the Division of Oil, Gas, and Mining to determine whether either type of arrangement functions satisfactorily without detriment to the State of Utah. If such inspection results in an adverse report with recommendations for modification or discontinuance of such operations, a copy of the report with recommendations shall be submitted as expeditiously as possible to the Lessee. If any objectionable condition is not promptly remedied to safeguard the rights of the State as Lessor, the Board of State Lands & Forestry shall have the right to order discontinuance of such arrangement; and failure to comply with such order of the Board shall constitute a breach of this Lease Agreement. ARTICLE XVI. SPECIAL REQUIREMENTS IN EVENT OF STRIP-MINING In the event Lessee desires to conduct any strip-mining or open-pit mining or operations which will materially disturb the surface of the above-described lands or some portion thereof, at least sixty (60) days before commencing such type of mining activities, Lessee shall submit to the Division of State Lands & Forestry the proposed plan of operations together with a proposed plan of surface rehabilitation in compliance with the Utah Mined Land Reclamation Act and in compliance with the Rules and Regulations adopted thereunder. A copy of such proposed plan of operations and proposed plan of surface rehabilitation also shall be submitted to the Division of Oil, Gas, and Mining. No such operations shall be commenced until the Division of Oil, Gas, and Mining approves the plan of operations and approves a program of rehabilitation. Security may be required of Lessee to assure appropriate rehabilitation in accordance with the said statute and rules and regulations adopted thereunder. ARTICLE XVII. EQUIPMENT OR FACILITIES TO REMAIN WITH THE LAND Upon surrender, forfeiture, expiration, or termination of this lease, any and all underground timbering supports, shaft linings, rails, and other installations necessary for the support of underground tunnels, shafts, inclines, or other underground mine supports, together with all rails or head frames and all other underground construction and safety equipment annexed to the ground (excluding detachable motor-driven machinery) which cannot be removed without creating a danger to any shaft, tunnel, incline, or other underground improvements annexed to the mine, and including equipment installed underground to provide for ventilation of the mine or some portion thereof, shall be left within said land above described by the Lessee, operator, and contractor of Lessee and shall remain a part of the realty. Lessor shall acquire all rights thereto without indemnification of Lessee or operator or contractor for Lessee. Except as herein specifically excepted, all personal property of Lessee, including removable machinery, equipment, tools, and stockpiles of leased substances for which royalty has been paid shall remain the property of Lessee or operator or contractor for Lessee and Lessee or operator or contractor for Lessee may remove the same at the sole expense of Lessee or operator or contractor within two (2) months following expiration, forfeiture, surrender, or termination of this lease, except that the Board -11- of State Lands & Forestry for good cause shown shall have the right to grant a reasonable extension of time beyond the period of two (2) months for removal of any and all equipment which may be removed by Lessee or operator or contractor as herein provided. At the end of such period, Lessor may consider abandoned and lay claim to any or all equipment or stockpiles remaining on the premises. Upon expiration, surrender, forfeiture, or termination of this lease or abandonment of the leasehold by Lessee, the Lessee shall cause to be sealed or properly shut off all or parts of the mine openings including shafts and tunnels in the manner and method required by the Director of the Division of Oil, Gas, and Mining, and to abate any hazardous condition which may have been left by Lessee, such abatement of hazardous condition to be performed in accordance with reasonable requirements of the Director of the Division of Oil, Gas, and Mining. ARTICLE XVIII. CONSENT TO SUIT IN STATE DISTRICT COURT It is agreed that if there arises any controversy between lessor and Lessee or any successor in interest of Lessee which needs to be litigated, Lessee or any one claiming by or under the Lessee shall bring such action in the District Court of Salt Lake County, State of Utah, after compliance with the requirements of State statutes for bringing suit, including compliance with the requirements of the State Governmental Immunity Act, Title 63, Chapter 30, Utah Code Annotated, 1953, as amended. Neither Lessee nor any assignee of lessee nor against the State of Utah or against any State agency in the United States District Court for the District of Utah, nor in any other United States District Court in some other state, nor in the District of Columbia. ARTICLE XIX. REMEDIES FOR DEFAULT BY LESSEE OR ASSIGNS This Mineral Lease and the terms and conditions of this lease agreement issued by the State of Utah are made with the Lessee herein on condition that Lessee and any lawful successor in interest to Lessee shall perform all covenants and terms and conditions herein set forth to be performed by Lessee or its lawful assigns including payment of rentals and royalties as herein provided; and if at any time there shall be default on the part of lessee or breach of any of the terms or conditions hereof on the part of Lessee or by the successor in interest to the Lessee; and if such default or breach shall continue for a period of thirty (30) days after written notice from Lessor of such default or breach given to Lessee or successor in interest addressed to Lessee or successor in interest at the last address furnished by Lessee or successor in interest by United States mail, then at the expiration of said period of thirty (30) days immediately following such notice if the default or breach has not been remedied, then at the expiration of said period of thirty (30) days, at the option of the Lessor, Lessor may issue written notice of termination and cancellation of this lease and forfeiture declaring that the leased premises and each and every part thereof have thereby reverted to the Lessor, including any and all fixtures and improvements required to be left with the property upon expiration, termination, or cancellation of this lease. -12- In the event that the leasehold estate shall have been damaged or injured by the acts or neglect of the Lessee or operator, contractor, or assigns of Lessee, Lessor also shall have a right of action for damages and for restitution for any failure or refusal to comply with the terms and conditions of any statute of this State relating to reclamation or rehabilitation, or for abatement of pollution, together with rights for injunctive relief. Lessor also shall have the right to recover on any bond or other security deposited with the State of Utah in accordance with the terms or conditions hereinabove set forth for indemnification. ARTICLE XX. DISPOSITION OF ROCK TAILINGS Rock, tailings, and waste materials resulting from the operation of the Lessee on this land which contain the metalliferous minerals enumerated in Article I hereof are covered by this mineral lease, unless and until such time as Lessee renounces in writing the leasehold interest in such materials. In the event Lessee sells or otherwise disposes of any such rock, tailing, or waste materials, Lessee agrees to pay Lessor a Production Royalty on the materials consistent with the prevailing State of Utah royalty for materials or minerals of like kind. IN WITNESS WHEREOF, the parties have executed this lease as of the date hereinabove first written. THE STATE OF UTAH, acting by and through the BOARD OF STATE LANDS & FORESTRY and DIVISION OF STATE LANDS & FORESTRY APPROVED AS TO FORM: JAN GRAHAM SCOTT HIRSCHI, DIRECTOR ATTORNEY GENERAL By /s/ Steven F. Alder By /s/ Edward W. Bonner ----------------------- ------------------------------------------ STEVEN F. ALDER EDWARD W. BONNER, MINERALS SECTION MANAGER Division of State Lands & Forestry-LESSOR MAY 14, 1993 SUMMO USA CORPORATION, c/o St. Mary minerals Inc. --------------------------------------------- By /s/ Gregory A. Hahn ------------------------------------------- Gregory A. Hahn, Executive Vice Pres. LESSEE -13- STATE OF UTAH ) COUNTY OF SALT LAKE ) On the 6th day of April, 1994, personally appeared before me EDWARD W. BONNER, who being by me duly sworn did say that he is the Minerals Section Manager of the Division of State Lands & Forestry of the State of Utah and the signer of the above instrument, who duly acknowledged that he executed the same. Given under my hand and seal this 6th day of April, 1994. /s/ Teresa [Illegible] ---------------------------------- NOTARY PUBLIC, residing at: My Commission Expires: 5-5-95 NOTARY PUBLIC SEAL STATE OF COLORADO ) COUNTY OF DENVER ) On the 23rd day of March, 1994, personally appeared before me Gregory A. Hahn, signer of the above instrument, who duly acknowledged to me that he executed the same. Given under my hand and seal this 23rd day of March, 1994. /s/ James C. [Illegible] ---------------------------------- NOTARY PUBLIC, residing at: 1776 Lincoln #1100 Denver, CO 80203 My Commission Expires: February 14, 1997 STATE OF UTAH ) COUNTY OF ) On the _____ day of _______________, 19_____, personally appeared before me who being duly sworn did say that he is an officer of and that said instrument was signed in behalf of said corporation by resolution of its Board of Directors, and said acknowledged to me that said corporation executed the same. Given under my hand and seal this _____ day of _______________, 19_____. ---------------------------------- NOTARY PUBLIC, residing at: My Commission Expires: December 20, 1996 KENNECOTT UTAH COPPER CORPORATION P.O. BOX 11248 SALT LAKE CITY, UTAH 84147 KENNECOTT UTAH COPPER CORPORATION (Seller) hereby agrees to sell and deliver, and SUMMO USA CORPORATION, San Juan County, UT (Buyer) agrees to purchase and receive the products on terms and subject to conditions specified below and on the reverse side of this Agreement. KC# 3732 Product: Approximately 93% Sulfuric Acid, no specifications Quantity: Nominal 50,000 short tons per year, 100% basis H(2)SO(4) Price: For the first 24 months of deliveries, $35.00/st. 100% basis, f.o.b. Destination, delivered via truck. Price will be adjusted at the beginning of the 25th month of deliveries and annually thereafter, for one year of escalation or de-escalation, by the most recent Consumer Price Index that is available at that time. Delivery Period: 60 months beginning with start up of BUYER's Lisbon Valley Mine. Start up is estimated to be in January 1998. Delivery Schedule: Pursuant to Summo Corporation's requirements, subject to Kennecott Utah Copper Corporation's approval. Deliver Destination: Summo USA Corporation, Lisbon Valley Mine in San Juan County, Utah. Unloading Period: For truck shipments, a maximum two-hour unloading period is allowed after arrival at destination, on a 24-hour basis, 7 days per week. Payment terms: 30 days from date of shipment. Payment In U.S. Dollars by check to: Kennecott Utah Copper Corporation P.O. Box 224 Magna, UT 84044-0224 BUYER ACKNOWLEDGES THAT IT HAS READ THE TERMS AND CONDITIONS ON THE STANDARD KENNECOTT CONTRACT ON THE REVERSE SIDE OF THIS AGREEMENT AND BY SIGNING BELOW AGREES TO BE BOUND BY THESE TERMS AND CONDITIONS. ACCEPTED December 30 1996 ---------------------- SUMMO USA CORPORATION KENNECOTT UTAH COPPER CORPORATION BY Robert A. Prescott BY David A. Litum ----------------------------- ------------------------------ OFFICER OF CORPORATION DIRECTOR-BYPRODUCT SALES The SELLER and BUYER agree that the following terms and conditions govern the sale of the Product: 1. TAXES: All Federal, State or local taxes (except income taxes) now or hereafter imposed in respect to this order, or any transaction involved herein and/or the Production sale, use consumption, delivery, transportation of the Product shall be for account of the BUYER, and if paid or required to be paid by the SELLER, the amount thereof shall be added to and become a part of the price payable to the BUYER hereunder. 2. FINANCIAL RESPONSIBILITY: If, in the reasonable opinion of SELLER, the credit or financial responsibility of BUYER is, or becomes, impaired or unsatisfactory, SELLER reserves the right to demand cash or satisfactory security before making shipment. If BUYER fails to provide cash or satisfactory security to fully satisfy SELLER's demands, such failure shall constitute a breach of the Agreement, and SELLER shall have the right to withhold further shipments and/or to cancel this Agreement or any part of this Agreement at the option of SELLER, without any liability or obligations on the SELLER. Such withholding of shipments and/or cancellation, however, shall not affect the BUYER's liability for damages, including the costs associated with reshipment of tank railcars or tank trucks due to BUYER's failure to meet its financial responsibilities. Additionally, SELLER reserves the right to possession of the Product and the right to stop Product in transit. The acceptance by SELLER of any payment less than the full amount due shall not be a waiver of any rights of SELLER. 3. PAYMENT: Payment of the price shall be made in lawful money of the United States, as per the Payment Terms specified on the front of this document. If payment is not made when due, or in the manner herein provided, SELLER may at its option, without notice, cancel this Agreement as to all or any part of the unfilled quantity. Sales and use taxes paid or required to be paid by the SELLER, which are part of the price pursuant to Paragraph 1, shall be included in the billing for the Product delivery. All other taxes which become part of the price pursuant to Paragraph 1, the amount of which cannot be determined on the invoice date, will be billed when they become known and will be payable within thirty (30) days of billing date. 4. TITLE: Unless otherwise specified, title to and risk of loss of any shipment of Product shall pass from SELLER to BUYER FOB railroad tank car or tank truck at the destination point unless BUYER supplies the equipment to transport the Product, in which case title and risk of loss shall pass FOB railroad tank car or tank truck at loading point. 5. LIABILITY: SELLER assumes no responsibility for the condition of trucks, tank cars and related equipment supplied by BUYER. SELLER is not responsible for, and BUYER agrees to indemnify, defend, and save harmless the SELLER against any, and all liabilities, claims, investigations, suits, causes of action, judgments, losses, penalties, costs or expenses (including, without limitation, reasonable attorneys fees) (collectively, "Liabilities"), arising out of or in consequence of, or alleged to have arisen out of or in consequence of, in whole or in part 1) any breach or default by the BUYER of the terms or conditions of this Agreement, 2) any and all negligent acts by the BUYER, 3) any and all civil or criminal breaches or violations or statutes, regulations, ordinances, or otherwise by the BUYER, 4) any and all Liabilities predicated on theories of strict liability, whether imposed or arising under a statute, ordinance, regulation, or at common law or otherwise by the BUYER, 5) any and all improper acts of loading, transporting, storage, handling, or application of the Product by the BUYER, or, 5) any subsequent resale of the Product or other disposal by the BUYER, including, but not limited to, any and all representations or warranties that the BUYER makes to a third party in the course of the resale or other disposal of the Product, or 7) any and all other acts or omissions of BUYER, whether arising under this contract or otherwise, which result in Liabilities to the SELLER. BUYER hereby assumes liability for, and shall reimburse SELLER for, all damage to, and all loss or description of, any private tank car or tank truck (including the fittings and appurtenances thereto) occurring while said tank car or tank truck is in the possession of BUYER, except when such damage, loss or destruction does not result from the negligence or default of BUYER. BUYER's reimbursement of SELLER hereunder shall be limited to the lessor of: (a) the actual cost to SELLER of repairing, reconditioning or replacing said tank car or tank truck, or (b) the actual depreciated cash value of said tank car or tank truck at the time of such damage, loss or destruction. BUYER shall report promptly to SELLER all damage to, or loss or destruction of, any such tank car or tank truck, howsoever arising, occurring while such tank car or tank truck is in the possession or under the control of BUYER. 6. WARRANTY: Attached to this Agreement is a Composite Analysis, for the dates indicated, of the Product. SELLER OR PRODUCER MAKE NO EXPRESS OR IMPLIED WARRANTIES OF ANY KIND, INCLUDING WHETHER THE PRODUCT CONFORMS TO THE ATTACHED COMPOSITE ANALYSIS. NO WARRANTY BY SELLER OR PRODUCER (OTHER THAN WARRANTY OF TITLE AS PROVIDED IN THE UNIFORM COMMERCIAL CODE) SHALL BE IMPLIED OR OTHERWISE CREATED UNDER THE UNIFORM COMMERCIAL CODE INCLUDING, BUT NOT LIMITED TO, WARRANTY OF MERCHANTABILITY OR WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE. 7. NOTICE: The BUYER shall give written notice of any claim for any cause whatsoever within ten (10) days after arrival of any shipment at destination, and failure to do so shall constitute a waiver by the BUYER of all claims with respect to such shipment. For any defect of quality established, SELLER's liability shall be limited to replacing any defective acid delivered hereunder and in no event shall SELLER incur liability for defects or damage to Products in which acid delivered hereunder is used or for any other kind of consequential, nominal, or incidental damages. 8. INVOICE: SELLER shall invoice BUYER for each delivery on the basis of price provided herein, and each such delivery shall constitute a separate and independent sale. SELLER's weights and analyses shall govern unless proven to be in error. 9. MUTUALLY AGREED PRODUCER: BUYER agrees that SELLER may meet its commitments under this Agreement by having a mutually agreed producer deliver Product on behalf of SELLER, so long as the agreed producer otherwise agrees to meet the terms and conditions of this Agreement. 10. FORCE MAJEURE: This Agreement is subject to the following conditions of force majeure. Any strike, lockout, difference with workmen, accident, fire, explosion, flood, earthquake, storm, unavoidable accident, mechanical breakdown (including shutdowns for maintenance and inventorying) mobilization, war (whether declared or undeclared), riot, rebellion, revolution, requirement, regulation, restriction, or other act of any government, whether legal or otherwise, the elements, inability to secure or delay in securing fuel, or other supplies or materials, or power, necessary for the operation of the mines and plants where the Product sold hereunder is produced or consumed, economic shutdown of SELLER's or BUYER's mine or plant facilities, delays or interruption to, or destruction of mines or plants of SELLER or BUYER, or any other acts beyond the control of the parties, whether or not of the nature or character hereinabove specifically enumerated which delays or interferes with the performance of this Agreement shall be considered sufficient justification for delay in making shipments, delivery or performance hereunder, in whole or in part, until such cause ceases to exist; and this Agreement shall be deemed suspended as long as such cause prevents or delays its execution. Neither party shall be responsible for or liable to the other for damages or expenses incurred or sustained because of any delay or failure to perform because of a condition of force majeure. If under any of the conditions set forth in this Paragraph, supplies of sulfuric acid available to SELLER are insufficient to complete delivery of orders accepted by SELLER prior to the occurrence of the condition or to SELLER's nominated long term regular contract customers. SELLER shall allocate available supplies pro rata to such long term customers until such customers' contractual requirements are met by SELLER, and then SELLER may, at its option, allocate available supplies (having first satisfied the long term customers' contractual requirements) in a manner it deems suitable, without liability for any damages sustained by BUYER. A nominated long term regular contract customer is a minimum annual tonnage commitment of 50,000 sl or more and five (5) years or longer in original contract duration. BUYER shall allocate purchased supplies pro rata to such long term suppliers until such suppliers' contractual requirements are met by BUYER, and then BUYER may at its option allocate purchases (having first satisfied the long term suppliers contractual requirements) in a manner it deems suitable without liability for damages sustained by supplier. If deliveries are interrupted or delayed for any condition of force majeure, the amount of Product which is not delivered at the regular order rate during the period of any such suspension or reduction shall, at the option of SELLER, be deducted from the full amount which otherwise would have been delivered under this order in which event SELLER shall not be obligated to make up such omitted deliveries either during the order period or after termination thereof. It is understood and agreed that SELLER shall be under no obligation to operate its copper smelters nor will it be under any obligation to operate its sulfuric acid plants except as, and to the extent that, it shall have available for that purpose sulfurous cases of commercial grade, produced in the course of operating its smelter and lack of such gases shall be deemed a cause beyond SELLER's control and subject to the Force Majeure provision and, notwithstanding paragraph 9 of this Agreement, SELLER is not obligated to find another producer to meet its obligations under a condition of force majeure. 11. HAZARDS: BUYER acknowledges that there are hazards associated with the use of the Product. BUYER agrees to make its personnel concerned with the Product aware of the hazards and assumes all responsibility for the warning of its employees and independent contractors of all hazards to persons and property in any way connected with Product. BUYER also assumes all responsibility for the risks of using Product in combination with other articles or substances and in any manufacturing process. The SELLER shall not be liable to the BUYER for any consequential, nominal, or incidental damages, including lost profits, arising out of the use, handling, storage, or any application or activity related to the Product. The SELLER shall not be liable to the BUYER for compensation, reimbursement or damages on account of loss of prospective profits or anticipated sales or on account of expenditures, investments or commitments in connection with the business or good will of the BUYER caused by failure of Product to conform to the specifications herein set forth. 12. CLAIMS: The BUYER will promptly notify the SELLER in writing of any claims, demands, suit, action, or proceeding with respect to the Product. 13. GOVERNING LAW: This Agreement shall be deemed to be made under and shall be governed by the laws of the Sale of Utah in all respects, including matters of construction, validity, and performance. 14. ENTIRE AGREEMENT: This Agreement constitutes the entire Agreement between the parties as to the subject matter hereof and may not be changed or modified except by signed writing by the SELLER and BUYER. 15. AFFILIATES: This Agreement inures to the benefit of affiliates, subsidiaries, or parents of the parties. 16. SURVIVAL: The provisions of paragraphs 2, 3, 5 and 11 above survive termination of this Agreement. 17. PRICE PROTECTION: If, after the interval designated in the contract, BUYER is offered material of equal quality by a responsible domestic manufacturer for delivery to the same destination on like terms and conditions as herein provided in quantities adequate to fulfill the entire commitment to deliver product during the entire remaining term (time left) of this contract at a lower delivered cost to BUYER than the delivered cost hereunder. SELLER, within thirty days of receipt of written evidence of same, shall either meet such lower delivered cost or release BUYER from their obligation to purchase by cancelling this contract. The written evidence shall be in the form of a signed proposal to sell sulfuric acid to BUYER on the corporate stationery of the manufacturer or distributor. It must contain the price for sulfuric acid delivered to BUYER's facilities, the provision for changing the price, the volume offered, the term (dates the supply is to commence and end), and the product specifications. STATE OF NORTH CAROLINA ) )ss. COUNTY OF ) On this 17th day of April, 1996 before me the undersigned, a notary public, personally appeared Carolyn Moretz Jennings known to me to be the person whose name is subscribed to the within instrument, and acknowledged that she executed the same. /s/ Lisa A. Watkins ---------------------------------------- Notary Public My Commission Expires: 8/26/98 - --------- [SEAL] STATE OF NORTH CAROLINA ) )ss. COUNTY OF CALDWELL ) On this 18th day of April, 1996 before me the undersigned, a notary public, personally appeared Helen Moretz Sides known to me to be the person whose name is subscribed to the within instrument, and acknowledged that she executed the same. /s/ Joan E. Magee ---------------------------------------- Notary Public My Commission Expires: 4-29-96 - --------- [SEAL] AMENDMENT TO OPTION AGREEMENT This Amendment to Option Agreement is made and entered into as of March _____, 1996 by and between George Alfred Moretz, Carolyn Moretz Jennings, Helen Moretz Sides, Nancy Moretz Burnside, whose address is c/o of George Moretz, 1296 9th Street NW, Hickory, North Carolina 28601, and Christine Abernethy, whose address is 806 S. College Avenue, Newton, North Carolina 28658 ("Owners"), and SUMMO USA CORPORATION, a Colorado corporation and successor in interest to St. Mary Minerals Inc. ("St. Mary"), whose address is 1776 Lincoln Street, Suite 1100, Denver, Colorado 80203. WHEREAS, Owners and St. Mary entered into an Option Agreement dated September 1, 1993 pertaining to certain lands in Township 47 North, Range 19 West, in Montrose County, Colorado. WHEREAS, by Assignment and Assumption Agreement dated November 2, 1993, St. Mary assigned its interest in the option Agreement to Summo. WHEREAS, Owners and Summo now desire to amend the option Agreement and to ratify and confirm the Option Agreement as so modified. NOW, THEREFORE, in consideration of the following covenants, the Owners and Summo agree as follows: 1. Subparagraph (b) of Article 7 is deleted in its entirety and replaced with the following: (b) Summo shall pay to Owners further option payments on the dates and in the amounts as follows: 11-12-93 $ 10,000 March 1, 1994 20,000 (paid 2-7-94) September 1, 1994 20,000 (paid 8-15-94) September 1, 1995 50,000 (paid 8-16-95) September 1, 1996 50,000 September 1, 1997 50,000 September 1, 1998 50,000 September 1, 1999 50,000 September 1, 2000 70,000 --------- $ 370,000 THIS Amendment shall be effective as of March 29, 1996. EXCEPT as herein amended, the Option Agreement is hereby ratified and confirmed by Owners and Summo as executed and as being in full force and effect. STATE OF TENNESSEE ) )ss. COUNTY OF HAMILTON ) On this 4th day of April, 1996 before me the undersigned, a notary public, personally appeared Nancy Moretz Burnside known to me to be the person whose name is subscribed to the within instrument, and acknowledged that she executed the same. /s/ Brian H. Sewell --------------------------------------- Notary Public My Commission Expires: My Commission Expires APRIL 21, 1999 - ------------------------------------ [SEAL] STATE OF NORTH CAROLINA ) )ss. COUNTY OF CATAWBA ) On this 27th day of April, 1996 before me the undersigned, a notary public, personally appeared Christine Abernethy known to me to be the person whose name is subscribed to the within instrument, and acknowledged that she executed the same. /s/ Linda L. Griggs ---------------------------------------- Notary Public My Commission Expires: 4-21-97 - --------- [SEAL] THIS Amendment will inure to the benefit of and will be binding upon the respective successors, representatives and assigns of the Owners and Summo. IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first above written. /s/ George Alfred Moretz /s/ Carolyn Moretz Jennings - ----------------------------------- ----------------------------------- George Alfred Moretz Carolyn Moretz Jennings /s/ Helen Moretz Sides /s/ Nancy Moretz Burnside - ----------------------------------- ----------------------------------- Helen Moretz Sides Nancy Moretz Burnside /s/ Christine Abernethy --------------------------------- Christine Abernethy SUMMO USA CORPORATION By: /s/ [illegible] ---------------------------------- STATE OF NORTH CAROLINA ) )ss. COUNTY OF CALDWELL ) On this 18th day of April, 1996 before me the undersigned, a notary public, personally appeared George Alfred Moretz known to me to be the person whose name is subscribed to the within instrument, and acknowledged that he executed the same. /s/ Joan C. Magee ---------------------------------- Notary Public My Commission Expires: 4-29-96 - --------- [SEAL] STATE OF COLORADO ) CITY AND )ss. COUNTY OF DENVER ) The foregoing instrument was acknowledged before me this 27th day of March, 1996, by Gregory A. Hahn, the president of Summo USA Corporation, on behalf of the corporation. /s/ Michelle Hebert ---------------------------------- Notary Public My Commission Expires: 3-18-99 - --------- [SEAL] EX-10.10 19 EXHIBIT 10.10 EXHIBIT 10.10 PURCHASE OPTION AGREEMENT dated May 1, 1995 ----- TABLE OF CONTENTS PREAMBLE.................................................................... 1 1. OPTION.................................................................. 2 2. ESCROW.................................................................. 2 3. EXCLUSIVE POSSESSION AND SURFACE RIGHTS PRIORITY ....................... 3 4. TITLE................................................................... 4 5. UNDIVIDED INTEREST...................................................... 6 6. OPTION EXERCISE, TERM OF OPTION AND PAYMENT OF PURCHASE PRICE........... 6 (a) OPTION EXERCISE..................................................... 6 (b) TERM OF OPTION...................................................... 6 (c) PAYMENT OF PURCHASE PRICE........................................... 6 7. OPERATIONS ............................................................. 7 (a) SCOPE .............................................................. 7 (b) STANDARDS OF OPERATIONS ............................................ 7 (c) COMPLIANCE WITH LAW; RECLAMATION ................................... 7 8. NO IMPLIED COVENANTS ................................................... 8 9. PROTECTION FROM LIENS AND DAMAGES....................................... 8 10. TAXES................................................................... 8 11. INSURANCE............................................................... 9 12. INSPECTION.............................................................. 9 13. DATA.................................................................... 9 14. CONFIDENTIALITY........................................................ 10 15. TERMINATION AND SURRENDER.............................................. 10 16. REMOVAL OF PROPERTY.................................................... 11 17. ACCESS................................................................. 11 18. EASEMENTS.............................................................. 11 19. NOTICES................................................................ 12 20. ASSIGNMENT............................................................. 12 21. NO TRANSFER OR ENCUMBRANCE ............................................ 14 22. FORCE MAJEURE ......................................................... 14 23. SHORT FORM ............................................................ 15 24. INUREMENT.............................................................. 15 25. MODIFICATION........................................................... 15 26. WAIVER................................................................. 15 27. ENTIRE AGREEMENT....................................................... 16 28. CONSTRUCTION........................................................... 16 29. GOVERNING LAW.......................................................... 16 30. TIME OF ESSENCE........................................................ 16 31. TIME COMPUTATIONS...................................................... 16 32. INVALIDITY............................................................. 16 33. COUNTERPARTS........................................................... 17 34. ADDITIONAL DOCUMENTS................................................... 17 EXHIBIT LIST No. Description --- ----------- A. Names and Addresses of Owners B. Description of the Properties C. Form of General Warranty Deeds D. Form of Quit Claim Deed E. Petrotech Oil and Gas Lease F. Form of Short Form of Agreement ii PURCHASE OPTION AGREEMENT THIS PURCHASE OPTION AGREEMENT made effective as of the 1st day of May, 1995 (the "Effective Date"), by and between those persons whose names and addresses are shown on EXHIBIT A attached hereto and incorporated herein (individually an "Owner" and collectively the "Owners") and SUMMO USA CORPORATION, a Colorado corporation, whose address is 1776 Lincoln Street, Denver, Colorado 80203, ("Summo"). PREAMBLE 1. Owners are the owners of two parcels of real property. One of the parcels contains approximately 320 acres; the other contains approximately 80 acres. The 320 acre parcel is hereafter referred to as the "Plant Parcel" and the 80 acre parcel is hereafter referred to as the "Exploration Parcel." Both parcels are hereafter collectively called the "Properties." They are located in San Juan County, Utah, and are more particularly described on EXHIBIT B attached hereto and incorporated herein. 2. Subject to the Petrotech oil and gas lease hereafter discussed in Section 4(e) (the "Petrotech Matter"), Summo desires to carry out certain mineral exploration work on the Properties and certain survey and site evaluation work on the Plant Parcel. Summo also wishes to acquire the option to purchase the Properties. 3. Owners desire to make the Properties available for the conduct by Summo of such exploration and survey-site evaluation work thereon and to grant Summo the option to purchase the Properties. NOW THEREFORE, in consideration of Twenty Thousand Dollars ($20,000.00) in hand paid to Owners (the "Signing Bonus"), the receipt and sufficiency of which is hereby acknowledged, and further in consideration of the mutual covenants, agreements, and promises herein contained, the parties agree as follows: 1. OPTION. (a) Owners grant to Summo during the term of this Agreement the sole and exclusive option (the "Option") to purchase the Properties, together with all appurtenances, all minerals and mineral rights except as hereafter expressly excluded, all water and water rights incident thereto and all improvements and personal property thereon, free and clear of all liens and encumbrances, for a total purchase price of Two Hundred Forty Thousand Dollars ($240,000.00) (the "Purchase Price). Summo shall be entitled to a credit against the purchase price for all costs and expenses incurred by Summo under the provisions of Section 4 hereof. If either of the Properties are placed into commercial production at any time during the term of the Option (the "Term") as hereafter defined, Summo shall exercise the option by providing written notice of exercise to Owners within ten (10) days of the date of first shipment for sale of ores, concentrates, metals and other mineral products. Within thirty (30) days after such notice Summo shall pay the Purchase Price to Owners in the manner provided in Section 6(c) hereof. "Commercial production" shall mean the processing and sale of ores, concentrates, metals and other mineral products which have been mined on either of the Properties but which shall not include processing for the purpose of testing or milling by a pilot plant. Whether or not either of the Properties are placed into commercial production during the Term of the Option, Summo shall also have the right to exercise the Option as hereafter provided. (b) The Option shall NOT include any rights in and to any oil, gas distillate, other hydrocarbons or sulfur appurtenant to the Properties (the "Oil and Gas Rights"), which shall remain the property of the Owners. 2. ESCROW. (a) Contemporaneously with the execution of this Agreement, Owners shall execute, acknowledge, and deliver to the Escrow Agent as hereafter defined one or more general warranty deeds (the "Deeds") conveying the Properties to Summo in the form (without legal descriptions) of EXHIBIT C attached hereto and incorporated 2 herein but reserving to the Owners (i) the Oil and Gas Rights and (ii) a royalty of one percent (1%) of the net returns from all ores, minerals, concentrates or other products mined and removed from the Exploration Parcel and sold or processed by Summo. (b) Contemporaneously with the execution of this Agreement, Summo shall (i) execute, acknowledge and deliver to Escrow Agent a quit claim deed conveying the Properties back to Owners and terminating the Surface Rights Priority (the "Quit Claim Deed") in the event Summo fails to exercise the Option during the Term thereof (The form of the Quit Claim Deed (without legal descriptions) is attached hereto as EXHIBIT D and incorporated herein), and (ii) deliver to Escrow Agent a check for $20,000 for the balance of the signing bonus ("Signing Bonus Balance") to be held by Escrow Agent in accordance with the provisions of Section 4(e)(iv) hereof. (c) Owners and Summo hereby appoint CB&S Nominee, Inc., 1800 One Norwest Center Building, 1700 Lincoln Street, Denver, Colorado 80203 as their Escrow Agent (i) to receive and distribute the $20,000 Signing Bonus Balance to the party entitled to receive same, (ii) to receive and distribute payment of the Purchase Price; (iii) to hold the Deeds and deliver them to the party entitled to receive the same under the escrow instructions executed contemporaneously herewith by the Owners, Summo and the Escrow Agent (the "Escrow Instructions"); and (iv) to hold the Quit Claim Deed for delivery to the party entitled to receive the same under the Escrow Instructions. The parties hereto agree that the Escrow Agent shall act only pursuant to the Escrow Instructions. 3. EXCLUSIVE POSSESSION AND SURFACE RIGHTS PRIORITY. (a) Subject to the Petrotech Matter, Summo shall have the exclusive possession of and surface rights priority in and to the Properties during the Term of the Option and thereafter if the Option is exercised. (b) In the event during the Term of the Option that the Owners shall enter into any oil or gas leases or any other agreements regarding the Properties all or any 3 portion of the Properties, the surface rights to the Properties of any lessees or third parties thereunder shall at all times be subordinate to the surface rights to the Properties herein granted to Summo (the "Surface Rights Priority"), which shall be specifically designated in the Short Form of Agreement to be executed by Owners and Summo pursuant to Section 23 hereof. 4. TITLE. (a) Lisbon Land & Livestock Company ("Lisbon L&L"), a Colorado general partnership, is record owner of the Properties. The Owners warrant that Warren J. Wood, Wilbur L. Wood, Wesley 0. Wood, Wm. H. Wood and Willard G. Wood constitute all of the general partners of Lisbon L&L. Except for the Petrotech Matter, Owners warrant that they are in sole possession of the Properties, that they have the right to enter into this Agreement, that they know of no other person claiming any interest in the Properties or the ground covered thereby, and that the Properties are free from all liens, encumbrances leases, claims of leasehold interests, restrictions, easements and any other limitations on the rights granted Summo hereunder, except liens for property taxes not yet due and payable. Subject to the Petrotech Matter, Owners further warrant to Summo the quiet enjoyment of the Properties and the right to explore, develop and mine the same in accordance with the rights herein granted to Summo. (b) Owners warrant and will defend title of the Properties against all persons whomsoever except for the Petrotech Matter. (c) At Summo's request, Owners shall take all action necessary (including judicial proceedings) to remove any cloud from or cure any defect in their title to the Properties or the ground covered thereby, including the Petro-Tech Oil & Gas Lease as hereafter defined and obtaining the Petro-Tech Sign-Off as hereafter defined. If Owners fail or refuse to take any such action, Summo may take any such action in Owners' names and at Owners' expense. In the event Owners are unable to obtain the requisite Petro-Tech Sign-Off within the time frame required under Section 4(e)(iv), then any expenses or costs thereafter so incurred by Summo, including any 4 cost incurred by Summo to obtain the Petro-Tech Sign-off, shall be credited against the Purchase Price. Owners agree to cooperate with Summo in any such action. (d) Summo shall not be estopped to deny the validity of Owners' title. (e) (i) On or about January 4, 1993, Owners leased the Plant Parcel to Petrotech Corp. ("Petrotech") pursuant to a certain Oil and Gas Lease that was recorded in the Recorder's Office of San Juan County, Utah as Entry No. 005355 (the "Petrotech Oil-Gas Lease"), a true, correct and complete copy of which is attached hereto and made a part hereof as EXHIBIT E. (ii) To the best of Owners' actual knowledge, Petrotech has not conducted any testing, prospecting or drilling activities on the Plant Parcel nor has Petrotech installed or constructed any pipelines, tanks, roads, buildings or other structures thereon. (iii) Owners acknowledge that during the term of the Option, Summo intends to conduct exploratory investigations, mineral prospecting, soil testing, survey and geophysical surveys, core drilling and other studies on the Plant Parcel to determine, among other things, the feasibility of constructing a plant facillity thereon for use in conjunction with Summo's copper exploration and mining activities in the Lisbon Valley and that extensive acreage is required for such a facility. Owners further acknowledge that conflicts might arise between Summo and Petrotech regarding the use of the surface of the Plant Parcel during the Term of the Option and thereafter if the Option is exercised by Summo. (iv) Owners accordingly agree to use their best efforts to obtain at their sole expense on or before July 31, 1995 a recordable document executed by Petrotech or its successors and assigns (the "Petro-Tech Sign-off") which either wholly terminates the Petrotech Oil-Gas Lease or which subordinates the rights of Petrotech or its successors and assigns to utilize the surface of the Plant Parcel to the rights of Summo as herein granted as well as the rights of Summo as owner of the Plant Parcel if the Option is exercised. The terms of such subordination must be satisfactory to Summo as evidenced by a written approval executed by Summo. If the Petro-Tech Sign-off approved by Summo is received by Escrow Agent by August 7, 5 1995, promptly upon receipt thereof Escrow Agent shall distribute the $20,000 Signing Bonus Balance to Owners. If the Petro-Tech Sign-off is not received by Escrow Agent by August 7, 1995, (i) Escrow Agent shall return the $20,000 Signing Bonus Balance to Summo and (ii) this Agreement/Option shall continue in full force and effect in accordance with its terms and conditions unless terminated by Summo as hereafter provided. 5. UNDIVIDED INTEREST. If the interest claimed by any Owner in any portion of the Properties is less than one hundred percent, the interest claimed by such Owner is set forth in EXHIBIT A. Any representation or warranty of title made by any Owner shall apply only to the interest set forth in EXHIBIT A. 6. OPTION EXERCISE, TERM OF OPTION AND PAYMENT OF PURCHASE PRICE. (a) OPTION EXERCISE. Subject to the provisions of Section 1(a), the Option may be exercised by Summo at any time during the term of the Option by providing written notice of Option exercise to Owners. (b) TERM OF OPTION. The Term of the Option shall be for the period commencing with the Effective Date hereof and ending September 30, 1995. (c) PAYMENT OF PURCHASE PRICE. Within thirty (30) days after notice of Option exercise is given, Summo shall pay the Purchase Price by check which shall be made payable to and shall be transmitted to the Escrow Agent. The amount of Purchase Price shall be reduced by the amount of any credit to which Summo is entitled under Section 1(a) and 4(c) hereof. The Escrow Instructions will instruct the Escrow Agent how the payment shall be disbursed. Upon making such payment to the Escrow Agent, Summo shall be deemed to have paid the Purchase Price to Owners, their heirs, representatives, successors, and assigns, and thereupon Summo shall be discharged to the extent thereof as if the payment had been made directly to Owners, or to any person, firm or corporation entitled thereto, and Summo shall not be liable for the ultimate distribution or receipt of any payment or payments. 6 7. OPERATIONS. (a) SCOPE. During the Term of the Option, Summo shall have free and unrestricted access to the Properties including the surface rights thereof shall have the right and privilege of conducting exploratory investigations and prospecting for mineral deposits on the Properties and the right and privilege of performing survey and other site evaluation work on the Plant Parcel. Such prospecting on the Properties shall include, but not be limited to, soil testing, geophysical surveys, core drilling, shaft sinking, tunnel and mine building and the removal of ore for testing purposes but not removal of ore for sale but subject, nevertheless, to the provisions of Section 1(a). Summo shall also have the right to erect and maintain upon each of the Properties any improvements, structures, or facilities including mines, shafts, tunnels and buildings as may be necessary or convenient for the conduct of its operations. (b) STANDARDS OF OPERATIONS. Summo shall conduct all operations on title Properties in a good and workmanlike manner and in accordance with accepted mining practice. (c) COMPLIANCE WITH LAW; RECLAMATION. Summo shall endeavor in good faith to comply with applicable provisions of federal, state and local laws and regulations, as required by the operation permits issued to Summo by these agencies under which Summo shall conduct its operations. If this Agreement is terminated or if the Option is not exercised during its Term, Summo shall (i) reclaim only those portions of the Properties disturbed by its operations and in compliance with all applicable govermnental laws, regulations and orders ("Govermnentally Required Condition"), and (ii) Summo shall have the right, without payment of any additional consideration to Owners, to enter upon the Properties subsequent to termination of this Agreement or the expiration of the Term of the Option for purposes of performing such reclamation work. Any such reclamation work shall be pursued to a final and Governmentally Required Condition on a forthwith basis without unnecessary delay upon termination of this Agreement. 7 8. NO IMPLIED COVENANTS. No covenants or conditions relating to the exploration or related operations on or in connection with the Properties or the timing thereof other than those expressly provided in this Agreement, shall be implied. After commencing any exploration or related operations on or in connection with the Properties and so long as this Agreement has not been terminated before the expiration of its Term, Summo may in its sole discretion curtail or cease such operations. 9. PROTECTION FROM LIENS AND DAMAGES. Summo shall keep the Properties free of liens for labor performed or materials or merchandise furnished for use on the Properties under this Agreement, and shall hold Owners harmless from all costs, loss or damage which may result from any work or operations of Summo or its occupancy of the Properties. 10. TAXES. Owners shall pay all taxes levied against the Properties prior to the Effective Date of this Agreement. Summo shall pay or reimburse Owners for all taxes levied against the Properties during the Term of the Option. In the case of taxes for the calendar year in which the Term of the Option commences and for the calendar year in which the Term ends, there shall be an apportionment between the parties, Summo to bear the proportion of taxes upon the Properties applicable to that part of the calendar year included during the Term hereof and Owners to bear the balance of the taxes. Summo shall also pay all taxes levied during the Term of the Option against all buildings, structures, machinery, equipment, personal property, fixtures and improvements placed upon the Properties by Summo, and all taxes levied against Summo as an employer of labor. All taxes shall be paid when due and before delinquent, but Summo shall be under no obligation to pay any tax so long as the tax is being contested in good faith by appropriate legal proceedings and the nonpayment thereof does not adversely affect any right, title or interest of Owners in or to the Properties. 8 11. INSURANCE. Summo shall carry at all times during the term of the Option worker's compensation and other insurance required by state laws and mining regulations, or Summo may self-insure as to such matters if it qualifies as a self-insurer under the appropriate laws and regulations. Summo will hold Owners harmless from any and all liability for any claim of loss or damage arising out of the operations of Summo, its agents, representatives, employees and assignees hereunder. 12. INSPECTION. (a) Owners or their authorized representative may enter on the Properties at any reasonable time for the purpose of inspection, but shall enter at their own risk and so as not to hinder unreasonably the operations of Summo. Owners shall indemnify and hold Summo harmless from any damage, claim or demand by reason of injury to or the presence of Owners, their agents or representatives on the Property. (b) Owners or their authorized representative may, at any reasonable time, inspect any records pertinent and necessary for substantiating the compliance by Summo with the provisions of this Agreement. 13. DATA. (a) Upon the execution of this Agreement, Owners shall deliver to Summo any and all drill core, all geological, geophysical, engineering data and maps, logs of drill holes, results of assaying and sampling and similar data concerning the Properties (or copies thereof) which are in Owners' possession or control. (b) Upon the surrender or other termination of this Agreement (except upon exercise of the Option and full payment of the Purchase Price as provided in Section 1(a) and Section 6(c) hereof), Summo shall, within sixty days after termination, (i) return to Owners all drill core and original data delivered by Owners to Summo which are then in Summo's possession or control, and (ii) make available for inspection by Owners all factual geological and geophysical data and maps (not including interpretive data), logs of drill holes, drill core or cuttings and results of assaying and sampling pertaining to the Properties which Summo has obtained as a 9 result of its exploration work under this Agreement and which are then in Summo's possession or control or any assignee of Summo or in the possession or control of any third party equity owner in Summo or an assignee of such third party equity owner. Upon Owners' request made within ninety (90) days after termination of this Agreement, Summo shall at Owners' expense provide Owners with the drill core or cuttings designated by Owners and with copies of any portion of the factual geological and geophysical data and maps (not including interpretive data), logs of drill holes and results of assaying and sampling designated by Owners. Summo makes no representation or warranty as to the accuracy or completeness of any such data or information and shall not be liable on account of any use by Owners or any other person of any such data or information. Summo shall not be liable for the loss or destruction of any drill core or cuttings. 14. CONFIDENTIALITY. During the Term of the Option, all information obtained by Owners or their authorized representatives from Summo or arising out of Summo's activities on the Properties pursuant to this Agreement shall be kept strictly confidential by Owners and shall not be released to any third party except with the prior written consent of Summo. 15. TERMINATION AND SURRENDER. (a) A failure by Summo to pay the Purchase Price within 30 days after exercise of the Option as provided in Section 1(a) and in Section 6(c) hereof shall constitute a termination of this Agreement effective upon the expiration of such 30 day period. Upon the effective date of such termination, all rights of Summo under this Agreement, except as provided in Sections 16 and 17 hereof, shall terminate and all liabilities and obligations of Summo hereunder (including the obligation of paying the purchase price under Section 6(c) hereof) shall likewise thereupon terminate except as provided in Sections 7(c) and 13(b) hereof. (b) Summo may also at any time terminate this Agreement and the Option by delivering to Owners or by filing for record in the appropriate office (with a copy 10 to Owners) a good and sufficient Surrender of this Agreement. Upon mailing the Surrender to Owners or to the appropriate office, all rights of Summo under this Agreement shall terminate, except as provided in Sections 16 and 17 hereof, and all liabilities and obligations of Summo under this Agreement shall likewise terminate except as provided in Section 7(c) and 13(b) hereof and except liability for payment of the purchase price under Section 1 hereof if such became due more than 30 days prior to the date of such termination. 16. REMOVAL OF PROPERTY. For a period of six (6) months after the termination of this Agreement Summo shall have the right (but not the obligation except to the extent set forth in Section 7(c) hereof) to remove from the Properties all buildings, structures, machinery, equipment, personal property, fixtures, and improvements owned by Summo or erected or placed on or in the Properties by Summo, except mine timbers in place. Summo may keep one or more watchmen on the Properties during the six-month period. 17. ACCESS. Subject to the provisions of Section 7(c) of this Agreement, for as long as necessary after termination of this Agreement or Summo's failure to exercise the Option during the Term thereof, Summo shall have the right of access to and across the Properties for reclamation purposes. 18. EASEMENTS. If requested by Summo during the term of this Agreement or following the exercise of the Option, Owners shall execute one or more instruments granting to Summo without cost to Summo easements upon, over or through the Properties or upon, over or through other property owned by Owners, for the construction, maintenance, use, and removal of pipe lines, telephone lines, electrical power or transmission lines, roads, railroads, tramways, flumes, ditches, shafts, drifts, tunnels and other facilities necessary or convenient for Summo's operations on the Properties or on other property. 11 19. NOTICES. All notices and other communications to any party shall be in writing and shall be sufficiently given if delivered in person or sent by certified or registered mail, return receipt requested, addressed as hereinafter set forth. Notices given by mail shall be deemed delivered as of the date of mailing. Until a change of address is communicated as indicated above, all notices to Owners shall be addressed: Lisbon Land & Livestock Company 9220 W. Kerry Lane Peoria, Arizona 85382 Warren J. Wood - c/o Lisbon Land & Livestock Company Elsie Wood - c/o Lisbon Land & Livestock Company Wilbur L. Wood - c/o Lisbon Land & Livestock Company Ethel Wood - c/o Lisbon Land & Livestock Company Wesley 0. Wood - c/o Lisbon Land & Livestock Company Donna Wood - c/o Lisbon Land & Livestock Company Wm. H. Wood - c/o Lisbon Land & Livestock Company Louise M. Wood - c/o Lisbon Land & Livestock Company Willard G. Wood - c/o Lisbon Land & Livestock Company Betty Wood - c/o Lisbon Land & Livestock Company and all notices to Summo shall be addressed: Summo USA Corporation 1776 Lincoln Street Denver, Colorado 80203 Attn: Gregory A. Hahn 20. ASSIGNMENT. (a) The rights of any party hereunder may be assigned in whole or in part without the consent of the other parties hereto, subject to the following provisions: (b) No change or division in the ownership of the Properties or the payment provided for herein, however accomplished, shall enlarge the obligations or diminish the rights or obligations of Summo hereunder. Owners covenant that any 12 change in their ownership shall be accomplished in such a manner that Summo shall be required to make payment and to give notices to but one person, firm or corporation, and upon breach of this covenant, Summo may retain all monies otherwise due to Owners until the breach has been cured. No change or division in ownership shall be binding on Summo until 30 days after Owners have given Summo a certified copy of the recorded instrument evidencing the change or division. (c) No assignment by Summo of the whole or an undivided interest in this Agreement or the Option shall relieve Summo of liability for any subsequent breach by the assignee of any of Summo's obligations hereunder. If this Agreement/Option is assigned as to a segregated portion of the Properties, default by the holder hereunder of that portion shall not affect the rights of holders hereunder of any other portion. (d) If Owners or any of them receive and propose to accept a bona fide written offer from an unrelated third party to purchase, subject to the terms of this Agreement, and purpose to accept all or any part of Owners' interest in the Properties or in this Agreement, such Owners shall first offer the interest to Summo stating the interest proposed to be sold or otherwise disposed of, the offering price from such third party and the other terms and conditions of sale. Summo may accept the offer on the same terms and conditions as such third party offer by notice to Owners given within 60 days following the date of Owners' offer. If Summo does not accept Owners' offer, Owners may sell or otherwise dispose of the interest offered to Summo at a price and upon terms and conditions equal to or less favorable to the third party than those offered to Summo provided that the sale or other disposition is effectuated within 120 days from the effective date of Owners' offer. Any sale or other disposition shall be subject to the terms of this Agreement, including this subsection (d), all of which shall survive the closing of any such sale in full force and effect. If Owners do not sell or otherwise dispose of the interest offered within such 120 day period, the provisions of this subsection (d) shall apply to any subsequent offer received by Owners. 13 21. NO TRANSFER OR ENCUMBRANCE. Without Summo's prior written consent, neither Owners nor any Owner during Term of this Agreement/Option shall (a) sell, transfer, assign or convey any interest in the Properties without Summo's prior written consent or otherwise in accordance with the provisions of Section 20(d) hereof; (b) do or fail to do any act or thing which would cause or permit any part of the Properties to be pledged, collateralized or stand as security for any matter whatsoever; (c) enter into any leases or other agreements concerning the Properties or any part thereof except in connection with the Oil and Gas Rights; or (d) enter into any leases, contracts or other agreements concerning the Oil and Gas Rights in contravention of the Surface Rights Priority herein granted to Summo. 22. FORCE MAJEURE. (a) If Summo shall be prevented by Force Majeure from timely performance of any of its obligations hereunder (except the payment of the Purchase Price), the failure of performance shall be excused and the period for performance and the Term of the Option and this Agreement shall be extended for an additional period equal to the duration of the Force Majeure. Upon the occurrence and upon the termination of any Force Majeure, Summo shall promptly notify Owners. Summo shall use reasonable diligence to remedy a Force Majeure but shall not be required against its better judgment to settle any labor dispute or contest the validity of any law or regulation or any action or inaction of civil or military authority. (b) "Force Majeure" means any cause beyond Summo's reasonable control, including law or regulation, action or inaction of civil or military authority, inability to obtain any license, permit, or other authorization that may be required to conduct operations on or in connection with the Properties in connection with this Agreement; unusually severe weather, mining casualty, fire, explosion, flood, insurrection, riot, labor dispute, inability after diligent effort to obtain workmen or material, delays in transportation and acts of God; unavailability of a suitable market for the ores, minerals, concentrates or other products from the Properties; and excessive costs of mining, milling, processing or marketing, or insufficient prices 14 available for the ores, minerals, concentrates or other products produced from the Properties which render Summo's operations uneconomic. 23. SHORT FORM. Contemporaneously herewith, Summo and Owners have executed and delivered a Short Form of Agreement. Summo may record the Short Form or this Agreement, or both, as it may elect. The form of such Short Form of Agreement is attached hereto and incorporated herein as EXHIBIT F. 24. INUREMENT. All covenants, conditions, limitations and provisions herein contained apply to and are binding upon the parties hereto, their heirs, representatives, successors and assigns. 25. MODIFICATION. No modification, variation, or amendment of this Agreement shall be effective unless the modification, variation or amendment is in writing and is signed by Owners and Summo. 26. WAIVER. No waiver of any breach or default under this Agreement shall be effective unless the waiver is in writing and signed by the party against whom the waiver is claimed. No waiver of any breach or default shall be deemed to be a waiver of any other or subsequent breach or default. 27. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement of the parties and, except as herein expressly provided, supersedes all previous and contemporaneous agreements, representations, warranties or understandings, written or oral. 28. CONSTRUCTION. The paragraph headings are for convenience only, and shall not be used in the construction of this Agreement. 15 29. GOVERNING LAW. The formation, interpretation, and performance of this Agreement shall be governed by the law of the state of Colorado. 30. TIME OF ESSENCE. Except as set forth in Section 22, hereof, time is of the essence in the performance of each and every term, condition, and covenant of this Agreement. 31. TIME COMPUTATIONS. In computing the time permitted or required for performance or payment as provided hereunder, the first day shall be excluded and the last day shall be included. If the last day of any such period is a Saturday, Sunday or legal holiday, the period shall extend to include the next day which is not a Saturday, Sunday, or legal holiday. Any performance or payment which must be taken or made under this Agreement must be taken or made prior to 5:00 p.m. (Denver, Colorado time) of the last day of the applicable period provided hereunder for such action, unless another time is expressly specified. All references to time shall be Denver, Colorado time. If a date for performance or payment falls on a holiday or weekend, the time for performance or payment shall be extended to the next business day, and if performance or payment has occurred on such weekend or holiday it shall be deemed to have occurred on the next business day. 32. INVALIDITY. The invalidity of any provision of this Agreement shall not affect the enforceability of any other provision of this Agreement. 33. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same agreement. If any person named as one of the Owners does not execute this Agreement, it nevertheless shall be binding upon those Owners executing it. 16 34. ADDITIONAL DOCUMENTS. Owners will provide Summo with such additional documents as may be necessary to carry out the purposes of this Agreement. If conditions change by reason of conveyances, assignments or other matters relating to the title to or description of the Properties, Owners and Summo shall execute amendments of this Agreement, the Short Form of Option Agreement and any other documents which may be necessary to reflect such changed conditions. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. LISBON LAND & LIVESTOCK COMPANY, a Colorado general partnership By:/s/Warren J. Wood ------------------------------------- Warren J. Wood, general partner By:/s/Wilbur L. Wood ------------------------------------- Wilbur L. Wood, general partner By:/s/Wesley O. Wood ------------------------------------- Wesley O. Wood, general partner By:/s/William H. Wood ------------------------------------- Wm. H. Wood, general partner By:/s/Willard G. Wood ------------------------------------- Willard G. Wood, general partner /s/Warren J. Wood /s/Elsie Wood - ----------------------------- ------------------------------------ Warren J. Wood, Individually Elsie Wood, Individually 17 /s/Wilbur L. Wood /s/Ethel Wood - ------------------------------- --------------------------------- Wilbur L. Wood, Individually Ethel Wood, Individually /s/Wesley O. Wood /s/Donna Wood - ------------------------------- --------------------------------- Wesley 0. Wood, Individually Donna Wood, Individually /s/William H. Wood /s/Louise M. Wood - ------------------------------- --------------------------------- Wm. H. Wood, Individually Louise M. Wood, Individually /s/Willard G. Wood /s/Betty Wood - ------------------------------- --------------------------------- Willard G. Wood, Individually Betty Wood, Individually SUMMO USA CORPORATI0N, a Colorado corporation By:/s/Gregory A. Hahn ------------------------------- Gregory A. Hahn, Vice President STATE OF COLORADO ) )ss. COUNTY OF MESA ) On this 26th day of April, 1995 before me the undersigned, a notary public, personally appeared Warren J. Wood, Wilbur L. Wood, Wesley 0. Wood, Wm. H. Wood and Willard G. Wood as all of the general partners of Lisbon Land & Livestock Company, a Colorado general partnership, known to me (or proved to me on the oath of Wesley 0. Wood (to be the persons whose names are subscribed to the within instrument and acknowledged that they each executed the same for and on behalf of said partnership. My Commission Expires: 2/6/99 [ILLEGIBLE] --------- -------------------------------- Notary Public 18 ACKNOWLEDGMENT STATE OF CALIFORNIA ) ) ss COUNTY OF SANTA BARBARA ) On this 19th day of April, 1995, before me, Belinda Poindexter, a notary public in and for the State of California, personally appeared WILLIARD G. WOOD AND BETTY WOOD, personally known to me (or proved to me on the basis of satisfactory evidence) to be the persons whose names are subscribed to the within instrument, and acknowledged to me that they executed the same in their individual capacities, and that by their signature on the instrument, the persons executed the instrument. WITNESS my hand and official seal. [SEAL] Belinda Poindexter Comm. #1020189 NOTARY PUBLIC CALIFORNIA SANTA BARRARA COUNTY Comm Expires March 17, 1998 Signature /s/ Belinda Poindexter ------------------------ STATE OF OREGON ) )ss. COUNTY OF MARION ) On this 18th day of April, 1995 before me the undersigned, a notary public, personally appeared Warren J. Wood and his wife Elsie Wood known to me (or proved to me on the oath of ______________ (to be the persons whose names are subscribed to the within instrument, and acknowledged that they each executed the same. My Commission Expires: 11-8-96 /s/T. Nichols ----------------- ----------------------- Notary Public [OFFICIAL SEAL] T. NICHOLS NOTARY PUBLIC - OREGON COMMISSION NO-019514 MY COMMISSION EXPIRES NOV 08, 1996 STATE OF OREGON ) )ss. COUNTY OF MARION ) On this 18th day of April 1995 before me the undersigned, a notary public, personally appeared Wilbur L. Wood and his wife Ethel Wood known to me (or proved to me on the oath of __________________________ (to be the persons _____________ whose names are subscribed to the within instrument, and acknowledged that they each executed the same. My Commission Expires: 11-8-96 /s/T. Nichols ----------------- ----------------------- Notary Public [OFFICIAL SEAL] T. NICHOLS NOTARY PUBLIC - OREGON COMMISSION NO-019514 MY COMMISSION EXPIRES NOV 08, 1996 STATE OF COLORADO ) )ss. COUNTY OF MESA ) On this 14th day of April, 1995 before me the undersigned, a notary public, personally appeared Wesley 0. Wood and his wife Donna Wood known to me (or proved to me on the oath of _______________ (to be the persons whose names are subscribed to the within instrument, and acknowledged that they each executed the same. My Commission Expires: 2/6/99 /s/ [ILLEGIBLE] -------------------- -------------------------- Notary Public 19 STATE OF _________ ) )ss. COUNTY OF ________ ) On this _______ day of ______________________, 19__ before me the undersigned, a notary public, personally appeared Willard G. Wood and his wife Betty Wood known to me (or proved to me on the oath of ___________________ (to be the persons whose names are subscribed to the within instrument, and acknowledged that they each executed the same. My Commission Expires: ___________________ __________________________ Notary Public STATE OF ARIZONA ) )ss. COUNTY OF MARICOPA ) On this 21 day of April, 1995 before me the undersigned, a notary public, personally appeared Wm. H. Wood and his wife Louise Wood known to me (or proved to me on the oath of _____________________ (to be the persons whose names are subscribed to the within instrument, and acknowledged that they each executed the same. My Commission Expires: [ILLEGIBLE] /s/Connie L. Sanchez ----------------------- ---------------------- Notary Public STATE OF COLORADO ) ) ss. CITY AND COUNTY OF DENVER ) The foregoing instrument was acknowledged before me this 10th day of April, 1995, by Gregory A. Hahn, the Vice President of Summo USA Corporation, a Colorado corporation, on behalf of the corporation. Commission Expires: Feb. 14, 1997 James C. Robertson ----------------------- ------------------------- Notary Public [OFFICIAL SEAL] JAMES C. ROBERTSON NOTARY PUBLIC STATE OF COLORADO 20 EXHIBIT A OWNERS Name and Address % Interest - ----------------- ---------- Lisbon Land & Livestock Company 100% 9220 W. Kerry Lane Peoria, AZ 85382 Warren J. Wood and Elsie Wood, Undivided 20% Partnership Interest husband and wife* Wilbur L. Wood and Ethel Wood, Undivided 20% Partnership Interest husband and wife* Wesley 0. Wood and Donna Wood, Undivided 20% Partnership Interest husband and wife* Wm H. Wood and Louise M. Wood, Undivided 20% Partnership Interest husband and wife* Willard G. Wood and Betty Wood, Undivided 20% Partnership Interest husband and wife* *All care of: Lisbon Land & Livestock Company at the above address EXHIBIT B The following parcels of real property located in San Juan County, Utah: Plant Parcel: - ------------- T 30 S, R 25 E, Sec. 26 - SW/4, W2 SE/4 T 30 S, R 25 E, Sec. 35 - NE/4 NW/4, NW/4 NE/4 Exploration Parcel: - ------------------ T 31 S, R 26 E, Sec. 6 - SW/4 NW/4, NW/4 SW/4 EXHIBIT C [form of individual deed] Recorded at the request of __________________ at___________ a.m./p.m. Fee paid ___________________________________Dollars _______________________ Recorder, by ________________________, DEP Book ________________, Page _______ Mail Tax Notice to __________________________________________________________ Address _____________________________________________________________________ WARRANTY DEED THIS DEED, made this _________ day of _________________, 1995, by ______________________ and ____________________, husband and wife, whose address is c/o Lisbon Land & Livestock Company, 9220 West Kerry Lane, Peoria, Arizona 85382, collectively the Grantor, and Summo USA Corporation, a Colorado corporation, whose address is 1776 Lincoln Street, Denver, Colorado 80203, Grantee: W I T N E S S E T H: That the Grantor, for and in consideration of the sum of $48,000, the receipt and sufficiency of which is hereby acknowledged, has granted, bargained, sold and conveyed, and by these presents does grant, bargain, sell, convey and confirm unto the Grantee, its successors and assigns forever, an undivided twenty percent (20%) interest in and to all the real properties together, with improvements, if any, situate, lying and being in the County of San Juan, State of Utah, as described on EXHIBIT A attached hereto and incorporated herein (the "Properties"). TOGETHER with all and singular the hereditaments and appurtenances thereto belonging, or in anywise appertaining, and the reversions, remainder, rents, issues and profits thereof, and all the estate, right, title, interest, claim and demand whatsoever of the Grantor, either in law or equity, of, in and to the Properties, with the hereditaments and appurtances, BUT FOREVER RESERVING UNTO GRANTOR the following: (a) An undivided twenty percent (20%) interest in and to all rights in and to any oil, gas distillate, other hydrocarbons or sulphur appurtenant to the Properties, which shall remain the property of Grantor; and (b) A royalty of one-fifth of one percent (1%) of the Net Returns from all ores, minerals, concentrates or other products mined and removed from the Exploration parcel described on EXHIBIT A hereto and sold or processed by Grantee. For purposes hereof, the phrase "Net Returns" means: The amount received by Grantee or its successors and assigns from the purchaser of the ores, minerals, concentrates or other products less the following items to the extent borne by Grantee or its successors and assigns: sales, severance and other similar taxes, purchaser's treatment charges or costs, and charges for and taxes on transportation from the mine to the place of sale; TO HAVE AND TO HOLD the Properties above-bargained and described with the appurtenances, unto the Grantee, its successors and assigns forever. And the Grantor, for itself and its successors and assigns, does covenant, grant, bargain and agree to and with the Grantee, its successors and assigns, that at the time of the ensealing and delivery of these presents, Grantor is well seized of its above interest in the Properties above conveyed, has sure, perfect, absolute and indefeasible fee simple title to such interest and has good right, full power and authority to grant, bargain, sell and convey the same in the manner and form as aforesaid, and that the same are free and clear from all former and other grants, bargains, sales, liens, taxes, assessments, encumbrances and restrictions of whatever kind or nature whatsoever, except liens for real property taxes not yet due and payable. 2 THE GRANTOR SHALL AND WILL WARRANT AND FOREVER DEFEND its interest in the Properties in the quiet and peaceable possession of the Grantee, its successors and assigns, against all and every person or persons lawfully claiming the whole or any part thereof. IN WITNESS WHEREOF, the Grantor has executed this Deed on the date set forth above. ____________________________________ and ____________________________________ husband and wife STATE OF __________ ) )ss. COUNTY OF _________ ) On this ____ day of _________, 1995, before me, the undersigned, a notary public, personally appeared __________________ and ________________, husband and wife known to me or proved to me on the oath of _________________, to be the persons whose names are subscribed to the within instrument and that they each executed the same in their individual capacities. WITTNESS my hand and official seal. My commission expires: --------------------------------- --------------------------------- Notary Public 3 EXHIBIT C [FORM OF PARTNERSHIP DEED] Recorded at the request of ____________________ at________ a.m./p.m. Fee paid _____________________________ Dollars _____________________________ Recorder, by ___________________, DEP Book ____________________, Page _________ Mail Tax Notice to __________________________________________________ Address _____________________________________________________________ WARRANTY DEED THIS DEED, made this ______________ day of ________________, 1995, by Lisbon Land & Livestock Company, a Colorado general partnership, whose legal address is 9220 West Kerry Lane, Peoria, Arizona 85382, Grantor, and Summo USA Corporation, a Colorado corporation, whose address is 1776 Lincoln Street, Denver, Colorado 80203, Grantee: WITNESSETH: That the Grantor, for and in consideration of the sum of $240,000, the receipt and sufficiency of which is hereby acknowledged, has granted, bargained, sold and conveyed, and by these presents does grant, bargain, sell, convey and confirm unto the Grantee, its successors and assigns forever, all the real properties together with improvements, if any, situate, lying and being in the County of San Juan, State of Utah, as described on Exhibit A attached hereto and incorporated herein (the "Properties"). TOGETHER with all and singular the hereditaments and appurtenances thereto belonging, or in anywise appertaining, and the reversions, remainder, rents, issues and profits thereof, and all the estate, right, title, interest, claim and demand whatsoever of the Grantor, either in law or equity, of, in and to the Properties, with the hereditaments and appurtances, BUT FOREVER RESERVING UNTO GRANTOR the following: (a) All rights in and to any oil, gas distillate, other hydrocarbons or sulphur appurtenant to the Properties, which shall remain the property of Grantor; and (b) A royalty of one percent (1%) of the Net Returns from all ores, minerals, concentrates or other products mined and removed from the Exploration Parcel described on EXHIBIT A hereto and sold or processed by Grantee. For purposes hereof, the phrase "Net Returns" means: The amount received by Grantee or its successors and assigns from the purchaser of the ores, minerals, concentrates or other products less the following items to the extent borne by Grantee or its successors and assigns: sales, severance and other similar taxes, purchaser's treatment charges or costs, and charges for and taxes on transportation from the mine to the place of sale; TO HAVE AND TO HOLD the Properties above-bargained and described with the appurtenances, unto the Grantee, its successors and assigns forever. And the Grantor, for itself and its successors and assigns, does covenant, grant, bargain and agree to and with the Grantee, its successors and assigns, that at the time of the ensealing and delivery of these presents, Grantor is well seized of the Properties above conveyed, has sure, perfect, absolute and indefeasible fee simple title and has good right, full power and authority to grant, bargain, sell and convey the same in the manner and form as aforesaid, and that the same are free and clear from all former and other grants, bargains, sales, liens, taxes, assessments, encumbrances and restrictions of whatever kind or nature whatsoever, except liens for real property taxes not yet due and payable. THE GRANTOR SHALL AND WILL WARRANT AND FOREVER DEFEND the Properties in the quiet and peaceable posession of the Grantee, its 2 successors and assigns, against all and every person or persons lawfully claiming the whole or any part thereof. IN WITNESS WHEREOF, the Grantor has executed this Deed on the date set forth above. LISBON LAND & LIVESTOCK COMPANY, a Colorado general partnership, by all of its general partners as follows: --------------------------------------------- Warren J. Wood, General Partner --------------------------------------------- Wilbur L. Wood, General Partner --------------------------------------------- Wesley 0. Wood, General Partner --------------------------------------------- William H. Wood, General Partner --------------------------------------------- Willard G. Wood, General Partner STATE OF __________ ) )ss. COUNTY OF _________ ) On this _____ day of ______________, 1995, before me, the undersigned, a notary public, personally appeared Warren J. Wood, Wilbur L. Wood, Wesley 0. Wood, William H. Wood and Willard G. Wood, as all of the general partners of Lisbon Land & Livestock Company, a Colorado general partnership, known to me or proved to me on the oath of _____________________ ________________________, to be the persons whose names are subscribed to the within instrument and that they each executed the same for and on behalf of said partnership. WITNESS my hand and official seal. My commission expires: --------------------------------------------- ---------------------------------------- Notary Public 3 EXHIBIT D Recorded at the request of ____________________ at _______ a.m./p.m. Fee paid ____________________________ Dollars _______________________ Recorder, by _________________, DEP Book _____________, Page ____________ Mail Tax Notice to ________________________________________________ Address __________________________________________________________________ QUITCLAIM DEED THIS DEED, made this _____ day of ___________________, 1995, by Summo USA Corporation, a Colorado corporation whose address is 1776 Lincoln Street, Denver, Colorado 80203, Grantor, hereby quitclaims to Lisbon Land & Livestock Company, a Colorado general partnership, Grantee, for and in consideration of ten and no/100th's ($10.00) and other good and valuable consideration, those real properties located in San Juan County, State of Utah, as described on Exhibit A attached hereto and incorporated herein (the "Properties"). RESERVING UNTO GRANTOR: (a) For a period of six months from the date hereof to remove from the Properties all buildings, structures, machinery, equipment, personal property, fixtures and improvements owned by Grantor erected or placed on or in the Properties by Grantor, except mine timbers in place. (b) The right to perform reclamation work on those portions of the Properties which have been disturbed by prior operations of Grantor. (c) Grantor shall have the right of access to and across the Properties for the above purposes. IN WITNESS WHEREOF, the Grantor has executed this deed on the date set forth above. SUMMO USA CORPORATION, a Colorado corporation By: ------------------------------------- Gregory A. Hahn, Vice President STATE OF COLORADO ) )ss. CITY AND COUNTY OF DENVER ) The foregoing instrument was acknowledged before me this ___ day of _______________, 1995, by Gregory A. Hahn, the Vice President of Summo USA Corporation, a Colorado corporation, on behalf of the corporation. My Commission Expires: ------------------ ----------------------------------- Notary Public EXHIBIT F SHORT FORM OF OPTION AGREEMENT This short Form of Option Agreement is between those persons whose names and addresses are shown on EXHIBIT A attached hereto and made a part hereof (individually an "Owner" and collectively the "Owners") and Summo USA Corporation, a Colorado corporation, whose address is 1776 Lincoln Street, Denver, Colorado 80203 (hereinafter referred to as "Summo"). RECITALS Effective _________________, 1995 (the "Effective Date"), the Owners and Summo entered into a Purchase Option Agreement ("Option Agreement") by which Summo has been granted an exclusive option (the "Option") to purchase certain real properties located in San Juan County, Utah (the "Properties") more particularly described on EXHIBIT B attached hereto and made a part hereof. The Option does not include any rights in and to any oil, gas distillate, other hydrocarbons or sulphur appurtenant to the Properties (the "Oil and Gas Rights"), which shall remain the property of Owners. The parties hereby execute this Short Form of Option Agreement (the "Short Form") to summarize for recording purposes certain features of the Option as follows: 1. TERM AND PAYMENT. The term of the Option is from the Effective Date through September 30, 1995 within which Summo has the right to exercise the Option and then to pay the purchase price for the Properties within thirty days after such exercise of the Option. 2. OPERATIONS. During the term of the Option, Summo has the right to conduct exploratory investigations, mineral prospecting, soil testing, survey and geological surveys, core drilling, shaft sinking, tunnel and mine buildings, the removal of ore for testing purposes, the right to erect and maintain on the Properties any improvements, structures or facilities including mines and buildings, for example, that may be necessary or convenient to Summo. 3. EXCLUSIVE POSSESSION. Subject to the rights granted under a certain Oil & Gas Lease dated on or about January 4, 1993 that was recorded in the Recorder's Office of San Juan County, Utah as Entry No. 005355, Summo shall have exclusive possession of and surface rights priority in and to the Properties during the term of the Option. 4. CONFIDENTIALITY. During the term of the Option all information obtained by Owners or their representatives from Summo or rising out of Summo's activities on the Properties shall be kept strictly confidential by Owners. 5. TERMINATION. Summo has the right at any time to terminate the Option. 6. RIGHT OF FIRST REFUSAL. If Owners receive a bona fide written offer from an unrelated third party to purchase all or any part of Owners' interest in the Properties or in the Option, Owners shall first offer the interest to Summo on the same terms and conditions. Summo has 60 days to accept such offer. If Summo does not accept such offer, the Owners may dispose of the interest offered to Summo at a price and upon such terms and conditions equal to or less favorable to the third party than those offered to Summo provided that the sale or other disposition must be effected within 120 days from the date of the offer to Summo. Any sale or other disposition shall be subject to the terms of the Option, including the right of first refusal, all of which shall survive the closing of any such sale in full force and effect. If Owners do not sell or otherwise dispose of the interest 2 offered to Summo within such 120-day period, the right of first refusal continues to apply to any subsequent third party offer or offers received by Owners. 7. NO TRANSFER OR ENCUMBRANCE. Without Summo's prior written consent, neither the Owners nor any Owner during the term of the Option shall: (a) sell, transfer, assign or convey any interest in the Properties without Summo's prior written consent or otherwise in accordance with the right of first refusal provisions contained in the Option; (b) do or fail to do any act or thing which would cause or permit any part of the Properties to be pledged, collateralized or stand as security for any matter whatsoever; or (c) enter into any leases or other agreements concerning the Properties or any part thereof except in connection with the Oil & Gas Rights. In the event, however, that any leases or other agreements are entered into with respect to the Oil & Gas Interests in the Properties, the surface rights to the Properties or any part thereof granted in connection with any such leases or agreements shall be subordinate in all respects to the Surface Rights Priority granted to Summo under the Option. 8. SUMMO RIGHTS UPON TERMINATION OR EXPIRATION OF OPTION. Notwithstanding the expiration of the Option or Summo's failure to exercise the Option, Summo shall have the right of access to and across the Properties following the expiration or termination of the Option as follows: (1) for a period of six months thereafter to enable Summo to remove from the Properties all buildings, structures, machinery, equipment, personal 3 property, fixtures and improvements owned by Summo or erected or placed on or in the Properties by Summo except mine timbers in place; (2) for as long as is necessary after termination or failure to exercise the Option Summo shall have the right of access to and across the Properties for reclamation purposes. 9. COUNTERPARTS. This Short Form may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same agreement. 10. ADDITIONAL TERMS. Additional terms and conditions of the Option are contained in the Option Agreement between the parties. This Short Form of Option Agreement shall not limit, decrease, increase or in any manner affect any of the terms and conditions of the Option or any rights, interests or obligations of the parties thereunder. This Short Form is being recorded for the purpose, INTER ALIA of serving notice of the interests held by Summo in the Properties. IN WITNESS WHEREOF, the parties have executed this Short Form of Option Agreement as of the day of 1995. ----- -------------- LISBON LAND & LIVESTOCK COMPANY, a Colorado general partnership By: ------------------------------------- Warren J. Wood, general partner By: ------------------------------------- Wilbur L Wood, general partner By: ------------------------------------- Wesley 0. Wood, general partner 4 By: ------------------------------------- Wm. H. Wood, general partner By: ------------------------------------- Willard G. Wood, general partner - ----------------------------------- ----------------------------------- Warren J. Wood, Individually Elsie Wood, Individually - ----------------------------------- ----------------------------------- Wilbur L. Wood, Individually Ethel Wood, Individually - ----------------------------------- ----------------------------------- Wesley 0. Wood, Individually Donna Wood, Individually - ----------------------------------- ----------------------------------- Wm. H. Wood, Individually Louise M. Wood, Individually - ----------------------------------- ----------------------------------- Willard G. Wood, Individually Betty Wood, Individually. SUMMO USA CORPORATION, a Colorado corporation By: -------------------------------- Gregory A. Hahn, Vice President 5 STATE OF __________ ) ) ss. COUNTY OF _________ ) On this ___________ day of______________________, 19___ before me the undersigned, a notary public, personally appeared Warren J. Wood, Wilbur L. Wood, Wesley 0. Wood, Wm. H. Wood and Willard G. Wood as all of the general partners of Lisbon Land & Livestock Company, a Colorado general partnership, known to me (or proved to me on the oath of _____________________________) to be the persons whose names are subscribed to the within instrument and acknowledged that they each executed the same for and on behalf of said partnership. My Commission Expires: ------------------ ----------------------------------- Notary Public STATE OF __________ ) ) ss. COUNTY OF _________ ) On this ________ day of _______________________, 19____ before me the undersigned, a notary public, personally appeared Warren J. Wood and his wife Elsie Wood known to me (or proved to me on the oath of _________________________) to be the persons whose names are subscribed to the within instrument, and acknowledged that they each executed the same. My Commission Expires: ------------------ ----------------------------------- Notary Public STATE OF __________ ) ) ss. COUNTY OF _________ ) On this ________ day of ___________________, 19___ before me the undersigned, a notary public, personally appeared Wilbur L. Wood and his wife Ethel Wood known to me (or proved to me on the oath of ______________________) to be the persons whose names are subscribed to the within instrument, and acknowledged that they each executed the same. My Commission Expires: ------------------ ----------------------------------- Notary Public 6 STATE OF __________ ) )ss. COUNTY OF _________ ) On this _______ day of __________________, 19___ before me the undersigned, a notary public, personally appeared Wesley 0. Wood and his wife Donna Wood known to me (or proved to me on the oath of ______________________ (to be the persons whose names are subscribed to the within instrument, and acknowledged that they each executed the same. My Commission Expires: ------------------ ----------------------------------- Notary Public STATE OF __________ ) )ss. COUNTY OF _________ ) On this _______ day of __________________,19____ before me the undersigned, a notary public, personally appeared Wm. H. Wood and his wife Louise M. Wood known to me (or proved to. me on the oath of ____________________ (to be the persons whose names are subscribed to the within instrument, and acknowledged that they each executed the same. My Commission Expires: ------------------ ----------------------------------- Notary Public STATE OF __________ ) )ss. COUNTY OF _________ ) On this _______ day of __________________, 19___ before me the undersigned, a notary public, personally appeared Willard G. Wood and his wife Betty Wood known to me (or proved to me on the oath of ______________________ (to be the persons whose names are subscribed to the within instrument, and acknowledged that they each executed the same. My Commission Expires: ------------------ ----------------------------------- Notary Public 7 STATE OF ________________ ) )ss. CITY AND COUNTY OF DENVER ) The foregoing instrument was acknowledged before me this ________ day of ____________________, 19___, by Gregory A. Hahn, the Vice President of Summo USA Corporation, a Colorado corporation, on behalf of the corporation. My Commission Expires: ------------------ ----------------------------------- Notary Public 8 EXHIBIT A OWNERS Name and Address % Interest - ---------------- ---------- Lisbon Land & Livestock Company 100% 9220 W. Kerry Lane Peoria, AZ 85382 Warren J. Wood and Elsie Wood, Undivided 20% Partnership Interest husband and wife* Wilbur L. Wood and Ethel Wood, Undivided 20% Partnership Interest husband and wife* Wesley 0. Wood and Donna Wood, Undivided 20% Partnership Interest husband and wife* Wm. H. Wood and Louise M. Wood, Undivided 20% Partnership Interest husband and wife* Willard G. Wood and Betty Wood, Undivided 20% Partnership Interest husband and wife* *All care of: Lisbon Land & Livestock Company at the above address EXHIBIT B The following parcels of real property located in San Juan County, Utah: Plant Parcel: - ------------ T 30 S, R 25 E, Sec. 26 - SW/4, W2 SE/4 T 30 S, R 25 E, Sec. 35 - NE/4 NW/4, NW/4 NE/4 Exploration Parcel: - ------------------ T 31 S, R 26 E, Sec. 6 - SW/4 NW/4, NW/4 SW /4 ESCROW AGREEMENT This Escrow Agreement is made and entered into effective as of the 1st day of May, 1995, between those persons whose names and addresses are shown on EXHIBIT A attached hereto and made a part hereof (individually an "Owner" and collectively the "Owners"), Summo USA Corporation, a Colorado corporation, whose address is 1776 Lincoln Street, Denver, Colorado 80203 ("Summo") and CB&S Nominee, Inc., 1800 One Norwest Center Building, 1700 Lincoln Street, Denver, Colorado 80203 ("Escrow Agent"). PREAMBLE 1. Owners and Summo have entered into a Purchase Option Agreement with an effective date of May 1, 1995 by which the Owners have granted Summo an exclusive option (the "Option") to purchase certain real properties (the "Properties") located in San Juan County, Utah (the "Option Agreement"), a copy of which is attached hereto and incorporated herein as EXHIBIT B. The Properties are described on EXHIBIT C attached hereto and incorporated herein. 2. The Option Agreement requires the appointment of an Escrow Agent to (a) hold the Deeds executed by the Owners conveying the Properties to Summo; (b) receive certain funds from Summo in payment of the purchase price and disburse same to the Owners; (c) receive certain other funds from Summo and disburse them to Owners or Summo as hereafter provided; (d) receive a Quit Claim Deed from Summo conveying the Properties back to Owners in the event of the non-exercise of the Option or the non-payment of the purchase price by Summo; (e) deliver the Deeds to Summo upon payment of the purchase price; and (f) redeliver the Deeds to the Owners in the event of the non-exercise of the Option or the nonpayment of the purchase price by Summo. 3. Terms used herein shall have the same meaning as contained in the Option Agreement unless expressly provided to the contrary herein. NOW THEREFORE, Owners and Summo hereby nominate, constitute and appoint CB&S Nominee, Inc. as their Escrow Agent for the purposes and on the terms and conditions set forth below and CB&S NOMINEE, INC. accepts such appointment and agrees to so act. 1. OWNERS' DEPOSITS. The Owners have executed and herewith deposit with Escrow Agent six separate general warranty deeds conveying the Properties to Summo as follows: (i) Lisbon Land & Livestock Company ("LL&L:") conveying 100% of the Properties; (ii) Warren J. Wood and his wife, Elsie Wood ("Warren & Elsie"), individually conveying an undivided 20% interest in the Properties; (iii) Wilbur L. Wood and his wife Ethel Wood ("Wilbur & Ethel"), individually conveying an undivided 20% interest in the Properties; (iv) Wesley O. Wood and his wife Donna Wood ("Wesley & Donna"), individually conveying an undivided 20% interest in the Properties; (v) Wm. H. Wood and his wife Louise M. Wood ("Wm. & Louise"), individually conveying an undivided 20% interest in the Properties; (vi) Willard G. Wood and his wife Betty Wood ("Willard & Betty"), individually conveying an undivided 20% interest in the Properties; (hereafter collectively called the "Deeds," copies of which are attached hereto and incorporated herein as EXHIBIT C.) 2 2. SUMMO DEPOSITS. Summo herewith deposits with Escrow Agent the following: (a) Twenty Thousand Dollar Summo check payable to Escrow Agent (the "Signing Bonus Balance"); (b) Quit Claim Deed executed by Summo conveying the Properties back to Owners and terminating the Surface Rights Priority previously granted to Summo (the "Quit Claim Deed"); 3. DISTRIBUTION OF SIGNING BONUS BALANCE. (a) If the Petro-Tech Sign-off approved in writing by Summo is received by Escrow Agent by August 7, 1995, upon receipt thereof Escrow Agent shall promptly distribute the Signing Bonus Balance to LL&L. (b) If the Petro-Tech Sign-off approved in writing by Summo is not received by Escrow Agent by August 7, 1995, Escrow Agent shall (i) so notify Owners and Summo and; (ii) return the Signing Bonus Balance to Summo, in which event this Escrow Agreement shall continue in full force and effect in accordance with its terms and conditions. 4. RECEIPT AND DISTRIBUTION OF PURCHASE PRICE; DELIVERY OF DEEDS. (a) Owners hereby authorize the Escrow Agent to hold the Deeds until such time as Escrow Agent has received a Summo check in the amount of $240,000 pursuant to Section 6(c) of the Option Agreement, but subject to reduction for any credit claimed by Summo under Sections 1(a) and 4(c) of the Option Agreement (the "Purchase Price"), at which time Escrow Agent shall promptly deliver the Deeds to Summo and distribute such funds to LL&L. (b) If Escrow Agent shall not have received payment of the Purchase Price from Summo by October 31, 1995, Escrow Agent shall (i) give prompt notice thereof to Summo and the Owners; and (iii) return the Deeds to the Owners. 5. FEES OF ESCROW AGENT. Escrow Agent's fees for acting hereunder shall be paid by Summo. 3 6. INDEMNIFICATION OF ESCROW AGENT. Owners and Summo hereby, jointly and severally, agree to indemnify Escrow Agent from and against any and all claims, causes of action, costs and expenses, including reasonable attorneys' fees and costs, that Escrow Agent may suffer as a result of acting as Escrow Agent hereunder. If Escrow Agent shall receive written instructions from either Summo or Owners which Escrow Agent believes to be in conflict with the obligations of Escrow Agent under the provisions hereof, Escrow Agent shall promptly notify Summo and the Owners of any such apparent conflict ("Conflict Notice"). If such matter is not fully resolved to Escrow Agent's satisfaction by a joint written instruction to Escrow Agent from Summo and Owners within thirty days of Escrow Agent's Conflict Notice, Escrow Agent shall promptly commence an interpleader action in the District Court of the City and County of Denver and deposit with such court all the deposits then held by Escrow Agent hereunder. Summo and Owners also agree that such court shall have jurisdiction and venue for all purposes under this Escrow Agreement. In such event, Escrow Agent shall not take any further action hereunder unless it receives joint written direction so do to from Summo and Owners or until it is so directed by the final order of a court of competent jurisdiction. 7. STRICT ADHERENCE TO AGREEMENT. Escrow Agent agrees to act in strict accordance with the terms and conditions hereof. 8. MODIFICATION. This Agreement may not be modified except by written agreement therefor signed by the Owners, Summo and Escrow Agent. Escrow Agent shall have the right to assume that any such document furnished to it which appears to Escrow Agent to have been signed by the other parties hereto was in fact duly signed by such parties and Escrow Agent need not inquire into such matter. 9. NOTICES. All notices required or permitted hereunder shall be in writing and shall be served by prepaid, registered or certified mail, or by personal delivery, addressed to the parties at the addresses set forth on page 1 for Summo and on EXHIBIT A for Owners or at such other address or addresses as may be furnished to the other parties by a party hereto. Any such notice shall be deemed to be given and effective three days 4 after such notice has been deposited in the United States mail, first class, postage prepaid, addressed as above, or when personally delivered to and received by the specified parties. 10. OWNERS - SUMMO LITIGATION. In the event of any litigation between Owners and Summo with respect to the construction or enforcement of this Agreement, the prevailing party in any such litigation, including any interpleader action pursuant to Section 4 hereof, shall be entitled to recover reasonable attorneys' fees and costs from the non-prevailing party as a court may determine to be proper under the circumstances. 11. TERM. This Agreement shall continue until such time as all of the deposits under sections 1 and 2 hereof have been disposed of in accordance with the provisions or any modifications hereof, the joint written direction of Summo and the Owners or the final order of a court of competent jurisdiction. 12. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same agreement. EXECUTED the day and year first above written. LISBON LAND & LIVESTOCK COMPANY, a Colorado general partnership By: /s/ Warren J. Wood ------------------------------------ Warren J. Wood, general partner By: /s/ Wilbur L. Wood ------------------------------------ Wilbur L. Wood, general partner By: /s/ Wesley O. Wood ------------------------------------ Wesley O. Wood, general partner 5 By: /s/ William H. Wood ------------------------------------ Wm. H. Wood, general partner By: /s/ Willard G. Wood ------------------------------------ Willard G. Wood, general partner /s/ Warren J. Wood /s/ Elsie Wood - ------------------------------- ---------------------------------- Warren J. Wood, Individually Elsie Wood, Individually /s/ Wilbur L. Wood /s/ Ethel Wood - ------------------------------- ---------------------------------- Wilbur L. Wood, Individually Ethel Wood, Individually /s/ Wesley O. Wood /s/ Donna Wood - ------------------------------- ---------------------------------- Wesley O. Wood, Individually Donna Wood, Individually /s/ William H. Wood /s/ Louise M. Wood - ------------------------------- ---------------------------------- Wm. H. Wood, Individually Louise M. Wood, Individually /s/ Williard G. Wood /s/ Betty Wood - ------------------------------- ---------------------------------- Willard G. Wood, Individually Betty Wood, Individually SUMMO USA CORPORATION, a Colorado corporation By: /s/ Gregory A. Hahn --------------------------------- Gregory A. Hahn, Vice President CB&S NOMINEE, INC., a Colorado corporation By: ILLEGIBLE --------------------------------- 6 EXHIBIT A OWNERS Name and Address % Interest - ---------------- ---------- Lisbon Land & Livestock Company 100% 9220 W. Kerry Lane Peoria, AZ 85382 Warren J. Wood and Elsie Wood, Undivided 20% Partnership Interest husband and wife* Wilbur L. Wood and Ethel Wood, Undivided 20% Partnership Interest husband and wife* Wesley 0. Wood and Donna Wood, Undivided 20% Partnership Interest husband and wife* Wm. H. Wood and Louise M. Wood, Undivided 20% Partnership Interest husband and wife* Willard G. Wood and Betty Wood, Undivided 20% Partnership Interest husband and wife* *All care of: Lisbon Land & Livestock Company at the above address EXHIBIT C The following parcels of real property located in San Juan County, Utah: PLANT PARCEL: T 30 S, R 25 E, Sec. 26 - SW/4, W2 SE/4 T 30 S, R 25 E, Sec. 35 - NE/4 NW/4, NW/4 NE/4 EXPLORATION PARCEL: T 31 S, R 26 E, Sec. 6 - SW/4 NW/4, NW/4 SW/4 EX-10.11 20 EXHIBIT 10.11 EXHIBIT 10.11 EXPLORATION AND PURCHASE OPTION AGREEMENT THIS OPTION AGREEMENT ("Agreement") made effective as of the 1st day of September, 1993, by and between those persons whose names and addresses are shown on EXHIBIT A attached hereto and made a part hereof (individually an "Owner" and collectively the "Owners') and ST. MARY MINERALS INC., a Colorado corporation, whose address is 1776 Lincoln Street, Denver, Colorado 80203 (hereinafter referenced to as "St. Mary"); WHEREAS, Owners are the owners of certain patented mining claims and millsites situate in Montrose County, Colorado, herein referred to as "the Property," and more particularly described on EXHIBIT B attached hereto and made a part hereof; and WHEREAS, St. Mary desires to carry out exploration work and to acquire an option to purchase the Property, WHEREAS, Owners desire to make the Property available for the conduct by St. Mary of certain mineral exploration work thereon and to grant St. Mary the option to purchase the Property, NOW THEREFORE, in consideration of Ten Dollars ($10.00) in hand paid to Owners, the receipt and sufficiency of which are hereby acknowledged, and further in consideration of the mutual covenants, agreements, and promises herein contained, the parties agree as follows: 1. OPTION. Owners grant to St. Mary during the term of this Agreement the sole and exclusive option (the "Option") to purchase the Property, together with all appurtenances and water rights incident thereto and all improvements and personal property thereon, free and clear of all liens and encumbrances, for a total purchase price of Three Hundred Fifty Thousand Dollars ($350,000.00). St. Mary shall be entitled to a credit against the purchase price for all amounts paid under the provisions of Section 7. The balance will be payable within thirty (30) days after St. Mary gives notice that it elects to exercise the Option. 2. OPTION EXERCISE. St. Mary's option to purchase the Property shall be exercisable by delivery to Owners of notice of its option exercise. Within thirty (30) days of such notice, Owners shall deliver one or more general warranty deeds conveying the Property to St. Mary, and St. Mary shall pay to Owners the unpaid balance of the purchase price. The deeds shall be in the form of Exhibit C attached hereto. Owners agree to execute such other documents and perform such other acts as St. Mary may reasonably require to affect the transfer of complete title of the Property to St. Mary. All recording fees shall be paid by St. Mary. 3. SPECIFIC PERFORMANCE. In addition to the standard remedies available by law to any party in the event of a breach of this agreement, Owners and St. Mary hereby agree that St. Mary shall be entitled to the remedy of specific performance with respect to its option exercise rights. The availability of the remedy of specific performance is expressly provided in lieu of escrow provisions, originally proposed by St. Mary but deleted at the request of Owners, pursuant to which Owners would have executed and delivered general warranty deeds to an escrow agent at the time this agreement was made. 4. EXCLUSIVE POSSESSION. St. Mary shall have the exclusive possession of the Property during the term of this Agreement. 5. TITLE. (a) Owners warrant that they are in possession of the Property, that they have the right to enter into this Agreement, that they know of no other person claiming any interest in the Property or the ground covered thereby, and that the Property is free from all liens and encumbrances, except liens for property taxes not yet due and payable. 2 Owners further warrant to St. Mary the quiet enjoyment of the Property and the right to explore, develop, and mine the same. (b) Owners warrant and will defend title of the property against all persons whomsoever. (c) At St. Mary's request, Owners shall take all action necessary (including judicial proceedings) to remove any cloud from or cure any title defect to the Property. (Note: Owners shall have no obligation to St. Mary to cure surface disturbances resulting from prior mining activities.) If Owners fail or refuse to take any such action, St. Mary may take any such action in Owners' name. Owners agree to cooperate with St. Mary in any such action taken. If the United States or any third person attacks the validity of any of the patented mining claims included in the Property for any reason, St. Mary shall have no obligation to defend the validity of the claim. (d) St. Mary shall not be estopped to deny the validity of Owners' title. 6. UNDIVIDED INTEREST. The interest in the Property claimed by each Owner is set forth in Exhibit A. Any representation or warranty of title made by any Owner shall apply only to the interest set forth in Exhibit A. 7. OPTION PAYMENTS. (a) Concurrent with the execution of this Agreement by Owners, St. Mary has made an option payment to Owners in the amount of $ 10,000, receipt of which is hereby acknowledged by Owners. (b) St. Mary shall pay to Owners further option payments on or before the dates and in the amounts as follows: March 1, 1994 20,000 September 1, 1994 20,000 September 1, 1995 50,000 September 1, 1996 100,000 September 1, 1997 150,000 -------- $340,000 3 8. MANNER OF FURTHER OPTION PAYMENTS. St. Mary shall make all further option payments due Owners hereunder by check which shall be made payable to Owners in the percentage shares set forth in Exhibit A and mailed to the respective addresses shown in Exhibit A. 9. OPERATIONS. (a) SCOPE. During the term of this Agreement, St. Mary shall have free and unrestricted access to the Property, and shall have the right and privilege of conducting exploratory investigations and prospecting for mineral deposits on the Property, effective during the life of the Option, and that prospecting shall include, but not be limited to, soil testing, geophysical surveys, core drilling, shaft sinking, tunnel and mine building and the removal of ore for testing purposes but not removal of ore for sale. St. Mary shall have the right to erect and maintain upon the Property any improvements, structures or facilities including mines, shafts and tunnels as may be necessary or convenient for the conduct of its operations. (b) STANDARDS OF OPERATION. St. Mary shall conduct all operations on the Property in a good and workmanlike manner and in accordance with accepted mining practice. (c) COMPLIANCE WITH LAW; RECLAMATION: St. Mary shall endeavor in good faith to comply with applicable provisions of federal, state and local laws and regulations, as required by the operating permits issued to St. Mary by these agencies under which St. Mary shall conduct its operations. If this Agreement is terminated, St. Mary shall reclaim only those portions of the Property disturbed by its operations, and in compliance with all applicable governmental laws, regulations and orders. St. Mary shall have the right, without payment of any additional consideration to Owners, to enter upon the Property subsequent to termination of this Agreement for purposes of performing such reclamation work. Owners shall be notified prior to St. Mary re-entering the Property for reclamation purposes. 4 10. NO IMPLIED COVENANTS. No covenants or conditions relating to the exploration or related operations on or in connection with the Property, or the timing thereof, other than those expressly provided in this Agreement, shall be implied. After commencing any exploration or related operations on or in connection with the Property and so long as this Agreement has not been terminated before the expiration of its term, St. Mary may in its sole discretion curtail or cease such operations so long as it continues to make any payments due Owners under this Agreement subject to the provisions of Section 17 hereof. 11. PROTECTION FROM LIENS AND DAMAGES. St. Mary shall keep the Property free of liens for labor performed or materials or merchandise furnished for use on the Property under this Agreement, and shall hold Owners harmless from all costs, loss, or damage which may result from any work or operations of St. Mary or its occupancy of the Property. 12. TAXES. Owners shall pay all taxes levied against the Property prior to the date of this Agreement. St. Mary shall pay or reimburse Owners for all taxes levied against the Property during the term of this Agreement. In the case of taxes for the calendar year in which this Agreement commences, and for the calendar year in which this Agreement ends, there shall be an apportionment between the parties, St. Mary to bear the proportion of taxes upon the Property applicable to the part of the calendar year included hereunder, and Owners to bear the balance of the taxes. St. Mary shall pay all taxes levied during the term of this Agreement against all buildings, structures, machinery, equipment, personal property, fixtures, and improvements placed upon the Property by St. Mary, and all taxes levied against St. Mary as an employer of labor. All taxes shall be paid when due and before delinquent, but St. Mary shall be under no obligation to pay any tax so long as the tax is being contested in good faith and by appropriate legal proceedings and the nonpayment thereof does not adversely affect any right, title, or interest of Owners in or to the Property. 5 13. INSURANCE. St. Mary shall carry at all times during the term of this Agreement worker's compensation and other insurance required by state laws and mining regulations. 14. INSPECTION. (a) Owners or their authorized representative may enter on the Property at any reasonable time for the purpose of inspection, but shall enter at Owners' own risk and so as not to hinder unreasonably the operations of St. Mary. Owners shall indemnify and hold St. Mary harmless from any damage, claim, or demand by reason of injury to or the presence of Owners, their agents or representatives on the Property. (b) Owners or their authorized representative may, at any reasonable time, inspect any records pertinent and necessary for substantiating the compliance of St. Mary with the provisions of this Agreement. 15. DATA. (a) Upon the execution of this Agreement, Owners shall deliver to St. Mary all drill core, all geological, geophysical, and engineering data and maps, logs of drill holes, results of assaying and sampling, and similar data concerning the Property (or copies thereof) which are in Owners' possession or control. (b) Upon the surrender or other termination of this Agreement (except upon exercise of the Option and payment of the full purchase price as provided in Section 6 hereof), St. Mary shall, within sixty days after termination, (i) return to Owners all drill core and original data delivered by Owners to St. Mary which are then in St. Mary's possession or control, and (ii) make available for inspection by Owners all factual geological and geophysical data and maps (not including interpretive data), logs of drill holes, drill core or cuttings and results of assaying and sampling pertaining to the Property which St. Mary has obtained as a result of its exploration work under this Agreement and which are then in St. Mary's possession or control. Upon Owners' request made within ninety (90) days after termination of this Agreement, St. Mary shall at Owners' expense provide Owners with the drill core or cuttings designated by Owners 6 and with copies of any portion of the factual geological and geophysical data and maps (not including interpretive data), logs of drill holes, and results of assaying and sampling, designated by Owners. St. Mary makes no representation or warranty as to the accuracy or completeness of any such data or information, and shall not be liable on account of any use by Owners or any other person of any such data or information. St. Mary shall not be liable for the loss or destruction of any drill core or cuttings. 16. CONFIDENTIALITY. During the term of this Agreement all information obtained by Owners or their authorized representatives from St. Mary or arising out of St. Mary's activities on the Property pursuant to this Agreement shall be kept strictly confidential by Owners and shall not be released to any third party except with the prior written consent of St. Mary. 17. TERM, TERMINATION AND SURRENDER. (a) The term of this Agreement shall be for a period of four (4) years from the date hereof unless sooner surrendered or otherwise terminated, or until the earlier exercise of the Option. (b) It is also agreed that a failure by St. Mary to make an option payment within 30 days of the due date therefor as provided in Section 7(b) hereof shall also constitute a termination of this Agreement effective upon the expiration of such 30 day period. Upon the effective date of such termination, all rights of St. Mary under this Agreement except as provided in Sections 18 and 19 hereof shall terminate and all liabilities and obligations of St. Mary hereunder (including the obligation of making any further payments under Section 7(b) hereof) shall likewise thereupon terminate except as provided in Sections 9(c) and 15(b) hereof. (c) St. Mary may also at any time terminate this Agreement as to all or any part of the Property by delivering to Owners or by filing for record in the appropriate office (with a copy to Owners) a good and sufficient Surrender of this Agreement. Upon mailing, the Surrender to Owners or to the appropriate office, all rights of St. Mary under this Agreement shall terminate except as provided in Sections 18 and 19 hereof, and all 7 liabilities and obligations of St. Mary under this Agreement shall likewise terminate except as provided in Sections 9(c) and 15(b) hereof and except liability for payments under Section 7(b) hereof that became due prior to the date of such termination. 18. REMOVAL OF PROPERTY. For a period of six months after the termination of this Agreement St. Mary shall have the right (but not the obligation except to the extent set forth in Section 9(c) hereof) to remove from the Property all buildings, structures, machinery, equipment, personal property, fixtures, and improvements owned by St. Mary or erected or placed on or in the Property by St. Mary, except mine timbers in place. St. Mary may keep one or more watchmen on the Property during the six- month period. 19. ACCESS. For as long as necessary after termination of this Agreement, St. Mary shall have the right of access to and across the Property for reclamation purposes. 20. NOTICES. All notices and other communications to either party shall be in writing and shall be sufficiently given if delivered in person or sent by certified or registered mail, return receipt requested, addressed as hereinafter set forth. Notices given by mail shall be deemed delivered as of the date of mailing. Until a change of address is communicated as indicated above, all notices to Owners shall be addressed: c/o George Alfred Moretz 1296 9th Street N.W. Hickory, North Carolina 28601 and all notices to St. Mary shall be addressed: St. Mary Minerals Inc. 1776 Lincoln Street, Suite 1100 Denver, Colorado 80203 Attn: Gregory A. Hahn 8 21. ASSIGNMENT. (a) The rights of either party hereunder may be assigned in whole or in part without the consent of the other party hereto, subject to the provisions hereinafter set forth. However, no such assignment shall be effective unless and until the assigning party delivers to the non-assigning party a written assumption by assignee of all of the assignor's duties under this Agreement. (b) No change or division in the ownership of the Property or the payments provided for herein, however accomplished, shall enlarge the obligations or diminish the rights of St. Mary hereunder. Owners covenant that any change in their ownership shall be accomplished in such a manner that St. Mary shall be required to make payments and to give notices to but one person, firm, or corporation, and upon breach of this covenant, St. Mary may retain all monies otherwise due to Owners until the breach has been cured. No change or division in ownership shall be binding on St. Mary until thirty days after Owners have given St. Mary a certified copy of the recorded instrument evidencing the change or division. (c) If St. Mary assigns the whole of or an undivided interest in this Agreement, liability for breach of any obligation hereunder shall rest exclusively upon the holder of the Agreement or of an undivided interest herein who commits the breach. If this Agreement is assigned as to a segregated portion of the Property, default by the holder hereunder of that portion shall not affect the rights of holders hereunder of any other portion. (d) If Owners receive a bona fide written offer from an unrelated third party to purchase all or any part of Owners' interest in the Property or in this Agreement, Owners shall first offer the interest to St. Mary stating the interest proposed to be sold or otherwise disposed of, the offering price from such third party and other terms and conditions of sale. St. Mary may accept the offer on the same terms and conditions as such third party offer by notice to Owners given within sixty days following the effective date Owners' offer. If St. Mary does not accept Owners' offer, Owners may sell or otherwise dispose of the interest offered to St. Mary at a price and upon terms and conditions equal to or less favorable to the third party than those offered to St. Mary 9 provided that the sale or other disposition is effectuated within 120 days from the effective date of Owners' offer. Any sale or other disposition shall be subject to the terms of this Agreement, including this subsection (d), all of which shall survive the closing, of any such sale in full force and effect. If Owners do not sell or otherwise dispose of the interest offered within 120 days, the provisions of this subsection (d) shall apply to any subsequent third party offer received by Owners. 22. NO TRANSFER OR ENCUMBRANCE. Without St. Mary's prior written consent, neither the Owners nor any Owner during term of this Agreement shall (a) sell, transfer, assign or convey any interest in the Property except in accordance with the provisions of Section 21 (d) hereof; (b) do or fail to do any act or thing which would cause or permit any part of the Property to be pledged, collateralized or stand as security for any matter whatsoever; or (c) enter into any leases or other agreements concerning the Property or any part thereof. 23. FORCE MAJEURE. (a) If St. Mary shall be prevented by Force Majeure from timely performance of any of its obligations hereunder (except the payment of money to Owners), the failure of performance shall be excused and the period for performance and the term of this Agreement shall be extended for an additional period equal to the duration of the Force Majeure. Upon the occurrence and upon the termination of any Force Majeure, St. Mary shall promptly notify Owners. St. Mary shall use reasonable diligence to remedy a Force Majeure, but shall not be required against its better judgment to settle any labor dispute or contest the validity of any law or regulation or any action or inaction of civil or military authority. (b) "Force Majeure" means any cause beyond St. Mary's reasonable control, including law or regulation; action or inaction of civil or military authority; inability to obtain any license, permit, or other authorization that may be required to conduct operations on or in connection with the Property; unusually severe weather, mining casualty; fire; explosion; flood; insurrection; riot; labor dispute; inability after diligent 10 effort to obtain workmen or material; delay in transportation; acts of God; unavailability of a suitable market for the ores, minerals, concentrates, or other products from the Property; and excessive costs of mining, milling, processing or marketing, or insufficient prices available for the ores, minerals, concentrates, or other products produced from the Property, which render St. Mary's operations uneconomic. 24. SHORT FORM. Contemporaneously herewith, St. Mary and Owners have executed and delivered a Short Form of Agreement. St. Mary may record the Short Form or this Agreement, or both, as it may elect. 25. INUREMENT. All covenants, conditions, limitations, and provisions herein contained apply to and are binding upon the parties hereto, their heirs, representatives, successors, and assigns. 26. MODIFICATION. No modification, variation, or amendment of this Agreement shall be effective unless the modification, variation, or amendment is in writing and is signed by Owners and St. Mary. 27. WAIVER. No waiver of any breach or default under this Agreement shall be effective unless the waiver is in writing and signed by the party against whom the waiver is claimed. No waiver of any breach or default shall be deemed to be a waiver of any other or subsequent breach or default. 28. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement of the parties and, except as herein expressly provided, supersedes all previous and contemporaneous agreements, representations, warranties, or understandings, written or oral. 29. CONSTRUCTION. The paragraph headings are for convenience only, and shall not be used in the construction of this Agreement. 11 30. GOVERNING LAW. The formation, interpretation, and performance of this Agreement shall be governed by the law of the state of Colorado. 31. TIME OF ESSENCE. Except as set forth in Section 23 hereof, time is of the essence in the performance of each and every term, condition, and covenant of this Agreement. 32. TIME COMPUTATIONS. In computing the time permitted or required for performance or payment as provided hereunder, the first day shall be excluded and the last day shall be included. If the last day of any such period is a Saturday, Sunday or legal holiday, the period shall extend to include the next day which is not a Saturday, Sunday, or legal holiday. Any performance or payment which must be taken or made under this Agreement must be taken or made prior to 5:00 p.m. (Denver, Colorado time) of the last day of the applicable period provided hereunder for such action, unless another time is expressly specified. All references to time shall be Denver, Colorado time. If a date for performance or payment falls on a holiday or weekend, the time for performance or payment shall be extended to the next business day, and if performance or payment has occurred on such weekend or holiday, it shall be deemed to have occurred on the next business day. 33. INVALIDITY. The invalidity of any provision of this Agreement shall not affect the enforceability of any other provision of this Agreement. 34. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same agreement. If any person named as one of the Owners does not execute this Agreement, it nevertheless shall be binding upon those persons executing it. 35. ADDITIONAL DOCUMENTS. Owners will provide St. Mary with such additional documents as may be necessary to carry out the purposes of this Agreement. If conditions change by reason of conveyances, assignments, or other matters relating to 12 the title to or description of the Property, Owners and St. Mary shall execute amendments of this Agreement and the Short Form of Agreement, and any other documents which may be necessary to reflect such changed conditions. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. /s/ George Alfred Moretz /s/ Carolyn Moretz Jennings - ----------------------------------- ----------------------------------- George Alfred Moretz Carolyn Moretz Jennings /s/ Helen Moretz Jennings /s/ Nancy Moretz Burnside - ----------------------------------- ----------------------------------- Helen Moretz Sides Nancy Moretz Burnside /s/ Christine Abernethy ----------------------------------- Christine Abernethy ST. MARY MINERALS INC. By: /s/ Hugh J. Matheson -------------------------------- Hugh J. Matheson, President 13 STATE OF North Carolina ) )SS. COUNTY OF Caldwell ) On this 12 day of November, 1993 before me the undersigned, a notary public, personally appeared George Alfred Moretz known to me (or proved to me on the oath of ______________________ (to be the person whose name is subscribed to the within instrument, and acknowledged that he executed the same. My Commission Expires: 4-29-96 /s/ Joan C. Magee - ------------------------------ ------------------------------ Notary Public STATE OF North Carolina ) )SS. COUNTY OF Catawber ) On this 12th day of November, 1993 before me the undersigned, a notary public, personally appeared Carolyn Moretz Jennings known to me (or proved to me on the oath of ________________________ (to be the person whose name is subscribed to the within instrument, and acknowledged that she executed the same. My Commission Expires: 8-26-98 /s/ Lise A. Watkins - ------------------------------ ------------------------------ Notary Public 14 STATE OF North Carolina ) )SS. COUNTY OF Caldwell ) On this 12 day of November, 1993 before me the undersigned, a notary public, personally appeared Helen Moretz Sides known to me (or proved to me on the oath of ___________________________ (to be the person whose name is subscribed to the within instrument, and acknowledged that she executed the same. My Commission Expires: 4-29-96 /s/ Joan C. Magee - ------------------------------ ------------------------------ Notary Public STATE OF North Carolina ) )SS. COUNTY OF Caldwell ) On this 12 day of November, 1993 before me the undersigned, a notary public, personally appeared Nancy Moretz Burnside known to me (or proved to me on the oath of ___________________________ (to be the person whose name is subscribed to the within instrument, and acknowledged that she executed the same. My Commission Expires: 4-29-96 /s/ Joan C. Magee - ------------------------------ ------------------------------ Notary Public 15 STATE OF ) )SS. COUNTY OF ) On this 12th day of November, 1993 before me the undersigned, a notary public, personally appeared Christine Abernethy, a widow, known to me (or proved to me on the oath of _______________________ (to be the person whose name is subscribed to the within instrument, and acknowledged that she executed the same. My Commission Expires: 4-21-97 /s/ Linda L. Griggs - ------------------------------ ------------------------------ Notary Public STATE OF Colorado ) City and )SS. COUNTY OF Denver ) The foregoing instrument was acknowledged before me this 11th day of November, 1993, by Hugh J. Matheson the President of St. Mary Minerals Inc., a Colorado corporation, on behalf of the corporation. My Commission Expires: Feb. 14, 1997 /s/ James C. Robertson - ------------------------------ ------------------------------ Notary Public James C. Robertson 16 EXHIBIT A OWNERS ------ Name and Address % Interest in Property - ---------------- ---------------------- George Alfred Moretz 12.50% 1296 9th Street NW Hickory, North Carolina 28601 Carolyn Moretz Jennings 12.50% 1413 6th Street NW Hickory, North Carolina 28601 Helen Moretz Sides 12.50% 7071 Watersedge Drive Sherrills Ford, North Carolina 28673 Nancy Moretz Burnside 12.50% 5707 Shady Branch Drive Chattanooga, Tennessee 37415 Christine Abernethy (a widow) 50.00% 806 S. College Avenue Newton, North Carolina 28658 EXHIBIT B PROPERTIES 100% interest in and to the following patented mining claims and millsites located in Montrose County, Colorado: Red Chief Lode, Mineral Survey No. 13029A Cashin, Maude and Titon Lodes, Mineral Survey No. 13030A Humboldt, Angell and Bennie Lodes, Mineral Survey No. 13031A Red Rock, Red Bird, Michigan and Horseshoe Lodes, Mineral Survey No. 19163 Malachite Lode, Mineral Survey No. 19164 Red Chief Millsite, Survey No. 13029B Titon Millsite, Survey No. 13030B Maude Millsite, Survey No. 13031B EX-10.12 21 EXHIBIT 10.12 EXHIBIT 10.12 OPTION AGREEMENT THIS OPTION AGREEMENT made as of this 27 day of September, 1993, by and between those persons whose names and addresses are shown on EXHIBIT A attached hereto and made a part hereof (individually an "Owner" and collectively the "Owners") and ST. MARY MINERALS INC., a Colorado corporation, whose address is 1776 Lincoln Street, Denver, Colorado 80203, (hereinafter referred to as "St. Mary"); WHEREAS, Owners are the owners of certain patented and unpatented mining claims situate in Montrose County, Colorado, herein referred to as "the Property," and more particularly described on EXHIBIT B attached hereto and made a part hereof; and WHEREAS, St. Mary desires to carry out exploration work and to acquire the Option to Purchase the Property, WHEREAS, Owners desire to make the Property available for the conduct by St. Mary of certain mineral exploration work thereon and to grant St. Mary the option to purchase the Property, NOW THEREFORE, in consideration of Ten Dollars ($ 10.00) in hand paid to Owners, the receipt and sufficiency of which are hereby acknowledged, and further in consideration of the mutual covenants, agreements, and promises herein contained, the parties agree as follows: 1. OPTION. Owners grant to St. Mary during the term of this Agreement the sole and exclusive option (the "Option") to purchase the Property, together with all appurtenances and water rights incident thereto and all improvements and personal property thereon, free and clear of all liens and encumbrances, for a total purchase price of Five Hundred Fifty Thousand Dollars ($550,000.00). St. Mary shall be entitled to a credit against the purchase price for all amounts paid under the provisions of Section 7 hereof and for all costs and expenses incurred under the provisions of Section 5 hereof and the balance of the purchase price will be payable within thirty (30) days after St. Mary gives notice that it elects to exercise the Option. 2. ESCROW. Contemporaneously with the execution of this Agreement, Owners shall execute, acknowledge, and deliver to the Escrow Agent one or more special warranty deeds conveying the Property to St. Mary in the form (without legal descriptions) of Exhibit C attached hereto and incorporated herein. Owners and St. Mary hereby appoint ____________________________ as their Escrow Agent to receive and distribute all payments and to hold the deed and deliver it to the party entitled hereunder to receive the same. The parties hereto agree. that the Escrow Agent shall act pursuant to Escrow Instructions executed contemporaneously herewith. 3. EXCLUSIVE POSSESSION. St. Mary shall have the exclusive possession of the Property during the term of this Agreement. 4. TITLE. (a) Owners warrant that they are in possession of the Property, that they have the right to enter into this Agreement, that they know of no other person claiming any interest in the Property or the ground covered thereby, and that the Property is free from all liens and encumbrances, except liens for property taxes not yet due and payable. Owners further warrant to St. Mary the quiet enjoyment of the Property and the right to explore, develop and mine the same. (b) Owners warrant that the unpatented mining claims included in the Property have been properly located, and that for each assessment year assessment work has been performed (or other steps taken in accordance with the law) for the benefit of the claims. Owners warrant and shall defend title to the Property against all persons whomsoever. 2 (c) Owners shall provide St. Mary with recording data with respect to location notices and certificates, affidavits of annual labor, deeds, easements or other documents which bear upon Owners' title to the Property, and shall provide St. Mary with copies of all such documents and all title reports and abstracts in Owners' possession or control. Owners shall, upon St. Mary's request, record any such document in Owners' possession or control which has not been recorded. (d) At St. Mary's request, Owners shall take all action necessary (including judicial proceedings) to remove any cloud from or cure any defect in their title to the Property or the ground covered thereby. If Owners fail or refuse to take any such action, St. Mary may take any such action in Owners' names. Owners agree to cooperate with St. Mary in any such action taken. St. Mary may recover from Owners or from any payments thereafter to become due to Owners hereunder all costs and expenses (including attorneys' fees) incurred by St. Mary in any such action. If the United States or any third person attacks the validity of any of the patented mining claims included in the Property for any reason, St. Mary shall have no obligation to defend the validity of the claim. (e) St. Mary shall not be estopped to deny the validity of Owners' title. 5. UNDIVIDED INTEREST. If the interest claimed by any Owner in any portion of the Property is less than one hundred percent (100%), the interest claimed by such Owner is set forth in exhibit A. Any representation or warranty of title made by any Owner shall apply only to the interest set forth in Exhibit A. 6. OPTION PAYMENTS. (a) Concurrent with the execution of this Agreement by Owners, St. Mary has made an option payment to Owners in the amount of $10,000, receipt of which is hereby acknowledged by Owners. (b) St. Mary shall pay to Owners further option payments on the dates and in the amounts as follows: 3 March 1, 1994 20,000 September 1, 1994 20,000 September 1, 1995 50,000 September 1, 1996 100,000 September 1, 1997 150,000 September 1, 1998 200,000 -------- $540,000 7. MANNER OF FURTHER OPTION PAYMENTS. St. Mary shall make all further option payments due Owners hereunder by check which shall be made payable to and shall be transmitted to the Escrow Agent. The Escrow Instructions to be executed contemporaneously herewith will instruct the Escrow Agent how the payments shall be disbursed. Upon making the payments to the Escrow Agent, St. Mary shall be deemed to have made the payments to Owners, their heirs, representatives, successors, and assigns, and thereupon St. Mary shall be discharged to the extent thereof as if the payments had been made directly to Owners, or to any person, firm or corporation entitled thereto, and St. Mary shall not be liable for the ultimate distribution or receipt of any payment or payments. 8. OPERATIONS. (a) SCOPE. During the term of this Agreement, St. Mary shall have free and unrestricted access to the Property, and shall have the right and privilege of conducting exploratory investigations and prospecting for mineral deposits on the Property, effective during the life of the Option, and such prospecting shall include, but not be limited to, soil testing, geophysical surveys, core drilling, shaft sinking, tunnel and mine building and the removal of ore for testing purposes but not removal of ore for sale. St. Mary shall have the right to erect and maintain upon the Property any improvements, structures, or facilities including mines, shafts and tunnels as may be necessary or convenient for the conduct of its operations. 4 (b) STANDARDS OF OPERATIONS. St. Mary shall conduct all operations on the Property in a good and workmanlike manner and in accordance with accepted mining practice. (c) COMPLIANCE WITH LAW; RECLAMATION: St. Mary shall endeavor in good faith to comply with applicable provisions of federal, state and local laws and regulations, as required by the operating permits issued to St. Mary by these agencies under which St. Mary shall conduct its operations. If this Agreement is terminated, St. Mary shall reclaim only those portions of the Property actually disturbed by its operations and only to the extent of St. Mary's disturbance thereof whether or not such reclamation then complies with applicable governmental laws, regulations and orders. St. Mary shall have the right, without payment of any additional consideration to Owners, to enter upon the Property subsequent to termination of this Agreement for purposes of performing such reclamation work. Owners shall be notified prior to St. Mary re-entering the Property for reclamation purposes. (d) ANNUAL REPORTS: During the term of this Agreement, St. Mary shall furnish to Owners annual summaries of work performed on or for the benefit of the Property. Such summaries may include, raw data relating to the Property, but shall not include any interpretative data with respect thereto. 9. NO IMPLIED COVENANTS. No covenants or conditions relating to the exploration or related operations on or in connection with the Property, or the timing thereof, other than those expressly provided in this Agreement, shall be implied. After commencing any exploration or related operations on or in connection with the Property and so long as this Agreement has not been terminated before the expiration of its term, St. Mary may in its sole discretion curtail or cease such operations so long as it continues to make any payments due Owners under this Agreement, subject to the provisions of Section 16 hereof. 10. PROTECTION FROM LIENS AND DAMAGES. St. Mary shall keep the Property free of liens for labor performed or materials or merchandise furnished for use on the Property under 5 this Agreement, and shall hold Owners harmless from all costs, loss or damage which may result from any work or operations of St. Mary or its occupancy of the Property. 11. TAXES. Owners shall pay all taxes levied against the Property prior to the date of this Agreement. St. Mary shall pay or reimburse Owners for all taxes levied against the Property during the term of this Agreement. In the case of taxes for the calendar year in which this Agreement commences, and for the calendar year in which this Agreement ends, there shall be an apportionment between the parties, St. Mary to bear the proportion of taxes upon the Property applicable to the part of the calendar year included hereunder and Owners to bear the balance of the taxes. St. Mary shall pay all taxes levied during the term of this Agreement against all buildings, structures, machinery, equipment, personal property, fixtures and improvements placed upon the Property by St. Mary, and all taxes levied against St. Mary as an employer of labor. All taxes shall be paid when due and before delinquent, but St. Mary shall be under no obligation to pay any tax so long as the tax is being contested in good faith and by appropriate legal proceedings and the nonpayment thereof does not adversely affect any rights, title or interest of Owners in or to the Property. 12. INSURANCE. St. Mary shall carry at all times during the term of this Agreement worker's compensation and other insurance required by state laws and mining regulations, or St. Mary may self-insure as to such matters if it qualifies as a self-insurer under the appropriate laws and regulations. 13. INSPECTION. (a) Owners or their authorized representative may enter on the Property at any reasonable time, and with reasonable notice to St. Mary, for the purpose of inspection, but shall enter at Owners' own risk and so as not to hinder unreasonably the operations of St. Mary. Owners shall indemnify and hold St. Mary harmless from any damage, claim or demand by reason of injury to or the presence of Owners, their agents or representatives on the Property. 6 (b) Owners or their authorized representative may, at any reasonable time, and with reasonable notice to St. Mary, inspect any records pertinent and necessary for substantiating the compliance of St. Mary with the provisions of this Agreement. 14. DATA. (a) Upon the execution of this Agreement, Owners shall deliver to St. Mary all drill core, all geological, geophysical and engineering data and maps, logs of drill holes, results of assaying and sampling, and similar data concerning the Property (or copies thereof) which are in Owners' possession or control. (b) Upon the surrender or other termination of this Agreement (except upon exercise of the Option and payment of the full purchase price as provided in Section 6 hereof, St. Mary shall, within 60 days after termination, (i) return to Owners all drill core and original data delivered by Owners to St. Mary which are then in St. Mary's possession or control, and (ii) make available for inspection by Owners all factual geological and geophysical data and maps (not including interpretive data), logs of drill holes, drill core or cuttings and results of assaying and sampling pertaining to the Property which St. Mary has obtained as a result of its exploration work under this Agreement and which are then in St. Mary's possession or control. Upon Owners' request made within ninety (90) days after termination of this Agreement, St. Mary shall at Owners' expense, provide Owners with the drill core or cuttings designated by Owners and with copies of any portion of the factual geological and geophysical data and maps (not including interpretive data), logs of drill holes, and results of assaying and sampling designated by Owners. St. Mary makes no representation or warranty as to the accuracy or completeness of, any such data or information, and shall not be liable on account of any use by Owners or any other person of any such data or information. St. Mary shall not be liable for the loss or destruction of any drill core or cutting. 15. CONFIDENTIALITY. During the term of this Agreement all information obtained by Owners or their authorized representatives from St. Mary or arising out of St. Mary's activities on the Property pursuant to this Agreement shall be kept strictly confidential by 7 Owners and shall not be released to any third party except upon the prior written consent of St. Mary. 16. TERMINATION AND SURRENDER. (a) The term of this Agreement shall be for a period of five years from the date hereof unless sooner surrendered or otherwise terminated, or until the earlier exercise of the Option. (b) It is also agreed that a failure by St. Mary to make an option payment within 60 days of the due date, therefor as provided in Section 6(b) hereof shall constitute also a termination of this Agreement effective upon the expiration of such 60 day period. Upon the effective date of such termination, all rights of St. Mary under this Agreement, except as provided in Sections 17 and 18 hereof, shall terminate and all liabilities and obligations of St. Mary hereunder (including the obligation of making any further payments under Section 6(b) hereof) shall likewise thereupon terminate except as provided in Sections 8(c) and 14(b) hereof. (c) St. Mary may also at any time terminate this Agreement as to all or any part of the Property by delivering to Owners or by filing for record in the appropriate office (with a copy to Owners) a good and sufficient Surrender of this Agreement. Upon mailing the Surrender to Owners or to the appropriate office, all rights of St. Mary under this Agreement shall terminate, except as provided in Sections 17 and 18 hereof, and all liabilities and obligations of St. Mary under this agreement shall likewise terminate except as provided in Section 8(c) and 14(b) hereof and except liability for payments under Section 6(b) hereof that became due more than 60 days prior to the date of such termination. 17. REMOVAL OF PROPERTY. For a period of six (6) months after the termination of this Agreement St. Mary shall have the right (but not the obligation except to the extent set forth in Section 8(c) hereof) to remove from the Property all buildings, structures, machinery, equipment, personal property, fixtures, and improvements owned by St. Mary or 8 erected or placed on or in the Property by St. Mary, except mine timbers in place. St. Mary may keep one or more watchmen on the Property during the six-month period. 18. ACCESS. For as long as necessary after termination of this Agreement or following, the exercise of the Option, St. Mary shall have the right of access to and across the Property for reclamation purposes. 19. EASEMENTS. If requested by St. Mary during the term of this Agreement or following, the exercise of the Option, Owners shall execute one or more instruments granting to St. Mary without cost to St. Mary easements upon, over or through the Property or upon, over or through other property owned by Owners, for the construction, maintenance, use, and removal of pipe lines, telephone lines, electrical power or transmission lines, roads, railroads, tramways, flumes, ditches, shafts, drifts, tunnels and other facilities necessary or convenient for St. Mary's operations on the Property or on other property. 20. AMENDMENTS, RELOCATIONS AND PATENTS. During the term of this Agreement, St. Mary shall have the right (but not the obligation), in the name of Owners, to amend or relocate any or all of the unpatented mining claims included in the Property, to locate placer claims on ground theretofore covered by lode claims and vice versa, and to locate any millsites on ground theretofore covered by mining claims and vice versa, and to locate any fractions resulting from the location, amendment or relocations of mining claims or millsites. At the request of St. Mary, Owners shall apply for a patent for any or all of the unpatented mining claims and millsites. For purposes of implementing the provisions of this Section, Owners do hereby nominate, constitute and appoint St. Mary as their true and lawful attorney-in-fact to execute, deliver and record on behalf of the Owners and in their name, place and stead all such documents as St. Mary may deem necessary or appropriate for such purposes. All expenses authorized by St. Mary in connection with locating, amending, or relocating mining claims or millsites or prosecuting patent proceedings shall be borne by St. Mary. The rights 9 of St. Mary under this Agreement shall extend to all such locations, amended locations, relocations and patented mining claims and millsites. 21. COMPLIANCE WITH FEDERAL LAND POLICY AND MANAGEMENT ACT. (a) Owners warrant that the location notices or location certificates for the unpatented mining claims included in the Property have been properly filed in the proper office of the Bureau of Land Management pursuant to 43 U.S.C. Section 1744 (b). (b) Owners warrant that evidence of assessment work or notices of intention to hold have been properly recorded in the proper county (or recording district) office and filed in the proper office of the Bureau of Land Management pursuant to 43 U.S.C. Section 1744(a), as required, for each assessment year to and including the assessment year ending September 1, 1992. 22. Assessment Work. (a) Owners warrant that the annual assessment work required to hold the Property has been performed for each assessment year to and including the assessment year sending September 1, 1992. For every assessment year thereafter in which St. Mary continues this Agreement beyond the 1st day of August of any year, St. Mary shall perform assessment work or pay any rental fee required by the Department of the Interior. If any court or governmental agency decides that the work performed by St. Mary does not constitute the kind of work required by federal or state law, St. Mary shall nevertheless be deemed to have complied with the terms of this Agreement if the work done by St. Mary is the kind generally accepted in the mining industry as assessment work under existing law. (b) St. Mary shall be relieved of its obligation to perform assessment work for any period in which assessment work is not required or is suspended, and St. Mary shall have the benefit of subsequent laws enacted which relate to assessment work, including any laws extending the time within which to perform assessment work. For each year in which St. Mary performs assessment work, it will record in the office where the location notice or location certificate is recorded, and in any other proper office in the county (or recording 10 district) in which the claims are located, and in the proper office of the Bureau of Land Management, an affidavit of assessment work or other documents complying with the requirements of state law and the Federal land Policy and Management Act of 1976 and the regulations implementing and supplementing the Act. (c) Owners represent that the Property is one contiguous group of mining claims, and agree that work on any one or more of the claims will be for the benefit of all of the claims. (d) Owners represent that no report of geological, geophysical, and geochemical work (30 U.S.C. Sections 28-1 and 28-2) on the Property has been filed for assessment years commencing September 1, 1990 and thereafter. 23. NOTICES. All notices and other communications to either party shall be in writing and shall be sufficiently given if delivered in person or sent by certified or registered mail, return receipt requested, addressed as hereinafter set forth. Notices given by mail shall be deemed delivered as of the date of mailing. Until a change of address is communicated as indicated above, all notices to Owners shall be addressed: c/o Wanda H. Ahlstrom 1628 Mulberry Way Sandy, Utah 84093 and all notices to St. Mary shall be addressed, St. Mary Minerals Inc. 1776 Lincoln Street Denver, Colorado 80203 Attn: Gregory A. Hahn 24. ASSIGNMENT. (a) The rights of either party hereunder may be assigned in whole or in part without the consent of the other party hereto, subject to the provisions hereinafter set forth. (b) No change or division in the ownership of the Property or the payments provided for herein, however accomplished, shall enlarge the obligations or diminish the rights of St. Mary hereunder. Owners covenant that any change in their ownership shall be 11 accomplished in such a manner that St. Mary shall be required to make payments and to give notices to but one person, firm or corporation, and upon breach of this covenant, St. Mary may retain all monies otherwise due to Owners until the breach has been cured. No change or division in ownership shall be binding on St. Mary until 30 days after Owners have given St. Mary a certified copy of the recorded instrument evidencing the change or division. (c) If St. Mary assigns the whole of or an undivided interest in this Agreement, liability for breach of any obligation hereunder shall rest exclusively upon the holder of the Agreement or of an undivided interest herein who commits the breach. If this Agreement is assigned as to a segregated portion of the Property, default by the holder hereunder of that portion shall not affect the rights of holders hereunder of any other portion. (d) If Owners receive and propose to accept a bona fide written offer from an unrelated third party to purchase, subject to the terms of this Agreement, and purpose to accept all or any part of Owners' interest in the Property or in this Agreement, Owners shall first offer the interest to St. Mary stating the interest proposed to be sold or otherwise disposed of, the offering price from such third party and other terms and conditions of sale. St. Mary may accept the offer on the same terms and conditions as such third party offer by notice to Owners given within 60 days following the date of Owners' offer. If St. Mary does not accept Owners' offer, Owners may sell or otherwise dispose of the interest offered to St. Mary at a price and upon terms and conditions equal to or less favorable to the third party than those offered to St. Mary provided that the sale or other disposition is effectuated within 120 days from the effective date of Owners' offer. Any sale or other disposition shall be subject to the terms of this Agreement, including this subsection (d), all of which shall survive the closing of any such sale in full force and effect. If Owners do not sell or otherwise dispose of the interest offered within 120 days, the provisions of this subsection (d) shall apply to any subsequent offer received by Owners. 25. NO TRANSFER OR ENCUMBRANCE. Without St. Mary's prior written consent, neither Owners nor any Owner during term of this Agreement shall (a) sell, transfer, assign or convey any interest in the Property without St. Mary's prior written consent or otherwise in 12 accordance with the provisions of Section 25(d) hereof; (b) do or fail to do any act or thing which would cause or permit any part of the Property to be pledged, collateralized or stand as security for any matter whatsoever; or (c) enter into any leases or other agreements concerning the Property or any part thereof. 26. FORCE MAJEURE. (a) If St. Mary shall be prevented by Force Majeure from timely performance of any of its obligations hereunder (except the payment of money to Owners), the failure of performance shall be excused and the period for performance and the term of this Agreement shall be extended for an additional period equal to the duration of the Force Majeure. Upon the occurrence and upon the termination of any Force Majeure, St. Mary shall promptly notify Owners. St. Mary shall use reasonable diligence to remedy a Force Majeure, but shall not be required against its better judgment to settle any labor dispute or contest the validity of any law or regulation or any action or inaction of civil or military authority. (b) "Force Majeure" means any cause beyond St. Mary's reasonable control, including law or regulation, action or inaction of civil or military authority, inability to obtain any license, permit, or other authorization that may be required to conduct operations on or in connection with the Property, unusually severe weather, mining casualty, fire, explosion, insurrection, riot, labor dispute, inability after diligent effort to obtain workmen or material, delay in transportation and acts of God. 27. SHORT FORM. Contemporaneously herewith, St. Mary and Owners have executed and delivered a Short Form of Agreement. St. Mary may record the Short Form or this Agreement, or both, as it may elect. 28. INUREMENT. All covenants, conditions, limitations and provisions herein contained apply to and are binding upon the parties hereto, their heirs, representatives, successors and assigns. 13 29. MODIFICATION. No modification, variation, or amendment of this Agreement shall be effective unless the modification, variation or amendment is in writing and is signed by Owners and St. Mary. 30. WAIVER. No waiver of any breach or default under this Agreement shall be effective unless the waiver is in writing and signed by the party against whom the waiver is claimed. No waiver of any breach or default shall be deemed to be a waiver of any other or subsequent breach or default. 31. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement of the parties and, except as herein expressly provided, supersedes all previous and contemporaneous agreements, representations, warranties or understandings, written or oral. 32. CONSTRUCTION. The paragraph headings are for convenience only, and shall not be used in the construction of this Agreement. 33. GOVERNING LAW. The formation, interpretation, and performance of this Agreement shall be governed by the law of the state of Colorado. 34. TIME OF ESSENCE. Except as set forth in Section 26 hereof, time is of the essence in the performance of each and every term, condition, and covenant of this Agreement. 35. TIME COMPUTATIONS. In computing the time permitted or required for performance or payment as provided hereunder, the first day shall be excluded and the last day shall be included. If the last day of any such period is a Saturday, Sunday or legal holiday, the period shall extend to include the next day which is not a Saturday, Sunday, or legal holiday. Any performance or payment which must be taken or made under this Agreement must be taken or made prior to 5:00 p.m. (Denver, Colorado time) of the last day of the applicable period provided hereunder for such action, unless another time is expressly specified. All 14 references to time shall be Denver, Colorado time. If a date for performance or payment falls on a holiday or weekend, the time for performance or payment shall be extended to the next business day, and if performance or payment has occurred on such weekend or holiday, it shall be deemed to have occurred on the next business day. 36. INVALIDITY. The invalidity of any provision, of this Agreement shall not affect the enforceability of any other provision of this Agreement. 37. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same agreement. If any person named as one of the Owners does not execute this Agreement, it nevertheless shall be binding upon those persons executing it. 38. ADDITIONAL DOCUMENTS. Owners will provide St. Mary with such additional documents as may be necessary to carry out the purposes of this Agreement. If conditions change by reason of conveyances, assignments or other matters relating to the title to or description of the Property, Owners and St. Mary shall execute amendments of this Agreement, the Short Form of Option Agreement and any other documents which may be necessary to reflect such changed conditions. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. /s/ Wanda H. Ahlstrom /s/ Clive L. Ahlstrom - -------------------------- -------------------------- Wanda H. Ahlstrom Clive L. Ahlstrom /s/ Max J. Peacock /s/ Florene Peacock - -------------------------- -------------------------- Max J. Peacock Florene Peacock 15 ST. MARY MINERALS INC. By: /s/ ILLEGIBLE ------------------------------ Executive Vice President STATE OF ) ) ss. COUNTY OF ) On this 27 day of September, 1993 before me the undersigned, a notary ---- ---------- -- public, personally appeared Wanda H. Ahlstrom known to me (or proved to me on the oath of _________________________________(to be the person whose name is subscribed to the within instrument, and acknowledged that she executed the same. My Commission Expires: [DAVID A. SHAIA SEAL] /s/David Shaia - ------------------------------ ------------------------------ Notary Public STATE OF ) ) ss. COUNTY OF ) On this 27 day of September, 1993 before me the undersigned, a notary ---- ---------- -- public, personally appeared CLive L. Ahlstrom known to me (or proved to me on the oath of _________________________________(to be the person whose name is subscribed to the within instrument, and acknowledged that he executed the same. My Commission Expires: [DAVID A. SHAIA SEAL] /s/David Shaia - ------------------------------ ------------------------------ Notary Public 16 STATE OF ) ) ss. COUNTY OF ) On this 27 day of Sept. , 1993 before me the undersigned, a notary ---- ---------- -- public, personally appeared Max J. Peacock known to me (or proved to me on the oath of _________________________________(to be the person whose name is subscribed to the within instrument, and acknowledged that he executed the same. My Commission Expires: [DAVID A. SHAIA SEAL] /s/David Shaia - ------------------------------ ------------------------------ Notary Public STATE OF ) ) ss. COUNTY OF ) On this 27 day of Sept. , 1993 before me the undersigned, a notary ---- ---------- -- public, personally appeared Florene N. Peacock known to me (or proved to me on the oath of _________________________________(to be the person whose name is subscribed to the within instrument, and acknowledged that she executed the same. My Commission Expires: [DAVID A. SHAIA SEAL] /s/David Shaia - ------------------------------ ------------------------------ Notary Public 17 STATE OF COLORADO ) ) ss. CITY AND COUNTY OF DENVER ) The foregoing instrument was acknowledged before me this 22nd day of ---- September, 1993, by Gregory A. Hahn, the Exec. Vice Pres. of St. Mary - --------- -- --------------- ---------------- Minerals Inc., a Colorado corporation, on behalf of the corporation. My Commission Expires: Feb. 14, 1997 /s/ James C. Robertson - ------------------------------ -------------------------------- Notary Public James C. Robertson EXHIBIT A OWNERS NAME AND ADDRESS % INTEREST IN PROPERTY Wanda H. Ahlstrom and Undivided 50% Interest Clive L. Ahlstrom husband and wife 1628 Mulberry Way Sandy, Utah 84093 Max J. Peacock and Undivided 50% Interest Florene N. Peacock, husband and wife 5889 So. 20 East Murray, Utah 84107 EXHIBIT B PATENTED CLAIMS An undivided two-thirds interest in and to the following patented mining claims located in Montrose County, Colorado: Cliff Dweller Lode, Mineral Survey No. 17486 Rainbow Lode, Mineral Survey No. 17487 UNPATENTED CLAIMS 100% interest in and to the unpatented mining claims located in Montrose County, Colorado that are listed on Exhibit B-1 attached hereto and incorporated herein. EXHIBIT B-1 Claim Name Twn/Ran/Sec Book/Page Blm Ser. No. - ---------- ----------- --------- ------------ Azurite #1 47N/19W/22 782/439 234431 Azurite #2 47N/19W/15 782/440 234432 Azurite #3 47N/19W/15 782/441 234433 Azurite #4 47N/19W/15 782/442 234434 Azurite #5 47N/19W/15 782/443 234435 Azurite #6 47N/19W/15 782/444 234436 Azurite #7 47N/19W/15 782/445 234437 Azurite #8 47N/19W/15 782/446 234438 Azurite.#9 47N/19W/15 782/447 234439 Azurite #10 47N/19W/15 782/448 234440 Azurite #11 47N/19W/15 782/449 234441 Azurite #12 47N/19W/22 782/450 234442 Azurite #13 47N/19W/15 782/451 234443 Azurite #14 47N/19W/15 782/452 234444 Azurite #15 47N/19W/15 782/453 234445 Azurite #16 47N/19W/15 782/454 234446 Azurite #17 47N/19W/15 782/455 234447 Azurite #18 47N/19W/22 782/456 234448 Azurite #19 47N/19W/22 782/457 234449 Azurite #20 47N/19W/15 782/491 236292 Azurite #21 47N/19W/22 782/492 236293 Azurite #22 47N/19W/22 782/493 236294 Azurite #23 47N/19W/22 782/494 236295 Azurite #24 47N/19W/22 782/495 236296 Azurite #25 47N/19W/22 782/496 236297 Azurite #26 47N/19W/22 782/497 236298 Azurite #27 47N/19W/22 782/498 236299 Azurite #28 47N/19W/22 782/499 236300 Azurite #29 47N/19W/22 782/500 236301 Azurite #30 47N/19W/22 782/501 236302 Azurite #31 47N/19W/27 782/502 236303 Azurite #32 47N/19W/14 782/503 236304 Azurite #33 47N/19W/14 782/504 236305 Azurite #34 47N/19W/22 782/505 236306 Azurite #35 47N/19W/22 782/506 236307 Azurite #36 47N/19W/22 782/507 236308 Azurite #37 47N/19W/22 782/508 236309 Azurite #38 47N/19W/22 782/509 236310 Azurite #39 47N/19W/22 782/510 236311 Azurite #40 47N/19W/22,23 782/511 236312 Azurite #41 47N/19W/22,23 782/512 236313 Azurite #42 47N/19W/22,23,26,27 782/513 236314 Azurite #43 47N/19W/26,27 782/514 236315 Azurite #44 47N/19W/23 782/515 236316 Azurite #45 47N/19W/23 782/516 236317 Azurite #46 47N/19W/23 782/517 236318 Azurite #47 47N/19W/23 782/518 236319 Azurite #48 47N/19W/23 782/519 236320 Azurite #49 47N/19W/23 782/520 236321 Claim Name Twn/Ran/Sec Book/Page Blm Ser. No. - ---------- ----------- --------- ------------ Azurite #50 47N/19W/14 782/521 236322 Azurite #51 47N/19W/14 782/522 236323 Azurite #52 47N/19W/14,23 782/523 236324 Azurite #53 47N/19W/23 782/524 236325 Claude #1 47N/19W/22 782/430 234423 Claude #2 47N/19W/22 782/431 234424 Claude #3 47N/19W/22,28 782/432 234425 Claude #4 47N/19W/6,22,28 782/433 234426 Claude #5 47N/19W/22 782/434 234427 Claude #6 47N/19W/22 782/435 234428 Claude #7 47N/19W/22,28 782/436 234429 Claude #8 47N/19W/22,28 782/437 234430 Claude #9 47N/19W/27 782/526 236326 Claude #10 47N/19W/27 782/527 236327 Claude #11 47N/19W/27 782/528 236328 Claude #12 47N/19W/27 782/529 236329 Claude #13 47N/19W/22 782/574 237204 Claude #14 47N/19W/22 782/575 237205 Recorded at _____________________ O'clock ____________M ________________ Reception No. __________________ _____________________________Recorder - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ SPECIAL WARRANTY DEED Wanda H. Ahlstrom & Clive L. Ahlstrom husband and wife whose address is 1628 Mulberry Way, Sandy Utah 84093 xxxxxxxx xxxxxxxxxxxxx , for the consideration of Two Hundred Seventy-Five Thousand & 00/100 dollars, ($275,000.00) in hand paid, hereby sell(s) and convey(s) to St. Mary Minerals Inc., a Colorado corporation whose legal address is 1776 Lincoln Street City and County of Denver , and State of Colorado the following real property in the County of Montrose and State of Colorado, to wit: An undivided fifty percent (50%) interest in the property described in Exhibit A attached hereto and incorporated herein also known as street and number NA and water rights with all its appurtenances and warrant(s) the title against all persons claiming under (me)(us). Signed and delivered this day of 1993. /s/ Wanda H. Ahlstrom /s/ Clive L. Ahlstrom - ----------------------------- ------------------------------ Wanda H. Ahlstrom Clive L. Ahlstrom _____________________________ ______________________________ _____________________________ ______________________________ STATE OF COLORADO ) ) ss. County of ) The foregoing instrument was acknowledged before me this 27 day of Sept 1993, by Clive L. Ahlstrom and Wanda H. Ahlstrom, husband and wife My commission expires 6/3 , 1995. Witness my hand and official seal [DAVID A. SHAIA SEAL] /s/ David A. Shaia If in Denver, insert "City and" ------------------------------- Notary Public - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Recorded at _____________________ O'clock ____________M ________________ Reception No. __________________ _____________________________Recorder - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ SPECIAL WARRANTY DEED Florene H. Peacock and Max J. Peacock husband and wife whose address is 5889 So. 20 East, Murray, Utah 84107 xxxxxxxx xxxxxxxxxxxxx , for the consideration of Two Hundred Seventy-Five Thousand & 00/100 dollars, ($275,000.00) in hand paid, hereby sell(s) and convey(s) to St. Mary Minerals Inc., a Colorado corporation whose legal address is 1776 Lincoln Street City and County of Denver , and State of Colorado the following real property in the County of Montrose and State of Colorado, to wit: An undivided fifty percent (50%) interest in the property described in Exhibit A attached hereto and incorporated herein also known as street and number NA and water rights with all its appurtenances and warrant(s) the title against all persons claiming under (me)(us). Signed and delivered this day of 1993. /s/ Florene H. Peacock /s/ Max J. Peacock - ----------------------------- ------------------------------ Florene H. Peacock Max J. Peacock _____________________________ ______________________________ _____________________________ ______________________________ STATE OF COLORADO ) ) ss. County of ) The foregoing instrument was acknowledged before me this 27 day of Sept 1993, by Max J. Peacock and Florene N. Peacock, husband and wife. My commission expires 6/3 , 1995. Witness my hand and official seal [DAVID A. SHAIA SEAL] /s/ David A. Shaia If in Denver, insert "City and" ------------------------------- Notary Public - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ AMENDMENT #2 TO OPTION AGREEMENT This Amendment #2 to Option Agreement is made and entered into as of March __, 1996 by and between Wanda H. Ahlstrom and Clive L. Ahlstrom, husband and wife, and Max J. Peacock and Florene N. Peacock, husband and wife ("Owners"), whose address is P. 0. Box 31, Eden, Utah 84310 and SUMMO USA CORPORATION, a Colorado corporation and successor in interest to St. Mary Minerals Inc. ("St. Mary"), whose address is 1776 Lincoln Street, Suite 1100, Denver, Colorado 80203. WHEREAS, Owners and St. Mary entered into an Option Agreement dated September 27, 1993 pertaining to certain lands in Township 47 North, Range 19 West, in Montrose County, Colorado. WHEREAS, Owners and Summo amended the Option Agreement effective December 28, 1994 in order to revise the property description. WHEREAS, Owners and Summo now desire to amend the Option Agreement and to ratify and confirm the Option Agreement as so modified. NOW, THEREFORE, in consideration of the following covenants, the Owners and Summo agree as follows: 1. Subparagraph (b) of Article 6 is deleted in its entirety and replaced with the following: (b) Summo shall pay to Owners further option payments on the dates and in the amounts as follows: March 1, 1994 $ 20,000 (paid 2-7-94) September 1, 1994 20,000 (paid 8-19-94) September 1, 1995 50,000 (paid 8-15-95) September 1, 1996 50,000 September 1, 1997 50,000 September 1, 1998 50,000 September 1, 1999 50,000 September 1, 2000 50,000 September 1, 2001 $200,000 -------- $540,000 THIS Amendment shall be effective as of March 29, 1996. EXCEPT as herein amended, the Option Agreement is hereby ratified and confirmed by Owners and Summo as executed and as being in full force and effect. THIS Amendment will inure to the benefit of and will be binding upon the respective successors, representatives and assigns of the Owners and Summo. IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first above written. /s/ Wanda H. Ahlstrom /s/ Clive L. Ahlstrom - ----------------------------- ------------------------------ Wanda H. Ahlstrom Clive L. Ahlstrom /s/ Max J.Peacock /s/ Florene N. Peacock - ----------------------------- ------------------------------ Max J.Peacock Florene N. Peacock SUMMO USA CORPORATION By: /s/ [ILLEGIBLE] --------------------------- STATE OF UTAH ) ) ss. COUNTY OF SALT LAKE ) On this 24 day of June, 1996 before me the undersigned, a notary public, -- ---- personally appeared Wanda H. Ahlstrom, owner of said claims. /s/ Angela Spencer ------------------------------ Notary Public My Commission Expires: July 7, 1998 - ----------------------------- [SEAL] [NOTARY PUBLIC ANGELA SPENCER SEAL] -2- STATE OF UTAH ) ) ss. COUNTY OF SALT LAKE ) On this __ day of _____, 1996 before me the undersigned, a notary public, personally appeared Clive L. Ahlstrom, owner of said claims. ______________________________ Notary Public My Commission Expires: _____________________________ [SEAL] STATE OF UTAH ) ) ss. COUNTY OF SALT LAKE ) On this 21 day of June, 1996 before me the undersigned, a notary public, -- ---- personally appeared Max J. Peacock, owner of said claims. /s/ Yvonne M. Hill ------------------------------ Notary Public My Commission Expires: 2/21/98 - ----------------------------- [SEAL] [NOTARY PUBLIC YVONNE M. HILL SEAL] -3- STATE OF UTAH ) ) ss. COUNTY OF SALT LAKE ) On this 21 day of June, 1996 before me the undersigned, a notary public, -- ---- personally appeared Florene N. Peacock, owner of said claims. /s/ Yvonne M. Hill ------------------------------ Notary Public My Commission Expires: 2/21/98 - ----------------------------- [SEAL] [NOTARY PUBLIC YVONNE M. HILL SEAL] -4- STATE OF COLORADO ) CITY AND ) ss. COUNTY OF DENVER ) On this 27 day of March 1996 before me the undersigned, a notary public, -- ----- personally appeared Gregory A. Hahn, the President of Summo USA Corporation, on behalf of the corporation. /s/ Michelle Herbert ------------------------------ Notary Public My Commission Expires: 3-18-99 - ----------------------------- [SEAL] -5- EX-10.13 22 EXHIBIT 10.13 EXHIBIT 10.13 EXPLORATION AND PURCHASE OPTION AGREEMENT THIS OPTION AGREEMENT ("Agreement") made effective as of the lst day of August, 1994, by and between those persons whose names and addresses are shown on EXHIBIT A attached hereto and made a part hereof (individually an "Owner" and collectively the "Owners") and ST. MARY MINERALS INC., a Colorado corporation, whose address is 1776 Lincoln Street, Denver, Colorado 80203 (hereinafter referred to as "St. Mary"); WHEREAS, Owners are the owners of certain patented mining claims and millsites situate in Taos County, New Mexico, herein referred to as "the Property," and more particularly described on EXHIBIT B attached hereto and made a part hereof; and WHEREAS, St. Mary desires to carry out exploration work and to acquire an option to purchase the Property, WHEREAS, Owners desire to make the Property available for the conduct by St. Mary of certain mineral exploration work thereon and to grant St. Mary the option to purchase the Property, NOW THEREEFORE, in consideration of Ten Dollars ($10.00) in hand paid to Owners, the receipt and sufficiency of which are hereby acknowledged, and further in consideration of the mutual covenants, agreements, and promises herein contained, the parties agree as follows: 1. OPTION. Owners grant to St. Mary during the term of this Agreement the sole and exclusive option (the "Option") to purchase the Property, together with all appurtenances and water rights incident thereto and all improvements and personal property thereon, free and clear of all liens and encumbrances, for a total purchase price of Five Hundred Thousand Dollars ($500,000.00). St. Mary shall be entitled to a credit against the purchase price for all amounts paid under the provisions of Section 6. hereof and for all costs and expenses incurred under the provisions of Section 4 hereof. If the Property is placed in commercial production at any time during the term of this Agreement, St. Mary shall exercise the option by providing written notice of exercise to Owners. Within three (3) years after such notice, but no later than August 1, 2015, St. Mary shall deliver the balance of the purchase price to Owners. "Commercial production" shall mean the processing and sale of ores, concentrates, metals and other mineral products which have been mined on the Property but which shall not include processing for the purpose of testing or milling by a pilot plant. 2. ESCROW. Contemporaneously with the execution of this Agreement, Owners shall execute, acknowledge, and deliver to the Escrow Agent one or more general warranty deeds conveying the Property to St. Mary in the form (without legal descriptions) of Exhibit C attached hereto and incorporated herein. Owners and St. Mary hereby appoint CB&S Nominee Corporation, 1800 One Norwest Center Building, 1700 Lincoln Street, Denver, Colorado 80203 as their Escrow Agent to receive and distribute all payments and to hold the deed and deliver it to the party entitled hereunder to receive the same. The parties hereto agree that the Escrow Agent shall act pursuant to Escrow Instructions executed contemporaneously herewith. 3. EXCLUSIVE POSSESSION. St. Mary shall have the exclusive possession of the Property during the term of this Agreement. 4. TITLE. (a) Owners warrant that they are in possession of the Property, that they have the right to enter into this Agreement, that they know of no other person claiming any interest in the Property or the ground covered thereby, and that the Property is free from all liens and encumbrances, except liens for property taxes not yet due and payable. Owners further warrant to St. Mary the quiet enjoyment of the Property and the right to explore, develop, and mine the same. (b) Owners warrant and will defend title of the property against all persons whomsoever. 2 (c) At St. Mary's request, Owners shall take all action necessary (including judicial proceedings) to remove any cloud from or cure any defect in their title to the Property or the ground covered thereby. If Owners fail or refuse to take any such action, St. Mary may take any such action in Owners' name. Owners agree to cooperate with St. Mary in any such action taken. If the United States or any third person attacks the validity of any of the patented mining claims included in the Property for any reason, St. Mary shall have no obligation to defend the validity of the claim. (d) St. Mary shall not be stopped to deny the validity of Owners' title. 5. UNDIVIDED INTEREST. If the interest claimed by any Owner in any portion of the Property is less than one, hundred percent, the interest claimed by such Owner is set forth in Exhibit A. Any representation or warranty of title made by any Owner shall apply only to the interest set forth in Exhibit A. 6. OPTION PAYMENTS. (a) Concurrent with the execution of this Agreement by Owners, St. Mary has made an option payment to Owners in the amount of $5,000, receipt of which is hereby acknowledged by Owners. (b) St. Mary shall pay to Owners further annual option payments on or before the dates and in the amounts as follows: August 1, 1995 $ 5,000 August 1, 1996 10,000 August 1, 1997 10,000 August 1, 1998 10,000 August 1, 1999 10,000 August 1, 2000 15,000 August 1, 2001 15,000 August 1, 2002 15,000 August 1, 2003 15,000 August 1, 2004 15,000 August 1, 2005 20,000 August 1, 2006 20,000 August 1, 2007 20,000 August 1, 2008 20,000 3 August 1 ,2009 20,000 August 1, 2010 20,000 August 1, 2011 20,000 August 1, 2012 20,000 August 1, 2013 20,000 August 1, 2014 20,000 August 1, 2015 175,000 -------- $500,000 7. MANNER OF FURTHER OPTION PAYMENTS. St. Mary shall make all further option payments due Owners hereunder by check which shall be made payable to and shall be made payable to and shall be transmitted to the Escrow Agent. The Escrow Instructions to be executed contemporaneously herewith will instruct the Escrow Agent how the payments shall be disbursed. Upon making the payments to the Escrow Agent, St. Mary shall be deemed to have made the payments to Owners, their heirs, representatives, successors, and assigns, and thereupon St. Mary shall be discharged to the extent thereof as if the payments had been made directly to Owners, or to any person, firm or corporation entitled thereto, and St. Mary shall not be liable for the ultimate distribution or receipt of any payment or payments. 8. OPERATIONS. (a) SCOPE. During the term of this Agreement, St. Mary shall have free and unrestricted access to the Property, and shall have the right and privilege of conducting exploratory investigations and prospecting for mineral deposits on the Property, effective during the life of the Option, and that prospecting shall include, but not be limited to, soil testing, geophysical surveys, core drilling, shaft sinking, tunnel and mine building and the removal of ore for testing purposes but not removal of ore for sale. St. Mary shall have the right to erect and maintain upon the Property any improvements, structures or facilities including mines, shafts and tunnels as may be necessary or convenient for the conduct of its operations. 4 (b) STANDARDS OF OPERATION. St. Mary shall conduct all operations on the Property in a good and workmanlike manner and in accordance with accepted mining practice. (c) COMPLIANCE WITH LAW; RECLAMATION: St. Mary shall endeavor in good faith to comply with applicable provisions of federal, state and local laws and regulations, as required by the operating permits issued to St. Mary by these agencies under which St. Mary shall conduct its operations. If this Agreement is terminated, St. Mary shall reclaim only those portions of the Property disturbed by its operations, and in compliance with all applicable governmental laws, regulations and orders. St. Mary shall have the right, without payment of any additional consideration to Owners, to enter upon the Property subsequent to termination of this Agreement for purposes of performing such reclamation work. 9. NO IMPLIED COVENANTS. No covenants or conditions relating to the exploration or related operations on or in connection with the Property, or the timing thereof, other than those expressly provided in this Agreement, shall be implied. After commencing any exploration or related operations on or in connection with the Property and so long as this Agreement has not been terminated before the expiration of its term, St. Mary may in its sole discretion curtail or cease such operations so long as it continues to make any payments due Owners under this Agreement subject to the provisions of Section 16 hereof. 10. PROTECTION FROM LIENS AND DAMAGES. St. Mary shall keep the Property free of liens for labor performed or materials or merchandise furnished for use on the Property under this Agreement, and shall hold Owners harmless from all costs, loss, or damage which may result from any work or operations of St. Mary or its occupancy of the Property. 5 11. TAXES. Owners shall pay all taxes levied against the Property prior to the date of this Agreement. St. Mary shall pay or reimburse Owners for all taxes levied against the Property during the term of this Agreement. In the case of taxes for the calendar year in which this Agreement commences, and for the calendar year in which this Agreement ends, there shall be an apportionment between the parties, St. Mary to bear the proportion of taxes upon the Property applicable to the part of the calendar year included hereunder, and Owners to bear the balance of the taxes. St. Mary shall pay all taxes levied during the term of this Agreement against all buildings, structures, machinery, equipment, personal property, fixtures, and improvements placed upon the Property by St. Mary, and all taxes levied against St. Mary as an employer of labor. All taxes shall be paid when due and before delinquent, but St. Mary shall be under no obligation to pay any tax so long as the tax is being contested in good faith and by appropriate legal proceedings and the nonpayment thereof does not adversely affect any right, title, or interest of Owners in or to the Property. 12. INSURANCE. St. Mary shall carry at all times during the term of this Agreement worker's compensation and other insurance required by state laws and mining regulations, or St. Mary may self-insure as to such matters if it qualifies as a self-insurer under the appropriate laws and regulations. 13. INSPECTION. (a) Owners or their authorized representative may enter on the Property at any reasonable time for the purpose of inspection, but shall enter at Owners' own risk and so as not to hinder unreasonably the operations of St. Mary. Owners shall indemnify and hold St. Mary harmless from any damage, claim, or demand by reason of injury to or the presence of Owners, their agents or representatives on the Property. (b) Owners or their authorized representative may, at any reasonable time, inspect any records pertinent and necessary for substantiating the compliance of St. Mary with the provisions of this Agreement. 6 14. DATA. (a) Upon the execution of this Agreement, Owners shall deliver to St. Mary all drill core, all geological, geophysical, and engineering data and maps, logs of drill holes, results of assaying and sampling, and similar data concerning the Property (or copies thereof) which are in Owners' possession or control. (b) Upon the surrender or other termination of this Agreement (except upon exercise of the Option and payment of the full purchase price as provided in Section 6 hereof), St. Mary shall, within sixty days after termination, (i) return to Owners all drill core and original data delivered by Owners to St. Mary which are then in St. Mary's possession or control, and (ii) make available for inspection by Owners all factual geological and geophysical data and maps (not including interpretive data), logs of drill holes, drill core or cuttings and results of assaying and sampling pertaining to the Property which St. Mary has obtained as a result of its exploration work under this Agreement and which are then in St. Mary's possession or control. Upon Owners' request made within ninety (90) days after termination of this Agreement, St. Mary shall at Owners' expense provide Owners with the drill core or cuttings designated by Owners and with copies of any Portion of the factual geological and geophysical data and maps (not including interpretive data), logs of drill holes, and results of assaying and sampling designated by Owners. St. Mary makes no representation or warranty as to the accuracy or completeness of any such data or information, and shall not be liable on account of any use by Owners or any other person of any such data or information. St. Mary shall not be liable for the loss or destruction of any drill core or cuttings. 15. CONFIDENTIAL. During the term of this Agreement all information obtained by Owners or their authorized representatives from St. Mary or arising out of St. Mary's activities on the Property pursuant to this Agreement shall be kept strictly confidential by Owners and shall not be released to any third party except with the prior written consent of St. Mary. 16. TERM, TERMINATION AND SURRENDER. 7 (a) The term of this Agreement shall be for a period of twenty-one (21) years from the date hereof unless sooner surrendered or otherwise terminated, or until the earlier exercise of the Option. (b) It is also agreed that a failure by St. Mary to make an option payment within 60 days of the due date therefor as provided in Section 6(b) hereof shall constitute also a termination of this Agreement effective upon the expiration of such 60 day period. Upon the effective date of such termination, all rights of St. Mary under this Agreement except as provided in Sections 17 and 18 hereof shall terminate and all liabilities and obligations of St. Mary hereunder (including the obligation of making any further payments under Section 6(b) hereof) shall likewise thereupon terminate except as provided in Sections 8(c) and 14(b) hereof. (c) St. Mary may also at any time terminate this Agreement as to all or any part of the Property by delivering to Owners or by filing for record in the appropriate office (with a copy to Owners) a good and sufficient Surrender of this Agreement. Upon mailing the Surrender to Owners or to the appropriate office, all rights of St. Mary under this Agreement shall terminate except as provided in Sections 17 and 18 hereof, and all liabilities and obligations of St. Mary under this Agreement shall likewise terminate except as provided in Sections 8(c) and 14(b) hereof and except liability for payments under Section 6(b) hereof that became due prior to the date of such termination. 17. REMOVAL OF PROPERTY. For a period of six months after the termination of this Agreement St. Mary shall have the right (but not the obligation except to the extent set forth in Section 8(c) hereof) to remove from the Property all buildings, structures, machinery, equipment, personal property, fixtures, and improvements owned by St. Mary or erected or placed on or in the Property by St. Mary, except mine timbers in place. St. Mary may keep one or more watchmen on the Property during the six-month period. 18. ACCESS. For as long as necessary after termination of this Agreement, St. Mary shall have the right of access to and across the Property for reclamation purposes. 8 19. EASEMENTS. If requested by St. Mary during the term of this Agreement or following the exercise of the Option, Owners shall execute one or more instruments granting to St. Mary without cost to St. Mary easements upon, over, or through the Property or upon, over, or through other property owned by Owners, for the construction, maintenance, use, and removal of pipe lines, telephone lines, electrical power or transmission lines, roads, railroads, tramways, flumes, ditches, shafts, drifts, tunnels, and other facilities necessary or convenient for St. Mary's operations on the Property or on other property. 20. NOTICES. All notices and other communications to either party shall be in writing and shall be sufficiently given if delivered in person or sent by certified or registered mail, return receipt requested, addressed as hereinafter set forth. Notices given by mail shall be deemed delivered as of the date of mailing. Until a change of address is communicated as indicated above, all notices to Owners shall be addressed: Mr. Boyce Cook 9845 West 11th Avenue Lakewood, Colorado 80215 and all notices to St. Mary shall be addressed: St. Mary Minerals Inc. l776 Lincoln Street, Suite 1100 Denver, Colorado 80203 Attn: Gregory A. Hahn 21. ASSIGNMENT. (a) The rights of either party hereunder may be assigned in whole or in part without the consent of the other party hereto, subject to the provisions hereinafter set forth. (b) No change or division in the ownership of the Property or the payments provided for herein, however accomplished, shall enlarge the obligations or diminish the rights of St. Mary hereunder. Owners covenant that any change in their ownership shall 9 be accomplished in such a manner that St. Mary shall be required to make payments and to give notices to but one person, firm, or corporation, and upon breach of this covenant, St. Mary may retain all monies otherwise due to Owners until the breach has been cured. No change or division in ownership shall be binding on St. Mary until thirty days after Owners have given. St. Mary a certified copy of the recorded instrument evidencing the change or division. (c) If St. Mary assigns the whole of or an undivided interest in this Agreement, liability for breach of any obligation hereunder shall rest exclusively upon the holder of the Agreement or of an undivided interest herein who commits the breach. If this Agreement is assigned as to a segregated portion of the Property, default by the holder hereunder of that portion shall not affect the rights of holders hereunder of any other portion. (d) If Owners receive a bona fide written offer from an unrelated third party to purchase all or any part of Owners' interest in the Property or in this Agreement, Owners shall first offer the interest to St. Mary stating the interest proposed to be sold or otherwise disposed of, the offering price from such third party and other terms and conditions of sale. St. Mary may accept the offer on the same terms and conditions as such third party offer by notice to Owners given within sixty days following the effective date Owners' offer. If St. Mary does not accept Owners' offer, Owners may sell or otherwise dispose of the interest offered to St. Mary at a price and upon terms and conditions equal to or less favorable to the third party than those offered to St. Mary provided that the sale or other disposition is effectuated within 120 days from the effective date of Owners' offer. Any sale or other disposition shall be subject to the terms of this Agreement, including this subsection (d), all of which shall survive the closing of any such sale in full force and effect. If Owners do not sell or otherwise dispose of the interest offered within 120 days, the provisions of this subsection (d) shall apply to any subsequent third party offer received by Owners. 22. NO TRANSFER OR ENCUMBRANCE. Without St. Mary's prior written consent, neither the Owners nor any Owner during term of this Agreement shall (a) sell, transfer, assign 10 or convey any interest in the Property without St. Mary's prior written consent or otherwise in accordance with the provisions of Section 21(d) hereof; (b) do or fail to do any act or thing which would cause or permit any part of the Property to be pledged, collateralized or stand as security for any matter whatsoever; or (c) enter into any leases or other agreements concerning the Property or any part thereof. 23. FORCE MAJEURE. (a) If St. Mary shall be prevented by Force Majeure from timely performance of any of its obligations hereunder (except the payment of money to Owners), the failure of performance shall be excused and the period for performance and the term of this Agreement shall be extended for an additional period equal to the duration of the Force Majeure. Upon the occurrence and upon the termination of any Force Majeure, St. Mary shall promptly notify Owners. St. Mary shall use reasonable diligence to remedy a Force Majeure, but shall not be required against its better judgment to settle any labor dispute or contest the validity of any law or regulation or any action or inaction of civil or military authority. (b) "Force Majure" means any cause beyond St. Mary's reasonable control, including law or regulation; action or inaction of civil or military authority; inability to obtain any license, permit, or other authorization that may be required to conduct operations on or in connection with the Property; unusually severe weather; mining casualty; fire; explosion; flood; insurrection; riot; labor dispute; inability after diligent effort to obtain workmen or material; delay in transportation; acts of God; unavailability of a suitable market for the ores, minerals, concentrates, or other products from the Property; and excessive costs of mining, milling, processing or marketing, or insufficient prices available for the ores, minerals, concentrates, or other products produced from the Property, which render St. Mary's operations uneconomic. 24. SHORT FORM. Contemporaneously herewith, St. Mary and Owners have executed and delivered a Short Form of Agreement. St. Mary may record the Short Form or this Agreement, or both, as it may elect. 11 25. INUREMENT. All covenants, conditions, limitations, and provisions herein contained apply to and are binding upon the parties hereto, their heirs, representatives, successors, and assigns. 26. MODIFICATION. No modification, variation, or amendment of this Agreement shall be effective unless the modification, variation, or amendment is in writing and is signed by Owners and St. Mary. 27. WAIVER. No waiver of any breach or default under this Agreement shall be effective unless the waiver is in writing and signed by the party against whom the waiver is claimed. No waiver of any breach or default shall be deemed to be a waiver of any other or subsequent breach or default. 28. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement of the parties and, except as herein expressly provided, supersedes all previous and contemporaneous agreements, representations, warranties, or understandings, written or oral. 29. CONSTRUCTION. The paragraph headings are for convenience only, and shall not be used in the construction of this Agreement. 30. GOVERNING LAW. The formation, interpretation, and performance of this Agreement shall be governed by the law of the state of Colorado. 31. TIME OF ESSENCE. Except as set forth in Section 23 hereof, time is of the essence in the performance of each and every term, condition, and covenant of this Agreement. 32. TIME COMPUTATIONS. In computing the time permitted or required for performance or payment as provided hereunder, the first day shall be excluded and the last day shall be included. If the last day of any such period is a Saturday, Sunday or legal holiday, the period shall extend to include the next day which is not a Saturday, 12 Sunday, or legal holiday. Any performance or payment which must be taken or made under this Agreement must be taken or made prior to 5:00 p.m. (Denver, Colorado time) of the last day of the applicable period provided hereunder for such action, unless another time is expressly specified. All references to time shall be Denver, Colorado time. If a date for performance or payment falls on a holiday or weekend, the time for performance or payment shall be extended to the next business day, and if performance or payment has occurred on such weekend or holiday, it shall be deemed to have occurred on the next business day. 33. INVALIDITY. The invalidity of any provision of this Agreement shall not affect the enforceability of any other provision of this Agreement. 34. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same agreement. If any person named as one of the Owners does not execute this Agreement, it nevertheless shall be binding upon those persons executing it. 35. ADDITIONAL DOCUMENTS. Owners will provide St. Mary with such additional documents as may be necessary to carry out the purposes of this Agreement. If conditions change by reason of conveyances, assignments, or other matters relating to the title to or description of the Property, Owners and St. Mary shall execute amendments of this Agreement and the Short Form of Agreement, and any other documents which may be necessary to reflect such changed conditions. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. /s/ Josephine Hill 8-4-94 - --------------------------- Josephine Hill and 13 /s/ Donald Charles Giaccarni - --------------------------- Donald Charles Giaccarni ADL 6450909 /s/ Ruby E. Neill - --------------------------- Ruby E. Neill and /s/ Bruce E. Neill - --------------------------- Bruce Neill, Joint Tenants /s/ Vivian L. Rutherford - --------------------------- Vivian I. Rutheford ST. MARY MINERALS INC BY: /s/ Gregory A. Hahn ----------------------------- Gregory A. Hahn, Vice President 14 STATE OF CALIFORNIA ) )SS. COUNTY OF SAN FRANCISCO ) On this 4TH day of AUGUST, 1994 before me the undersigned, a notary public, personally appeared Josephine Hill (or proved to me on the oath of JOSEPHINE HILL (to be the persons whose names are subscribed to the within instrument, and acknowledged that she executed the same. My Commission Expires: July 17th, 1995 /s/ Hans R. Hansson - ------------------------------ -------------------------------- Notary Public Hans R. Hansson Hans R. Hansson COMM. #930735 STATE OF ALASKA ) Notary Public - California )SS. SAN FRANCISCO COUNTY COUNTY OF KENAI PENINSULA ) My Comm. Expires JUL 17, 1996 BOROUGH On this 29TH day of AUGUST, 1995 before me the undersigned, a notary public, personally appeared Donald Charles Giaccarni known to me (or proved to me on the oath of DONALD CHARLES GIACCARNI (to be the persons whose names are subscribed to the within instrument, and acknowledged that he executed the same. My Commission Expires: 2/17/98 /s/ Diana Brumley - ------------------------------ -------------------------------- Notary Public State of Alaska STATE OF New Mexico ) NOTARY PUBLIC )SS. Diana Brumley COUNTY OF Rio Aruba ) My Commission Expires Feb 17, 1998 On this 2ND day of AUGUST, 1994 before me the undersigned, a notary public, personally appeared Ruby E. Neill known to me (or proved to me on the oath of RUBY E. NEILL (to be the person whose name is subscribed to the within instrument, and acknowledged that she executed the same. My Commission Expires: January 25,1997 /s/ Gloria June Kelly - ------------------------------ -------------------------------- Notary Public 15 STATE OF TEXAS ) )ss. COUNTY OF BRAZORIA ) On this 8th day of August, 1994 before me the undersigned, a notary public, personally appeared Bruce E. Neill known to me (or proved to me on the oath of Bruce E. Neill (to be the person whose name is subscribed to the within instrument, and acknowledged that she executed the same. My Commission Expires: 12-4-97 /s/ Eileen Chennault - ------------------------------ -------------------------------- Notary Public EILEEN CHENNAULT Notary Public, State of Texas Commission Expires 12-4-97 STATE OF ) )ss. COUNTY OF ) On this 2nd day of August, 1994 before me the undersigned, a notary public, personally appeared Vivian I. Rutherford known to me (or proved to me on the oath of _____________________ (to be the person whose name is subscribed to the within instrument, and acknowledged that she executed the same. My Commission Expires: March 9, 1996 /s/ Catherine F. Guy - ------------------------------ -------------------------------- Notary Public STATE OF COLORADO ) CITY AND )ss. COUNTY OF DENVER ) The foregoing instrument was acknowledged before me this 25th day of July, 1994, by Gregory A. Hahn, the Vice President of St. Mary Minerals Inc., a Colorado corporation, on behalf of the corporation. My Commission Expires: February 14, 1997 /s/ James C. Robertson - ------------------------------ -------------------------------- Notary Public James C. Robertson 16 EXHIBIT A --------- OWNERS ------ Name and Address % Interest in Property - ---------------- ---------------------- Josephine Hill and 16.667% each Donald Charles Giaccarni 20 Hidalgo Terrace San Francisco, CA 94103 Ruby E. Neill and 33.333% Bruce Neill, Joint Tenants 724 E. Pueblo Espanola, New Mexico 87532 Vivian I. Rutherford 33.333% P.O. Box 8467 Albuquerque, New Mexico 87198 EXHIBIT B PROPERTIES 100% interest in and to the following patented mining claims and millsites located in the Picuris and Copper Mounitain Mining District, Taos County, New Mexico: Jumbo Lode, Mineral Survey No. 1049, BLM Book A-50, Pages 338-340 Aztec Lode, Mineral Survey No. 1049A, BLM Book A-50, Pages 338-340 Sunset Lode, Mineral Survey No. 1049A, BLM Book A-50, Pages 338-340 Oxide King Lode, Mineral Survey No. 1049A, BLM Book A-50, Pages 338-340 Champion Lode, Mineral Survey No. 1049A, BLM Book A-50, Pages 338-340 Aztec Millsite, Mineral Survey No. 1049B, BLM Book A-50, Pages 338-340 Sunset Millsite, Mineral Survey No. 1049B, BLM Book A-50, Pages 338-340 Oxide King Millsite, Mineral Survey No. 1049B, BLM Book A-50, Pages 338-340 Champion Millsite Mineral Survey No. 1049B, BLM Book A-50, Pages 338-340 Schedule "D" to the [LETTERHEAD] Acquisition Agreement dated for reference November 16, 1994 May 20, 1994 Mr. Greg Hahn, VP, Minerals Exploration St. Mary Minerals, Inc. 1776 Lincoln Street, Suite 110 Denver, CO 80203-5400 Dear Greg: As per our recent phone call, I am herein describing terms of an Agreement, which if affirmed by your signature, will result in our passing onto you and your company information on an interesting "copper-oxide" prospect (prospect), located on claimed land in New Mexico. The prospect was encountered during a comprehensive review of leachable copper reserves in the Southwestern U.S. The prospect was explored during the porphyry copper era by a couple of majors, however, was not in itself big enough for their further interest. We estimate that there may be upward to 20-25 million tons of low-grade exotic copper with a possible core area of 0.5% or better. According to a call made to the owner last year, the prospect was open for option negotiations. Agreement to the following terms would make this prospect and our in-house data available to you. 1. St. Mary Minerals, Inc. (St. Mary) would have 60 days from date of disclosure of prospect data to accept or reject the prospect. If rejected, St. Mary shall submit in writing this rejection and agrees that it and any of its officers, employees, agents, representatives or consultants for a period of three (3) years from the date of rejection letter, shall not acquire or attempt to acquire any interest in the prospect or any property within a mile limit outside the boundaries of the prospect (Area to be defined on map with data). Furthermore, St. Mary shall keep all data on the prospect strictly confidential for the 3-year period. 2. If the prospect is accepted, St. Mary agrees to pay Applied Geologic Studies, Inc. (AGS) a discovery bonus amounting to $100,000. The bonus shall be paid as follows: a. $5,000 at time of land acquisition in prospect area, or in any area within a mile limit outside the prospect's boundaries. b. Five percent (5%) of total direct exploration expenditures made for benefit of the prospect, exclusive of land costs. Expenditures would include geologic work, geochemistry, geophysics, assay, drilling and costs related to mine feasibility studies or mine development. These payments would be made annually. c. Any balance (not to exceed $100,000), shall be paid at time of decision to put the prospect into mine production. 3. In the event that St. Mary conveys its interest in the prospect to another party, it will require such party to expressly assume in writing St. Mary's obligation to make the above payments; whereupon, St. Mary's further obligations under this Agreement shall cease. If St. Mary surrenders its interest in the prospect, or if St. Mary's rights in the property expire or terminate in any other way, it's obligations to make further payments under this Agreement shall immediately cease. If you are in agreement with the terms set forth above, please indicate by executing both copies of the Agreement and returning one signed copy to me. Sincerely, William A. Rehrig Dr. William A. Rehrig Pres. AGS INC. - ------------------------------------------------------------------------------- Accepted by me this the 23rd day of MAY 1994 ILLEGIBLE - -------------------------------------- Signature of Company Representative SCHEDULE "E" TO THAT CERTAIN AGREEMENT (THE "AGREEMENT") MADE AS OF THE 16TH DAY OF NOVEMBER, 1994 BETWEEN SUMMO MINERALS CORPORATION OF THE FIRST PART AND SUMMO USA CORPORATION OF THE SECOND PART (COLLECTIVELY, THE "PAYOR") AND ST. MARY MINERALS INC. OF THE THIRD PART (THE "PAYEE") NET SMELTER RETURNS ROYALTY 1. In this Agreement, the term "Net Smelter Returns" shall mean the gross revenue from the sale by the Payor of all ore, concentrate and metal produced from the Property, after deduction of the following: (a) all smelting, and refining costs (excluding the cost of SX-EW processing), treatment charges and penalties including but not limited to metal losses, penalties for impurities and charges for refining, selling and handling by the smelter, refinery or other purchaser; (b) costs of marketing, handling, transporting and insuring such ore, concentrate or metal from the Property or from a concentrator, whether situated on or off the Property, to a smelter, refinery or other place of treatment or to the purchaser thereof. 2. Payments of Net Smelter Returns shall be made within 30 days after the end of each fiscal quarter in which Net Smelter Returns, as determined on the basis of final adjusted invoices, are received by the Payor. All such payments shall be made in U.S. dollars. 3. For the purposes of determining Net Smelter Returns, all receipts and disbursements in currency other that U.S. dollars shall be converted into U.S. currency on the day of receipt or disbursement, as the case may be. 4. Each payment of Net Smelter Returns shall be accompanied by a statement indicating the calculation of Net Smelter Returns paid. The Payee shall be entitled to audit, during normal business hours, such books and records as are necessary to determine the correctness of the payments, provided however, that such audit shall be made only on an annual basis and within 12 months of the end of the fiscal period in respect of which such audit is made. 5. Payment of Net Smelter Returns shall be made to the Payee at such place or places in the United States as they shall advise the Payor from time to time. 6. The determination of the Net Smelter Returns hereunder is based on the premise that production will be developed solely on the Property. If other properties are incorporated with the Property in a single mining project and ores pertaining to each cannot be readily segregated on a practical or equitable basis, the Payor shall have the right to commingle with ore from the Property ore produced from other properties owned or controlled by the Payor provided that the Payor will adopt and employ generally accepted practices and procedures for weighing, sampling and assaying in order to determine the amount of metals or concentrate derived from the Property. The Payee, or the representative of the Payee authorized in writing, will be permitted to examine at all reasonable times the Payor's records pertaining to commingling of ores. 7. If metal, concentrates or ore shipped from the Property are lost or destroyed under circumstances in which the Payor receives payment under an insurance policy, such payments will be be deemed Net Smelter Returns. 8. The Payor shall not sell, assign, transfer or in any other manner deal with the Property or any interest therein without the purchaser, transferee or assignee acquiring the Property or such interest therein first agreeing with the Payor in writing to be bound by the terms of this agreement. The Payor's covenant to pay a 1.5% Net Smelter Return Royalty to the Payee hereunder shall be a covenant running with the Property. 9. No error in accounting or in interpretation of this Agreement shall be the basis for a claim of breach of fiduciary duty, or the like, or give rise to a claim for exemplary or punitive damages or for termination or rescission of the Agreement or the estate and rights acquired and held by the Payor under the terms of the Agreement. EX-10.14 23 EXHIBIT 10.14 EXHIBIT 10.14 EXPLORATION AND PURCHASE OPTION AGREEMENT THIS OPTION AGREEMENT ("Agreement") made effective as of the lst day of August, 1994, by and between those persons whose names and addresses are shown on EXHIBIT A attached hereto and made a part hereof (individually an "Owner" and collectively the "Owners") and ST. MARY MINERALS INC., a Colorado corporation, whose address is 1776 Lincoln Street, Denver, Colorado 80203 (hereinafter referred to as "St. Mary"); WHEREAS, Owners are the owners of certain unpatented mining claims situate in Taos County, New Mexico, herein referred to as "the Property," and more particularly described on EXHIBIT B attached hereto and made a part hereof; and WHEREAS, St. Mary desires to carry out exploration work and to acquire an option to purchase the Property, WHEREAS, Owners desire to make the Property available for the conduct by St. Mary of certain mineral exploration work thereon and to grant St. Mary the option to purchase the Property, NOW THEREFORE, in consideration of Ten Dollars ($10.00) in hand paid to Owners, the receipt and sufficiency of which are hereby acknowledged, and further in consideration of the mutual covenants, agreements, and promises herein contained, the parties agree as follows: 1. OPTION. Owners grant to St. Mary during the term of this Agreement the sole and exclusive option (the "Option") to purchase the Property, together with all appurtenances and water rights incident thereto and all improvements and personal property thereon, free and clear of all liens and encumbrances, for a total purchase price of Five Hundred Thousand Dollars ($500,000.00). St. Mary shall be entitled to a credit against the purchase price for all amounts paid under the provisions of Section 6. hereof and for all costs and expenses incurred under the provisions of Section 4 hereof. If the Property is placed in commercial production at any time during the term of this Agreement, St. Mary shall exercise, the option by providing written notice of exercise to Owners. Within three (3) years after such notice, but no later than August 1, 2015, St. Mary shall deliver the balance of the purchase price to Owners. "Commercial production" shall mean the processing and sale of ores, concentrates, metals and other mineral products which have been mined on the Property but which shall not include processing for the purpose of testing or milling by a pilot plant. 2. ESCROW. Contemporaneously with the execution of this Agreement, Owners shall execute, acknowledge, and deliver to the Escrow Agent one or more general warranty deeds conveying the property to St. Mary in the form (without legal descriptions) of Exhibit C attached hereto and incorporated herein. Owners and St. Mary hereby appoint CB&S Nominee Corporation, 1800 One Norwest Center Building, 1700 Lincoln Street, Denver, Colorado 80203 as their Escrow Agent to receive and distribute all payments and to hold the deed and deliver it to the party entitled hereunder to receive the same. The parties hereto agree that the Escrow Agent shall act pursuant to Escrow Instructions executed contemporaneously herewith. 3. EXCLUSIVE POSSESSION. St. Mary shall have the exclusive possession of the Property during the term of this Agreement. 4. TITLE. (a) Owners warrant that they are in possession of the Property, that they have the right to enter into this Agreement, that they know of no other person claiming any interest in the Property or the ground covered thereby, and that the Property is free from all liens and encumbrances, except liens for property taxes not yet due and payable. Owners further warrant to St. Mary the quiet enjoyment of the Property and the right to explore, develop, and mine the same. (b) Owners warrant and will defend title of the property against all persons whomsoever. 2 (c) At St. Mary's request, Owners shall take all action necessary (including judicial proceedings) to remove any cloud from or cure any defect in their title to the Property or the ground covered thereby. If Owners fail or refuse to take any such action, St. Mary may take, any such action in Owners' name. Owners agree to cooperate with St. Mary in any such action taken. If the United States or any third person attacks the validity of any of the unpatented mining claims included in the Property for any reason, St. Mary shall have no obligation to defend the validity of the claim. (d) St. Mary shall not be estopped to deny the validity of Owners' title. 5. UNDIVIDED INTEREST. If the interest claimed by any Owner in any portion of the Property is less than one hundred percent, the interest claimed by such Owner is set forth in Exhibit A. Any representation or warranty of title made by any Owner shall apply only to the interest set forth in Exhibit A. 6. OPTION PAYMENTS. (a) Concurrent with the execution of this Agreement by Owners, St. Mary has made an option payment to Owners in the amount of $5,000, receipt of which is hereby acknowledged by Owners. (b) St. Mary shall pay to Owners further annual option payments on or before the dates and in the amounts as follows: August 1, 1995 $ 5,000 August 1, 1996 10,000 August 1, 1997 10,000 August 1, 1998 10,000 August 1, 1999 10,000 August 1, 2000 15,000 August 1, 2001 15,000 August 1, 2002 15,000 August 1, 2003 15,000 August 1, 2004 15,000 August 1, 2005 20,000 August 1, 2006 20,000 August 1, 2007 20,000 August 1, 2008 20,000 3 August l, 2009 20,000 August 1, 2010 20,000 August 1, 2011 20,000 August 1, 2012 20,000 August 1, 2013 20,000 August 1, 2014 20,000 August 1, 2015 175,000 -------- $500,000 7. MANNER OF FURTHER OPTION PAYMENTS. St. Mary shall make all further option payments due Owners hereunder by check which shall be made payable to and shall be made payable to and shall be transmitted to the Escrow Agent. The Escrow Instructions to be executed contemporaneously herewith will instruct the Escrow Agent how the payments shall be disbursed. Upon making the payments to the Escrow Agent, St. Mary shall be deemed to have made the payments to Owners, their heirs, representatives, successors, and assigns, and thereupon St. Mary shall be discharged to the extent thereof as if the payments had been made directly to Owners, or to any person, firm or corporation entitled thereto, and St. Mary shall not be liable for the ultimate distribution or receipt of any payment or payments. 8. OPERATIONS. (a) SCOPE. During the term of this Agreement, St. Mary shall have free and unrestricted access to the Property, and shall have the right and privilege of conducting exploratory investigations and prospecting for mineral deposits on the Property, effective during the life of the Option, and that prospecting shall include, but not be limited to, soil testing, geophysical surveys, core drilling, shaft sinking, tunnel and mine building and the removal of ore for testing purposes but not removal of ore for sale. St. Mary shall have the right to erect and maintain upon the Property any improvements, structures or facilities including mines, shafts and tunnels as may be necessary or convenient for the conduct of its operations. 4 (b) STANDARDS OF OPERATION. St. Mary shall conduct all operations on the Property in a good and workmanlike manner and in accordance with accepted mining practice. (c) COMPLIANCE WITH LAW: RECLAMATION: St. Mary shall endeavor in good faith to comply with applicable provisions of federal, state and local laws and regulations, as required by the operating permits issued to St. Mary by these agencies under which St. Mary shall conduct its operations. If this Agreement is terminated, St. Mary shall reclaim only those portions of the Property disturbed by its operations, and in compliance with all applicable governmental laws, regulations and orders. St. Mary shall have the right, without payment of any additional consideration to Owners, to enter upon the Property subsequent to termination of this Agreement for purposes of performing such reclamation work. 9. NO IMPLIED COVENANTS. No covenants or conditions relating to the exploration or related operations on or in connection with the Property, or the timing thereof, other than those expressly provided in this Agreement, shall be implied. After commencing any exploration or related operations on or in connection with the Property and so long as this Agreement has not been terminated before the expiration of its term, St. Mary may in its sole discretion curtail or cease such operations so long as it continues to make any payments due Owners under this Agreement subject to the provisions of Section 16 hereof. 10. PROTECTION FROM LIENS AND DAMAGES. St. Mary shall keep the Property free of liens for labor performed or materials or merchandise furnished for use on the Property under this Agreement, and shall hold Owners harmless from all costs, loss, or damage which may result from any work or operations of St. Mary or its occupancy of the Property. 5 11. TAXES. Owners shall pay all taxes levied against the Property prior to the date of this Agreement. St. Mary shall pay or reimburse Owners for all taxes levied against the Property during the term of this Agreement. In the case of taxes for the calendar year in which this Agreement commences, and for the calendar year in which this Agreement ends, there shall be an apportionment between the parties, St. Mary to bear the proportion of taxes upon the Property applicable to the part of the calendar year included hereunder, and Owners to bear the balance of the taxes. St. Mary shall pay all taxes levied during the term of this Agreement against all buildings, structures, machinery, equipment, personal property, fixtures, and improvements placed upon the Property by St. Mary, and all taxes levied against St. Mary as an employer of labor. All taxes shall be paid when due and before delinquent, but St. Mary shall be under no obligation to pay any tax so long as the tax is being contested in good faith and by appropriate legal proceedings and the nonpayment thereof does not adversely affect any right, title, or interest of Owners in or to the Property. 12. INSURANCE. St. Mary shall carry at all times during the term of this Agreement worker's compensation and other insurance required by state laws and mining regulations, or St. Mary may self-insure as to such matters if it qualifies as a self-insurer under the appropriate laws and regulations. 13. INSPECTION. (a) Owners or their authorized representative may enter on the Property at any reasonable time for the purpose of inspection, but shall enter at Owners' own risk and so as not to hinder unreasonably the operations of St. Mary. Owners shall indemnify and hold St. Mary harmless from any damage, claim, or demand by reason of injury to or the presence of Owners, their agents or representatives on the Property. (b) Owners or their authorized representative may, at any reasonable time, inspect any records pertinent and necessary for substantiating the compliance of St. Mary with the provisions of this Agreement. 6 14. DATA. (a) Upon the execution of this Agreement, Owners shall deliver to St. Mary all drill core, all geological, geophysical, and engineering data and maps, logs of drill holes, results of assaying and sampling, and similar data concerning the Property (or copies thereof) which are in Owners' possession or control. (b) Upon the surrender or other termination of this Agreement (except upon exercise of the Option and payment of the full purchase price as provided in Section 6 hereof), St. Mary shall, within sixty days after termination, (i) return to Owners all drill core and original data delivered by Owners to St. Mary which are then in St. Mary's possession or control, and (ii) make available for inspection by Owners all factual geological and geophysical data and maps (not including interpretive data), logs of drill holes, drill core or cuttings and results of assaying and sampling pertaining to the Property which St. Mary has obtained as a result of its exploration work under this Agreement and which are then in St. Mary's possession or control. Upon Owners' request made within ninety (90) days after termination of this Agreement, St. Mary shall at Owners' expense, provide Owners with the drill core or cuttings designated by Owners and with copies of any portion of the factual geological and geophysical data and maps (not including interpretive data), logs of drill holes, and results of assaying and sampling designated by Owners. St. Mary makes no representation or warranty as to the accuracy or completeness of any such data or information, and shall not be liable on account of any use by Owners or any other person of any such data or information. St. Mary shall not be liable for the loss or destruction of any drill core or cuttings. 15. CONFIDENTIALITY. During the term of this Agreement all information obtained by Owners or their authorized representatives from St. Mary or arising out of St. Mary's activities on the Property pursuant to this Agreement shall be kept strictly confidential by Owners and shall not be released to any third party except with the prior written consent of St. Mary. 16. TERM, TERMINATION AND SURRENDER. 7 (a) The term of this Agreement shall be for a period of twenty-one (21) years from the date hereof unless sooner surrendered or otherwise terminated, or until the earlier exercise of the Option. (b) It is also agreed that a failure by St. Mary to make an option payment within 60 days of the due date therefor as provided in Section 6(b) hereof shall constitute also a termination of this Agreement effective upon the expiration of such 60 day period. Upon the effective date of such termination, all rights of St. Mary under this Agreement except as provided in Sections 17 and 18 hereof shall terminate and all liabilities and obligations of St. Mary hereunder (including the obligation of making any further payments under Section 6(b) hereof shall likewise thereupon terminate except as provided in Sections 8(c) and 14(b) hereof. (c) St. Mary may also at any time terminate this Agreement as to all or any part of the Property by delivering to Owners or by filing for record in the appropriate office (with a copy to Owners) a good and sufficient Surrender of this Agreement. Upon mailing the Surrender to Owners or to the appropriate office, all rights of St. Mary under this Agreement shall terminate except as provided in Sections 17 and 18 hereof, and all liabilities and obligations of St. Mary under this Agreement shall likewise terminate except as provided in Sections 8(c) and 14(b) hereof and except liability for payments under Section 6(b) hereof that became due prior to the date of such termination. 17. REMOVAL OF PROPERTY. For a period of six months after the termination of this Agreement St. Mary shall have the right (but not the obligation except to the extent set forth in Section 8(c) hereof) to remove from the Property all buildings, structures, machinery, equipment, personal property, fixtures, and improvements owned by St. Mary or erected or placed on or in the Property by St. Mary, except mine timbers in place. St. Mary may keep one or more watchmen on the Property during the six-month period. 18. ACCESS. For as long as necessary after termination of this Agreement, St. Mary shall have the right of access to and across the Property for reclamation purposes. 8 19. EASEMENTS. If requested by St. Mary during the term of this Agreement or following the exercise of the Option, Owners shall execute one or more instruments granting to St. Mary without cost to St. Mary easements upon, over, or through the Property or upon, over, or through other property owned by Owners, for the construction, maintenance, use, and removal of pipe lines, telephone lines, electrical power or transmission lines, roads, railroads, tramways, flumes, ditches, shafts, drifts, tunnels, and other facilities necessary or convenient for St. Mary's operations on the Property or on other property. 20. AMENDMENT RELOCATIONS AND PATENTS. During the term of this Agreement, St. Mary shall have the right (but not the obligation), in the name of Owners, to amend or relocate any or all of the unpatented mining claims included in the Property, to locate placer claims on ground theretofore covered by lode claims and vice versa, and to locate any millsites on ground theretofore covered by mining claims and vice versa, and to locate any fractions resulting from the location, amendment or relocations of mining claims or millsites. At the request of St. Mary, Owners shall apply for a patent for any or all of the unpatented mining claims and millsites. For purposes of implementing the provisions of the Section, Owners do hereby nominate, constitute and appoint St. Mary as their true and lawful attorney-in-fact to execute, deliver and record on behalf of the Owners and in their name, place, and stead all such documents as St. Mary may deem necessary or appropriate for such purposes. All expenses authorized by St. Mary in connection with locating, amending, or relocating mining claims or millsites or prosecuting patent proceedings shall be borne by St. Mary. The rights of St. Mary under this Agreement shall extend to all such locations, amended locations, relocations and patented mining claims and millsites. 21. COMPLIANCE WITH FEDERAL LAND POLICY AND MANAGEMENT ACT. (a) Owners warrant that the location notices or location certificates for the unpatented mining claims included in the Property have been properly filed in the proper office of the Bureau of Land Management pursuant to 43 U.S.C. Section 1744 (b). 9 (b) Owners warrant that evidence of assessment work or notices of intention to hold have been properly recorded in the proper county (or recording district) office and filed in the proper office of the Bureau of Land Management pursuant to 43 U.S.C. Section 1744 (a), as required, for each assessment year to and including the assessment year ending September 1, 1992. 22. ASSESSMENT WORK. (a) Owners warrant that the annual assessment work required to hold the Property has been performed for each assessment year to and including the assessment year ending September 1, 1992, and that the rental fee required by the Department of the Interior was paid for the assessment year ending September 1, 1993. For every assessment year thereafter in which St. Mary continues this Agreement beyond the 1st day of August of any year, St. Mary shall perform assessment work or pay any rental fee required by the Department of the Interior. If any court or governmental agency decides that the work performed by St. Mary does not constitute the kind of work required by federal or state law, St. Mary shall nevertheless be deemed to have complied with the terms of this Agreement if the work done by St. Mary is the kind generally accepted in the mining industry as assessment work under existing law. (b) St. Mary shall be relieved of its obligation to perform assessment work for any period in which assessment work is not required or is suspended, and St. Mary shall have the benefit of subsequent laws enacted which relate to assessment work, including any laws extending the time within which to perform assessment work. For each year in which St. Mary performs assessment work, it will record in the office where the location notice or location certificate is recorded, and in any other proper office in the county (or recording district) in which the claims are located, and in the proper office of the Bureau of Land Management, an affidavit of assessment work or other documents complying with the requirements of state law and the Federal land Policy and Management Act of 1976 and the regulations implementing and supplementing the Act. 10 (c) Owners represent that the Property is one contiguous group of mining claims, and agree that work on any one or more of the claims will be for the benefit of all of the claims. (d) Owners represent that no report of geological, geophysical, and geochemical work (30 U.S.C. Sections 28-1 and 28-2) on the Property has been applied as labor for more than two consecutive years or for more than a total of five years on any one mining claim. 23. NOTICES. All notices and other communications to either party shall be in writing and shall be sufficiently given if delivered in person or sent by certified or registered mail, return receipt requested, addressed as hereinafter set forth. Notices given by mail shall be deemed delivered as of the date of mailing. Until a change of address is communicated as indicated above, all notices to Owners shall be addressed: Mr. Boyce Cook 9845 West 11th Avenue Lakewood, Colorado 80215 and all notices to St. Mary shall be addressed: St. Mary Minerals Inc. 1776 Lincoln Street, Suite 1100 Denver, Colorado 80203 Attn: Gregory A. Hahn 24. ASSIGNMENT. (a) The rights of either party hereunder may be assigned in whole or in part without the consent of the other party hereto, subject to the provisions hereinafter set forth. (b) No change or division in the ownership of the Property or the payments provided for herein, however accomplished, shall enlarge the obligations or diminish the rights of St. Mary hereunder. Owners covenant that any change in their ownership shall be accomplished in such a manner that St. Mary shall be required to make payments and to give notices to but one person, firm, or corporation, and upon breach of this covenant, 11 St. Mary may retain all monies otherwise due to Owners until the breach has been cured. No change or division in ownership shall be binding on St. Mary until thirty days after Owners have given St. Mary a certified copy of the recorded instrument evidencing the change or division. (c) If St. Mary assigns the whole of or an undivided interest in this Agreement, liability for breach of any obligation hereunder shall rest exclusively upon the holder of the Agreement or of an undivided interest herein who commits the breach. If this Agreement is assigned as to a segregated portion of the Property, default by the holder hereunder of that portion shall not affect the rights of holders hereunder of any other portion. (d) If Owners receive a bona fide written offer from an unrelated third party to purchase all or any part of Owners' interest in the Property or in this Agreement, Owners shall first offer the interest to St. Mary stating the interest proposed to be sold or otherwise disposed of, the offering price from such third party and other terms and conditions of sale. St. Mary may accept the offer on the same terms and conditions as such third party offer by notice to Owners given within sixty days following the effective date Owners' offer. If St. Mary does not accept Owners' offer, Owners may sell or otherwise dispose of the interest offered to St. Mary at a price and upon terms and conditions equal to or less favorable to the third party than those offered to St. Mary provided that the sale or other disposition is effectuated within 120 days from the effective date of Owners' offer. Any sale or other disposition shall be subject to the terms of this Agreement, including this subsection (d), all of which shall survive the closing of any such sale in full force and effect. If Owners do not sell or otherwise dispose of the interest offered within 120 days, the provisions of this subsection (d) shall apply to any subsequent third party offer received by Owners. 25. NO TRANSFER OR ENCUMBRANCE. Without St. Mary's prior written consent, neither the Owners nor any Owner during term of this Agreement shall (a) sell, transfer, assign or convey any interest in the Property without St. Mary's prior written consent or otherwise in accordance with the provisions of Section 21(d) hereof; (b) do or fail to do 12 any act or thing which would cause or permit any part of the Property to be pledged, collateralized or stand as security for any matter whatsoever; or (c) enter into any leases or other agreements concerning the Property or any part thereof. 26. FORCE MAJEURE. (a) If St. Mary shall be prevented by Force Majeure from timely performance of any of its obligations hereunder (except the payment of money to Owners), the failure of performance shall be excused and the period for performance and the term of this Agreement shall be extended for an additional period equal to the duration of the Force Majeure. Upon the occurrence and upon the termination of any Force Majeure, St. Mary shall promptly notify Owners. St. Mary shall use reasonable diligence to remedy a Force Majeure, but shall not be required against its better judgment to settle any labor dispute or contest the validity of any law or regulation or any action or inaction of civil or military authority. (b) "Force Majeure" means any cause beyond St. Mary's reasonable control, including law or regulation; action or inaction of civil or military authority; inability to obtain any license, permit, or other authorization that may be required to conduct operations on or in connection with the Property; unusually severe weather; mining casualty; fire; explosion; flood; insurrection; riot; labor dispute; inability after diligent effort to obtain workmen or material; delay in transportation; acts of God; unavailability of a suitable market for the ores, minerals, concentrates, or other products from the Property; and excessive costs of mining, milling, processing or marketing, or insufficient prices available for the ores, minerals, concentrates, or other products produced from the Property, which render St. Mary's operations uneconomic. 27. SHORT FORM. Contemporaneously herewith, St. Mary and Owners have executed and delivered a Short Form of Agreement. St. Mary may record the Short Form or this Agreement, or both, as it may elect. 13 28. INUREMENT. All covenants, conditions, limitations, and provisions herein contained apply to and are binding upon the parties hereto, their heirs, representatives, successors, and assigns. 29. MODIFICATION. No modification, variation, or amendment of this Agreement shall be effective unless the modification, variation, or amendment is in writing and is signed by Owners and St. Mary. 30. WAIVER. No waiver of any breach or default under this Agreement shall be effective unless the waiver is in writing and signed by the party against whom the waiver is claimed. No waiver of any breach or default shall be deemed to be a waiver of any other or subsequent breach or default. 31. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement of the parties and, except as herein expressly provided, supersedes all previous and contemporaneous agreements, representations, warranties, or understandings, written or oral. 32. CONSTRUCTION. The paragraph headings are for convenience only, and shall not be used in the construction of this Agreement. 33. GOVERNING LAW. The formation, interpretation, and performance of this Agreement shall be governed by the law of the state of Colorado. 34. TIME OF ESSENCE. Except as set forth in Section 23 hereof, time is of the essence in the performance of each and every term, condition, and covenant of this Agreement. 35. TIME COMPUTATIONS. In computing the time permitted or required for performance or payment as provided hereunder, the first day shall be excluded and the last day shall be included. If the last day of any such period is a Saturday, Sunday or legal holiday, the period shall extend to include the next day which is not a Saturday, 14 Sunday, or legal holiday. Any performance or payment which must be taken or made under this Agreement must be taken or made prior to 5:00 p.m. (Denver, Colorado time) of the last day of the applicable period provided hereunder for such action, unless another time is expressly specified. All references to time shall be Denver, Colorado time. If a date for performance or payment falls on a holiday or weekend, the time for performance or payment shall be extended to the next business day, and if performance or payment has occurred on such weekend or holiday, it shall be deemed to have occurred on the next business day. 36. INVALIDITY. The invalidity of any provision of this Agreement shall not affect the enforceability of any other provision of this Agreement. 37. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same agreement. If any person named as one of the Owners does not execute this Agreement, it nevertheless shall be binding upon those persons executing it. 38. ADDITIONAL DOCUMENTS. Owner's will provide St. Mary with such additional documents as may be necessary to carry out the purposes of this Agreement. If conditions change by reason of conveyances, assignments, or other matters relating to the title to or description of the Property , Owners and St. Mary shall execute amendments of this Agreement and the Short Form of Agreement, and any other documents which may be necessary to reflect such changed conditions. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. /s/ Boyce Cook - ----------------------------------- Boyce Cook and 15 /s/ Margaret Cook - ----------------------------------- Margaret Cook /s/ Josephine Hill - 8-4-94 - ----------------------------------- Josephine Hill and /s/ Donald Charles Giaccarni - ----------------------------------- Donald Charles Giaccarni ST. MARY MINERALS INC. By: /s/ Gregory A. Hahn ------------------------------------- Gregory A. Hahn, Vice President 16 STATE OF COLORADO ) ) ss. COUNTY OF JEFFERSON ) On this 27th day of July, 1994 before me the undersigned, a notary public, personally appeared Boyce Cook known to me (or proved to me on the oath of Boyce Cook (to be the person whose name is subscribed to the within instrument, and acknowledged that he executed the same. My Commission Expires: My Commission Expires: 4/6/1996 10403 West Colfax Avenue Lakewood, CO 30215 /s/ Mariann K. Svec - ----------------------------------- ----------------------------------- Notary Public STATE OF COLORADO ) ) ss. COUNTY 0F JEFFERSON ) On this 27th day of July, 1994 before me the undersigned, a notary public, personally appeared Margaret Cook known to me (or proved to me on the oath of Margaret Cook (to be the person whose name is subscribed to the within instrument, and acknowledged that she executed the same. My Commission Expires: My Commission Expires: 4/6/1996 10403 West Colfax Avenue Lakewood, CO 30215 /s/ Mariann K. Svec - ----------------------------------- ----------------------------------- Notary Public STATE OF CALIFORNIA ) ) ss. COUNTY 0F SAN FRANCISCO ) On this 4th day of August, 1994 before me the undersigned, a notary public, personally appeared Josephine Hill (or proved to me on the oath of Josephine Hill (to be the persons whose names are subscribed to the within instrument, and acknowledged that she executed the same. My Commission Expires: July 17th, 1995 /s/ Hans R. Hansson - ----------------------------------- ----------------------------------- Notary Public HANS R. HANSSON [SEAL] 17 STATE OF ALASKA ) ) ss. COUNTY 0F KENAI PENINSULA ) On this 8th day of August, 1994 before me the undersigned, a notary public, personally appeared Donald Charles Giaccarni known to me (or proved to me on the oath of Donald Charles Giaccarni (to be the persons whose names are subscribed to the within instrument, and acknowledged that she executed the same. My Commission Expires: October 14, 1997 /s/ [illegible] - ----------------------------------- ----------------------------------- Notary Public STATE OF COLORADO ) CITY AND ) ss. COUNTY of DENVER ) The foregoing instrument was acknowledged before me this 25th day of July, 1994, by Gregory A. Hahn, the Vice President of St. Mary Minerals Inc., a Colorado corporation, on behalf of the corporation. My Commission Expires: February 14, 1997 /s/ James C. Robertson - ----------------------------------- ----------------------------------- Notary Public JAMES C. ROBERTSON 18 EXHIBIT A OWNERS Name and Address % Interest in Property - ---------------- ---------------------- Boyce Cook and 66.666% Margaret Cook, Husband and Wife 9845 W. 11th Avenue Lakewood, Colorado 80215 Josephine Hill and 16.667% each Donald Charles Giaccarni 20 Hidalgo Terrace San Francisco, CA 94103 EXHIBIT B PROPERTIES 100% interest in and to the following unpatented mining claims located in the Picuris and Copper Mountain Mining District, Taos County, New Mexico: Recorded Amended BLM Claim Name Book Page Book Page NMMC Number - ---------- ---------- --------- ----------- Blue Jay S 30 46 S 37 439 68901 Chipmunk S 30 47 S 37 443 68902 Mustang S 30 498 S 37 444 68903 Shiner S 30 499 S 37 448 68904 Lizzie S 37 4 S 37 441 68905 Magpie S 37 5-6 S 37 442 68906 M 95 109 Daisy S 37 3 S 37 440 68907 EX-10.15 24 EXHIBIT 10.15 EXHIBIT 10.15 CHAMPION PROPERTY, NEW MEXICO ACQUISITION AGREEMENT THIS AGREEMENT is made as of the 16th day of November, 1994 BETWEEN: SUMMO MINERALS CORPORATION, a company duly incorporated under the laws of British Columbia and having a head office at 860 - 625 Howe Street, Vancouver, British Columbia, V6C 2T6 (hereinafter referred to as "SUMMO CANADA") OF THE FIRST PART, AND: SUMMO USA CORPORATION, a company incorporated under the laws of the State of Colorado and having a head office at Suite 1100, 1776 Lincoln Street, Denver, Colorado, 80203 (hereinafter referred to as "SUMMO USA") OF THE SECOND PART, AND: ST. MARY MINERALS INC., a company incorporated under the laws of the State of Colorado and having a head office at Suite 1100, 1776 Lincoln Street, Denver, Colorado, 80203 (hereinafter referred to as "ST. MARY") OF THE THIRD PART. RECITALS A. WHEREAS St. Mary holds interests in a mining property known as the Champion copper property in Taos County, New Mexico; B. AND WHEREAS St. Mary's entire right and title and interest in and to the unpatented and patented mining claims and millsites located in the Picuris and Copper Mountain Mining District, Taos County, New Mexico and known as the Champion copper property all as described more particularly in Schedule "A" attached hereto and is referred to collectively herein as the "PROPERTY"; C. AND WHEREAS St. Mary wishes to sell and Summo USA wishes to acquire all of St. Mary's interest in the Property. NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the mutual covenants and agreements herein contained and subject to the terms and conditions hereinafter set out, the parties hereto agree as follows: 1. PURCHASE AND SALE 1.01 St. Mary hereby sells, assigns and transfers to Summo USA its entire right, title and interest in and to the Property except for a royalty interest of 1.5% of Net Smelter Returns as defined below, in consideration of the following: (a) the issuance of 80,000 common shares in the capital of Summo Canada to be issued to St. Mary upon receipt of shareholder and regulatory approval; (b) the right to retain the royalty interest and to receive the "Royalty" (as hereinafter defined); and (c) the assumption of all of St. Mary's duties, obligations and liabilities contained in the following underlying agreements: (i) Exploration and Purchase Option Agreement dated for reference August 1, 1994 with Boyce Cook, Margaret Cook, Josephine Hill and Donald Charles Giaccarni, a copy of which is attached hereto as Schedule "B" and referred to herein as the "COOK AGREEMENT"; (ii) Exploration and Purchase Option Agreement dated for reference August 1, 1994 with Josephine Hill, Donald Charles Giaccarni, Ruby E. Neill, Bruce Neill and Vivian Rutherford, a copy of which is attached hereto as Schedule "C" and referred to herein as the "RUTHERFORD AGREEMENT"; and (iii) Finder's Fee Agreement dated for reference May 20, 1994 with Applied Geologic Studies, Inc., a copy of which is attached hereto as Schedule "D" and referred to herein as the "FINDER'S FEE AGREEMENT". 2. REPRESENTATIONS AND WARRANTIES OF ST. MARY 2.01 St. Mary represents to each of Summo USA and Summo Canada that: (a) the interests assigned to Summo USA hereunder comprise St. Mary's entire right, title and interest in and to the Property and, notwithstanding the generality of the foregoing, St. Mary's entire right, title and interest in and to the Cook Agreement, the Rutherford Agreement and the Finder's Fee Agreement (referred to collectively herein as the "UNDERLYING AGREEMENTS"; (b) as of November 16, 1994 the Underlying Agreements were in good standing and no party was in default thereunder; (c) it has full right, power and authority to transfer and assign to Summo USA its entire right, title and interest in and to the Underlying Agreements in accordance with this agreement; (d) the entering into this agreement does not conflict with any applicable law or with its charter documents nor does it conflict with, or result in a breach of, or accelerate the performance required by any contract or other commitment to which it is a party or by which it is bound; (e) it has advised Summo USA of all of the material information relating to the mineral potential of the Property of which St. Mary has knowledge. 2.02 The representations and warranties hereinbefore set out are conditions upon which each of Summo Canada and Summo USA has relied on entering into this agreement and St. Mary hereby forever indemnifies and saves each of Summo Canada and Summo USA harmless from all loss, damage, costs actions and suits arising out of or in connection with any breach of any representation or warranty made by it and contained in this agreement. 3. REPRESENTATIONS AND WARRANTIES OF SUMMO 3.01 Each of Summo Canada and Summo USA severally and not jointly represents and warrants to St. Mary that: (a) it has full corporate power and authority to enter into this agreement, subject only to the requirement that it obtain shareholder approval to the issuance of 80,000 Common shares to St. Mary; and (b) the entering into this agreement does not conflict with any applicable laws or with its charter documents not does it conflict with, or result in a breach of, or accelerate the performance required by any contract or other commitment to which it is a party or by which it is bound. 3.02 The representations and warranties hereinbefore set out are conditions upon which St. Mary has relied on entering into this agreement and each of Summo Canada and Summo USA hereby forever indemnifies and saves St. Mary harmless from all loss, damage, costs actions and suits arising out of or in connection with any breach of any representation or warranty made by it and contained in this agreement. 4. COVENANTS OF SUMMO 4.01 Summo Canada and Summo USA hereby covenants with and to St. Mary that: (a) Summo Canada will issue 80,000 common shares in its capital to St. Mary, upon receipt of shareholder and regulatory approval; (b) Summo USA shall maintain in good standing the Underlying Agreements; (c) Summo USA shall use its best efforts to conduct all its operations on the Property in compliance with all applicable laws, regulations and policies; and (d) they will allow St. Mary access at all times to all maps, reports, assay results and other technical data prepared or obtained by them in connection with their operations on the Property. 5. RIGHT OF ENTRY 5.01 During the currency of this agreement Summo USA, its servants, agents and workmen and any persons duly authorized by Summo USA shall have the exclusive right to enter upon and take possession of and prospect, explore and develop the Property in such manner as Summo USA in its sole discretion may deem advisable. 6. ROYALTY 6.01 In this agreement, the "ROYALTY" means the obligation of Summo USA and any successor to its interest to pay to St. Mary 1.5% of Net Smelter Returns as defined, calculated and paid pursuant to Schedule "E" herein. This royalty interest ownership of St. Mary shall run with the land and shall be binding upon Summo USA, its successors and assigns. 7. TERMINATION 7.01 If Summo Canada has not issued to St. Mary the 80,000 Common shares in the capital of Summo Canada referred to in paragraph 1.01(a), by July 1, 1995, Summo USA shall reconvey to St. Mary all of its interest in the Property, but shall remain liable for the performance of any duties, obligations and liabilities, including payments under the agreements set forth in 1.01(c)(i), (ii) and (iii) that have accrued to the date of termination, and shall indemnify and hold St. Mary harmless therefrom. 8. INDEPENDENT ACTIVITIES 8.01 Except as expressly provided herein, each party shall have the free and unrestricted right to independently engage in and receive the full benefit of any and all business endeavours of any sort whatsoever, whether or not competitive with the endeavours contemplated herein without consulting the other or inviting or allowing the other to participate therein. No party shall be under any fiduciary or other duty to the other which will prevent it from engaging in or enjoying the benefits of competing endeavours within the general scope of the endeavours contemplated herein. The legal doctrines of "corporate opportunity" sometimes applied to persons engaged in a joint venture or having fiduciary status shall not apply in the case of any party. In particular, without limiting the foregoing, no party shall have an obligation to any other party as to: (a) any opportunity to acquire, explore and develop any mining property, interest or right presently owned by it or offered to it outside of the Property at any time; and (b) the erection of any mining plant, mill, smelter or refinery, whether or not such mining plant, mill, smelter or refinery treats ore or concentrates from the Property. 9. UNAVOIDABLE DELAYS 9.01 If any party should be delayed in or prevented from performing any of the terms, covenants or conditions of this agreement by reason of a cause beyond the control of such party, including fires, floods, earthquakes, subsidence, ground collapse or landslides, interruptions or delays in transportation or power supplies, strikes, lockouts, wars, acts of God, government regulation or interference, including but without restricting the generality of the foregoing, forest or highway closures or any other cause beyond such party's control, then any such failure on the part of such party to so perform shall not be deemed to be a breach of this agreement and the time within which such party is obliged to comply with any such term, covenant or condition of this agreement shall be extended by the total period of all such delays. In order that the provisions of this article may become operating, such party shall given notice in writing to the other party, forthwith and for each new cause of delay or prevention and shall set out in such notice particulars of the cause thereof and the day upon which the same arose, and shall give like notice forthwith following the date that such cause ceased to subsist. 10. ARBITRATION 10.01 If there is any disagreement, dispute or controversy (hereinafter collectively called a "DISPUTE") between the parties with respect to any matter arising under this agreement or the construction hereof, then the Dispute shall be determined by arbitration in accordance with the rules of the American Arbitration Association using a panel of three arbitrators. 11. NOTICES 11.01 Any notice, election, consent or other writing required or permitted to be given hereunder shall be deemed to be sufficiently given if delivered or if mailed by registered air mail or by telegram or fax, addressed as follows: In the case of St. Mary: St. Mary Minerals Inc. Suite 1100 - 1776 Lincoln Street Denver, Colorado 80203 Attention: Gregory Hahn - --------- ------------ with a copy to: Cohen, Brame & Smith Attorneys at Law One Norwest Centre, Suite 1800 1700 Lincoln Street Denver, Colorado 80203 Attention: Roger Cohen - --------- ----------- In the case of Summo USA: Summo USA Corporation Suite 1100 - 1776 Lincoln Street Denver, Colorado 80203 Attention: Gregory Hahn - --------- ------------ with a copy to: Cohen, Brame & Smith Attorneys at Law One Norwest Centre, Suite 1800 1700 Lincoln Street Denver, Colorado 80203 Attention: Roger Cohen - --------- ----------- In the case of Summo Canada: Summo Minerals Corporation Suite 860 - 625 Howe Street Vancouver, B.C. V6C 2T6 Attention: the Corporate Secretary - --------- ----------------------- with a copy to: SCOTT, BISSETT Barristers & Solicitors 1040 - 999 West Hastings Street Vancouver, B.C. V6C 2W2 Attention: Graham H. Scott - --------- --------------- and any such notice given as aforesaid shall be deemed to have been given to the parties hereto if delivered, when delivered, or if mailed, on the tenth business day following the date of mailing, or, if telegraphed or faxed, on the next succeeding day following the telegraphing or faxing thereof PROVIDED HOWEVER that during the period of any postal interruption in either the country of mailing or the country of delivery, any notice given hereunder by mail shall be deemed to have been given only as of the date of actual delivery of the same. Any party may from time to time by notice in writing change its address for the purpose of this paragraph. 12. APPROVALS 12.01 The parties acknowledge and agree that this agreement is subject to the acceptance of the securities regulatory bodies having jurisdiction and the shareholders of Summo Canada, and the parties hereby agree to use their respective best efforts to do all things reasonable and necessary in order to obtain such acceptance and approvals. 13. GENERAL TERMS AND CONDITIONS 13.01 The parties hereto hereby covenant and agree that they will execute such further agreements, conveyances and assurances as may be requisite, or which counsel for the parties may deem necessary to effectually carry out the intent of this agreement. 13.02 This agreement shall represent the entire understanding between the parties with respect to the Property, and supersedes and replaces the letter agreement dated November 16, 1994. No representations or inducements have been made save as herein set forth. No changes, alterations, or modifications of this agreement shall be binding upon either party until and unless a memorandum in writing to such effect shall have been signed by all parties hereto. 13.03 The titles to the articles to this agreement shall not be deemed to form part of this agreement but shall be regarded as having been used for convenience of reference only. 13.04 The schedules to this agreement shall be construed with and as an integral part of this agreement to the same extent as if they were set forth verbatim herein. 13.05 All references to dollar amounts contained in this agreement are references in United States funds. 13.06 This agreement shall be governed by and interpreted in accordance with the laws of the State of Colorado. 13.07 This agreement shall enure to the benefit of and be binding upon the parties hereto and their respective successors and assigns. 13.08 Time shall be of the essence of this agreement. IN WITNESS WHEREOF this agreement has been executed by the parties hereto as of the day and year first above written. SUMMO MINERALS CORPORATION Per: /s/ [ILLEGIBLE] - ------------------------- Authorized Signature Per: /S/ [ILLEGIBLE] - ------------------------- Authorized Signature ST. MARY MINERALS INC. By:/S/ [ILLEGIBLE] --------------------- [Name:] [ILLEGIBLE] ---------------- [Title:] PRESIDENT --------------- SUMMO USA CORPORATION By: /s/ Gregory P. Hahn --------------------- [Name:] Gregory P. Hahn ---------------- [Title:] Vice President --------------- SCHEDULE "A" TO THAT CERTAIN AGREEMENT (THE "AGREEMENT") MADE AS OF THE 16TH DAY OF NOVEMBER, 1994 BETWEEN SUMMO MINERALS CORPORATION OF THE FIRST PART AND SUMMO USA CORPORATION OF THE SECOND PART AND ST. MARY MINERALS INC. OF THE THIRD PART THE "PROPERTY" In this Schedule "A", all defined terms shall have the same meaning as set out in the Agreement. The "Property" means St. Mary's entire right, title and interest, except for the royalty interest of 1.5% of Net Smelter Returns, in the following: 1. COOK AGREEMENT The following unpatented mining claims located in the Picuris and Copper Mountain Mining District, Taos County, New Mexico: Recorded Amended BLM Claim Name Book Page Book Page NMMC Number ---------- ---- ---- ---- ---- ----------- Blue Jay S30 46 S37 439 68901 Chipmunk S30 47 S37 443 68902 Mustang S30 498 S37 444 68903 Shiner S30 499 S37 448 68904 Lizzie S37 4 S37 441 68905 Magpie S37 5-6 S37 442 68906 M95 109 Daisy S37 3 S37 440 68907 2. RUTHERFORD AGREEMENT The following patented mining claims and millsites located in the Picuris and Copper Mountain Mining District, Taos County, New Mexico: Jumbo Lode, Mineral Survey No. 1049, BLM Book A-50, Pages 338-340 Aztec Lode, Mineral Survey No. 1049A, BLM Book A-50, Pages 338-340 Sunset Lode, Mineral Survey No. 1049A, BLM Book A-50, Pages 338-340 Oxide King Lode, Mineral Survey No. 1049A, BLM Book A-50, Pages 338-340 Champion Lode, Mineral Survey No. 1049A, BLM Book A-50, Pages 338-340 Aztec Millsite, Mineral Survey No. 1049B, BLM Book A-50, Pages 338-340 Sunset Millsite, Mineral Survey No. 1049B, BLM Book A-50, Pages 338-340 Oxide King Millsite, Mineral Survey No. 1049B, BLM Book A-50, Pages 338-340 Champion Millsite, Mineral Survey No. 1049B, BLM Book A-50, Pages 338-340 A-1 SCHEDULE "A" (Continued) 3. Unpatented mining claims located in Township 23 North, Range 11 East, Taos County, New Mexico: Recorded Amended BLM Serial Claim Name Book Page Book Page No. - NMMC ---------- --------- --------- ---------- CH 1 M172 280 163015 CH 2 M172 283 163016 CH 3 M172 284 163017 CH 4 M172 285 163018 CH 5 M172 286 163019 CH 6 M172 287 163020 CH 7 M172 288 163021 CH 8 M172 289 163022 CH 9 M172 290 163023 CH 10 M172 291 160024 CH 11 M172 292 163025 CH 12 M172 293 163026 CH 13 M172 294 163027 CH 14 M172 295 163028 CH 15 M172 296 163029 CH 16 MI72 297 163030 CH 17 M172 298 163031 CH 18 M172 299 163032 CH 19 M172 300 163033 CH 20 M172 301 163034 CH 21 M173 300 163152 CH 22 M173 303 163153 CH 23 M173 304 163154 CH 24 M173 305 163155 CH 25 M173 306 163156 CH 26 M173 307 163157 CH 27 M173 308 163158 CH 28 M173 309 163159 CH 29 M173 310 163160 CH 30 M173 311 163161 CH 31 M173 312 163162 CH 32 M173 313 163163 CH 33 M173 314 163164 CH 34 M173 315 163165 CH 35 M173 316 163166 CH 36 M173 352 163167 CH 37 M173 353 163168 CH 38 M173 354 163169 CH 39 M173 355 163170 CH 40 M173 356 163171 CH 41 M173 357 163172 CH 42 M173 358 163173 CH 43 M173 359 163174 CH 44 M173 360 163175 A-2 SCHEDULE "A" (Continued) CH 45 M173 361 163176 CH 46 M173 362 163177 CH 47 M173 363 163178 CH 48 M173 364 163179 CH 49 M173 370 163180 CH 50 M173 371 163181 CH 51 M173 372 163182 CH 52 M173 373 163183 CH 53 M173 374 163184 CH 54 M173 375 163185 CH 55 M173 376 163186 CH 56 M173 377 163187 CH 57 M173 378 163188 CH 58 M173 379 163189 CH 59 M173 380 163190 CH 60 M173 381 163191 CH 61 M173 382 163192 CH 62 M173 383 163193 CH 63 M173 384 163194 CH 64 M173 385 163195 A-3 Schedule "B" to the Acquisition Agreement dated for reference November 16, 1994. EXPLORATION AND PURCHASE OPTION AGREEMENT THIS OPTION AGREEMENT ("Agreement") made effective as of the lst day of August, 1994, by and between those persons whose names and addresses are shown on EXHIBIT A attached hereto and made a part hereof (individually an "Owner" and collectively the "Owners") and ST. MARY MINERALS INC., a Colorado corporation, whose address is 1776 Lincoln Street, Denver, Colorado 80203 (hereinafter referred to as "St. Mary"); WHEREAS, Owners are the owners of certain unpatented mining claims situate in Taos County, New Mexico, herein referred to as "the Property," and more particularly described on EXHIBIT B attached hereto and made a part hereof; and WHEREAS, St. Mary desires to carry out exploration work and to acquire an option to purchase the Property, WHEREAS, Owners desire to make the Property available for the conduct by St. Mary of certain mineral exploration work thereon and to grant St. Mary the option to purchase the Property, NOW THEREFORE, in consideration of Ten Dollars ($10.00) in hand paid to Owners, the receipt and sufficiency of which are hereby acknowledged, and further in consideration of the mutual covenants, agreements, and promises herein contained, the parties agree as follows: 1. OPTION. Owners grant to St. Mary during the term of this Agreement the sole and exclusive option (the "Option") to purchase the Property, together with all appurtenances and water rights incident thereto and all improvements and personal property thereon, free and clear of all liens and encumbrances, for a total purchase price of Five Hundred Thousand Dollars ($500,000.00). St. Mary shall be entitled to a credit against the purchase price for all amounts paid under the provisions of Section 6. hereof and for all costs and expenses incurred under the provisions of Section 4 hereof. If the Property is placed in commercial production at any time during the term of this Agreement, St. Mary shall exercise the option by providing written notice of exercise to Owners. Within three (3) years after such notice, but no later than August 1, 2015, St. Mary shall deliver the balance of the purchase price to Owners. "Commercial production" shall mean the processing and sale of ores, concentrates, metals and other mineral products which have been mined on the Property but which shall not include processing for the purpose of testing or milling by a pilot plant. 2. ESCROW. Contemporaneously with the execution of this Agreement, Owners shall execute, acknowledge, and deliver to the Escrow Agent one or more general warranty deeds conveying the Property to St. Mary in the form (without legal descriptions) of Exhibit C attached hereto and incorporated herein. Owners and St. Mary hereby appoint CB&S Nominee Corporation, 1800 One Norwest Center Building, 1700 Lincoln Street, Denver, Colorado 80203 as their Escrow Agent to receive and distribute all payments and to hold the deed and deliver it to the party entitled hereunder to receive the same. The parties hereto agree that the Escrow Agent shall act pursuant to Escrow Instructions executed contemporaneously herewith. 3. EXCLUSIVE POSSESSION. St. Mary shall have the exclusive possession of the Property during the term of this Agreement. 4. TITLE. (a) Owners warrant that they are in possession of the Property, that they have the right to enter into this Agreement, that they know of no other person claiming any interest in the Property or the ground covered thereby, and that the Property is free from all liens and encumbrances, except liens for property taxes not yet due and payable. Owners further warrant to St. Mary the quiet enjoyment of the Property and the right to explore, develop, and mine the same. (b) Owners warrant and will defend title of the property against all persons whomsoever. 2 (c) At St. Mary's request, Owners shall take all action necessary (including judicial proceedings) to remove any cloud from or cure any defect in their title to the Property or the ground covered thereby. If Owners fail or refuse to take any such action, St. Mary may take any such action in Owners' name. Owners agree to cooperate with St. Mary in any such action taken. If the United States or any third person attacks the validity of any of the unpatented mining claims included in the Property for any reason, St. Mary shall have no obligation to defend the validity of the claim. (d) St. Mary shall not be estopped to deny the validity of Owners' title. 5. UNDIVIDED INTEREST. If the interest claimed by any Owner in any portion of the Property is less than one hundred percent, the interest claimed by such Owner is set forth in Exhibit A. Any representation or warranty of title made by any Owner shall apply only to the interest set forth in Exhibit A. 6. OPTION PAYMENTS. (a) Concurrent with the execution of this Agreement by Owners, St. Mary has made an option payment to Owners in the amount of $5,000, receipt of which is hereby acknowledged by Owners. (b) St. Mary shall pay to Owners further annual option payments on or before the dates and in the amounts as follows: August 1, 1995 $ 5,000 August 1, 1996 10,000 August 1, 1997 10,000 August 1, 1998 10,000 August 1, 1999 10,000 August 1, 2000 15,000 August 1, 2001 15,000 August 1, 2002 15,000 August 1, 2003 15,000 August 1, 2004 15,000 August 1, 2005 20,000 August 1, 2006 20,000 August 1, 2007 20,000 August 1, 2008 20,000 3 August 1, 2009 20,000 August 1, 2010 20,000 August 1, 2011 20,000 August 1, 2012 20,000 August 1, 2013 20,000 August 1, 2014 20,000 August 1, 2015 175,000 -------- $500,000 7. MANNER OF FURTHER OPTION PAYMENTS. St. Mary shall make all further option payments due Owners hereunder by check which shall be made payable to and shall be made payable to and shall be transmitted to the Escrow Agent. The Escrow Instructions to be executed contemporaneously herewith will instruct the Escrow Agent how the payments shall be disbursed. Upon making the payments to the Escrow Agent, St. Mary shall be deemed to have made the payments to Owners, their heirs, representatives, successors, and assigns, and thereupon St. Mary shall be discharged to the extent thereof as if the payments has been made directly to Owners, or to any person, firm or corporation entitled thereto, and St. Mary shall not be liable for the ultimate distribution or receipt of any payment or payments. 8. OPERATIONS. (a) SCOPE. During the term of this Agreement, St. Mary shall have free and unrestricted access to the Property, and shall have the right and privilege of conducting exploratory investigations and prospecting for mineral deposits on the Property, effective during the life of the Option, and that prospecting shall include, but not be limited to, soil testing, geophysical surveys, core drilling, shaft sinking, tunnel and mine building and the removal of ore for testing purposes but not removal of ore for sale. St. Mary shall have the right to erect and maintain upon the Property any improvements, structures or facilities including mines, shafts and tunnels as may be necessary or convenient for the conduct of its operations. 4 (b) STANDARDS OF OPERATIONS. St. Mary shall conduct all operations on the Property in a good and workmanlike manner and in accordance with accepted mining practice. (c) COMPLIANCE WITH LAW; RECLAMATION: St. Mary shall endeavor in good faith to comply with applicable provisions of federal, state and local laws and regulations, as required by the operating permits issued to St. Mary by these agencies under which St. Mary shall conduct its operations. If this Agreement is terminated, St. Mary shall reclaim only those portions of the Property disturbed by its operations, and in compliance with all applicable governmental laws, regulations and orders. St. Mary shall have the right, without payment of any additional consideration to Owners, to enter upon the Property subsequent to termination of this Agreement for purposes of performing such reclamation work. 9. NO IMPLIED COVENANTS. No covenants or conditions relating to the exploration or related operations on or in connection with the Property, or the timing thereof, other than those expressly provided in this Agreement, shall be implied. After commencing any exploration or related operations on or in connection with the Property and so long as this Agreement has not been terminated before the expiration of its term, St. Mary may in its sole discretion curtail or cease such operations so long as it continues to make any payments due Owners under this Agreement subject to the provisions of Section 16 hereof. 10. PROTECTION FROM LIENS AND DAMAGES. St. Mary shall keep the Property free of liens for labor performed or materials or merchandise furnished for use on the Property under this Agreement, and shall hold Owners harmless from all costs, loss, or damage which may result from any work or operations of St. Mary or its occupancy of the Property. 5 11. TAXES. Owners shall pay all taxes levied against the Property prior to the date of this Agreement. St. Mary shall pay or reimburse Owners for all taxes levied against the Property during, the term of this Agreement. In the case of taxes for the calendar year in which this Agreement commences, and for the calendar year in which this Agreement ends, there still be an apportionment between the parties, St. Mary to bear the proportion of taxes upon the Property applicable to the part of the calendar year included hereunder, and Owners to bear the balance of the taxes. St. Mary shall pay all taxes levied during the term of this Agreement against all buildings, structures, machinery, equipment, personal property, fixtures, and improvements placed upon the Property by St. Mary, and all taxes levied against St. Mary as an employer of labor. All taxes shall be paid when due and before delinquent, but St. Mary shall be under no obligation to pay any tax so long as the tax is being contested in good faith and by appropriate legal proceedings and the nonpayment thereof does not adversely affect any right, title, or interest of Owners in or to the Property. 12. INSURANCE. St. Mary shall carry at all times during the term of this Agreement worker's compensation and other insurance required by state laws and mining regulations, or St. Mary may self-insure as to such matters if it qualifies as a self-insurer under the appropriate laws and regulations. 13. INSPECTION. (a) Owners or their authorized representative may enter on the Property at any reasonable time for the purpose of inspection, but shall enter at Owners' own risk and so as not to hinder unreasonably the operations of St. Mary. Owners shall indemnify and hold St. Mary harmless from any damage, claim, or demand by reason of injury to or the presence of Owners, their agents or representatives on the Property. (b) Owners or their authorized representative may, at any reasonable time, inspect any records pertinent and necessary for substantiating the compliance of St. Mary with the provisions of this Agreement. 6 14. DATA. (a) Upon the execution of this Agreement, Owners shall deliver to St. Mary all drill core, all geological, geophysical, and engineering data and maps, logs of drill holes, results of assaying and sampling, and similar data conceding the Property (or copies thereof) which are in Owners' possession or control. (b) Upon the surrender or other termination of this Agreement (except upon exercise of the Option and payment of the full purchase price as provided in Section 6 hereof), St. Mary shall, within sixty days after termination, (i) return to Owners all drill core and original data delivered by Owners to St. Mary which are then in St. Mary's possession or control, and (ii) make available for inspection by Owners all factual geological and geophysical data and maps (not including interpretive data), logs of drill holes, drill core or cuttings and results of assaying and sampling pertaining to the Property which St. Mary has obtained as a result of its exploration work under this Agreement and which are then in St. Mary's possession or control. Upon Owners' request made within ninety (90) days after termination of this Agreement, St. Mary shall at Owners' expense provide Owners with the drill core or cuttings designated by Owners and with copies of any portion of the factual geological and geophysical data and maps (not including interpretive data), logs of drill holes, and results of assaying and sampling designated by Owners. St. Mary makes no representation or warranty as to the accuracy or completeness of any such data or information, and shall not be liable on account of any use by Owners or any other person of any such data or information. St. Mary shall not be liable for the loss or destruction of any drill core or cuttings. 15. CONFIDENTIALITY. During the term of this Agreement all information obtained by Owners or their authorized representatives from St. Mary or arising out of St. Mary's activities on the Property pursuant to this Agreement shall be kept strictly confidential by Owners and shall not be released to any third party except with the prior written consent of St. Mary. 16. TERM, TERMINATION AND SURRENDER. 7 (a) The term of this Agreement shall be for a period of twenty-one (21) years from the date hereof unless sooner surrendered or otherwise terminated, or until the earlier exercise of the Option. (b) It is also agreed that a failure by St. Mary to make an option payment within 60 days of the due date therefor as provided in Section 6(b) hereof shall constitute also a termination of this Agreement effective upon the expiration of such 60 day period. Upon the effective date of such termination, all rights of St. Mary under this Agreement except as provided in Sections 17 and 18 hereof shall terminate and all liabilities and obligations of St. Mary hereunder (including the obligation of making any further payments under Section 6(b) hereof) shall likewise thereupon terminate except as provided in Sections 8(c) and 14(b) hereof. (c) St. Mary may also at any time terminate this Agreement as to all or any part of the Property by delivering to Owners or by filing for record in the appropriate office (with a copy to owners) a good and sufficient Surrender of this Agreement. Upon mailing the Surrender to Owners or to the appropriate office, all rights of St. Mary under this Agreement shall terminate except as provided in Sections 17 and 18 hereof, and all liabilities and obligations of St. Mary under this Agreement shall likewise terminate except as provided in Sections 8(c) and 14(b) hereof and except liability for payments under Section 6(b) hereof that became due prior to the date of such termination. 17. REMOVAL OF PROPERTY. For a period of six months after the termination of this Agreement St. Mary shall have the right (but not the obligation except to the extent set forth in Section 8(c) hereof) to remove from the Property all buildings, structures, machinery, equipment, personal property, fixtures, and improvements owned by St. Mary or erected or placed on or in the Property by St. Mary, except mine timbers in place. St. Mary may keep one or more watchmen on the Property during the six-month period. 18. ACCESS. For as long as necessary after termination of this Agreement, St. Mary shall have the right of access to and across the Property for reclamation purposes. 8 19. EASEMENTS. If requested by St. Mary during the term of this Agreement or following the exercise of the Option, Owners shall execute one or more instruments granting to St. Mary without cost to St. Mary easements upon, over, or through the Property or upon, over, or through other property owned by Owners, for the construction, maintenance, use, and removal of pipe lines, telephone lines, electrical power or transmission lines, roads, railroads, tramways, flumes, ditches, shafts, drifts, tunnels, and other facilities necessary or convenient for St. Mary's operations on the Property or on other property. 20. AMENDMENTS, RELOCATIONS AND PATENTS. During the term of this Agreement, St. Mary shall have the right (but not the obligation), in the name of Owners, to amend or relocate any or all of the unpatented mining claims included in the Property, to locate placer claims on ground theretofore covered by lode claims and vice versa, and to locate any millsites on ground theretofore covered by mining claims and vice versa, and to locate any fractions resulting from the location, amendment or relocations of mining claims or millsites. At the request of St. Mary, Owners shall apply for a patent for any or all of the unpatented mining claims and millsites. For purposes of implementing the provisions of the Section, Owners do hereby nominate, constitute and appoint St. Mary as their true and lawful attorney-in-fact to execute, deliver and record on behalf of the Owners and in their name, place and stead all such documents as St. Mary may deem necessary or appropriate for such purposes. All expenses authorized by St. Mary in connection with locating, amending, or relocating mining claims or millsites or prosecuting patent proceedings shall be borne by St. Mary. The rights of St. Mary under this Agreement shall extend to all such locations, amended locations, relocations and patented mining claims and millsites. 21. COMPLIANCE WITH FEDERAL LAND POLICY AND MANAGEMENT ACT. (a) Owners warrant that the location notices or location certificates for the unpatented mining claims included in the Property have been properly filed in the proper office of the Bureau of Land Management pursuant to 43 U.S.C. Section 1744 (b). 9 (b) Owners warrant that evidence of assessment work or notices of intention to hold have been properly recorded in the proper county (or recording district) office and filed in the proper office of the Bureau of Land Management pursuant to 43 U.S.C. Section 1744 (a), as required, for each assessment year to and including the assessment year ending September 1, 1992. 22. ASSESSMENT WORK. (a) Owners warrant that the annual assessment work required to hold the Property has been performed for each assessment year to and including the assessment year ending September 1, 1992, and that the rental fee required by the Department of the Interior was paid for the assessment year ending September 1, 1993. For every assessment year thereafter in which St. Mary continues this Agreement beyond the 1st day of August of any year, St. Mary shall perform assessment work or pay any rental fee required by the Department of the Interior. If any court or governmental agency decides that the work performed by St. Mary does not constitute the kind of work required by federal or state law, St. Mary shall nevertheless be deemed to have complied with the terms of this Agreement if the work done by St. Mary is the kind generally accepted in the mining industry as assessment work under existing law. (b) St. Mary shall be relieved of its obligation to perform assessment work for any period in which assessment work is not required or is suspended, and St. Mary shall have the benefit of subsequent laws enacted which relate to assessment work, including any laws extending the time within which to perform assessment work. For each year in which St. Mary performs assessment work, it will record in the office where the location notice or location certificate is recorded, and in any other proper office in the county (or recording district) in which the claims are located, and in the proper office of the Bureau of Land Management, an affidavit of assessment work or other documents complying with the requirements of state law and the Federal Land Policy and Management Act of 1976 and the regulations implementing and supplementing the Act. 10 (c) Owners represent that the Property is one contiguous group of mining claims, and agree that work on any one or more of the claims will be for the benefit of all of the claims. (d) Owners represent that no report of geological, geophysical, and geochemical work (30 U.S.C. Section 28-l and 28-2) on the Property has been applied as labor for more than two consecutive years or for more than a total of five years on any one mining claim. 23. NOTICES. All notices and other communications to either party shall be in writing and shall be sufficiently given if delivered in person or sent by certified or registered mail, return receipt requested, addressed as hereinafter set forth. Notices given by mail shall be deemed delivered as of the date of mailing. Until a change of address is communicated as indicated above, all notices to Owners shall be addressed: Mr. Boyce Cook 9845 West llth Avenue Lakewood, Colorado 80215 and all notices to St. Mary shall be addressed: St. Mary Minerals Inc. 1776 Lincoln Street, Suite 1100 Denver, Colorado 80203 Attn: Gregory A. Hahn 24. ASSIGNMENT. (a) The rights of either party hereunder may be assigned in whole or in part without the consent of the other party hereto, subject to the provisions hereinafter set forth. (b) No change or division in the ownership of the Property or the payments provided for herein, however accomplished, shall enlarge the obligations or diminish the rights of St. Mary hereunder. Owners covenant that any change in their ownership shall be accomplished in such a manner that St. Mary shall be required to make payments and to give notices to but one person, firm, or corporation, and upon breach of this covenant, 11 St. Mary may retain all monies otherwise due to Owners until the breach has been cured. No change or division in ownership shall be binding on St. Mary until thirty days after Owners have given St. Mary a certified copy of the recorded instrument evidencing the change or division. (c) If St. Mary assigns the whole of or an undivided interest in this Agreement, liability for breach of any obligation hereunder shall rest exclusively upon the holder of the Agreement or of an undivided interest herein who commits the breach. If this Agreement is assigned as to a segregated portion of the Property, default by the holder hereunder of that portion shall not affect the rights of holders hereunder of any other portion. (d) If 0wners receive a bona fide written offer from an unrelated third party to purchase all or any part of Owners' interest in the Property or in this Agreement, Owners shall first offer the interest to St. Mary stating the interest proposed to be sold or otherwise disposed of, the offering price from such third party and other terms and conditions of sale. St. Mary may accept the offer on the same terms and conditions as such third party offer by notice to Owners given within sixty days following the effective date Owners' offer. If St. Mary does not accept Owners' offer, Owners may sell or otherwise dispose of the interest offered to St. Mary at a price and upon terms and conditions equal to or less favorable to the third party than those offered to St. Mary provided that the sale or other disposition is effectuated within 120 days from the effective date of Owners' offer. Any sale or other disposition shall be subject to the terms of this Agreement, including this subsection (d), all of which shall survive the closing of any such sale in full force and effect. If Owners do not sell or otherwise dispose of the interest offered within 120 days, the provisions of this subsection (d) shall apply to any subsequent third party offer received by Owners. 25. NO TRANSFER OR ENCUMBRANCE. Without St. Mary's prior written consent, neither the Owners nor any Owner during term of this Agreement shall (a) sell, transfer, assign or convey any interest in the Property without St. Mary's prior written consent or otherwise in accordance with the provisions of Section 21(d) hereof; (b) do or fail to do 12 any act or thing which would cause or permit any part of the Property to be pledged, collateralized or stand as security for any matter whatsoever; or (c) enter into any leases or other agreements concerning the Property or any part thereof. 26. FORCE MAJEURE. (a) If St. Mary shall be prevented by Force Majeure from timely performance of any of its obligations hereunder (except the payment of money to Owners), the failure of performance shall be excused and the period for performance and the term of this Agreement shall be extended for an additional period equal to the duration of the Force Majeure. Upon the occurrence and upon the termination of any Force Majeure, St. Mary shall promptly notify Owners. St. Mary shall use reasonable diligence to remedy a Force Majeure, but shall not be required against its better judgment to settle any labor dispute or contest the validity of any law or regulation or any action or inaction of civil or military authority. (b) "Force Majeure" means any cause beyond St. Mary's reasonable control, including law or regulation; action or inaction of civil or military authority; inability to obtain any license, permit, or other authorization that may be required to conduct operations on or in connection with the Property; unusually severe weather; mining casualty; fire; explosion; flood; insurrection; riot; labor dispute; inability after diligent effort to obtain workmen or material; delay in transportation; acts of God; unavailability of a suitable market for the ores, minerals, concentrates, or other products from the Property; and excessive costs of mining, milling, processing or marketing, or insufficient prices available for the ores, minerals, concentrates, or other products produced from the Property, which render St. Mary's operations uneconomic. 27. SHORT FORM. Contemporaneously herewith, St. Mary and Owners have executed and delivered a Short Form of Agreement. St. Mary may record the Short Form or this Agreement, or both, as it may elect. 13 28. INUREMENT. All covenants, conditions, limitations, and provisions herein contained apply to and are binding upon the parties hereto, their heirs, representatives, successors, and assigns. 29. MODIFICATION. No modification, variation, or amendment of this Agreement shall be effective unless the modification, variation, or amendment is in writing and is signed by Owners and St. Mary. 30. WAIVER. No waiver of any breach or default under this Agreement shall be effective unless the waiver is in writing and signed by the party against whom the waiver is claimed. No waiver of any breach or default shall be deemed to be a waiver of any other or subsequent breach or default. 31. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement of the parties and, except as herein expressly provided, supersedes all previous and contemporaneous agreements, representations, warranties, or understandings, written or oral. 32. CONSTRUCTION. The paragraph headings are for convenience only, and shall not be used in the construction of this Agreement. 33. GOVERNING LAW. The formation, interpretation, and performance of this Agreement shall be governed by the law of the state of Colorado. 34. TIME OF ESSENCE. Except as set forth in Section 23 hereof, time is of the essence in the performance of each and every term, condition, and covenant of this Agreement. 35. TIME COMPUTATIONS. In computing the time permitted or required for performance or payment as provided hereunder, the first day shall be excluded and the last day shall be included. If the last day of any such period is a Saturday, Sunday or legal holiday, the period shall extend to include the next day which is not a Saturday, 14 Sunday, or legal holiday. Any performance or payment which must be taken or made under this Agreement must be taken or made prior to 5:00 p.m. (Denver, Colorado time) of the last day of the applicable period provided hereunder for such action, unless another time is expressly specified. All references to time shall be Denver, Colorado time. If a date for performance, or payment falls on a holiday or weekend, the time for performance or payment shall be extended to the next business day, and if performance or payment has occurred on such weekend or holiday, it shall be deemed to have occurred on the next business day. 36. INVALIDITY. The invalidity of any provision of this Agreement shall not affect the enforceability of any other provision of this Agreement. 37. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same agreement. If any person named as one of the Owners does not execute this Agreement, it nevertheless shall be binding upon those persons executing it. 38. ADDITIONAL DOCUMENTS. Owners will provide St. Mary with such additional documents as may be necessary to carry out the purposes of this Agreement. If conditions change by reason of conveyances, assignments, or other matters relating to the title to or description of the Property, Owners and St. Mary shall execute amendments of this Agreement and the Short Form of Agreement, and any other documents which may be necessary to reflect such changed conditions. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. /s/ Boyce Cook - ------------------------------ Boyce Cook and 15 /s/ Margaret Cook - ------------------------------ Margaret Cook - ------------------------------ Josephine Hill and - ------------------------------ Donald Charles Giaccarni ST. MARY MINERALS INC. By: /s/ Gregory A. Hahn -------------------------------- Gregory A. Hahn, Vice President 16 STATE OF COLORADO ) )ss. COUNTY OF JEFFERSON ) On this 27th day of July, 1994 before me the undersigned, a notary public, personally appeared Boyce Cook known to me (or proved to me on the oath Boyce Cook (to be the person whose name is subscribed to the within instrument, and acknowledged that he executed the same. My Commission Expires: 4/6/1996 10403 West Colfax Avenue Lakewood, CO 80215 /S/ [Illegible] - ------------------------------ --------------------------------- Notary Public STATE OF COLORADO ) )ss. COUNTY OF JEFFERSON ) On this 27th day of July, 1994 before me the undersigned, a notary public, personally appeared Margaret Cook known to me (or proved to me on the oath Margaret Cook (to be the person whose name is subscribed to the within instrument, and acknowledged that she executed the same. My Commission Expires: 4/6/1996 10403 West Colfax Avenue Lakewood, CO 80215 /S/ [Illegible] - ------------------------------ --------------------------------- Notary Public STATE OF ) )ss. COUNTY OF ) On this ____ day of ____________, 19___ before me the undersigned, a notary public, personally appeared Boyce Cook known to me (or proved to me on the oath of _______________________ (to be the persons whose names are subscribed to the within instrument, and acknowledged that she executed the same. My Commission Expires: - ------------------------------ --------------------------------- Notary Public 17 STATE OF ) )ss. COUNTY OF ) On this ____ day of ____________, 19___ before me the undersigned, a notary public, personally appeared Donald Charles Giaccarni known to me (or proved to me on the oath of _______________________ (to be the persons whose names are subscribed to the within instrument, and acknowledged that he executed the same. My Commission Expires: - ------------------------------ --------------------------------- Notary Public STATE OF COLORADO ) CITY AND ) ss. COUNTY 0F DENVER ) The foregoing instrument was acknowledged before me this 25th day of July, 1994, by Gregory A. Hahn, the Vice President of St. Mary Minerals Inc., a Colorado corporation, on behalf of the corporation. My Commission Expires: February 14, 1997 /s/ James C. Robertson - ------------------------- --------------------------------- Notary Public JAMES C. ROBERTSON 18 EXHIBIT A OWNERS Name and Address % Interest in Property - ---------------- --------------------- Boyce Cook and 66.666% Margaret Cook, Husband and Wife 9845 W. 11th Avenue Lakewood, Colorado 80215 Josephine Hill and 16.667% each Donald Charles Giaccarni 20 Hidalgo Terrace San Francisco, CA 94103 EXHIBIT B PROPERTIES 100% interest in and to the following unpatented mining claims located in the Picuris and Copper Mountain Mining District, Taos County, New Mexico: Recorded Amended BLM Claim Name Book Page Book Page NMMC Number ---------- ----------- ----------- ----------- Blue Jay S 30 46 S 37 439 68901 Chipmunk S 30 47 S 37 443 68902 Mustang S 30 498 S 37 444 68903 Shiner S 30 499 S 37 448 68904 Lizzie S 37 4 S 37 441 68905 Magpie S 37 5-6 S 37 442 68906 M 95 109 Daisy S 37 3 S 37 440 68907 Schedule "C" to the Acquisition Agreement dated for reference November 16, 1994 EXPLORATION AND PURCHASE OPTION AGREEMENT THIS OPTION AGREEMENT ("Agreement") made effective as of the 1st day of August, 1994, by and between those persons whose names and addresses are shown on EXHIBIT A attached hereto and made a part hereof (individually an "Owner" and collectively the "Owners") and ST. MARY MINERALS INC., a Colorado corporation, whose address is 1776 Lincoln Street, Denver, Colorado 80203 (hereinafter referred to as "St. Mary"); WHEREAS, Owners are the owners of certain patented mining claims and millsites situate in Taos County, New Mexico, herein referred to as "the Property," and more particularly described on EXHIBIT B attached hereto and made a part hereof; and WHEREAS, St. Mary desires to carry out exploration work and to acquire an option to purchase the Property, WHEREAS, Owners desire to make the Property available for the conduct by St. Mary of certain mineral exploration work thereon and to grant St. Mary the option to purchase the Property, NOW THEREFORE, in consideration of Ten Dollars ($10.00) in hand paid to Owners, the receipt and sufficiency of which are hereby acknowledged, and further in consideration of the mutual covenants, agreements, and promises herein contained, the parties agree as follows: 1. OPTION. Owners grant to St. Mary during the term of this Agreement the sole and exclusive option (the "Option") to purchase the Property, together with all appurtenances and water rights incident thereto and all improvements and personal property thereon, free and clear of all liens and encumbrances, for a total purchase price of Five Hundred Thousand Dollars ($500,000.00). St. Mary shall be entitled to a credit against the purchase price for all amounts paid under the provisions of Section 6. hereof and for all costs and expenses incurred under the provisions of Section 4 hereof. If the Property is placed in commercial production at any time during the term of this Agreement, St. Mary shall exercise the option by providing written notice of exercise to Owners. Within three (3) years after such notice, but no later than August 1, 2015, St. Mary shall deliver the balance of the purchase price to Owners. "Commercial production" shall mean the processing and sale of ores, concentrates, metals and other mineral products which have been mined on the Property but which shall not include processing for the purpose of testing or milling by a pilot plant. 2. ESCROW. Contemporaneously with the execution of this Agreement, Owners shall execute, acknowledge, and deliver to the Escrow Agent one or more general warranty deeds conveying the Property to St. Mary in the form (without legal descriptions) of Exhibit C attached hereto and incorporated herein. Owners and St. Mary hereby appoint CB&S Nominee Corporation, 1800 One Norwest Center Building, 1700 Lincoln Street, Denver, Colorado 80203 as their Escrow Agent to receive and distribute all payments and to hold the deed and deliver it to the party entitled hereunder to receive the same. The parties hereto agree that the Escrow Agent shall act pursuant to Escrow Instructions executed contemporaneously herewith. 3. EXCLUSIVE POSSESION. St. Mary shall have the exclusive possession of the Property during the term of this Agreement. 4. TITLE. (a) Owners warrant that they are in possession of the Property, that they have the right to enter into this Agreement, that they know of no other person claiming any interest in the Property or the ground covered thereby, and that the Property is free from all liens and encumbrances, except liens for property taxes not yet due and payable. Owners further warrant to St. Mary the quiet enjoyment of the Property and the right to explore, develop, and mine the same. (b) Owners warrant and will defend title of the property against all persons whomsoever. 2 (c) At St. Mary's request, Owners shall take all action necessary (including judicial proceedings) to remove any cloud from or cure any defect in their title to the Property or the ground covered thereby. If Owners fail or refuse to take any such action, St. Mary may take any such action in Owners' name. Owners agree to cooperate with St. Mary in any such action taken. If the United States or any third person attacks the validity of any of the patented mining claims included in the Property for any reason, St. Mary shall have no obligation to defend the validity of the claim. (d) St. Mary shall not be estopped to deny the validity of Owners' title. 5. UNDIVIDED INTEREST. If the interest claimed by any Owner in any portion of the Property is less than one hundred percent, the interest claimed by such Owner is set forth in Exhibit A. Any representation or warranty of title made by any Owner shall apply only to the interest set forth in Exhibit A. 6. OPTION PAYMENTS. (a) Concurrent with the execution of this Agreement by Owners, St. Mary has made an option payment to Owners in the amount of $5,000, receipt of which is hereby acknowledged by Owners. (b) St. Mary shall pay to Owners further annual option payments on or before the dates and the amounts as follows: August 1, 1995 $ 5,000 August 1, 1996 10,000 August 1, 1997 10,000 August 1, 1998 10,000 August 1, 1999 10,000 August 1, 2000 15,000 August 1, 2001 15,000 August 1, 2002 15,000 August 1, 2003 15,000 August 1, 2004 15,000 August 1, 2005 20,000 August 1, 2006 20,000 August 1, 2007 20,000 August 1, 2008 20,000 3 August 1, 2009 20,000 August 1, 2010 20,000 August 1, 2011 20,000 August 1, 2012 20,000 August 1, 2013 20,000 August 1, 2014 20,000 August 1, 2015 175,000 -------- $500,000 7. MANNER OF FURTHER OPTION PAYMENTS. St. Mary shall make all further option payments due Owners hereunder by check which shall be made payable to and shall be made payable to and shall be transmitted to the Escrow Agent. The Escrow Instructions to be executed contemporaneously herewith will instruct the Escrow Agent how the payments shall be disbursed. Upon making the payments to the Escrow Agent, St. Mary shall be deemed to have made the payments to Owners, their heirs, representatives, successors, and assigns, and thereupon St. Mary shall be discharged to the extent thereof as if the payments had been made directly to Owners, or to any person, firm or corporation entitled thereto, and St. Mary shall not be liable for the ultimate distribution or receipt of any payment or payments. 8. OPERATIONS. (a) SCOPE. During the term of this Agreement, St. Mary shall have free and unrestricted access to the Property, and shall have the right and privilege of conducting exploratory investigations and prospecting for mineral deposits on the Property, effective during the life of the Option, and that prospecting shall include, but not be limited to, soil testing, geophysical surveys, core drilling, shaft sinking, tunnel and mine building and the removal of ore for testing purposes but not removal of ore for sale. St. Mary shall have the right to erect and maintain upon the Property any improvements, structures or facilities including mines, shafts and tunnels as may be necessary or convenient for the conduct of its operations. 4 (b) STANDARDS OF OPERATION. St. Mary shall conduct all operations on the Property in a good and workmanlike manner and in accordance with accepted mining practice. (c) COMPLIANCE WITH LAW; RECLAMATION: St. Mary shall endeavor in good faith to comply with applicable provisions of federal, state and local laws and regulations, as required by the operating permits issued to St. Mary by these agencies under which St. Mary shall conduct its operations. If this Agreement is terminated, St. Mary shall reclaim only those portions of the Property disturbed by its operations, and in compliance with all applicable governmental laws, regulations and orders. St. Mary shall have the right, without payment of any additional consideration to Owners, to enter upon the Property subsequent to termination of this Agreement for purposes of performing such reclamation work. 9. NO IMPLIED COVENANTS. No covenants or conditions relating to the exploration or related operations on or in connection with the Property, or the timing thereof, other than those expressly provided in this Agreement, shall be implied. After commencing any exploration or related operations on or in connection with the Property and so long as this Agreement has not been terminated before the expiration of its term, St. Mary may in its sole discretion curtail or cease such operations so long as it continues to make any payments due Owners under this Agreement subject to the provisions of Section 16 hereof. 10. PROTECTION FROM LIENS AND DAMAGES. St. Mary shall keep the Property free of liens for labor performed or materials or merchandise furnished for use on the Property under this Agreement, and shall hold Owners harmless from all costs, loss, or damage which may result from any work or operations of St. Mary or its occupancy of the Property. 5 11. TAXES. Owners shall pay all taxes levied against the Property prior to the date of this Agreement. St. Mary shall pay or reimburse Owners for all taxes levied against the Property during the term of this Agreement. In the case of taxes for the calendar year in which this Agreement commences, and for the calendar year in which this Agreement ends, there shall be an apportionment between the parties, St. Mary to bear the proportion of taxes upon the Property applicable to the part of the calendar year included hereunder, and Owners to bear the balance of the taxes. St. Mary shall pay all taxes levied during the term of this Agreement against all buildings, structures, machinery, equipment, personal property, fixtures, and improvements placed upon the Property by St. Mary, and all taxes levied against St. Mary as an employer of labor. All taxes shall be paid when due and before delinquent, but St. Mary shall be under no obligation to pay any tax so long as the tax is being contested in good faith and by appropriate legal proceedings and the nonpayment thereof does not adversely affect any right, title, or interest of Owners in or to the Property. 12. INSURANCE. St. Mary shall carry at all times during the term of this Agreement worker's compensation and other insurance required by state laws and mining regulations, or St. Mary may self-insure as to such matters if it qualifies as a self-insurer under the appropriate laws and regulations. 13. INSPECTION. (a) Owners or their authorized representative may enter on the Property at any reasonable time for the purpose of inspection, but shall enter at Owners' own risk and so as not to hinder unreasonably the operations of St. Mary. Owners shall indemnify and hold St. Mary harmless from any damage, claim, or demand by reason of injury to or the presence of Owners, their agents or representatives on the Property. (b) Owners or their authorized representative may, at any reasonable time, inspect any records pertinent and necessary for substantiating the compliance of St. Mary with the provisions of this Agreement. 6 14. DATA. (a) Upon the execution of this Agreement, Owners shall deliver to St. Mary all drill core, all geological, geophysical, and engineering data and maps, logs of drill holes, results of assaying, and sampling, and similar data concerning the Property (or copies thereof) which are in Owners' possession or control. (b) Upon the surrender or other termination of this Agreement (except upon exercise of the Option and payment of the full purchase price as provided in Section 6 hereof), St. Mary shall, within sixty days after termination, (i) return to Owners all drill core and original data delivered by Owners to St. Mary which are then in St. Mary's possession or control, and (ii) make available for inspection by Owners all factual geological and geophysical data and maps (not including interpretive data), logs of drill holes, drill core or cuttings and results of assaying and sampling pertaining to the Property which St. Mary has obtained as a result of its exploration work under this Agreement and which are then in St. Mary's possession or control. Upon Owners' request made within ninety (90) days after termination of this Agreement, St. Mary shall at Owners' expense provide Owners with the drill core or cuttings designated by Owners and with copies of any portion of the factual geological and geophysical data and maps (not including interpretive data), logs of drill holes, and results of assaying and sampling designated by Owners. St. Mary makes no representation or warranty as to the accuracy or completeness of any such data or information, and shall not be liable on account of any use by Owners or any other person of any such data or information. St. Mary shall not be liable for the loss or destruction of any drill core or cuttings. 15. CONFIDENTIALITY. During the term of this Agreement all information obtained by Owners or their authorized representatives from St. Mary or arising out of St. Mary's activities on the Property pursuant to this Agreement shall be kept strictly confidential by Owners and shall not be released to any third party except with the prior written consent of St. Mary. 16. TERM, TERMINATION AND SURRENDER. 7 (a) The term of this Agreement shall be for a period of twenty-one (21) years from the date hereof unless sooner surrendered or otherwise terminated, or until the earlier exercise of the Option. (b) It is also agreed that a failure by St. Mary to make an option payment within 60 days of the due date therefor as provided in Section 6(b) hereof shall constitute a termination of this Agreement effective upon the expiration of such 60 day period. Upon the effective date of such termination, all rights of St. Mary under this Agreement except as provided in Sections 17 and 18 hereof shall terminate and all liabilities and obligations of St. Mary hereunder (including the obligation of making any further payments under Section 6(b) hereof) shall likewise thereupon terminate except as provided in Sections 8(c) and 14(b) hereof. (c) St. Mary may also at any time terminate this Agreement as to all or any part of the Property by delivering to Owners or by filing for record in the appropriate office (with a copy to Owners) a good and sufficient Surrender of this Agreement. Upon mailing the Surrender to Owners or to the appropriate office, all rights of St. Mary under this Agreement shall terminate except as provided in Sections 17 and 18 hereof, and all liabilities and obligations of St. Mary under this Agreement shall likewise terminate except as provided in Sections 8(c) and 14(b) hereof and except liability for payments under Section 6(b) hereof that became due prior to the date of such termination. 17. REMOVAL OF PROPERTY. For a period of six months after the termination of this Agreement St. Mary shall have the right (but not the obligation except to the extent set forth in Section 8(c) hereof) to remove from the Property all buildings, structures, machinery, equipment, personal property, fixtures, and improvements owned by St. Mary or erected or placed on or in the Property by St. Mary, except mine timbers in place. St. Mary may keep one or more watchmen on the Property during the six-month period. 18. ACCESS. For as long as necessary after termination of this Agreement, St. Mary shall have the right of access to and across the Property for reclamation purposes. 8 19. EASEMENTS. If requested by St. Mary during the term of this Agreement or following the exercise of the Option, Owners shall execute one or more instruments granting to St. Mary without cost to St. Mary easements upon, over, or through the Property or upon, over, or through other property owned by Owners, for the construction, maintenance, use, and removal of pipe lines, telephone lines, electrical power or transmission lines, roads, railroads, tramways, flumes, ditches, shafts, drifts, tunnels, and other facilities necessary or convenient for St. Mary's operations on the Property or on other property. 20. NOTICES. All notices and other communications to either party shall be in writing and shall be sufficiently given if delivered in person or sent by certified or registered mail, return receipt requested, addressed as hereinafter set forth. Notices given by mail shall be deemed delivered as of the date of mailing. Until a change of address is communicated as indicated above, all notices to Owners shall be addressed: Mr. Boyce Cook 9845 West llth Avenue Lakewood, Colorado 80215 and all notices to St. Mary shall be addressed: St. Mary Minerals Inc. 1776 Lincoln Street, Suite 1100 Denver, Colorado 80203 Attn: Gregory A. Hahn 21. ASSIGNMENT. (a) The rights of either party hereunder may be assigned in whole or in part without the consent of the other party hereto, subject to the provisions hereinafter set forth. (b) No change or division in the ownership of the Property or the payments provided for herein, however accomplished, shall enlarge the obligations or diminish the rights of St. Mary hereunder. Owners covenant that any change in their ownership shall 9 be accomplished in such a manner that St. Mary shall be required to make payments and to give notices to but one person, firm, or corporation, and upon breach of this covenant, St. Mary may retain all monies otherwise due to Owners until the breach has been cured. No change or division in ownership shall be binding on St. Mary until thirty days after Owners have given St. Mary a certified copy of the recorded instrument evidencing the change or division. (c) If St. Mary assigns the whole of or an undivided interest in this Agreement, liability, for breach of any obligation hereunder shall rest exclusively upon the holder of the Agreement or of an undivided interest herein who commits the breach. If this Agreement is assigned as to a segregated portion of the Property, default by the holder hereunder of that portion shall not affect the rights of holders hereunder of any other portion. (d) If Owners receive a bona fide written offer from an unrelated third party to purchase all or any part of Owners' interest in the Property or in this Agreement, Owners shall first offer the interest to St. Mary stating the interest proposed to be sold or otherwise disposed of, the offering price from such third party and other terms and conditions of sale. St. Mary may accept the offer on the same terms and conditions as such third party offer by notice to Owners given within sixty days following the effective date Owners' offer. If St. Mary does not accept Owners' offer, Owners may sell or otherwise dispose of the interest offered to St. Mary at a price and upon terms and conditions equal to or less favorable to the third party than those offered to St. Mary provided that the sale or other disposition is effectuated within 120 days from the effective date of Owners' offer. Any sale or other disposition shall be subject to the terms of this Agreement, including this subsection (d), all of which shall survive the closing of any such sale in full force and effect. If Owners do not sell or otherwise dispose of the interest offered within 120 days, the provisions of this subsection (d) shall apply to any subsequent third party offer received by Owners. 22. NO TRANSFER OR ENCUMBRANCE. Without St. Mary's prior written consent, neither the Owners nor any Owner during term of this Agreement shall (a) sell, transfer, assign 10 or convey any interest in the Property without St. Mary's prior written consent or otherwise in accordance with the provisions of Section 21(d) hereof; (b) do or fail to do any act or thing which would cause or permit any part of the Property to be pledged, collateralized or stand as security for any matter whatsoever; or (c) enter into any leases or other agreements concerning the Property or any part thereof. 23. FORCE MAJEURE. (a) If St. Mary shall be prevented by Force Majeure from timely performance of any of its obligations hereunder (except the payment of money to Owners), the failure of performance shall be excused and the period for performance and the term of this Agreement shall be extended for an additional period equal to the duration of the Force Majeure. Upon the occurrence and upon the termination of any Force Majeure, St. Mary shall promptly notify Owners. St. Mary shall use reasonable diligence to remedy a Force Majeure, but shall not be required against its better judgment to settle any labor dispute or contest the validity of any law or regulation or any action or inaction of civil or military authority. (b) "Force Majeure" means any cause beyond St. Mary's reasonable control, including law or regulation; action or inaction of civil or military authority; inability to obtain any license, permit, or other authorization that may be required to conduct operations on or in connection with the Property; unusually severe weather; mining casualty; fire; explosion; flood; insurrection; riot; labor dispute; inability after diligent effort to obtain workmen or material; delay in transportation; acts of God; unavailability of a suitable market for the ores, minerals, concentrates, or other products from the Property; and excessive costs of mining, milling, processing or marketing, or insufficient prices available for the ores, minerals, concentrates, or other products produced from the Property, which render St. Mary's operations uneconomic. 24. SHORT FORM. Contemporaneously herewith, St. Mary and Owners have executed and delivered a Short Form of Agreement. St. Mary may record the Short Form or this Agreement, or both, as it may elect. 11 25. INUREMENT. All covenants, conditions, limitations, and provisions herein contained apply to and are binding upon the parties hereto, their heirs, representatives, successors, and assigns. 26. MODIFICATION. No modification, variation, or amendment of this Agreement shall be effective unless the modification, variation, or amendment is in writing and is signed by Owners and St. Mary. 27. WAIVER. No waiver of any breach or default under this Agreement shall be effective unless the waiver is in writing and signed by the party against whom the waiver is claimed. No waiver of any breach or default shall be deemed to be a waiver of any other or subsequent breach or default. 28. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement of the parties and, except as herein expressly provided, supersedes all previous and contemporaneous agreements, representations, warrantees, or understandings, written or oral. 29. CONSTRUCTION. The paragraph headings are for convenience only, and shall not be used in the construction of this Agreement. 30. GOVERNING LAW. The formation, interpretation, and performance of this Agreement shall be governed by the law of the state of Colorado. 31. TIME OF ESSENCE. Except as set forth in Section 23 hereof, time is of the essence in the performance of each and every term, condition, and covenant of this Agreement. 32. TIME COMPUTATIONS. In computing the time permitted or required for performance or payment as provided hereunder, the first day shall be excluded and the last day shall be included. If the last day of any such period is a Saturday, Sunday or legal holiday, the period shall extend to include the next day which is not a Saturday, 12 Sunday, or legal holiday. Any performance or payment which must be taken or made under this Agreement must be taken or made prior to 5:00 p.m. (Denver, Colorado time) of the last day of the applicable period provided hereunder for such action, unless another time is expressly specified. All references to time shall be Denver, Colorado time. If a date for performance or payment falls on a holiday or weekend, the time for performance or payment shall be extended to the next business day, and if performance or payment has occurred on such weekend or holiday, it shall be deemed to have occurred on the next business day. 33. INVALIDITY. The invalidity of any provision of this Agreement shall not affect the enforceability of any other provision of this Agreement. 34. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same agreement. If any person named as one of the Owners does not execute this Agreement, it nevertheless shall be binding upon those persons executing it. 35. ADDITIONAL DOCUMENTS. Owners will provide St. Mary with such additional documents as may be necessary to carry out the purposes of this Agreement. If conditions change by reason of conveyances, assignments, or other matters relating to the title or description of the Property, Owners and St. Mary shall execute amendments of this Agreement and the Short Form of Agreement, and any other documents which may be necessary to reflect such changed conditions. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. - ----------------------------------- Josephine Hill and 13 - ----------------------------------- Donald Charles Giaccarni - ----------------------------------- Ruby E. Neill and - ----------------------------------- Bruce Neill, Joint Tenants /s/ Vivian I. Rutherford - ----------------------------------- Vivian I. Rutherford ST. MARY MINERALS INC. By: /s/ Gregory A. Hahn ------------------------------------- Gregory A. Hahn, Vice President 14 STATE OF ) )SS. COUNTY OF ) On this day of ____ day of ________________, 19___ before me the undersigned, a notary public, personally appeared Josephine Hill known to me (or proved to me on the oath of ______________________________ (to be the persons whose names are subscribed to the within instrument, and acknowledged that she executed the same. My Commission Expires: - --------------------------------- ---------------------------------------- Notary Public STATE OF ) )SS. COUNTY OF ) On this _______ day of ______________, 19___ before me the undersigned, a notary public, personally appeared Donald Charles Giaccarni known to me (or proved to me on the oath of ______________________ (to be the persons whose names are subscribed to the within instrument, and acknowledged that he executed the same. My Commission Expires: - --------------------------------- ---------------------------------------- Notary Public STATE OF ) )SS. COUNTY OF ) On this ______ day of _____________________, 19____ before me the undersigned, a notary public, personally appeared Ruby E. Neill known to me (or proved to me on the oath of _____________________________ (to be the person whose name is subscribed to the within instrument, and acknowledged that she executed the same. My Commission Expires - --------------------------------- ---------------------------------------- Notary Public 15 STATE OF ) )SS. COUNTY OF ) On this ______ day of _____________________, 19____ before me the undersigned, a notary public, personally appeared Bruce Neill known to me (or proved to me on the oath of _____________________________ (to be the person whose name is subscribed to the within instrument, and acknowledged that she executed the same. My Commission Expires - --------------------------------- ---------------------------------------- Notary Public STATE OF ) )SS. COUNTY OF ) On this 2nd day of August, 1994 before me the undersigned, a notary public, personally appeared Vivian I. Rutherford known to me (or proved to me on the oath of _____________________________ (to be the person whose name is subscribed to the within instrument, and acknowledged that she executed the same. My Commission Expires March 9, 1996 /s/ Catherine S. Guy - --------------------------------- ---------------------------------------- Notary Public STATE OF COLORADO ) CITY AND )SS. COUNTY OF DENVER ) The foregoing instrument was acknowledged before me this 25th day of July, 1994, by Gregory A. Hahn, the Vice President of St. Mary Minerals Inc., Colorado corporation, on behalf of the corporation. My Commission Expires: February 14, 1997 /s/ James C. Robertson - ----------------------------------- ----------------------------------- Notary Public James C. Robertson 16 EXHIBIT A OWNERS Name and Address % Interest in Property - ---------------- ---------------------- Josephine Hill and 16.667% each Donald Charles Giaccarni 20 Hidalgo Terrace San Francisco, CA 94103 Ruby E. Neill and 33.333% Bruce Neill, Joint Tenants 724 E. Pueblo Espanola, New Mexico 87532 Vivian I. Rutherford 33.333% P.O. Box 8467 Albuquerque, New Mexico 87198 EXHIBIT B PROPERTIES 100% interest in and to the following patented mining claims and millsites located in the Picuris and Copper Mountain Mining District, Taos County, New Mexico: Jumbo Lode, Mineral Survey No. 1049, BLM Book A-50, Pages 338-340 Aztec Lode, Mineral Survey No. 1049A, BLM Book A-50, Pages 338-340 Sunset Lode, Mineral Survey No. 1049A, BLM Book A-50, Pages 338-340 Oxide King Lode, Mineral Survey No. 1049A, BLM Book A-50, Pages 338-340 Champion Lode, Mineral Survey No. 1049A, BLM Book A-50, Pages 338-340 Aztec Millsite, Mineral Survey No. 1049B, BLM Book A-50, Pages 338-340 Sunset Millsite, Mineral Survey No. 1049B, BLM Book A-50, Pages 338-340 Oxide King Millsite, Mineral Survey No. 1049B, BLM Book A-50, Pages 338-340 Champion Millsite, Mineral Survey No. 1049B, BLM Book A-50, Pages 338-340 APPLIED GEOLOGIC STUDIES, INC. 2875 West Oxford Suite #3 Englewood, Colorado 80110 (303) 761-5624 (303) 761-5625 (Fax) Schedule "D" to the Acquisition Agreement dated for reference November 16, 1994 May 20, 1994 Mr. Greg Hahn, VP, Minerals Exploration St. Mary Minerals, Inc. 1776 Lincoln Street, Suite 110 Denver, CO 80203-5400 Dear Greg: As per our recent phone call, I am herein describing terms of an Agreement, which if affirmed by your signature, will result in our passing onto you and your company information on an interesting "copper-oxide" prospect (prospect), located on claimed land in New Mexico. The prospect was encountered during a comprehensive review of leachable copper reserves in the Southwestern U.S. The prospect was explored during the porphyry copper era by a couple of majors, however, was not in itself big enough for their further interest. We estimate that there may be upward to 20-25 million tons of low-grade exotic copper with a possible core area of 0.5% or better. According to a call made to the owner last year, the prospect was open for option negotiations. Agreement to the following terms would make this prospect and our in-house date available to you. l. St. Mary Minerals, Inc. (St. Mary) would have 60 days from date of disclosure of prospect data to accept or reject the prospect. If rejected, St. Mary shall submit in writing this rejection and agrees that it and any of its officers, employees, agents, representatives or consultants for a period of three (3) years from the date of rejection letter, shall not acquire or attempt to acquire any interest in the prospect or any property within a mile limit outside the boundaries of the prospect (Area to be defined on map with data). Furthermore, St. Mary shall keep all data on the prospect strictly confidential for the 3-year period. 2. If the prospect is accepted, St Mary agrees to pay Applied Geologic Studies, Inc. (AGS) a discovery bonus amounting to $100,000. The bonus shall be paid as follows: a. $5,000 at time of land acquisition in prospect area, or in any area within a mile limit outside the prospect's boundaries. b. Five percent (5%) of total direct exploration expenditures made for benefit of the prospect, exclusive of land costs. Expenditures would include geologic work, geochemistry, geophysics, assay, drilling and costs related to mine feasibility studies or mine development. These payments would be made annually. c. Any balance (not to exceed $100,000), shall be paid at time of decision to put the prospect into mine production. 3. In the event that St. Mary conveys its interest in the prospect to another party, it will require such party to expressly assume in writing St. Mary's obligation to make the above payments; whereupon, St. Mary's further obligations under this Agreement shall cease. If St. Mary surrenders its interest in the prospect, or if St. Mary's rights in the property expire or terminate in any other way, it's obligations to make further payments under this Agreement shall immediately cease. If you are in agreement with the terms set forth above, please indicate by executing both copies of the Agreement and returning one signed copy to me. Sincerely, /s/ William A. Rehrig - --------------------- Dr. William A. Rehrig President, AGS Inc. - ------------------------------------------------------------------------- Accepted by me this the 23rd day of May, 1994 /s/ Gregory A. Hahn - ------------------------------------------------------- Signature of Company Representative SCHEDULE "E" TO THAT CERTAIN AGREEMENT (THE "AGREEMENT") MADE AS OF THE 16TH DAY OF NOVEMBER, 1994 BETWEEN SUMMO MINERALS CORPORATION OF THE FIRST PART AND SUMMO USA CORPORATION OF THE SECOND PART (COLLECTIVELY, THE "PAYOR") AND ST. MARY MINERALS INC. OF THE THIRD PART (THE "PAYEE") NET SMELTER RETURNS ROYALTY 1. In this Agreement, the term "NET SMELTER RETURNS" shall mean the gross revenue from the sale by the Payor of all ore, concentrate and metal produced from the Property, after deduction of the following: (a) all smelting and refining costs (excluding the cost of SX-EW processing), treatment charges and penalties including but not limited to metal losses, penalties for impurities and charges for refining, selling and handling by the smelter, refinery or other purchaser; (b) costs of marketing, handling, transporting and insuring such ore, concentrate or metal from the Property or from a concentrator, whether situated on or off the Property, to a smelter, refinery or other place of treatment or to the purchaser thereof. 2. Payments of Net Smelter Returns shall be made within 30 days after the end of each fiscal quarter in which Net Smelter Returns, as determined on the basis of final adjusted invoices, are received by the Payor. All such payments shall be made in U.S. dollars. 3. For the purposes of determining Net Smelter Returns, all receipts and disbursements in currency other that U.S. dollars shall be converted into U.S. currency on the day of receipt or disbursement, as the case may be. 4. Each payment of Net Smelter Returns shall be accompanied by a statement indicating the calculation of Net Smelter Returns paid. The Payee shall be entitled to audit, during normal business hours, such books and records as are necessary to determine the correctness of the payments, provided however, that such audit shall be made only on an annual basis and within 12 months of the end of the fiscal period in respect of which such audit is made. 5. Payment of Net Smelter Returns shall be made to the Payee at such place or places in the United States as they shall advise the Payor from time to time. 6. The determination of the Net Smelter Returns hereunder is based on the premise that production will be developed solely on the Property. If other properties are incorporated with the Property in a single mining project and ores pertaining to each cannot be readily segregated on a practical or equitable basis, the Payor shall have the right to commingle with ore from the Property ore produced from other properties owned or controlled by the Payor provided that the Payor will adopt and employ generally accepted practices and procedures for weighing, sampling and assaying in order to determine the amount of metals or concentrate derived from the Property. The Payee, or the representative of the Payee authorized in writing, will be permitted to examine at all reasonable times the Payor's records pertaining to commingling of ores. 7. If metal, concentrates or ore shipped from the Property are lost or destroyed under circumstances in which the Payor receives payment under an insurance policy, such payments will be deemed Net Smelter Returns. 8. The Payor shall not sell, assign, transfer or in any other manner deal with the Property or any interest therein without the purchaser, transferee or assignee acquiring the Property or such interest therein first agreeing with the Payor in writing to be bound by the terms of this agreement. The Payor's covenant to pay a 1.5% Net Smelter Return Royalty to the Payee hereunder shall be a covenant running with the Property. 9. No error in accounting or in interpretation of this Agreement shall be the basis for a claim of breach of fiduciary duty, or the like, or give rise to a claim for exemplary or punitive damages or for termination or rescission of the Agreement or the estate and rights acquired and held by the Payor under the terms of the Agreement. ASSIGNMENT AND QUITCLAIM DEED This Assignment and Quitclaim Deed, made effective November 16, 1994, is between ST. MARY MINERALS INC., a Colorado corporation, ("Assignor"), whose address is 1776 Lincoln St., Suite 1100, Denver, CO 80203, and SUMMO USA CORPORATION, a Colorado corporation ("Assignee"), whose address is 1776 Lincoln St., Suite 1100, Denver, CO 80203. IN CONSIDERATION of Ten Dollars ($10.00) and other valuable consideration in hand paid by Assignee, the receipt and sufficiency of which are hereby acknowledged, and further in consideration of the mutual covenants and conditions contained in this Assignment, the parties agree as follows: 1. ASSIGNMENT. Assignor assigns to Assignee, its successors and assigns, those certain agreements more particularly described in Exhibit A attached hereto and incorporated by reference herein (the "Agreements"). 2. QUITCLAIM. Assignor quitclaims to Assignee, its successors and assigns, all those certain patented and unpatented mining claims and mill sites in Taos County, New Mexico, more particularly described in Exhibits A and B attached hereto and incorporated by reference herein (the "Claims"), the Agreements and the Claims being herein referred to as the "Property". 3. RESERVATION OF ROYALTY. Assignor reserves, and Assignee Agrees to pay to Assignor, a royalty equal to One and One-Half Percent (1 1/2%) of Net Smelter Returns of all ore, concentrates, and metal produced from the Property as provided in Exhibit C attached hereto and incorporated by reference herein. 4. ADDITIONAL TERMS. Additional terms and conditions are contained in an Acquisition Agreement dated Nov. 16, 1994 among St. Mary Minerals Inc., Summo Minerals Corporation, and Summo USA Corporation. This Assignment and Quit Claim Deed shall not merge, limit, decrease, increase, or in any manner affect any of the terms of the Acquisition Agreement or any rights, interests, or oblilgations of the parties thereunder. IN WITNESS WHEREOF, Assignor has executed this Assignment and Quitclaim Deed effective the date first above written. ST. MARY MINERALS INC. By: /s/ H.J. Matheson -------------------------------- [Name:] HUGH J. MATHESON ---------------------------- [Title:] PRESIDENT --------------------------- -1- SUMMO USA CORPORATION By: /s/ Gregory A. Hahn -------------------------------- [Name:] GREGORY A. HAHN ---------------------------- [Title:] VICE PRESIDENT --------------------------- -2- STATE OF COLORADO ) ) ss: City and County of Denver) The foregoing instrument was acknowledged before me this 28th day of April, 1995, by Hugh J. Matheson, as the President of St. Mary Minerals Inc., a Colorado corporation, the corporation named in and that executed the foregoing instrument, on behalf of the corporation. /s/ James C Robertson --------------------- Notary Public [SEAL] STATE OF COLORADO ) ) ss: City and County of Denver) The foregoing instrument was acknowledged before me this 28th day of April, 1995, by Gregory A. Hahn, as the Vice President of Summo USA Corporation, a Colorado corporation, the corporation named in and that executed the foregoing instrument, on behalf of the corporation. /s/ James C. Robertson --------------------- Notary Public [SEAL] -3- EXHIBIT A 1. Exploration and Purchase Option Agreement dated for reference August 1, 1994, recorded October 17, 1994 in the Taos County records at Book M-170, Pages 821-830, between Boyce Cook, Margaret Cook, Josephine Hill, and Donald Charles Giaccarni, as Owners, and St. Mary Minerals Inc., covering the following unpatented mining claims located in the Picuris and Copper Mountain Mining District, Taos County, New Mexico: Recorded Amended BLM Serial Claim Name Book Page Book Page No. - NMMC ---------- --------- --------- ---------- Blue Jay S30 46 S37 439 68901 Chipmunk S30 47 S37 443 68902 Mustang S30 498 S37 444 68903 Shiner S30 499 S37 448 68904 Lizzie S37 4 S37 441 68905 Magpie S37 5-6 S37 442 68906 M95 109 Daisy S37 3 S37 440 68907 2. Exploration and Purchase Option Agreement dated for reference August 1, 1994, recorded October 17, 1994 in the Taos County records at Book M-170, Pages 831-841, between Josephine Hill, Donald Charles Giaccarni, Ruby E. Neill, Bruce Neill, and Vivid Rutherford, as Owners, and St. Mary Minerals Inc., covering the following patented mining claims located in the Picuris and Coppar Mountain Mining District, Taos County, New Mexico: Claim Name M.S. No. Recorded ----------- -------- --------- Jumbo Lode 1049 BLM Book A-50, Pages 338-340 Aztec Lode 1049A BLM Book A-50, Pages 338-340 Sunset Lode 1049A BLM Book A-50, Pages 338-340 Oxide Lode 1049A BLM Book A-50, Pages 338-340 Champion Lode 1049A BLM Book A-50, Pages 338-340 Aztec Millsite 1049B BLM Book A-50, Pages 338-340 Sunset Millsite 1049B BLM Book A-50, Pages 338-340 Oxide Millsite 1049B BLM Book A-50, Pages 338-340 Champion Millsite 1049B BLM Book A-50, Pages 338-340 A-1 EXHIBIT B Unpatented mining claims located in Township 23 North, Range 11 East, Taos County, New Mexico: Recorded Amended BLM Serial Claim Name Book Page Book Page No. - NMMC ---------- --------- --------- ----------- CH 1 M172 280 163015 CH 2 M172 283 163016 CH 3 M172 284 163017 CH 4 M172 285 163018 CH 5 M172 286 163019 CH 6 M172 287 163020 CH 7 M172 288 163021 CH 8 M172 289 163022 CH 9 M172 290 163023 CH 10 M172 291 163024 CH 11 M172 292 163025 CH 12 M172 293 163026 CH 13 M172 294 163027 CH 14 M172 295 163028 CH 15 M172 296 163029 CH 16 M172 297 163030 CH 17 M172 298 163031 CH 18 M172 299 163032 CH 19 M172 300 163033 CH 20 M172 301 163034 CH 21 M173 300 163152 CH 22 M173 303 163153 CH 23 M173 304 163154 CH 24 M173 305 163155 CH 25 M173 306 163156 CH 26 M173 307 163157 CH 27 M173 308 163158 CH 28 M173 309 163159 CH 29 M173 310 163160 CH 30 M173 311 163161 CH 31 M173 312 163162 CH 32 M173 313 163163 CH 33 M173 314 163164 CH 34 M173 315 163165 CH 35 M173 316 163166 CH 36 M173 352 163167 CH 37 M173 353 163168 CH 38 M173 354 163169 CH 39 M173 355 163170 CH 40 M173 356 163171 CH 41 M173 357 163172 CH 42 M173 358 163173 CH 43 M173 359 163174 CH 44 M173 360 163175 B-1 CH 45 M173 361 163176 CH 46 M173 362 163177 CH 47 M173 363 163178 CH 48 M173 364 163179 CH 49 M173 370 163180 CH 50 M173 371 163181 CH 51 M173 372 163182 CH 52 M173 373 163183 CH 53 M173 374 163184 CH 54 M173 375 163185 CH 55 M173 376 163186 CH 56 M173 377 163187 CH 57 M173 378 163188 CH 58 M173 379 163189 CH 59 M173 380 163190 CH 60 M173 381 163191 CH 61 M173 382 163192 CH 62 M173 383 163193 CH 63 M173 384 163194 CH 64 M173 385 163195 B-2 EXHIBIT C NET SMELTER RETURNS ROYALTY 1. The term "Net Smelter Returns" means the gross revenue from the sale by Assignee, its successors and assigns (hereinafter, "Payor") , of all ore, concentrate, and metal produced from the property, after deduction of the following: (a) all smelting and refining costs (excluding the cost of SX-EW processing), treatment charges and penalties including but not limited to metal losses, penalties for impurities and charges for refining, selling, and handling by the smelter, refinery, or other purchaser, and (b) costs of marketing, handling, transporting, and insuring such ore, concentrate, or metal from the Property or from a concentrator, whether situated on or off the Property, to a smelter, refinery, or other place of treatment or to the purchaser thereof. 2. Payments of Net Smelter Returns shall be made within thirty (30) days after the end of each fiscal quarter in which Net Smelter Returns, as determined on the basis of final adjusted invoices, are received by Payor. All such payments shall be made in U.S. dollars. 3. For the purposes of determining Net Smelter Returns, all receipts and disbursements in currency other than U.S. dollars shall be converted into U.S. currency on the day of receipt or disbursement, as the case may be. 4. Each payment of Net Smelter Returns shall be accompanied by a statement indicating the calculation of Net Smelter Returns paid. The payee shall be entitled to audit, during normal business hours, such books and records as are necessary to determine the correctness of the payments, provided however, that such audit shall be made only on an annual basis and within twelve (12) months of the end of the fiscal period in respect of which such audit is made. 5. Payment of Net Smelter Returns shall be made to the payee at such place or places in the United States as payee shall advise Payor from time to time. 6. The determination of the Net Smelter Returns hereunder is based on the premise that production will be developed solely on the Property. If other properties are incorporated with the Property in a single mining project and ores pertaining to each cannot be readily segregated on a practical or equitable basis, the Payor shall have the right to commingle with ore from the C-1 Property ore produced from other properties owned or controlled by the Payor provided that the Payor will adopt and employ generally accepted practices and procedures for weighing, sampling, and assaying in order to determine the amount of metals or concentrate derived from the Property. The payee, or the representative of the payee authorized in writing, will be permitted to examine at all reasonable times the Payor's records pertaining to commingling of ores. 7. If metal, concentrates, or ore shipped from the Property are lost or destroyed under circumstances in which Payor receives payment under an insurance policy, such payments will be deemed Net Smelter Returns. 8. The Payor shall not sell, assign, transfer, or in any other manner deal with the Property or any interest therein without the purchaser, transferee, or assignee acquiring the Property or such interest therein first agreeing with the Payor in writing to be bound by the terms hereof. The Payor's covenant to pay a One and One-Half Percent (1 1/2%) Net Smelter Return Royalty hereunder shall be a covenant running with the Property. 9. No error in accounting or in interpretation hereof shall be the basis for a claim of breach of fiduciary duty, or the like, or give rise to a claim for exemplary or punitive damages or for termination or rescission hereof or the estate and rights acquired and held by the Payor under the terms hereof. C-2 EX-10.16 25 EXHIBIT 10.16 EXHIBIT 10.16 APPLIED GEOLOGIC STUDIES, INC. 2875 West Oxford Suite #3 Englewood, Colorado 80110 (303) 761-5624 (303) 761-5625 (Fax) May 20, 1994 Mr. Greg Kahn, VP, Minerals Exploration St. Mary Minerals, Inc. 1776 Lincoln Street, Suite 110 Denver, CO 80203-5400 Dear Greg: As per our recent phone call, I am herein describing terms of an Agreement, which if affirmed by your signature, will result in our passing onto you and your company information on an interesting "copper-oxide" prospect (prospect), located on claimed land in New Mexico. The prospect was encountered during a comprehensive review of leachable copper reserves in the Southwestern U.S. The prospect was explored (luring the porphyry copper era by a couple of majors, however, was not in itself big enough for their further interest. We estimate that there may be upward to 20-25 million tons of low-grade exotic copper with a possible core area of 0.5% or better. According to a call made to the owner last year, the prospect was open for option negotiations. Agreement to the following terms would make this prospect and our in-house data available to you. 1. St. Mary Minerals, Inc. (St. Mary) would have 60 days from date of disclosure of prospect data to accept or reject the prospect. If rejected, St. Mary shall submit in writing this rejection and agrees that it and any of its officers, employees, agents, representatives or consultants for a period of three (3) years from the date of rejection letter, shall not acquire or attempt to acquire any interest in the prospect or any property within a mile limit outside the boundaries of the prospect (Area to be defined on map with data). Furthermore, St. Mary shall keep all data on the prospect strictly confidential for the 3-year period. 2. If the prospect is accepted, St. Mary agrees to pay Applied Geologic Studies, Inc (AGS) a discovery bonus amounting to $100,000. The bonus shall be paid as follows: a. $5,000 at time of land acquisition in prospect area, or in any area within a mile limit outside the prospect's boundaries. b. Five percent (5%) of total direct exploration expenditures made for benefit of the prospect, exclusive of land costs. Expenditures would include geologic work, geochemistry, geophysics, assay, drilling and costs related to mine feasibility studies or mine development. These payments would be made annually. c. Any balance (not to exceed $100,000), shall be paid at time of decision to put the prospect into mine production. 3. In the event that St. Mary conveys its interest in the prospect to another party, it will require such party to expressly assume in writing St. Mary's obligation to make the above payments; whereupon, St. Mary's further obligations under this Agreement shall cease. If St. Mary surrenders its interest in the prospect, or if St. Mary's rights in the property expire or terminates in any other way, it's obligations to make further payments under this Agreement shall immediately cease. If you are in agreement with the terms set forth above, please indicate by executing both copies of the Agreement and returning one signed copy to me. Sincerely, /s/ William A. Rehrig - ------------------------------------ Dr. William A. Rehrig Pres. AGS Inc. Accepted by me this the 23rd day of May, 1994 /s/ [ILLEGIBLE] - ------------------------------------ Signature of Company Representative EX-10.17 26 EXHIBIT 10.17 EXHIBIT 10.17 STOCK OPTION AGREEMENT (INSIDER) MEMORANDUM OF AGREEMENT made as of the 23rd day of February, 1995. BETWEEN: SUMMO MINERALS CORPORATION, a body corporate, duly incorporated under the laws of British Columbia, and having its head office at 860 - 625 Howe Street, Vancouver, British Columbia, V6C 2T6 (hereinafter called the "Company") OF THE FIRST PART AND: JOHN IVANY, of 9180 Kalamalka Rd. RR 1, Site 26, Comp 2 Vernon, British Columbia, V1T 6L4 (hereinafter called the "Optionee") OF THE SECOND PART WHEREAS the 0ptionee is a director of the Company. AND WHEREAS the Company wishes to maintain the continued services of and to provide incentive to the Optionee and to this end is desirous of granting to the Optionee an option to purchase shares in the capital of the Company subject to the terms and conditions hereinafter contained. NOW THEREFORE THIS AGREEMENT WITNESSETH: DEFINITION 1. In this Agreement the term "share" or "shares" means, as the case may be, one or more common shares without par value in the capital stock of the Company as constituted at the date of this Agreement. GRANTING OF OPTION 2. The Company hereby irrevocably grants to the Optionee, being a director of the Company, a non-assignable, non-transferable option to purchase 250,000 shares in the capital stock of the Company (hereinafter called the "Option") at a price of $1.20 per share (the "Option Price") on the terms and conditions hereinafter set forth. EXERCISE OF OPTION 3. The Option, may be exercised by the Optionee over a period of five years, from time to time, on or before February 23, 2000 by notice in writing to the Company to that effect. Any such notice given to the Company (an "Exercise Notice") shall specify the number of shares with respect to which the Option is being exercised and shall be accompanied by a cheque drawn on a Canadian chartered bank in favour of the Company in full payment of the Option Price for the number of shares then being purchased. DELIVER OF SHARE CERTIFICATE 4. The Company shall, within five business days after receipt of the Exercise Notice deliver to the Optionee a share certificate representing the number of shares with respect to which the Option is exercised and issued as of the date of the Exercise Notice. 5. An Exercise Notice shall be deemed to have been given, if delivered, on the date of delivery, or if mailed, on the date of mailing. A mailed Exercise Notice shall be sent by prepaid registered mail addressed to the Company at its Vancouver address. OPTION ONLY 6. Nothing herein contained or done pursuant hereto shall obligate the Optionee to purchase and/or pay for any shares of the Company, except those shares in respect of which the Optionee shall have exercised all or any part of the Option granted hereunder. 7. The Optionee shall have no rights whatsoever as a shareholder in respect to any of the shares optioned hereunder other than in respect of optioned shares upon which the Optionee shall have exercised all or any part of the Option granted hereunder and which shall have been taken up and paid for in full. APPROVAL 8. The Option granted hereunder is subject to approval by ordinary resolution of the members of the Company entitled to vote at a general meeting of the Company, passed prior to the exercise of the Option or any part thereof. FILING WITH REGULATORY AUTHORITIES 9. This Agreement may be required to be filed with some or all of the Superintendent of Brokers for the Province of British Columbia and the Vancouver Stock Exchange ("VSE") (collectively the "Regulatory Authorities") and the Optionee hereby agrees to be bound by any modification of the terms and conditions of the Option as may be required by the said Regulatory Authorities. 10. A Declaration of Stock Option Position as attached hereto as "Schedule A" to this Agreement, is required by the VSE and the Optionee hereby agrees to be bound by any modification of the terms and conditions of the Option as may be required by the said Regulatory Authorities. CAPITAL REORGANIZATION 11. In the event the authorized capital of the Company as presently constituted is consolidated into a lessor number of shares or subdivided into a greater number of shares, the number of shares in respect of which the Option remains unexercised shall be decreased or increased proportionately as the case may be, and the then prevailing purchase price to be paid by the Optionee for each such share shall be correspondingly decreased or increased as applicable. In the event the Company shall determine to amalgamate or merge with any other company or companies (and the right to do so is hereby expressly reserved) whether by way of statutory amalgamation, sale of its assets and undertaking, or otherwise howsoever, then and in each such event the number of shares in the corporation resulting from such amalgamation or merger in respect of which the Option remains unexercised shall be such number of shares in that corporation as would have been acquired by the Optionee pursuant to the amalgamation or merger had the Option been fully exercised immediately prior to the date of such amalgamation or merger and the then prevailing purchase price of the shares to be paid by the Optionee shall be correspondingly decreased or increased as applicable. TERMINATION 0F OPTION 12. The Option is not assignable or transferable and shall terminate on the 30th day following the date upon which the Optionee ceases to be a director of the Company; provided, however, that if such cessation is due to the death of the Optionee, the personal representative of the Optionee shall have the right to exercise any unexercised part of the Option for a period of one year following the date of death of the Optionee. AMENDMENT OF MATERIAL TERMS 13. Any amendment to the Option is subject to approval by ordinary resolution of the members of the Company entitled to vote at a general meeting of the Company. TIME OF THE ESSENCE 14. Time shall be of the essence of this Agreement. SUCCESSORS 15. This Agreement shall enure to the benefit of and be binding upon the heirs, executors and administrators of the Optionee and the successors of the Company. IN WITNESS WHEREOF the parties hereto have caused these presents to be executed as at the day and year first above written. The Corporate Seal of SUMMO ) MINERALS CORPORATION was ) hereunto affixed in the ) presence of: ) ) C/S ) ) ) ) ) /s/ [ILLEGIBLE] ) - ---------------------------- ) Authorized Signatory ) ) ) /s/ N. Hewett ) - ---------------------------- ) Authorized Signatory ) SIGNED, SEALED AND DELIVERED ) by the Optionee in the presence of: ) ) ) Name: /s/ Gail Sharp ) /s/ John Ivany ---------------------- ) -------------------- ) JOHN IVANY Address: [ILLEGIBLE] ) ------------------- ) [ILLEGIBLE] ) - ---------------------------- ) Occupation: Secretary ) ----------------- ) SCHEDULE "A" FORM VSE 1-16 DECLARATION OF STOCK OPTION POSITION THIS FORM FOR COMPLETION BY OPTIONEE RE: _________________________________________________________ (Name of Company) RE: _____________________ incentive stock options in _____________________ (No. of options) (Company) I,__________________________, HEREBY CERTIFY that the aforesaid non-transferable options have been granted to me in compliance with the requirements of the V.S.E. Listings Policy Statement No. 1: and more particularly that at the time of grant, I was not aware of any change in the affairs of the Company which might have affected the trading price and had not been disclosed to the public. If the company is classified as a Venture Company as of the date of this declaration, I confirm that I have not been granted a stock option in the said Company within 2 years of the date of grant of the above-stated options. I HEREBY FURTHER CERTIFY (complete either Part I or Part II as applicable): PART I THAT I have not been granted any director or employee incentive share options by any other listed companies. DATED the ____ day of _______________, 19___. SIGNATURE: __________________ PART II THAT I hold as of the date of this Declaration existing incentive share options which have been granted to me by the above named company or other listed companies as follows: Outstanding Name of No. of Date of Balance as Listed Shares Exercise at Date of Co. Optioned Grant Certificate ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Complete on separate sheet if insufficient space) DATED the ____ day of _______________, 19___. SIGNATURE: __________________ EX-10.18 27 EXHIBIT 10.18 EXHIBIT 10.18 STOCK OPTION AGREEMENT (INSIDER) MEMORANDUM OF AGREEMENT made as of the 24th day of April, 1995 BETWEEN: SUMMO MINERALS CORPORATION, a body corporate, duly incorporated under the laws of British Columbia, and having its head office at 860 - 625 Howe Street, Vancouver, British Columbia, V6C 2T6 (hereinafter called the "Company") OF THE FIRST PART AND: J. DOUGLAS LITTLE, of 4810 Puget Dr. Vancouver, B.C. V6L 2W3 (hereinafter called the "Optionee") OF THE SECOND PART WHEREAS the Optionee is an Insider of the Company. AND WHEREAS the Company wishes to maintain the continued services of and to provide incentive to the Optionee and to this end is desirous of granting to the Optionee an option to purchase shares in the capital of the Company subject to the terms and conditions hereinafter contained. NOW THEREFORE THIS AGREEMENT WITNESSETH: DEFINITION 1. In this Agreement the term "share" or "shares" means, as the case may be, one or more common shares without par value in the capital stock of the Company as constituted at the date of this Agreement. GRANTING OF OPTION 2. The Company hereby irrevocably grants to the Optionee, being an Insider of the Company, a non-assignable, non-transferable option to purchase 40,000 shares in the capital stock of the Company (hereinafter called the "Option") at $1.20 per share (the "Option Price") on the terms and conditions hereinafter set forth. EXERCISE OF OPTION 3. The Option, may be exercised by the Optionee over a period of five (5) years until April 24, 2000, by notice in writing to the Company to that effect. Any such notice given to the Company (an "Exercise Notice") shall specify the number of shares with respect to which the Option is being exercised and shall be accompanied by a cheque drawn on a Canadian chartered bank in favour of the Company in full payment of the Option Price for the number of shares then being purchased. DELIVER OF SHARE CERTIFICATE 4. The Company shall, within five business days after receipt of the Exercise Notice deliver to the Optionee a share certificate representing the number of shares with respect to which the Option is exercised and issued as of the date of the Exercise Notice. 5. An Exercise Notice shall be deemed to have been given, if delivered, on the date of delivery or if mailed, on the date of mailing. A mailed Exercise Notice shall be sent by prepaid registered mail addressed to the Company at its Vancouver address. OPTION ONLY 6. Nothing herein contained or done pursuant hereto shall obligate the Optionee to purchase and/or pay for any shares of the Company, except those shares in respect of which the Optionee shall have exercised all or any part of the Option granted hereunder. 7. The Optionee shall have no rights whatsoever as a shareholder in respect to any of the shares optioned hereunder other than in respect of optioned shares upon which the Optionee shall have exercised all or any part of the Option granted hereunder and which shall have been taken up and paid for in full. APPROVAL 8. The Option granted hereunder is subject to approval by ordinary resolution of the members of the Company entitled to vote at a general meeting of the Company, passed prior to the exercise of the Option or any part thereof. FILING WITH REGULATORY AUTHORITIES 9. This Agreement may be required to be filed with some or all of the Superintendent of Brokers for the Province of British Columbia and the Vancouver Stock Exchange ("VSE") (collectively the "Regulatory Authorities") and the Optionee hereby agrees to be bound by any modification of the terms and conditions of the Option as may be required by the said Regulatory Authorities. 10. A Declaration of Stock Option Position as attached hereto as "Schedule A" to this Agreement, is required by the VSE and the Option hereby agrees to be bound by any modification of the terms and conditions of the Option as may be required by the said Regulatory Authorities. CAPITAL REORGANIZATION 11. In the event the authorized capital of the Company as presently constituted is consolidated into a lessor number of shares or subdivided into a greater number of shares, the number of shares in respect of which the Option remains unexercised shall be decreased or increased proportionately as the case may be, and the then prevailing purchase price to be paid by the Optionee for each such share shall be correspondingly decreased or increased as applicable. In the event the Company shall determine to amalgamate or merge with any other company or companies (and the right to do so is hereby expressly reserved) whether by way of statutory amalgamation, sale of its assets and undertaking, or otherwise howsoever, then and in each such event the number of shares in the corporation resulting from such amalgamation or merger in respect of which the Option remains unexercised shall be such number of shares in that corporation as would have been acquired by the Optionee pursuant to the amalgamation or merger had the Option been fully exercised immediately prior to the date of such amalgamation or merger and the then prevailing purchase price of the shares to be paid by the Optionee shall be correspondingly decreased or increased as applicable. TERMINATION OF OPTION 12. The Option is not assignable or transferable and shall terminate on the 30th day following the date upon which the Optionee ceases to be an Insider of the Company; provided, however, that if such cessation is due to the death of the Optionee, the personal representative of the Optionee shall have the right to exercise any unexercised part of the Option for a period of one year following the date of death of the Optionee. AMENDMENT OF MATERIAL TERMS 13. Any amendment to the Option is subject to approval by ordinary resolution of the members of the Company entitled to vote at a general meeting of the Company. TIME OF THE ESSENCE 14. Time shall be of the essence of this Agreement. SUCCESSORS 15. This Agreement shall enure to the benefit of and be binding upon the heirs, executors and administrators of the Optionee and the successors of the Company. IN WITNESS WHEREOF the parties hereto have caused these presents to be executed as at the day and year first above written. The Corporate Seal of SUMMO ) MINERALS CORPORATION was ) hereunto affixed in the ) presence of: ) ) ) C/S /s/ [Illegible] ) - ---------------------------- ) Authorized Signatory ) ) ) /s/ [Illegible] ) - ---------------------------- ) Authorized Signatory ) SIGNED, SEALED AND DELIVERED ) by the Optionee in the presence of: ) ) Name: /s/ Gail Sharp ) /s/ J. Douglas Little ----------------------------- ) ---------------------------- ) J. DOUGLAS LITTLE Address: 1002-1460 Barclay ) -------------------------- ) Vancouver B.C. ) -------------------------- ) ) Occupation: Secretary ) ----------------------- ) SCHEDULE "A" DECLARATION OF STOCK OPTION POSITION THIS FORM FOR COMPLETION BY OPTIONEE RE: -------------------------------------------------- (Name of Company) RE: incentive stock options in ------------------- ---------------------- (No. of options) (Company) I, _____________________, HEREBY CERTIFY that the aforesaid non-transferable options have been granted to me in compliance with the requirements of the V.S.E. Policy 23: and more particularly that at the time of grant, I was not aware of any change in the affairs of the Company which might have affected the trading price and had not been disclosed to the public. If the company is classified as a Venture Company as of the date of this declaration, I confirm that I have not been granted a stock option in the said Company within 2 years of the date of grant of the above-stated options. I HEREBY FURTHER CERTIFY (complete either Part I or Part II as applicable): PART I THAT I have not be granted any director or employee incentive share options by any other listed companies. DATED the day of , 19 . SIGNATURE: ----- -------------- -- ------------------- PART II THAT I hold as of the date of this Declaration existing incentive share options which have been granted to me by the above named company or other listed companies as follows: Outstanding Name of No. of Date of Balance as Listed Shares Exercise at Date of Co. Optioned Grant Certificate - ------------------------------------------------------------------ - ------------------------------------------------------------------ - ------------------------------------------------------------------ (Complete on separate sheet if insufficient space) DATED the day of , 19 . SIGNATURE: ----- -------------- -- ------------------- STOCK OPTION AGREEMENT (INSIDER) MEMORANDUM OF AGREEMENT made as of the 24th day of April, 1995 BETWEEN: SUMMO MINERALS CORPORATION, a body corporate, duly incorporated under the laws of British Columbia, and having its head office at 860 - 625 Howe Street, Vancouver, British Columbia, V6C 2T6 (hereinafter called the "Company") OF THE FIRST PART AND: ROBERT A. PRESCOTT, of 1100 - 1776 Lincoln St. Denver, Colorado, 80203, USA (hereinafter called the "Optionee") OF THE SECOND PART WHEREAS the Option is an Insider of the Company. AND WHEREAS the Company wishes to maintain the continued services of and to provide incentive to the Optionee and to this end is desirous of granting to the Optionee an option to purchase shares in the capital of the Company subject to the terms and conditions hereinafter contained. NOW THEREFORE THIS AGREEMENT WITNESSETH: DEFINITION 1. In this Agreement the term "share" or "shares" means, as the case may be, one or more communion shares without par value in the capital stock of the Company as constituted at the date of this Agreement. GRANTING OF OPTION 2. The Company hereby irrevocably grants to the Optionee, being an Insider of the Company, a non-assignable, non-transferable option to purchase 100,000 shares in the capital stock of the Company (hereinafter called the "Option") at $1.20 per share (the "Option Price") on the terms and conditions hereinafter set forth. EXERCISE OF OPTION 3. The Option, may be exercised by the Optionee over a period of five (5) years until April 24, 2000, by notice in writing to the Company to that effect. Any such notice given to the Company (an "Exercise Notice") shall specify the number of shares with respect to which the Option is being exercised and shall be accompanied by a cheque drawn on a Canadian chartered bank in favor of the Company in full payment of the Option Price for the number of shares then being purchased. DELIVER OF SHARE CERTIFICATE 4. The Company shall, within five business days after receipt of the Exercise Notice deliver to the Optionee: a share certificate representing the number of shares with respect to which the Option is exercised and issued as of the date of the Exercise Notice. 5. An Exercise Notice shall be deemed to have been given, if delivered, on the date of delivery, or if mailed, on the date of mailing. A mailed Exercise Notice shall be sent by prepaid registered mail addressed to the Company at its Vancouver address. OPTION ONLY 6. Nothing herein contained or done pursuant hereto shall obligate the Optionee to purchase and/or pay for any shares of the Company, except those shares in respect of which the Optionee shall have exercised all or any part of the Option granted hereunder. 7. The Optionee shall have no rights whatsoever as a shareholder in respect to any of the shares optioned hereunder other than in respect of optioned shares upon which the Optionee shall Lave exercised all or any part of the Option granted hereunder and which shall have been taken up and paid for in full. APPROVAL 8. The Option granted hereunder is subject to approval by ordinary resolution of the members of the Company entitled to vote at a general meeting of the Company, passed prior to the exercise of the Option or any part thereof. FILING WITH REGULATORY AUTHORITIES 9. This Agreement may be required to be filed with some or all of the Superintendent of Brokers for the Province of British Columbia and the Vancouver Stock Exchange ("VSE") (collectively the "Regulatory Authorities") and the Option hereby agrees to be bound by any modification of the terms and conditions of the Option as may required by the said Regulatory Authorities. 10. A Declaration of Stock Option Position as attached hereto as "Schedule A" to this Agreement, is required by the VSE and the Optionee hereby agrees to be bound by any modification of the terms and conditions of the Option as may be required by the said Regulatory Authorities. CAPITAL REORGANIZATION 11. In the event the authorized capital of the Company as presently constituted is consolidated into a lessor number of shares or subdivided into a greater number of shares, the number of shares in respect of which the Option remains unexercised shall be decreased or increased proportionately as the case may be, and the then prevailing purchase price to be paid by the Optionee for each such share shall be correspondingly decreased or increased as applicable. In the event the Company shall determine to amalgamate or merge with any other company or companies (and the right to do so is hereby expressly reserved) whether by way of statutory amalgamation, sale of its assets and undertaking, or otherwise howsoever, then and in each such event the number of shares in the corporation resulting from such amalgamation or merger in respect of which the Option remains unexercised shall be such number of shares in that corporation as would have been acquired by the Optionee pursuant to the amalgamation or merger had the Option been fully exercised immediately prior to the date of such amalgamation or merger and the then prevailing purchase price of the shares to be paid by the Optionee shall be correspondingly decreased or increased as applicable. TERMINATION OF OPTION 12. The Option is not assignable or transferable and shall terminate on the 30th day following the date upon which the Optionee ceases to be an Insider of the Company; provided, however, that if such cessation is due to the death of the Optionee, the personal representative of the Optionee shall have the right to exercise any unexercised part of the Option for a period of one year following the date of death of the Optionee. AMENDMENT OF MATERIAL TERMS 13. Any amendment to the Option is subject to approval by ordinary resolution of the members of the Company entitled to vote at a general meeting of the Company. TIME OF THE ESSENCE 14. Time shall be of the essence of this Agreement. SUCCESSORS 15. This Agreement shall enure to the benefit of and be binding upon the heirs, executors and administrators of the Optionee and the successors of the Company. IN WITNESS WHEREOF the parties hereto have caused these presents to be executed as at the day and year first above written. The Corporate Seal of SUMMO ) MINERALS CORPORATION was ) hereunto affixed in ) presence of: ) ) ) C/S /s/ [Illegible] ) - ---------------------------- ) Authorized Signatory ) ) ) /s/ [Illegible] ) - ---------------------------- ) Authorized Signatory ) SIGNED, SEALED AND DELIVERED ) by the Optionee in the presence of: ) ) Name: /s/ Judith L. Prescott ) /s/ Robert A. Prescott ----------------------------- ) ---------------------------- ) ROBERT A. PRESCOTT Address: 1587 Bermuda Dunes ) -------------------------- ) Boulder City, Nevada ) -------------------------- ) ) Occupation: Housewife ) ----------------------- ) SCHEDULE"A" DECLARATION OF STOCK OPTION POSITION THIS FORM FOR COMPLETION BY OPTIONEE RE: -------------------------------------------------- (Name of Company) RE: incentive stock options in ------------------- ---------------------- (No. of options) (Company) I, ___________________, HEREBY CERTIFY that the aforesaid non-transferable options have been granted to me in compliance with the requirements of the V.S.E. Policy 23: and more particularly that at the time of grant, I was not aware of any change in the affairs of the Company which might have affected the trading price and had not been disclosed to the public. If the company is classified as a Venture Company as of the date of this declaration, I confirm that I have not been granted a stock option in the said Company within 2 years of the date of grant of the above-stated options. I HEREBY FURTHER CERTIFY (complete either Part I or Part II as applicable): PART I THAT I have not been granted any director or employee incentive share options by any other listed companies. DATED the day of , 19 . SIGNATURE: ----- -------------- -- ------------------- PART II THAT I hold as of the date of this Declaration existing incentive share options which have been granted to me by the above named company or other listed companies as follows: Outstanding Name of No. of Date of Balance as Listed Shares Exercise at Date of Co. Optioned Grant Certificate - ------------------------------------------------------------------ - ------------------------------------------------------------------ - ------------------------------------------------------------------ (Complete on separate sheet if insufficient space) DATED the day of , 19 . SIGNATURE: ----- -------------- -- ------------------- EX-10.19 28 EXHIBIT 10.19 EXHIBIT 10.19 SUMMO USA CORPORATION 1100 DENVER CENTER BUILDING 1776 LINCOLN STREET, DENVER, COLORADO 80203 TELEPHONE: 303/861-5400 FAX: 303/861-0934 April 5, 1995 Mr. Robert A. Prescott 1587 Bermuda Dunes Drive Boulder City, Nevada 89005 Dear Bob: This letter confirms your engagement as Vice President and General Manager of Summo USA Corporation, a wholly-owned subsidiary of Summo Minerals Corporation. Your annual salary will be $ 100,000.00 and we will provide a standard benefits package. We anticipate introducing a cash bonus scheme which you will both help design and participate in once the scheme is adopted. You will receive options to purchase 100,000 shares of Summo Minerals Corporation. The options will have a 5 year term and be priced in accordance with the requirements of the Vancouver Stock Exchange where Summo Minerals Corporation is currently listed. Your engagement will commence on April 24, 1995. We recognize that the development of the Lisbon Valley Project is critical to the ongoing success of the Corporation. We have agreed that should this project not proceed and your services no longer be required as a consequence, we will pay you one year's salary as a severance in these circumstances. Very truly yours, SUMMO USA CORPORATION /s/ HUGH J. MATHESON Hugh J. Matheson President EX-10.20 29 EXHIBIT 10.20 EMPLOYMENT AGREEMENT This Agreement is entered into this 31st day of December, 1995 between Summo Minerals Corporation ("Summo"), a British Columbia corporation, and Gregory A. Hahn ("Hahn"). This Agreement shall become effective upon the earlier of the employment termination of Hahn by St. Mary Minerals Inc. or the date of this Agreement (the "Effective Date"). 1. EMPLOYMENT. On the terms and conditions set forth herein, Summo hereby agrees to employ Hahn as President and Chief Executive Officer of Summo Minerals Corporation and Summo USA Corporation, and Hahn hereby agrees to be so employed and located in Denver, Colorado, for a minimum of one year from the Effective Date of this Agreement. Hahn shall utilize his full-time good faith efforts to perform such duties and discharge such responsibilities as are customarily undertaken by such an officer of a corporation, together with such other appropriate duties as may be assigned to him by the Board of Directors of Summo. 2. COMPENSATION. Summo shall compensate Hahn for his services hereunder at an initial rate of $120,000 per annum payable in semi-monthly installments. Such compensation shall be subject to review and increase, as approved by the Board of Directors of Summo, in July of each year beginning with July, 1996. Hahn shall participate in the fringe benefits and benefit plans of Summo in the same manner and to the same comparable extent as other senior executives of Summo, including three weeks of vacation, retirement benefits, life insurance, disability benefits and insurance and health and hospitalization benefits and insurance. Hahn shall also be entitled to additional bonus or incentive compensation, as determined by the Board of Directors of Summo, pursuant to any plans or programs established therefore, to an extent comparable with other senior executives of Summo and dependent upon the nature of the accomplishment of his employment duties and responsibilities including those described in paragraph 1 above. 3. TERM. (1) The term of employment of Hahn by Summo shall commence as of the above-mentioned Effective Date. This Agreement shall continue in effect for at least one year and then until terminated by Hahn or Summo upon not less than thirty days prior written notice to the other. Upon any termination of this Agreement by Summo for any reason other than the occurrence of an event described in subparagraph (2) below, Summo shall continue the compensation of Hahn at its rate at the time of such termination for a period of one year thereafter, together with a continuation of the insurance benefits in effect for him at the time of such termination. IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the day and year first above written. SUMMO MINERALS CORPORATION By: /s/ FRED G. HEWETT By: /s/ JOHN E. ROBINS -------------------------------- ------------------------------- Fred G. Hewett John E. Robins By: /s/ MATTHEW MASON By: /s/ JOHN IVANY -------------------------------- ------------------------------- Matthew Mason John Ivany By: /s/ DOUGLAS LITTLE By: /s/ MARK A. HELLERSTEIN -------------------------------- ------------------------------- Douglas Little Mark A. Hellerstein ACKNOWLEDGED AND AGREED TO this 31st day of December, 1995, in Denver, Colorado. By: /s/ GREGORY A. HAHN ------------------------------- Gregory A. Hahn EX-10.21 30 EXHIBIT 10.21 EMPLOYEE INCENTIVE STOCK OPTION PLAN THIS AGREEMENT is made as of the 30th day of April, 1996, BETWEEN: SUMMO MINERALS CORPORATION, a company duly incorporated under the laws of the Province of British Columbia, having its registered office at 860-625 Howe Street, Vancouver, B.C., V6C 2T6 (hereinafter called the "Company") OF THE FIRST PART AND: MATTHEW J. MASON, of 860-625 Howe St. ---------------- ------------------------------------------------- Vancouver, BC V6C 2T6 ---------------------------------------------------------------------- (RESIDENTIAL ADDRESS, INCLUDING POSTAL (ZIP) CODE) (hereinafter called the "Optionee") OF THE SECOND PART. WHEREAS: A. the Optionee is a director of the Company and requires as a condition of holding such position that the parties enter into this Incentive Stock Option Agreement on the terms and conditions hereinafter set forth; B. this incentive stock option is granted by the Company in reliance on the exemptions from registration and prospectus requirements contained in Sections 31(2)(10) and 55(2)(9) of the SECURITIES ACT (British Columbia) and Sections 35(1)(19) and 72(1)(n) of the SECURITIES ACT (Ontario); C. the Company has been classified as a "Resource" company by the Vancouver Stock Exchange and as a "Non-Exempt" resource company by The Toronto Stock Exchange; D. the directors of the Company passed a resolution at their board meeting held January 15, 1996 implementing an Incentive Stock Option Plan (the "PLAN"), subject to shareholder ratification, a copy of which is attached hereto as "Schedule "A"; E. the option herein granted is subject to the terms and conditions of the Plan; 3 8. This agreement may be executed in several parts in the same form and such parts as so executed will together constitute one original agreement, and such parts, if more than one, will be read together as if all the signing parties hereto had executed one copy of this agreement. 9. This agreement shall enure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, and successors. 10. Wherever the plural or masculine are used throughout this agreement, the same shall be construed as meaning singular or feminine or neuter or the body politic where the context of the parties thereto require. 11. The Optionee hereby acknowledges and confirms that he has obtained independent legal advice with respect to this agreement and understands and is aware that the securities of the Company have not been registered under the Securities Act of 1933, as amended. The Optionee covenants with and to the Company that he will exercise the option herein granted, and dispose of the shares thereby acquired, only in accordance with all applicable laws. 12. In this agreement, all references to money are references to Canadian dollars. IN WITNESS WHEREOF the parties have hereunto caused these presents to be executed as of the day and year first above written. The COMMON SEAL of ) SUMMO MINERALS ) CORPORATION ) in the presence of: ) ) [illegible] ) - ----------------------------- ) c/s Authorized signatory ) SIGNED, SEALED AND DELIVERED ) by MATTHEW J. MASON ) in the presence of: ) [illegible] ) /s/ Matthew J. Mason - ----------------------------- ) ------------------------------------ Witness Matthew J. Mason This is page 3 to that certain Incentive Stock Option Agreement between SUMMO MINERALS CORPORATION and MATTHEW J. MASON dated as of the 30th day of April, 1996. Schedule "A" - -------------------------------------------------------------------------------- SUMMO MINERALS CORPORATION EMPLOYEE INCENTIVE STOCK OPTION PLAN 1. PURPOSE The purpose of the Employee Incentive Stock Option Plan (the "Plan") is to promote the profitability and growth of SUMMO MINERALS CORPORATION ("Summo") by facilitating the efforts of Summo and its subsidiaries to obtain and retain key individuals. The Plan provides an incentive for and encourages ownership of Summo's shares by its key individual so that they may increase their stake in Summo and benefit from increases in the value of Summo's shares. 2. ADMINISTRATION The Plan will be administered by a committee (the "Committee") of Summo's Board of Directors (the "Board"), which will consist of two or more members. All members of the Committee shall be non-employee directors who a "Disinterested Persons" with regard to Plan administration, within the meaning of Rule 16b-3 as promulgated and amended from time to time by the United States Securities and Exchange Commission. The Committee will be authorized, subject to the provisions of the Plan, to adopt such rules and regulations which it deems consistent with the Plan's provisions and, in its sole discretion, to designate options ("Options") to purchase shares of Summo pursuant to the Plan. The Committee may authorize one or more individuals of Summo to execute, deliver and receive documents on behalf of the Committee. 3. ELIGIBILITY All directors and officers and employees of Summo and its subsidiaries will be eligible to receive Options. The term "subsidiaries" for the purpose of the Plan will include Summo U.S.A. Corporation, which definition may be varied by the Committee to conform with the changing interests of Summo. Nothing in the Plan or in any option shall confer any right on any individual to continue in the employ of or association with Summo or its subsidiaries or will interfere in any way with the right of Summo or subsidiaries to terminate at any time the employment of a person who is an optionee ("Optionee") under an Option. 4. SHARES SUBJECT TO OPTION The shares to be optioned under the Plan will be authorized but unissued Common Shares without par value ("Shares") of Summo. At no time will more than 2,000,000 Shares be under option either pursuant to the Plan or pursuant to other incentive stock options issued by Summo. The number of Shares under option at any specific time to any one Optionee shall not exceed 5% of the issued and outstanding common share capital of Summo, subject to adjustment under Section 12 below. Shares subject to and not delivered under an Option which expires or terminates shall again be available for option under the Plan. The maximum number of Shares which may be issued pursuant to 2 the Plan shall not however exceed 2,000,000 Shares. 5. GRANTING OF OPTIONS The Committee may from time to time at its discretion, subject to the provisions of the Plan, determine those eligible individuals to whom Options will be granted, the number of Shares subject to such Options, the dates on which such Options are to be granted and the expiration of such Options. The Committee may, at its discretion, with respect to any Option, impose additional terms and conditions which are more restrictive on the optionee than those provided for in the Plan. Each Option will be evidenced by a written agreement between, and executed by, Summo and the individual containing such terms and conditions established by the Committee with respect to such Option and will be consistent with the provisions of the Plan. Options shall be granted to directors only according to the following formula: (i) Each director who was a member of the Board of Directors prior to January 1, 1996, shall upon adoption of this Plan be issued Options for that number of Shares necessary to bring the aggregate number of Shares underlying incentive options issued to such director to 150,000 Shares. The exercise price of such Options shall be determined as provided in Section 6 hereof. (ii) Each director who becomes a member of the Board of Directors after January 1, 1996, shall be granted Options for 50,000 Shares upon his or her election or appointment to the Board. The exercise price shall be determined as provided in Section 6 hereof. (iii) Upon the expiration date of any Options issued to a director (regardless of whether such Options were exercised on or prior to the expiration date), such director shall be issued Options for an additional 50,000 Shares. The exercise price shall be determined as provided in Section 6 hereof. The provisions of this paragraph (iii) shall also apply upon the expiration date of any other incentive stock options issued to a director if at the time of such expiration date, the director holds incentive options, including Options, for fewer than an aggregate of 50,000 Shares underlying such options, in which case the director shall be issued that number of Options necessary to bring the aggregate number of Shares underlying incentive options issued to such director at such time to 50,000 Shares. The calculation of incentive options held by any director shall not include any warrants to purchase Summo shares held by a director provided such warrants were issued by Summo in connection with securities offered by Summo. (iv) The foregoing formulas shall not be amended more than once every six months other than to comport with changes in the Internal Revenue Code, the Employee Retirement Income Security Act, or the rules thereunder. (v) Additional options may be granted to directors at the discretion of the Committee, 3 provided that no director may receive additional options while serving on the Committee if the receipt of such options would cause him to cease to be a Disinterested Person. 6. OPTION PRICE The price per Share at which Shares may be purchased upon the exercise of an Option (the "Option Price") will not be lower that the "market price" of the Shares on The Toronto Stock Exchange (the "TSE") at the time of grant. In the context of the Plan, "market price" means the closing price of Summo's shares on the TSE at the close of trading which immediately preceded the time that the option was granted. If the shares of Summo do not trade on such day, the "market price" shall be the average of the bid and ask prices on the previous trading day. 7. TERM OF OPTION The maximum term of any Option will be 10 years. The Option Price will be paid in full at the time of exercise of the Option and no Shares will be delivered until full payment is made. An Optionee will not be deemed the holder of the Shares subject to his Option until the Shares are delivered to him. 8. TRANSFERABILITY OF OPTIONS An Option may not be assigned. During the lifetime of an Optionee, the Option may be exercised only by the Optionee. 9. TERMINATION OF EMPLOYMENT Upon termination of employment for any reason except death or retirement or failure of re-election as a director or failure to be re-appointed an officer of Summo, an Optionee may, at any time within 30 days after the date of termination but not later than the date of expiration of the Option, exercise the Option to the extent the Optionee was entitled to do so on the date of termination. Any option or portions of Options of terminated individuals not so exercised will terminate and again be available for future Options under the Plan. A change of employment will not be considered a termination so long as the Optionee continues to be employed by Summo or its subsidiaries. 10. DEATH Notwithstanding any other provision of this Plan other than the maximum of 10 years provided for in Section 7, if any Optionee shall die holding an Option which has not been fully exercised, his personal representative, heirs or legatees may, at any time within 60 days of grant of probate of the will or letters of administration of the estate of the decedent or within one year after the date of such death, whichever is the lesser time, exercise the Option with respect to the unexercised balance of the Shares subject to the Option. 4 11. RETIREMENT Notwithstanding any other provision of this Plan, if any Optionee shall retire or terminate his employment with the consent of the Board under circumstances equating retirement, while holding an Option which has not been fully exercised, such Optionee may exercise the Option at any time during the unexpired term of the Option. 12. CHANGE IN SHARES In the event the authorized common share capital of Summo as presently constituted is consolidated into a lesser number of Shares or subdivided into a greater number of Shares, the number of Shares for which Options are outstanding will be decreased or increased proportionately as the case may be and the Option Price will be adjusted accordingly and the Optionee will have the benefit of any stock dividend declared during the period within which the said Optionee held his Option. Should Summo amalgamate or merge with any other Company or companies (the right to do so being expressly reserved) whether by way of arrangement, sale of assets and undertakings or otherwise, then and in each such case the number of shares of the resulting corporation to which an Option relates will be determined as if the Option has been fully exercised prior to the effective date of the amalgamation or merger and the Option Price will be correspondingly increased or decreased, as applicable. 13. CANCELLATION AND RE-GRANTING OF OPTIONS The Committee may, with the consent of the Optionee, cancel any existing Option, and re-grant the Option at an Option Price determined in the same manner as provided in Section 6 hereof, subject to the prior approval of the TSE. 14. AMENDMENT OR DISCONTINUANCE The Board may alter, suspend or discontinue the Plan, but may not, without the approval of the shareholders of Summo and the TSE, may any alteration which would (a) increase the aggregate number of Shares subject to Option under the Plan except as provided in Section 12 or (b) decrease the Option Price except as provided in Section 12. Notwithstanding the foregoing, the terms of an existing Option may not be altered, suspended or discontinued without the consent in writing of the Optionee. 15. INTERPRETATION The Plan will be construed according to the laws of the Province of British Columbia, 16. LIABILITY No member of the Committee or any director, officer or employee of Summo will be personally liable for any act taken or omitted in good faith in connection with the Plan. EX-10.22 31 EXHIBIT 10.22 ================================================================================ ESCROW AGREEMENT THIS AGREEMENT made this 18th day of January, 1996 AMONG: ST. MARY MINERALS INC., AND GREGORY A. HAHN, each of Suite 1100, 1776 Lincoln Street, Denver, Colorado U.S.A. 80203 and MATTHEW J. MASON, JOHN E. ROBINS and FREDERIC G. HEWETT, each of Suite 860, 625 Howe Street, Vancouver, B.C. V6C 2T6, JOHN W. IVANY of King City, Ontario (hereinafter jointly and severally called the "SECURITY HOLDERS") OF THE FIRST PART AND PACIFIC CORPORATE TRUST COMPANY, of Suite 830, 625 Howe Street, Vancouver, British Columbia V6C 3B8 (hereinafter called the "TRUSTEE") OF THE SECOND PART AND SUMMO MINERALS CORPORATION, of Suite 860, 625 Howe Street, Vancouver, British Columbia V6C 2T6 (hereinafter called the "ISSUER") OF THE THIRD PART AND THE TORONTO STOCK EXCHANGE, of The Exchange Tower, 2 First Canadian Place, Toronto, Ontario M5X 1J2 (hereinafter called the "EXCHANGE") OF THE FOURTH PART 2 WHEREAS the Security Holders presently own or are about to receive securities of the Issuer; AND WHEREAS in furtherance of complying with the requirements of the Exchange, the security holders are desirous of depositing in escrow certain securities of the Issuer owned or to be received by them; AND WHEREAS the Trustee has agreed to undertake and perform its duties according to the terms and conditions hereof; NOW THEREFORE this Agreement witnesseth that in consideration of the aforesaid agreements, and of the sum of one dollar ($1.00) now paid by the parties hereto, each to the other (receipt of which sum the parties do hereby respectively acknowledge each to the other) the Security Holders jointly and severally covenant and agree with the Issuer and with the Trustee and the Issuer and the Trustee covenant and agree each with the other and with the Security Holders jointly and severally as follows: 1. Each of the Security Holders hereby places and deposits in escrow those of its securities of the Issuer which are represented by the certificates described or referred to in Schedule "A" hereto with the Trustee and, inasmuch as he is legally able to do so, in respect of existing restrictions on the delivery of such certificates (such as R.R.S.P. restrictions) hereby undertakes and agrees forthwith to deliver those certificates (including any replacement securities or certificates if and when such are issued or allotted) to the Trustee for deposit in escrow. 2. The parties hereby agree that the securities and the beneficial ownership of or any interest in them and the certificates representing them (including any replacement certificates) shall not be sold, assigned, hypothecated, alienated, released from escrow, transferred within escrow, or otherwise in any manner dealt with, without the express consent, order or direction in writing of the Exchange being first had and obtained or except as may be required by reason of the death or bankruptcy of any Security Holder, in which cases the Trustee shall hold the said certificates subject to this agreement, for whatever person, firm or corporation shall be legally entitled to be or become the registered owner thereof. It is understood that the Exchange has consented to a release from escrow of the securities on a PRO RATA basis as follows: (a) one-third on the first anniversary of the date of listing of the Issuer's common shares on the Exchange; (b) an additional one-third on the second anniversary of the date of listing of the Issuer's common shares on the Exchange; and (c) the remaining one-third on the third anniversary of the date of listing of the Issuer's common shares on the Exchange. 3 3. The Security Holders hereby direct the Trustee to retain their respective securities and the certificates (including any replacement securities or certificates) representing the same and not to do or cause anything to be done to release the same from escrow or to allow any transfer, hypothecation or alienation thereof except with and as directed by the written consent, order or direction of the Exchange. The Trustee hereby accepts the responsibilities placed on it hereby and agrees to perform the same in accordance with the terms hereof and the written consents, orders or directions of the Exchange. 4. If during the period in which any of the said securities are retained in escrow pursuant hereto, any dividend is received by the Trustee in respect of the escrowed securities, any such dividend shall be forthwith paid or transferred to the respective Security Holders entitled thereto. 5. All voting rights attached to the escrowed securities shall at all times be exercised by the respective registered owners thereof. 6. The Security Holders hereby jointly and severally agree to and do hereby release and indemnify and save harmless the Trustee from and against all claims, suits, demands, costs, damages and expenses which may be occasioned by reason of the Trustee's compliance in good faith with the terms hereof. 7. The Issuer hereby acknowledges the terms and conditions of this agreement and agrees to take all reasonable steps to facilitate its performance. 8. If the Trustee should wish to resign, it shall give at least six months notice to the Issuer, which may, with the written consent of the Exchange, by writing appoint another Trustee in its place and such appointment shall be binding on the Security Holders and the new Trustee shall assume and be bound by the obligations of the Trustee hereunder. 9. The written consent, order or direction of the Exchange as to a release from escrow of all or part of the said securities shall terminate this agreement only in respect to those securities so released. For greater certainty, this clause does not apply to securities transferred within escrow. 10. If the Issuer is delisted by the Exchange, thereafter any consent, order or direction of the Exchange herein required will, instead, require the consent, order or direction of the Ontario Securities Commission. 11. This agreement may be executed in several parts in the same form and such parts as so executed shall together form one original agreement, and such parts if more than one shall be read together and construed as if all the signing parties hereto had executed one copy of this agreement. 12. Wherever the singular or masculine are used throughout this agreement, the same shall be construed as being the plural or feminine or neuter where the context so requires. 4 13. This agreement shall inure to the benefit and be binding upon the parties hereto, their and each of their heirs, executors, administrators, successors and assigns. IN WITNESS whereof the parties hereto have executed these presents the day and year first above written. The COMMON SEAL of ST. MARY ) MINERALS INC. was hereunto affixed ) in the presence of: ) ) ) /s/ [ILLEGIBLE] ) c/s - ---------------------------- ) ) ) /s/ JAMES C. ROBERTSON ) - ----------------------------- ) SIGNED, SEALED and DELIVERED by ) GREGORY A. HAHN in the presence of: ) ) /s/ JENNIFER M. JAMES ) - ----------------------------- ) /s/ GREGORY A. HAHN Name ) ----------------------- ) GREGORY A. HAHN 15570 Wintergreen Pl. ) - ----------------------------- ) Address ) ) Clerical Assistant ) - ----------------------------- ) Occupation ) SIGNED, SEALED and DELIVERED by ) MATTHEW J. MASON in the ) presence of: ) ) /s/ [ILLEGIBLE] ) - ----------------------------- ) /s/ MATTHEW J. MASON Name ) ----------------------- ) MATTHEW J. MASON [ILLEGIBLE] ) - ----------------------------- ) Address ) ) [ILLEGIBLE] ) - ----------------------------- ) Occupation ) 5 SIGNED, SEALED and DELIVERED by ) JOHN E. ROBINS in the presence of: ) ) /s/ JENNIFER M. JAMES ) - ----------------------------- ) /s/ JOHN E. ROBINS Name ) ----------------------- ) JOHN E. ROBINS 15570 Wintergreen Pl. ) - ----------------------------- ) Address ) ) Clerical Assistant ) - ----------------------------- ) Occupation ) SIGNED, SEALED and DELIVERED by ) FREDERIC G. HEWETT in the ) presence of: ) ) /s/ JENNIFER M. JAMES ) - ----------------------------- ) /s/ FREDERIC G. HEWETT Name ) ----------------------- ) FREDERIC G. HEWETT 15570 Wintergreen Pl. ) - ----------------------------- ) Address ) ) Clerical Assistant ) - ----------------------------- ) Occupation ) SIGNED, SEALED and DELIVERED by ) JOHN W. IVANY in the presence of: ) ) ) - ----------------------------- ) /s/ JOHN W. IVANY Name ) ----------------------- ) JOHN W. IVANY ) - ----------------------------- ) Address ) ) ) - ----------------------------- ) Occupation ) 6 The COMMON SEAL of PACIFIC ) CORPORATE TRUST COMPANY was ) hereunto affixed in the ) presence of: ) ) /s/ [ILLEGIBLE] ) c/s - ---------------------------- ) /s/ [ILLEGIBLE] ) - ---------------------------- ) The COMMON SEAL of SUMMO ) MINERALS CORPORATION was ) hereunto affixed in the ) presence of: ) ) /s/ GREGORY A. HAHN ) c/s - ---------------------------- ) ) /s/ [ILLEGIBLE] ) - ---------------------------- ) THE TORONTO STOCK EXCHANGE Per: /s/ [ILLEGIBLE] - ---------------------------- Authorized Signatory This is page 6 to that certain Escrow Agreement between ST. MARY MINERALS INC., GREGORY A. HAHN, MATTHEW J. MASON, JOHN E. ROBINS, FREDERIC G. HEWETT, JOHN W. IVANY, PACIFIC CORPORATE TRUST COMPANY, SUMMO MINERALS CORPORATION and THE TORONTO STOCK EXCHANGE dated as of the 18th day of January, 1996. 7 SCHEDULE "A" ============================================================================== NAME OF BENEFICIAL NUMBER OF CERTIFICATE SECURITY HOLDER OWNER SECURITIES NUMBER --------------- ---------- ---------- ----------- ST. MARY MINERALS INC. St. Mary Minerals Inc. 6,771,002 1100-1776 Lincoln Street Denver, Colorado U.S.A. 80203 MATTHEW J. MASON Matthew J. Mason 1,084,568 1930 Nelson Avenue West Vancouver, B.C. V7V 2P4 JOHN E. ROBINS John E. Robins 517,423 860, 625 Howe Street Vancouver, B.C. V6C 2T6 FREDERIC G. HEWETT Frederic G. Hewett 70,307 860, 625 Howe Street Vancouver, B.C. V6C 2T6 JOHN IVANY John Ivany 64,687 King City, Ontario GREGORY A. HAHN Gregory A. Hahn 12,000 1100-1776 Lincoln Street Denver, Colorado U.S.A. 80203 --------- TOTAL 8,519,987 ============================================================================== EX-10.23 32 EXHIBIT 10.23 EXHIBIT 10.23 STOCK OPTION AGREEMENT (INSIDER) MEMORANDUM OF AGREEMENT made as of the 24th day of April, 1995 BETWEEN: SUMMO MINERALS CORPORATION, a body corporate, duly incorporated under the laws of British Columbia, and having its head office at 860 - 625 Howe Street, Vancouver, British Columbia, V6C 2T6 (hereinafter called the "Company") OF THE FIRST PART AND: J. DOUGLAS LITTLE, of 4810 Puget Dr. Vancouver, B.C. V6L 2W3 (hereinafter called the "Optionee") OF THE SECOND PART WHEREAS the Optionee is an Insider of the Company. AND WHEREAS the Company wishes to maintain the continued services of and to provide incentive to the Optionee and to this end is desirous of granting to the Optionee an option to purchase shares in the capital of the Company subject to the terms and conditions hereinafter contained. NOW THEREFORE THIS AGREEMENT WITNESSETH: DEFINITION 1. In this Agreement the term "share" or "shares" means, as the case may be, one or more common shares without par value in the capital stock of the Company as constituted at the date of this Agreement. GRANTING OF OPTION 2. The Company hereby irrevocably grants to the Optionee, being an Insider of the Company, a non-assignable, non-transferable option to purchase 40,000 shares in the capital stock of the Company (hereinafter called the "Option") at $1.20 per share (the "Option Price") on the terms and conditions hereinafter set forth. EXERCISE OF OPTION 3. The Option, may be exercised by the Optionee over a period of five (5) years until April 24, 2000, by notice in writing to the Company to that effect. Any such notice given to the Company (an "Exercise Notice") shall specify the number of shares with respect to which the Option is being exercised and shall be accompanied by a cheque drawn on a Canadian chartered bank in favour of the Company in full payment of the Option Price for the number of shares then being purchased. DELIVER OF SHARE CERTIFICATE 4. The Company shall, within five business days after receipt of the Exercise Notice deliver to the Optionee a share certificate representing the number of shares with respect to which the Option is exercised and issued as of the date of the Exercise Notice. 5. An Exercise Notice shall be deemed to have been given, if delivered, on the date of delivery or if mailed, on the date of mailing. A mailed Exercise Notice shall be sent by prepaid registered mail addressed to the Company at its Vancouver address. OPTION ONLY 6. Nothing herein contained or done pursuant hereto shall obligate the Optionee to purchase and/or pay for any shares of the Company, except those shares in respect of which the Optionee shall have exercised all or any part of the Option granted hereunder. 7. The Optionee shall have no rights whatsoever as a shareholder in respect to any of the shares optioned hereunder other than in respect of optioned shares upon which the Optionee shall have exercised all or any part of the Option granted hereunder and which shall have been taken up and paid for in full. APPROVAL 8. The Option granted hereunder is subject to approval by ordinary resolution of the members of the Company entitled to vote at a general meeting of the Company, passed prior to the exercise of the Option or any part thereof. FILING WITH REGULATORY AUTHORITIES 9. This Agreement may be required to be filed with some or all of the Superintendent of Brokers for the Province of British Columbia and the Vancouver Stock Exchange ("VSE") (collectively the "Regulatory Authorities") and the Optionee hereby agrees to be bound by any modification of the terms and conditions of the Option as may be required by the said Regulatory Authorities. 10. A Declaration of Stock Option Position as attached hereto as "Schedule A" to this Agreement, is required by the VSE and the Option hereby agrees to be bound by any modification of the terms and conditions of the Option as may be required by the said Regulatory Authorities. CAPITAL REORGANIZATION 11. In the event the authorized capital of the Company as presently constituted is consolidated into a lessor number of shares or subdivided into a greater number of shares, the number of shares in respect of which the Option remains unexercised shall be decreased or increased proportionately as the case may be, and the then prevailing purchase price to be paid by the Optionee for each such share shall be correspondingly decreased or increased as applicable. In the event the Company shall determine to amalgamate or merge with any other company or companies (and the right to do so is hereby expressly reserved) whether by way of statutory amalgamation, sale of its assets and undertaking, or otherwise howsoever, then and in each such event the number of shares in the corporation resulting from such amalgamation or merger in respect of which the Option remains unexercised shall be such number of shares in that corporation as would have been acquired by the Optionee pursuant to the amalgamation or merger had the Option been fully exercised immediately prior to the date of such amalgamation or merger and the then prevailing purchase price of the shares to be paid by the Optionee shall be correspondingly decreased or increased as applicable. TERMINATION OF OPTION 12. The Option is not assignable or transferable and shall terminate on the 30th day following the date upon which the Optionee ceases to be an Insider of the Company; provided, however, that if such cessation is due to the death of the Optionee, the personal representative of the Optionee shall have the right to exercise any unexercised part of the Option for a period of one year following the date of death of the Optionee. AMENDMENT OF MATERIAL TERMS 13. Any amendment to the Option is subject to approval by ordinary resolution of the members of the Company entitled to vote at a general meeting of the Company. TIME OF THE ESSENCE 14. Time shall be of the essence of this Agreement. SUCCESSORS 15. This Agreement shall enure to the benefit of and be binding upon the heirs, executors and administrators of the Optionee and the successors of the Company. IN WITNESS WHEREOF the parties hereto have caused these presents to be executed as at the day and year first above written. The Corporate Seal of SUMMO ) MINERALS CORPORATION was ) hereunto affixed in the ) presence of: ) ) ) C/S /s/ [Illegible] ) - ---------------------------- ) Authorized Signatory ) ) ) /s/ [Illegible] ) - ---------------------------- ) Authorized Signatory ) SIGNED, SEALED AND DELIVERED ) by the Optionee in the presence of: ) ) Name: /s/ Gail Sharp ) /s/ J. Douglas Little ----------------------------- ) ---------------------------- ) J. DOUGLAS LITTLE Address: 1002-1460 Barclay ) -------------------------- ) Vancouver B.C. ) -------------------------- ) ) Occupation: Secretary ) ----------------------- ) SCHEDULE "A" DECLARATION OF STOCK OPTION POSITION THIS FORM FOR COMPLETION BY OPTIONEE RE: -------------------------------------------------- (Name of Company) RE: incentive stock options in ------------------- ---------------------- (No. of options) (Company) I, _____________________, HEREBY CERTIFY that the aforesaid non-transferable options have been granted to me in compliance with the requirements of the V.S.E. Policy 23: and more particularly that at the time of grant, I was not aware of any change in the affairs of the Company which might have affected the trading price and had not been disclosed to the public. If the company is classified as a Venture Company as of the date of this declaration, I confirm that I have not been granted a stock option in the said Company within 2 years of the date of grant of the above-stated options. I HEREBY FURTHER CERTIFY (complete either Part I or Part II as applicable): PART I THAT I have not be granted any director or employee incentive share options by any other listed companies. DATED the day of , 19 . SIGNATURE: ----- -------------- -- ------------------- PART II THAT I hold as of the date of this Declaration existing incentive share options which have been granted to me by the above named company or other listed companies as follows: Outstanding Name of No. of Date of Balance as Listed Shares Exercise at Date of Co. Optioned Grant Certificate - ------------------------------------------------------------------ - ------------------------------------------------------------------ - ------------------------------------------------------------------ (Complete on separate sheet if insufficient space) DATED the day of , 19 . SIGNATURE: ----- -------------- -- ------------------- STOCK OPTION AGREEMENT (INSIDER) MEMORANDUM OF AGREEMENT made as of the 24th day of April, 1995 BETWEEN: SUMMO MINERALS CORPORATION, a body corporate, duly incorporated under the laws of British Columbia, and having its head office at 860 - 625 Howe Street, Vancouver, British Columbia, V6C 2T6 (hereinafter called the "Company") OF THE FIRST PART AND: ROBERT A. PRESCOTT, of 1100 - 1776 Lincoln St. Denver, Colorado, 80203, USA (hereinafter called the "Optionee") OF THE SECOND PART WHEREAS the Option is an Insider of the Company. AND WHEREAS the Company wishes to maintain the continued services of and to provide incentive to the Optionee and to this end is desirous of granting to the Optionee an option to purchase shares in the capital of the Company subject to the terms and conditions hereinafter contained. NOW THEREFORE THIS AGREEMENT WITNESSETH: DEFINITION 1. In this Agreement the term "share" or "shares" means, as the case may be, one or more communion shares without par value in the capital stock of the Company as constituted at the date of this Agreement. GRANTING OF OPTION 2. The Company hereby irrevocably grants to the Optionee, being an Insider of the Company, a non-assignable, non-transferable option to purchase 100,000 shares in the capital stock of the Company (hereinafter called the "Option") at $1.20 per share (the "Option Price") on the terms and conditions hereinafter set forth. EXERCISE OF OPTION 3. The Option, may be exercised by the Optionee over a period of five (5) years until April 24, 2000, by notice in writing to the Company to that effect. Any such notice given to the Company (an "Exercise Notice") shall specify the number of shares with respect to which the Option is being exercised and shall be accompanied by a cheque drawn on a Canadian chartered bank in favor of the Company in full payment of the Option Price for the number of shares then being purchased. DELIVER OF SHARE CERTIFICATE 4. The Company shall, within five business days after receipt of the Exercise Notice deliver to the Optionee: a share certificate representing the number of shares with respect to which the Option is exercised and issued as of the date of the Exercise Notice. 5. An Exercise Notice shall be deemed to have been given, if delivered, on the date of delivery, or if mailed, on the date of mailing. A mailed Exercise Notice shall be sent by prepaid registered mail addressed to the Company at its Vancouver address. OPTION ONLY 6. Nothing herein contained or done pursuant hereto shall obligate the Optionee to purchase and/or pay for any shares of the Company, except those shares in respect of which the Optionee shall have exercised all or any part of the Option granted hereunder. 7. The Optionee shall have no rights whatsoever as a shareholder in respect to any of the shares optioned hereunder other than in respect of optioned shares upon which the Optionee shall Lave exercised all or any part of the Option granted hereunder and which shall have been taken up and paid for in full. APPROVAL 8. The Option granted hereunder is subject to approval by ordinary resolution of the members of the Company entitled to vote at a general meeting of the Company, passed prior to the exercise of the Option or any part thereof. FILING WITH REGULATORY AUTHORITIES 9. This Agreement may be required to be filed with some or all of the Superintendent of Brokers for the Province of British Columbia and the Vancouver Stock Exchange ("VSE") (collectively the "Regulatory Authorities") and the Option hereby agrees to be bound by any modification of the terms and conditions of the Option as may required by the said Regulatory Authorities. 10. A Declaration of Stock Option Position as attached hereto as "Schedule A" to this Agreement, is required by the VSE and the Optionee hereby agrees to be bound by any modification of the terms and conditions of the Option as may be required by the said Regulatory Authorities. CAPITAL REORGANIZATION 11. In the event the authorized capital of the Company as presently constituted is consolidated into a lessor number of shares or subdivided into a greater number of shares, the number of shares in respect of which the Option remains unexercised shall be decreased or increased proportionately as the case may be, and the then prevailing purchase price to be paid by the Optionee for each such share shall be correspondingly decreased or increased as applicable. In the event the Company shall determine to amalgamate or merge with any other company or companies (and the right to do so is hereby expressly reserved) whether by way of statutory amalgamation, sale of its assets and undertaking, or otherwise howsoever, then and in each such event the number of shares in the corporation resulting from such amalgamation or merger in respect of which the Option remains unexercised shall be such number of shares in that corporation as would have been acquired by the Optionee pursuant to the amalgamation or merger had the Option been fully exercised immediately prior to the date of such amalgamation or merger and the then prevailing purchase price of the shares to be paid by the Optionee shall be correspondingly decreased or increased as applicable. TERMINATION OF OPTION 12. The Option is not assignable or transferable and shall terminate on the 30th day following the date upon which the Optionee ceases to be an Insider of the Company; provided, however, that if such cessation is due to the death of the Optionee, the personal representative of the Optionee shall have the right to exercise any unexercised part of the Option for a period of one year following the date of death of the Optionee. AMENDMENT OF MATERIAL TERMS 13. Any amendment to the Option is subject to approval by ordinary resolution of the members of the Company entitled to vote at a general meeting of the Company. TIME OF THE ESSENCE 14. Time shall be of the essence of this Agreement. SUCCESSORS 15. This Agreement shall enure to the benefit of and be binding upon the heirs, executors and administrators of the Optionee and the successors of the Company. IN WITNESS WHEREOF the parties hereto have caused these presents to be executed as at the day and year first above written. The Corporate Seal of SUMMO ) MINERALS CORPORATION was ) hereunto affixed in ) presence of: ) ) ) C/S /s/ [Illegible] ) - ---------------------------- ) Authorized Signatory ) ) ) /s/ [Illegible] ) - ---------------------------- ) Authorized Signatory ) SIGNED, SEALED AND DELIVERED ) by the Optionee in the presence of: ) ) Name: /s/ Judith L. Prescott ) /s/ Robert A. Prescott ----------------------------- ) ---------------------------- ) ROBERT A. PRESCOTT Address: 1587 Bermuda Dunes ) -------------------------- ) Boulder City, Nevada ) -------------------------- ) ) Occupation: Housewife ) ----------------------- ) SCHEDULE"A" DECLARATION OF STOCK OPTION POSITION THIS FORM FOR COMPLETION BY OPTIONEE RE: -------------------------------------------------- (Name of Company) RE: incentive stock options in ------------------- ---------------------- (No. of options) (Company) I, ___________________, HEREBY CERTIFY that the aforesaid non-transferable options have been granted to me in compliance with the requirements of the V.S.E. Policy 23: and more particularly that at the time of grant, I was not aware of any change in the affairs of the Company which might have affected the trading price and had not been disclosed to the public. If the company is classified as a Venture Company as of the date of this declaration, I confirm that I have not been granted a stock option in the said Company within 2 years of the date of grant of the above-stated options. I HEREBY FURTHER CERTIFY (complete either Part I or Part II as applicable): PART I THAT I have not been granted any director or employee incentive share options by any other listed companies. DATED the day of , 19 . SIGNATURE: ----- -------------- -- ------------------- PART II THAT I hold as of the date of this Declaration existing incentive share options which have been granted to me by the above named company or other listed companies as follows: Outstanding Name of No. of Date of Balance as Listed Shares Exercise at Date of Co. Optioned Grant Certificate - ------------------------------------------------------------------ - ------------------------------------------------------------------ - ------------------------------------------------------------------ (Complete on separate sheet if insufficient space) DATED the day of , 19 . SIGNATURE: ----- -------------- -- ------------------- EX-10.24 33 EXHIBIT 10.24 [LETTERHEAD ILLEGIBLE] January 29, 1996 James D. Frank 7773 S. Oneida Court Englewood, CO 80112 FAX: (303) 290-9165 Dear Jim: This letter confirms our offer to you for employment as Vice President - Finance and Chief Financial Officer for Summo Minerals Corporation and Summo USA Corporation, a wholly-owned subsidiary, beginning February 1, 1996. Your initial annual salary will be US$110,000.00. Summo offers a standard health benefits package and a 401(k) plan for its employees, which you would be eligible to participate in. You will be awarded a stock option by the Board of Directors to purchase 100,000 shares of Summo Minerals Corporation common stock. The option price will be set by the market price at the date the option is issued. The option will have a 5-year term. You will be vested in 25% of the option immediately, with additional vesting accruing at 25% increments annually; you will be fully vested after 3 years. The Compensation Committee of the Board will be establishing a bonus plan for Executive Management to reward executives for outstanding performance in accomplishing key milestones which bear significantly on the Corporation's future. Milestones for 1996 include obtaining the requisite operating permits for Lisbon Valley and securing project financing. Anticipated milestones for 1997 include completion of construction on time and within budget and successful start-up and operation at Lisbon Valley. You can expect to participate in this bonus plan as one of the key executives in the Corporation. The bonus package will likely take the form of additional stock options, and/or cash. We recognize that the permitting and financing of the Lisbon Valley project is critical to the ongoing success of the Corporation. We have agreed that should this project not proceed and your services are no longer required as a consequence, or in the event of a change of control of the company whereby you are asked to resign or to perform in a reduced capacity to the position being offered, Summo will continue your salary and benefits for one year as a severance. If these terms are acceptable to you, please accept by signing below. I trust you find the opportunity to join Summo and contribute to building a solid mining company exciting. I believe together we would constitute a solid core management team that can fulfill the vision of becoming a multiple-mine operator within the next 5-10 years, with a targeted mine output of 100 million pounds of cathode copper by the end of this period. I look forward to working with you and having your input on the financial and business issues the Company will address as it grows. Sincerely, /s/ GREGORY A. HAHN --------------------------------------- Gregory A. Hahn President & CEO Accepted this day January 30, 1996 /s/ JAMES D. FRANK --------------------- James D. Frank EX-10.25 34 EXHIBIT 10.25 EXHIBIT 10.25 MASTER ELECTRIC SERVICE AGREEMENT between PACIFICORP and SUMMO USA CORPORATION This Master ELECTRIC SERVICE AGREEMENT ("Agreement"), entered into on this 31st day of October, l996, is by and between PacifiCorp, an Oregon Corporation that provides retail electric service, and SUMMO USA CORPORATION, hereinafter referred to as SUMMO, a Colorado corporation conducting business through facilities located at Lisbon Valley in San Juan County, Utah. WHEREAS, PacifiCorp is a provider of retail electric energy and power, hereinafter referred to as "Firm Power and Energy," and WHEREAS, SUMMO desires to purchase Firm Power and Energy requirements for its copper mining facilities, hereinafter referred to as "Facilities," under this Agreement, and WHEREAS, PacifiCorp desires to provide Firm Power and Energy to the Facilities as described above. NOW, THEREFORE, the parties hereto agree as follows: SECTION 1: DEFINITIONS As used in this Agreement, the following terms have the following meanings: 1.1 AGREEMENT: This Electric Service Agreement and any extensions or renewals thereof. 1.2 BILLING DEMAND: The Demand in kilowatts used to determine the Demand (power) charges in accordance with the provisions of Electric Service Schedule 9. 1.3 BILLING PERIOD: The period of approximately thirty (30) days intervening between regular successive meter readings. 1.4 COMMISSION: The Public Service Commission of the State of Utah. 1.5 CONTRACT DEMAND: The maximum amount of power that PacifiCorp is obligated to provide under this Agreement. 1.6 DEMAND: The rate in kilowatts at which PacifiCorp delivers electric energy to SUMMO either at a given instant or averaged over any designated period of time. 1 1.7 ELECTRIC SERVICE REGULATIONS: PacifiCorp's effective electric service regulations on file with and approved by the Commission. 1.8 ELECTRIC SERVICE SCHEDULE: PacifiCorp's effective electric service schedule on file with and approved by the Commission. 1.9 FIRM POWER AND ENERGY: Electric power expressed in kilowatts and associated energy expressed in kilowatt-hours intended to have assured availability to SUMMO to meet all or any agreed-upon portion of SUMMO's load requirements. 1.10 MEASURED DEMAND: The Demand in kilowatts as shown by or computed from the readings of PacifiCorp's power Demand) meter for the 15-minute period of SUMMO's greatest use during the Billing Period, adjusted for Power Factor as specified in Electric Service Schedule 9. 1.11 POWER FACTOR: The percentage determined by dividing SUMMO's average power use in kilowatts (real power) by the average kilovolt-ampere power load (apparent power) SUMMO imposes upon PacifiCorp. SECTION 2: TERM AND TERMINATION; EARLY TERMINATION CHARGE 2.1 TERM: This Agreement shall remain in full force and effect for a period of ten (10) years from its effective date and shall automatically be renewed from year to year subject to the same terms and conditions unless either party submits written termination notice to the other party not less than thirty (30) nor more than sixty (60) days prior to expiration of initial term or any renewal term. 2.2 EARLY TERMINATION CHARGE :If SUMMO terminates service or defaults during the first ten years of this Agreement, SUMMO shall pay a termination charge equal to the unamortized extension allowance as computed by PacifiCorp in accord with Electric Service Schedule No.9 and Electric Service Regulation No.12. SECTION 3: DELIVERY OF AND CHARGES FOR FIRM POWER AND ENERGY 3.1 SCOPE OF DELIVERIES: The Contract Demand for deliveries under this Agreement is 7,500 kW. PacifiCorp shall deliver such amounts of Firm Power and Energy SUMMO requires to meet its load requirements up to, but not in excess of, such Contract Demand; PROVIDED, that if the Measured Demand exceeds the Contract Demand as a result of SUMMO's operations, the Measured Demand shall establish a new Contract Demand if PacifiCorp has capacity available adequate to supply such Demand on a firm basis. PacifiCorp shall notify SUMMO within sixty (60) days of the billing covering the period in which Measured Demand exceeded the Contract Demand whether such capacity is available. In such event, the new Contract Demand shall continue in effect until either (1) the new Demand is in turn exceeded by a Contract Demand, or (2) the eleventh billing 2 month following the billing month in which such Demand was established; PROVIDED, in the latter event the Contract Demand shall then become the maximum actual Measured Demand established in any of the preceding eleven (11) billing months. 3.2 REQUEST FOR ADDITIONAL CONTRACT DEMAND: Upon PacifiCorp's receipt of SUMMO's written request for additional power and energy, PacifiCorp shall attempt to supply such additional power and energy under terms and conditions acceptable to both parties. Within 15 days of the request PacifiCorp shall advise SUMMO in writing whether the additional power and energy is or can be made available. If PacifiCorp does provide SUMMO with Firm Power and Energy in excess of the Contract Demand commitments, such deliveries shall trigger a Contract Demand superseding the Contract Demand set forth in section 3.1. 3.3 PAYMENT FOR AND COMMENCEMENT OF CONSTRUCTION: Within one (l) year of the date of this Agreement SUMMO expects to obtain all necessary permits and financing for its copper mining facilities in Lisbon Valley, Utah. Summo shall notify PacifiCorp when it obtains such permits and financing. If SUMMO provides such notice after December 24, 1996, PacifiCorp may recalculate the cost of the line extension and adjust the line extension payment and guaranteed minimum payments in a manner to compensate PacifiCorp fully for any decreased value of the dollar from the date of this Agreement to the date PacifiCorp receives such notice. Until it gives notice to PacifiCorp, SUMMO shall owe no financial obligation to PacifiCorp except the payment of $35,000 required upon execution of this Agreement pursuant to section 4.4. SUMMO shall make the first payment required under section 4.4 when it notifies PacifiCorp that it has obtained the necessary permits and financing. PacifiCorp shall complete construction of the facilities necessary to provide service to SUMMO in accordance with the terms of this agreement within eight (8) months of its receipt of such notice. 3.4 POINT OF DELIVERY: The Point of Delivery for all Firm Power and Energy delivered to SUMMO shall be at the terminus of PacifiCorp's 69 kV power line at SUMMO's copper mine. 3.5 DELIVERY VOLTAGE: PacifiCorp shall deliver Firm Power and Energy at the Point of Delivery in the form of alternating current at a nominal frequency of 60 Hertz, and at a nominal voltage of 69,000 volts. 3.6 REACTIVE REQUIREMENTS: 3.6.1 SUMMO'S OBLIGATIONS: SUMMO shall control and limit the flow of reactive power between PacifiCorp's and SUMMO's system so as to maintain a Power Factor of between ninety five percent (95%) lagging and ninety percent (90%) leading at all times. If SUMMO's Power Factor adversely affects operation of PacifiCorp's facilities or adversely affects PacifiCorp's other customers, SUMMO shall install at SUMMO's expense switched capacitors, synchronous condensers, or such other devices and 3 equipment as PacifiCorp may reasonably require to eliminate that portion of unscheduled reactive power flow which causes the Power Factor to exceed the limits established herein. Should SUMMO fail to take corrective action requested by PacifiCorp within six (6) months after written notice from PacifiCorp, PacifiCorp may perform such services or supply and install such equipment as it deems necessary to provide corrective action, whereupon SUMMO shall compensate PacifiCorp for all sums expended and all services contracted or performed, including PacifiCorp's standard overhead costs, plus ten percent (10%) of all expenditures. SUMMO shall pay such sums within thirty (30) days after PacifiCorp has mailed to SUMMO an itemized statement of its charges therefor. 3.6.2 ADJUSTMENT TO BILLING DEMAND: In the event SUMMO's Power Factor drops below either 95% lagging or 90% leading, PacifiCorp's Billing Demands shall be increased as specified for Power Factor that drops below 90% lagging in Electric Service Schedule 9. 3.6.3 HARMONICS: SUMMO shall operate its facilities on harmonic distortion within the guideline of the Agreement. 3.6.3. 1 The total harmonic voltage distortion (THD) shall be less than five percent (5%), and the maximum individual frequency voltage harmonic shall be less than three percent (3%) of the fundamental. The voltage notch depth shall be less than twenty percent (20%) and the notch area shall be less than 22,800 microseconds-volts. 3.6.3.2 The total demand distortion (TDD) or harmonic current distortion shall be less than eight percent (8%) of the maximum demand load current. Individual odd current harmonics shall be less than the following percentage of the fundamental (60 hertz) current. 3rd through 9th 7.0% 11th through 15th 3.5% 17th through 21st 2.5% 23rd through 35th 1.5% 35th and higher 0.5% Individual even harmonics shall be limited to twenty-five percent (25%) of the odd harmonic limits specified above. 4 SECTION 4: PAYMENT FOR POWER AND ENERGY 4.1 STATEMENTS: All billing statements shall show the amount due for Firm Power and Energy purchased. 4.2 PAYMENT FOR POWER AND ENERGY: PacifiCorp shall serve SUMMO under Electric Service Schedule No.9. All bills shall be paid by the due date of the bill. 4.3 GUARANTEED MINIMUM PAYMENT: In consideration of the special investment by PacifiCorp to supply service hereunder, SUMMO shall make minimum annual total payments for service of $281,664 in each year for a period of five years, beginning six months from the commencement of deliveries. The guaranteed minimum payments shall be in the amount of $23,472 per month for sixty (60) consecutive months. PacifiCorp shall calculate and bill the guaranteed minimum at intervals of every twelve (12) months beginning one year from commencements of deliveries. Where the actual billed service is less than $281,664, PacifiCorp shall bill SUMMO for the difference between actual billed service and the required stated minimum. In the event actual use as determined by meter readings exceeds the monthly minimum guaranteed payment, SUMMO shall pay the higher amount. 4.4 SUMMO LINE EXTENSION PAYMENT: SUMMO shall pay $735,000 pursuant to Electric Service Regulation No.12 in partial compensation for PacifiCorp's cost of construction of the facilities necessary to provide service to SUMMO's copper mining facilities. PacifiCorp acknowledges receipt of $35,000 delivered by SUMMO contemporaneously with the execution of this Agreement. SUMMO shall pay the remaining balance of $700,000 in quarterly installments of $100,000 each beginning with the payment which SUMMO is required to provide simultaneously with the notice specified in section 3.3. 4.5 REFUND OF SUMMO EXTENSION PAYMENT: For the five years commencing on the sixth (6th) through the end of the tenth (10th contract years PacifiCorp shall make available to SUMMO a credit on its bill for Firm Power and Energy in an amount up to $147,000 per contract year, which credit shall be allowed on a dollar-for-dollar basis for all actual billed service in each year in excess of $281,664. SECTION 5: METERING 5.1 METERING EQUIPMENT: PacifiCorp shall provide, maintain, and test meters and metering equipment required for billing purposes. The parties shall specify the locations for PacifiCorp's installation of metering equipment in SUMMO's premises, and SUMMO shall allow PacifiCorp access to such locations without charge during reasonable business hours. 5 5.2 TELECOMMUNICATIONS FACILITIES: Upon PacifiCorp's request, SUMMO shall install a dedicated telephone line for meter reading purposes without charge to PacifiCorp. 5.3 SECONDARY METERING: PacifiCorp may install its meter on the secondary side of SUMMO's transformers. 5.4 TRANSFORMER LOSS CURVES: If secondary metering is used, transformer and other losses occurring between the Point of Delivery and the meter shall be computed and added to the meter readings to determine the monthly demand and energy consumption. SUMMO shall, prior to commencement of service, provide PacifiCorp with transformer loss curves and test data to allow PacifiCorp to calculate transformer losses for billing purposes. SECTION 6: INTEGRATION This Agreement replaces and supersedes in their entirety all prior agreements between the parties related to the same subject matter except that certain Customer Requested Work Agreement dated August 1, 1995, and covering PacifiCorp's design of the electrical facilities and providing assistance to SUMMO to obtain permission to construct a 69 kV power line from PacifiCorp's Pinto-Hatch 69 kV line to SUMMO's copper mine. SECTION 7: EXCLUSIVE SUPPLIER & RESALE OF POWER The Firm Power and Energy that PacifiCorp delivers to SUMMO pursuant to this Agreement may not be resold directly or indirectly by SUMMO to any of SUMMO's subcontractors or to any other party. PacifiCorp shall be the exclusive provider of Firm Power and Energy throughout the term of this Agreement unless the Agreement is terminated and SUMMO pays the appropriate early termination charge under sections 2.2, 4.3 and 4.4 hereof. SECTION 8: JURISDICTION OF REGULATORY AUTHORITIES PacifiCorp's currently applicable, effective Electric Service Schedule No.9 and Electric Service Regulations are attached hereto, incorporated herein and by reference made a part hereof. SUMMO shall abide by them and all amendments and changes thereto so approved by the Commission. In the event that the Commission or any other state, federal, or municipal authority issues any rules, regulations, or orders which require PacifiCorp to alter or amend any of the provisions of this Agreement or to terminate or curtail the delivery of Firm Power and Energy to SUMMO, PacifiCorp shall not be liable to SUMMO for damages or losses of any kind whatsoever which SUMMO may sustain as a result of such rule, regulation, or order, including consequential damages. In the event that the Utah Commission or federal body promulgates rules, regulations or statutes allowing SUMMO to obtain power or energy from a source other than PacifiCorp, including the use of PacifiCorp's facilities, nothing in the Agreement shall be construed to 6 prevent such alternative power supply; PROVIDED, that SUMMO shall not be relieved of its obligations under sections 2.2, 3.6.1, 3.6.2, 4.3 and 4.4 hereunder. SECTION 9: FORCE MAJEURE Neither Party shall be subject to any liability or damages for inability to provide or receive service to the extent that such failure shall be due to causes beyond the control of either PacifiCorp or SUMMO, including, but not limited to, the following: (a) the operation and effect of any rules, regulations and orders promulgated by any commission, municipality, or governmental agency of the United States, or subdivision thereof; (b) restraining order, injunction or similar decree of any court; (c) war; (d) flood; (e) earthquake; (f) act of God; (g) sabotage; or (h) strikes or boycotts. Should any of the foregoing occur, the minimum billing demands that would otherwise be applicable under this Schedule shall be waived and SUMMO shall have no liability for service until SUMMO is able to resume service; provided, the party claiming Force Majeure shall make every reasonable attempt to remedy the cause thereof as diligently and expeditiously as possible. SECTION 10: NOTICE Any notice required to be given hereunder shall be deemed to have been given when it is sent, with postage prepaid, by registered or certified mail, return receipt requested, to the parties hereto at their respective addresses as follows: If to SUMMO: SUMMO USA, CORP. Attn: James D. Frank, Vice President and Chief Financial Officer 900 Denver Center Building 1776 Lincoln Street Denver, CO 80203 If to PacifiCorp: PacifiCorp Lee M. Kimball, Strategic Account Manager P.O. Box 728 51 East Main American Fork, UT 84003 SECTION 11: ASSIGNMENT Neither party shall assign this Agreement without the written consent of the other party, which consent shall not be unreasonably withheld. 7 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by persons duly authorized as of the date first above written. PACIFICORP By: /s/ [illegible] -------------------------------- SUMMO USA CORPORATION By: /s/ [illegible] -------------------------------- 8 [LOGO] P.S.C.U. NO. 41 ORIGINAL SHEET NO. 9.1 - ----------------------------------------------------------------------------- UTAH POWER & LIGHT COMPANY ELECTRIC SERVICE SCHEDULE NO. 9 STATE OF UTAH ---------- GENERAL SERVICE - HIGH VOLTAGE ---------- AVAILABILITY: At any point on the Company's interconnected system where there are facilities of adequate capacity. APPLICATION: This Schedule is for alternating current, three-phase electric service supplied at approximately 46,000 volts or 69,000 volts or greater, through a single point of delivery. Seasonal service will be available only under other appropriate schedules. MONTHLY BILL: (Computer Codes 9, 115, 116) CUSTOMER SERVICE CHARGE: $100.00 per service connection POWER CHARGE: $5.87 per kW all kW ENERGY CHARGE: 2.4227 CENTS per kWh all kWh MINIMUM: The monthly customer charge plus appropriate power and energy charges. POWER FACTOR: This rate is based on the Customer maintaining at all times a Power factor of 90% lagging, or higher, as determined by measurement. If the average Power factor is found to be less than 90% lagging the Power as recorded by the Company's meter will be increased by 3/4 of 1% for every 1% that the Power factor is less than 90%. CONTRACT PERIOD: One year or longer. CONTRACT DEED: This provision does not apply to any General Service Customers who contracted prior to July 29, 1982, for service except for those Customer's whose Electric Service Agreements already contain this specification. However, in the event that Customer makes any material changes or increases in his installation which amount to at least 25% of Customer's greatest historical actual demand, Company, under the provisions of Paragraph 6, Electric Service Regulation No. 5, will require a new Contract containing this provision. "Contract Demand" as used herein shall mean the maximum Power contracted for by Customer and in excess of which the Company is under no obligation to supply, as set forth in the Electric Service Agreement executed by [LOGO] P.S.C.U. No. 41 ORIGINAL SHEET NO. 9.3 - ----------------------------------------------------------------------------- ELECTRIC SERVICE SCHEDULE NO. 9 - CONTINUED and action of Customer but are not the result of Customer's usual and ordinary operations, shall be excluded from determination of new Contract Demands. Upon prior arrangement with Company, Customer may test, repair or start-up equipment at mutually acceptable and scheduled off-peak periods and any demands in excess of the Contract Demand established during such test, repair or start-up shall be excluded from determination of new Contract Demands. FORCE MAJEURE: Neither Company or Customer shall be subject to any liability or damages for inability to provide or receive service to the extent that such failure shall be due to causes beyond the control of either Company or Customer, including, but not limited to the following: (a) the operation and effect of any rules, regulations and orders promulgated by any Commission, municipality, or governmental agency of the United States, or subdivision thereof; (b) restraining order, injunction or similar decree of any court; (c) war; (d) flood; (e) earthquake; (f) act of God; (g) sabotage; or (h) strikes or boycotts. Should any of the foregoing occur, the minimum billing demands that would otherwise be applicable under this Schedule shall be waived and Customer will have no liability for service until such time as Customer is able to resume service. The party claiming Force Majeure under this provision shall make every reasonable attempt to remedy the cause thereof as diligently and expeditiously as possible. Should Customer find it necessary to shut down operations because of market or economic conditions for a period of at least thirty (30) days, the 65% minimum billing demands that would otherwise be applicable under this Schedule shall be waived; provided, however, that in this event, 65% minimum billing demands shall not be waived for more than two (2) billing months in any contract year. TERMINATION: This provision does not apply to any Customers who contracted prior to July 29, 1982, for service except for those Customers whose Electric Service Agreements contain Contract Demand provisions with 65% minimum demand payment obligations. Termination of electric service by the Customer prior to the expiration date of the Electric Service Agreement (or any extension thereof) will not relieve the Customer of his obligations under this Rate Schedule and the Electric Service Agreement, including all 65% minimum payment obligations. In the event of termination, the 65% minimum payment amounts as stated herein, shall remain in full force and effect for the remaining unexpired term of the Electric Service Agreement; provided, however, that Company upon written request of Customer, shall attempt to sell Customer's Contract Demand obligations, or any portion thereof, to other parties and, upon such sale, Customer shall be relieved of the equivalent 65% minimum Contract Demand payment obligation. Company shall determine the priority of Customer's request to sell any Portion of its Contract Demand obligations by the date upon which Company receives Customer's written request. A sale is deemed to have occurred on the date Company executes an Electric Service Agreement for service with another party, and Customer, in order of priority, shall be relieved of its equivalent 65% minimum Contract Demand payment obligation as of that date. Termination prior to the expiration date of the Electric Service Agreement (or any extensions thereof) shall not relieve Customer of any non-contract demand minimum payment obligations incurred as a result of Company investments in special facilities EX-10.26 35 EXHIBIT 10.26 December 20, 1996 KENNECOTT UTAH COPPER CORPORATION P.O. BOX 11248 SALT LAKE CITY, UTAH 84147 KENNECOTT UTAH COPPER CORPORATION (Seller) hereby agrees to sell and deliver, and SUMMO USA CORPORATION, San Juan County, UT (Buyer) agrees to purchase and receive the products on terms and subject to conditions specified below and on the reverse side of this Agreement. KC# 3732 Product: Approximately 93% Sulfuric Acid, no specifications Quantity: Nominal 50,000 short tons per year, 100% basis H(2)SO(4) Price: For the first 24 months of deliveries, $35.00/st. 100% basis, f.o.b. Destination, delivered via truck. Price will be adjusted at the beginning of the 25th month of deliveries and annually thereafter, for one year of escalation or de-escalation, by the most recent Consumer Price Index that is available at that time. Delivery Period: 60 months beginning with start up of BUYER's Lisbon Valley Mine. Start up is estimated to be in January 1998. Delivery Schedule: Pursuant to Summo Corporation's requirements, subject to Kennecott Utah Copper Corporation's approval. Deliver Destination: Summo USA Corporation, Lisbon Valley Mine in San Juan County, Utah. Unloading Period: For truck shipments, a maximum two-hour unloading period is allowed after arrival at destination, on a 24-hour basis, 7 days per week. Payment terms: 30 days from date of shipment. Payment In U.S. Dollars by check to: Kennecott Utah Copper Corporation P.O. Box 224 Magna, UT 84044-0224 BUYER ACKNOWLEDGES THAT IT HAS READ THE TERMS AND CONDITIONS ON THE STANDARD KENNECOTT CONTRACT ON THE REVERSE SIDE OF THIS AGREEMENT AND BY SIGNING BELOW AGREES TO BE BOUND BY THESE TERMS AND CONDITIONS. ACCEPTED December 30 1996 ---------------------- SUMMO USA CORPORATION KENNECOTT UTAH COPPER CORPORATION BY Robert A. Prescott BY David A. Litum ----------------------------- ------------------------------ OFFICER OF CORPORATION DIRECTOR-BYPRODUCT SALES The SELLER and BUYER agree that the following terms and conditions govern the sale of the Product: 1. TAXES: All Federal, State or local taxes (except income taxes) now or hereafter imposed in respect to this order, or any transaction involved herein and/or the Production sale, use consumption, delivery, transportation of the Product shall be for account of the BUYER, and if paid or required to be paid by the SELLER, the amount thereof shall be added to and become a part of the price payable to the BUYER hereunder. 2. FINANCIAL RESPONSIBILITY: If, in the reasonable opinion of SELLER, the credit or financial responsibility of BUYER is, or becomes, impaired or unsatisfactory, SELLER reserves the right to demand cash or satisfactory security before making shipment. If BUYER fails to provide cash or satisfactory security to fully satisfy SELLER's demands, such failure shall constitute a breach of the Agreement, and SELLER shall have the right to withhold further shipments and/or to cancel this Agreement or any part of this Agreement at the option of SELLER, without any liability or obligations on the SELLER. Such withholding of shipments and/or cancellation, however, shall not affect the BUYER's liability for damages, including the costs associated with reshipment of tank railcars or tank trucks due to BUYER's failure to meet its financial responsibilities. Additionally, SELLER reserves the right to possession of the Product and the right to stop Product in transit. The acceptance by SELLER of any payment less than the full amount due shall not be a waiver of any rights of SELLER. 3. PAYMENT: Payment of the price shall be made in lawful money of the United States, as per the Payment Terms specified on the front of this document. If payment is not made when due, or in the manner herein provided, SELLER may at its option, without notice, cancel this Agreement as to all or any part of the unfilled quantity. Sales and use taxes paid or required to be paid by the SELLER, which are part of the price pursuant to Paragraph 1, shall be included in the billing for the Product delivery. All other taxes which become part of the price pursuant to Paragraph 1, the amount of which cannot be determined on the invoice date, will be billed when they become known and will be payable within thirty (30) days of billing date. 4. TITLE: Unless otherwise specified, title to and risk of loss of any shipment of Product shall pass from SELLER to BUYER FOB railroad tank car or tank truck at the destination point unless BUYER supplies the equipment to transport the Product, in which case title and risk of loss shall pass FOB railroad tank car or tank truck at loading point. 5. LIABILITY: SELLER assumes no responsibility for the condition of trucks, tank cars and related equipment supplied by BUYER. SELLER is not responsible for, and BUYER agrees to indemnify, defend, and save harmless the SELLER against any, and all liabilities, claims, investigations, suits, causes of action, judgments, losses, penalties, costs or expenses (including, without limitation, reasonable attorneys fees) (collectively, "Liabilities"), arising out of or in consequence of, or alleged to have arisen out of or in consequence of, in whole or in part 1) any breach or default by the BUYER of the terms or conditions of this Agreement, 2) any and all negligent acts by the BUYER, 3) any and all civil or criminal breaches or violations or statutes, regulations, ordinances, or otherwise by the BUYER, 4) any and all Liabilities predicated on theories of strict liability, whether imposed or arising under a statute, ordinance, regulation, or at common law or otherwise by the BUYER, 5) any and all improper acts of loading, transporting, storage, handling, or application of the Product by the BUYER, or, 5) any subsequent resale of the Product or other disposal by the BUYER, including, but not limited to, any and all representations or warranties that the BUYER makes to a third party in the course of the resale or other disposal of the Product, or 7) any and all other acts or omissions of BUYER, whether arising under this contract or otherwise, which result in Liabilities to the SELLER. BUYER hereby assumes liability for, and shall reimburse SELLER for, all damage to, and all loss or description of, any private tank car or tank truck (including the fittings and appurtenances thereto) occurring while said tank car or tank truck is in the possession of BUYER, except when such damage, loss or destruction does not result from the negligence or default of BUYER. BUYER's reimbursement of SELLER hereunder shall be limited to the lessor of: (a) the actual cost to SELLER of repairing, reconditioning or replacing said tank car or tank truck, or (b) the actual depreciated cash value of said tank car or tank truck at the time of such damage, loss or destruction. BUYER shall report promptly to SELLER all damage to, or loss or destruction of, any such tank car or tank truck, howsoever arising, occurring while such tank car or tank truck is in the possession or under the control of BUYER. 6. WARRANTY: Attached to this Agreement is a Composite Analysis, for the dates indicated, of the Product. SELLER OR PRODUCER MAKE NO EXPRESS OR IMPLIED WARRANTIES OF ANY KIND, INCLUDING WHETHER THE PRODUCT CONFORMS TO THE ATTACHED COMPOSITE ANALYSIS. NO WARRANTY BY SELLER OR PRODUCER (OTHER THAN WARRANTY OF TITLE AS PROVIDED IN THE UNIFORM COMMERCIAL CODE) SHALL BE IMPLIED OR OTHERWISE CREATED UNDER THE UNIFORM COMMERCIAL CODE INCLUDING, BUT NOT LIMITED TO, WARRANTY OF MERCHANTABILITY OR WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE. 7. NOTICE: The BUYER shall give written notice of any claim for any cause whatsoever within ten (10) days after arrival of any shipment at destination, and failure to do so shall constitute a waiver by the BUYER of all claims with respect to such shipment. For any defect of quality established, SELLER's liability shall be limited to replacing any defective acid delivered hereunder and in no event shall SELLER incur liability for defects or damage to Products in which acid delivered hereunder is used or for any other kind of consequential, nominal, or incidental damages. 8. INVOICE: SELLER shall invoice BUYER for each delivery on the basis of price provided herein, and each such delivery shall constitute a separate and independent sale. SELLER's weights and analyses shall govern unless proven to be in error. 9. MUTUALLY AGREED PRODUCER: BUYER agrees that SELLER may meet its commitments under this Agreement by having a mutually agreed producer deliver Product on behalf of SELLER, so long as the agreed producer otherwise agrees to meet the terms and conditions of this Agreement. 10. FORCE MAJEURE: This Agreement is subject to the following conditions of force majeure. Any strike, lockout, difference with workmen, accident, fire, explosion, flood, earthquake, storm, unavoidable accident, mechanical breakdown (including shutdowns for maintenance and inventorying) mobilization, war (whether declared or undeclared), riot, rebellion, revolution, requirement, regulation, restriction, or other act of any government, whether legal or otherwise, the elements, inability to secure or delay in securing fuel, or other supplies or materials, or power, necessary for the operation of the mines and plants where the Product sold hereunder is produced or consumed, economic shutdown of SELLER's or BUYER's mine or plant facilities, delays or interruption to, or destruction of mines or plants of SELLER or BUYER, or any other acts beyond the control of the parties, whether or not of the nature or character hereinabove specifically enumerated which delays or interferes with the performance of this Agreement shall be considered sufficient justification for delay in making shipments, delivery or performance hereunder, in whole or in part, until such cause ceases to exist; and this Agreement shall be deemed suspended as long as such cause prevents or delays its execution. Neither party shall be responsible for or liable to the other for damages or expenses incurred or sustained because of any delay or failure to perform because of a condition of force majeure. If under any of the conditions set forth in this Paragraph, supplies of sulfuric acid available to SELLER are insufficient to complete delivery of orders accepted by SELLER prior to the occurrence of the condition or to SELLER's nominated long term regular contract customers. SELLER shall allocate available supplies pro rata to such long term customers until such customers' contractual requirements are met by SELLER, and then SELLER may, at its option, allocate available supplies (having first satisfied the long term customers' contractual requirements) in a manner it deems suitable, without liability for any damages sustained by BUYER. A nominated long term regular contract customer is a minimum annual tonnage commitment of 50,000 sl or more and five (5) years or longer in original contract duration. BUYER shall allocate purchased supplies pro rata to such long term suppliers until such suppliers' contractual requirements are met by BUYER, and then BUYER may at its option allocate purchases (having first satisfied the long term suppliers contractual requirements) in a manner it deems suitable without liability for damages sustained by supplier. If deliveries are interrupted or delayed for any condition of force majeure, the amount of Product which is not delivered at the regular order rate during the period of any such suspension or reduction shall, at the option of SELLER, be deducted from the full amount which otherwise would have been delivered under this order in which event SELLER shall not be obligated to make up such omitted deliveries either during the order period or after termination thereof. It is understood and agreed that SELLER shall be under no obligation to operate its copper smelters nor will it be under any obligation to operate its sulfuric acid plants except as, and to the extent that, it shall have available for that purpose sulfurous cases of commercial grade, produced in the course of operating its smelter and lack of such gases shall be deemed a cause beyond SELLER's control and subject to the Force Majeure provision and, notwithstanding paragraph 9 of this Agreement, SELLER is not obligated to find another producer to meet its obligations under a condition of force majeure. 11. HAZARDS: BUYER acknowledges that there are hazards associated with the use of the Product. BUYER agrees to make its personnel concerned with the Product aware of the hazards and assumes all responsibility for the warning of its employees and independent contractors of all hazards to persons and property in any way connected with Product. BUYER also assumes all responsibility for the risks of using Product in combination with other articles or substances and in any manufacturing process. The SELLER shall not be liable to the BUYER for any consequential, nominal, or incidental damages, including lost profits, arising out of the use, handling, storage, or any application or activity related to the Product. The SELLER shall not be liable to the BUYER for compensation, reimbursement or damages on account of loss of prospective profits or anticipated sales or on account of expenditures, investments or commitments in connection with the business or good will of the BUYER caused by failure of Product to conform to the specifications herein set forth. 12. CLAIMS: The BUYER will promptly notify the SELLER in writing of any claims, demands, suit, action, or proceeding with respect to the Product. 13. GOVERNING LAW: This Agreement shall be deemed to be made under and shall be governed by the laws of the Sale of Utah in all respects, including matters of construction, validity, and performance. 14. ENTIRE AGREEMENT: This Agreement constitutes the entire Agreement between the parties as to the subject matter hereof and may not be changed or modified except by signed writing by the SELLER and BUYER. 15. AFFILIATES: This Agreement inures to the benefit of affiliates, subsidiaries, or parents of the parties. 16. SURVIVAL: The provisions of paragraphs 2, 3, 5 and 11 above survive termination of this Agreement. 17. PRICE PROTECTION: If, after the interval designated in the contract, BUYER is offered material of equal quality by a responsible domestic manufacturer for delivery to the same destination on like terms and conditions as herein provided in quantities adequate to fulfill the entire commitment to deliver product during the entire remaining term (time left) of this contract at a lower delivered cost to BUYER than the delivered cost hereunder. SELLER, within thirty days of receipt of written evidence of same, shall either meet such lower delivered cost or release BUYER from their obligation to purchase by cancelling this contract. The written evidence shall be in the form of a signed proposal to sell sulfuric acid to BUYER on the corporate stationery of the manufacturer or distributor. It must contain the price for sulfuric acid delivered to BUYER's facilities, the provision for changing the price, the volume offered, the term (dates the supply is to commence and end), and the product specifications. EX-10.27 36 EXHIBIT 10.27 PURCHASE AGREEMENT This Agreement, effective as of the 29th day of February, 1996, is between MICHAEL L. WILCOX ("Seller"), whose address is P.O. Box 202, La Sal, UT 84530, and SUMMO USA CORPORATION, a Colorado corporation ("Purchaser"), whose address is 1776 Lincoln St., Suite 1100, Denver, CO 80203. RECITALS Seller represents that he is the owner of and is in possession of certain lands in San Juan County, Utah more particularly described as follows: Township 31 South, Range 25 East', SLB&M San Juan County, Utah -------------------------------------------------------------- Section 1: Lots 1, 2, 3, and 4 (also known as N 1/2 N 1/2) Township 31 South, Range 26 East, SLB&M San Juan County, Utah -------------------------------------------------------------- Section 6: NW 1/4 NW 1/4 said lands together all appurtenances and water rights incident thereto, and all improvements and personal property thereon, subject to mineral reservations of record, being herein referred to as the "Property". Seller is willing sell and Purchaser desires to purchase Property. NOW THEREFORE, in consideration of Ten Dollars ($10.00) in hand paid to Seller, the receipt and sufficiency of which are hereby acknowledged, and further in consideration of the mutual covenants, agreements, and promises herein contained, the parties hereto agree as follows: PURCHASE. Seller agrees to sell to Purchaser, and Purchaser agrees to purchase, all of Seller's right, title, and interest in the Property upon the terms and conditions set forth in this Agreement, for the amount of Fifty Thousand Dollars ($50,000.00) (the "Purchase Price"). CLOSING. (a) Unless the parties agree that the closing shall take place at some other time and place, the closing shall take place at the office of South Eastern Utah Title Company, whose address is 117 S. Main, Room 118, Monticello, Utah, at 10:00 o'clock a.m. on the 14th day of March, 1996. (b) At the closing, Seller shall deliver to Purchaser (i) a -1- general warranty deed in the form of Exhibit B attached hereto, and (ii) a 1970 ALTA Form B owner's policy of title insurance showing title to be marketable and to be vested in Purchaser at the closing. (c) At the closing, Purchase shall pay the Purchase Price to Seller by certified or cashier's check or by wire transfer to Seller's account. (d) Purchaser shall pay all recording fees and documentary transfer taxes. Real property taxes shall be prorated as of the date of the exercise of the option. TITLE. Seller warrants that he is in possession of the Property, that he has the right to enter into this Agreement, that he knows of no other person claiming any interest in the Property, and that the Property is free from all liens and encumbrances, except liens for property taxes not yet due and payable. Seller warrants and will defend title to the Property against all persons whomsoever. GRAZING RIGHTS. Seller agrees that from time to time, upon Purchaser's request made within two (2) years after the date of this Purchase Agreement, Seller shall take all steps necessary to relinquish or cause to be relinquished all grazing rights, Federal, State, or private, held by Seller or by Wilcox Ranches, a partnership, on the Property and on the additional lands more particularly shown on the map set out in Exhibit A attached hereto and incorporated by reference herein. STOCK POND. Purchaser acknowledges the existence of a stock pond constructed by Seller in Section 36, Township 30 South, Range 25 East, SLB&M. When earth-moving equipment becomes available to Purchaser (which Purchaser estimates shall occur within ____ months from the date of this Purchase Agreement), Purchaser shall, at no cost to Seller, assist Seller in the construction of a replacement stock pond of similar size and character on other land owned or controlled by Seller. INUREMENT. All covenants, conditions, limitations, and provisions herein contained apply to and are binding upon the parties hereto, their heirs, representatives, successors, and assigns. MODIFICATION. No modification, variation, or amendment of this Agreement shall be effective unless the modification, variation, or amendment is in writing and is signed by Seller and Purchaser. WAIVER. No waiver of any breach or default under this -2- Agreement shall be effective unless the waiver is in writing and signed by the party against whom the waiver is claimed. No waiver of any breach or default shall be deemed to be a waiver of any other or subsequent breach or default. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement of the parties and, except as herein expressly provided, supersedes all previous and contemporaneous agreements, representations, warranties, or understandings, written or oral. CONSTRUCTION. The paragraph headings are for convenience only, and shall not be used in the construction of this Agreement. GOVERNING LAW. The formation, interpretation, and performance of this Agreement shall be governed by the law of the state of Utah. ADDITIONAL DOCUMENTS. Seller will provide Purchaser with such additional documents as may be necessary to carry out the purposes of this Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. SELLER: /s/ Michael L. Wilcox ----------------------------------- Michael L. Wilcox PURCHASER: SUMMO USA CORPORATION By: /s/ Gregory A. Hahn ------------------------------- Gregory A. Hahn President -3- STATE OF Utah ) --------------- ) ss: County of San Juan ) --------------- The foregoing instrument was acknowledged before me this 14th day of March, 1996, by Michael L. Wilcox, the person named in and who executed the foregoing instrument. /s/ Jean L. Pehrson ------------------------------------ Notary Public [STAMP] Residing at Monticello, Utah ------------------------------------ 84535 ------------------------------------ My Commission Expires: 4-20-97 - ---------------------- [SEAL] STATE OF Colorado ) ---------------- County of Jefferson ) ss: ----------------) The foregoing instrument was acknowledged before me this 20 day of February, 1996, by Gregory A. Hahn as President of Summo USA Corporation, a Colorado corporation, the corporation named in and that executed the foregoing instrument, on behalf of the corporation. /s/ Michelle Hebert ------------------------------------ Notary Public Residing at Lakewood CO ------------------------------------ 80227 ------------------------------------ My Commission Expires: 3-18-99 - ---------------------- [SEAL] -4- EXHIBIT B WARRANTY DEED MICHAEL L. WILCOX and JOAN I. WILCOX ("Grantors"), whose address is P.O. Box 202, La Sal, UT 84530, for the consideration of Ten Dollars ($10.00) and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, convey and warrants to SUMMO USA CORPORATION, a Colorado corporation ("Grantee"), whose address is 1776 Lincoln St., Suite 1100, Denver, CO 80203, the real property more particularly described as follows: Township 31 South, Range 25 East, SLB&M San Juan County, Utah -------------------------------------------------------------- Section 1: Lots 1, 2, 3, and 4 (also known as N 1/2 N 1/2) Township 31 South, Range 26 East, SLB&M San Juan County, Utah -------------------------------------------------------------- Section 6: NW 1/4 NW 1/4 together with all appurtenances and water rights incident thereto, and all improvements and personal property thereon, subject to mineral reservations of record (the "Property"1). TO HAVE AND TO HOLD the Property to Grantee, its successors and assigns. IN WITNESS WHEREOF, Grantors have executed this Warranty Deed this _____ day of February, 1996. /s/ Michael L. Wilcox ------------------------------------ Michael L. Wilcox /s/ Joan I. Wilcox ------------------------------------ Joan I. Wilcox B-1 STATE OF _______________ ) ) ss: County of ______________ ) The foregoing instrument was acknowledged before me this _____ day of February, 1996, by Michael L. Wilcox and Joan I. Wilcox, the persons named in and who executed the foregoing instrument. ------------------------------------ Notary public Residing at ------------------------------------ ------------------------------------ My Commission Expires: - ---------------------- [SEAL] B-2 TO: Karen Melfi From: Jean, South Eastern Utah Title Company RE: Mike & Joan Wilcox Here's the settlement statement and our escrow agreement. Please look them over to make sure everything to Okay! Any questions or if I need to change anything please give me a call - 801-587-2588 Thanks, Jean P.S. No deed from Wilcox Ranch yet! Hopefully next week! EX-10.28 37 EXHIBIT 10.28 Exhibit 10.28 SURFACE AGREEMENT This Agreement, effective as of the 10th day of June, 1996, is between Joe Henry Pacheco and Susie Pacheco, husband and wife: James Pacheco and Libbie Pacheco, husband and wife; Rodolfo Rodriguez and Gladys Rodriguez, husband and wife; Jerry Sanchez and Mary Sanchez, husband and wife; Henry Atencio and Virginia Atencio, son and mother; Nelson Pacheco and Vickie Pacheco, husband and wife; Johnny Gurule; Gilbert Pacheco and Kathy Pacheco, husband and wife ("Surface Owner", whether one or more), whose address is c/o Nelson Pacheco, 9833 4th St. N.W. #B, Albuquerque, New Mexico 87114 and SUMMO USA CORPORATION ("SUMMO"), whose address is 1776 Lincoln St., Suite 900, Denver, Colorado 80203. RECITALS Surface Owner represents that he is the owner of and is in possession of the surface estate in certain lands in Taos County, New Mexico (the "Property"), more particularly described in Exhibit A attached hereto and incorporated by reference herein. SUMMO is the owner of certain unpatented mining claims (the "Claims") located on the reserved mineral estate underlying the Property. NOW THEREFORE, in consideration of Ten Dollars ($10.00) in hand paid to Surface Owner, the receipt and sufficiency of which are hereby acknowledged, and further in consideration of the mutual covenant, agreements, and promises herein contained, the parties hereto agree as follows: RIGHT TO USE SURFACE: Surface Owner grants to SUMMO the sole and exclusive right to use the Property for the purpose of exploring, developing, and mining the Claims. TERM: The term of this Agreement shall be for twenty (20) years from the date hereof and so long thereafter as SUMMO holds any interest in the Claims, unless SUMMO sooner surrenders this Agreement. OPERATIONS: (a) During the term of this Agreement, SUMO shall have unrestricted access to the Property, and shall have the right (i) to explore, develop, and mine from the Claims by means of operations on the Property, (ii) to deposit ores, water, waste, and materials from the Claims or from other mining properties within a two-mile perimeter of the Property, and to use any part of the Property for waste dumps and tailings disposal areas, (iii) to conduct on the Property general mining, 1 milling, processing, and related operations respecting the Claims and other mining properties, and to use any part of the Property for any purposes incident to such operation, and (iv) to erect, construct, use, and maintain on the Property such roads, buildings, structures, machinery, equipment, personal property, fixtures, and improvements as may be necessary or convenient for the conduct of SUMMO's operations. (b) SUMMO shall conduct all operations on the Property in a good and workmanlike manner and in accordance with accepted mining practice. (c) SUMMO may use any mining method, whether or not the method is in general use at the time of the execution of this Agreement, including, without limitation, underground mining (including methods, such as block caving, which result in the disturbance or subsidence of the surface), surface mining (including strip mining, open pit mining, and dredging), and in situ mining (including solution mining, leaching, gasification, and liquification). Surface Owner shall be notified within ten (10) days if SUMMO decides to use solution mining, leaching, gasification, and liquification methods. (d) SUMMO shall comply with all laws and regulations governing its operations on the property. If this Agreement is inconsistent with or contrary to any law or regulation, the law or regulation shall control and this Agreement shall be deemed to be modified accordingly. (e) SUMMO may use existing roads, if any, on the Property, and may construct and maintain at its own expense any additional roads reasonably necessary or convenient for the conduct of SUMMO's operations on the Claims or on other mining properties. SUMMO will endeavor to construct any such additional roads on the Property at a location agreeable to Surface owner and SUMMO. All additional roads shall be constructed and maintained in such manner to bear the traffic necessary to SUMMO's operations. Surface Owner may use any additional road so long as his use does not interfere with SUMMO's use. Upon notice to SUMMO given within thirty (30) days after the termination of this Agreement, Surface Owner may require that all or any part of any additional road be reclaimed. (f) If SUMMO finds it necessary to cut any fence on the Property for the purpose of passage, SUMMO shall, prior to cutting the fence, install and brace heavy "corner-type" posts at each end of the opening to be made, to which the fence wire shall be securely fastened in such manner as to prevent sagging. Summo shall install a gate of a quality acceptable to Surface Owner in each opening. If SUMMO desires that opening provide uninterrupted ingress and egress, it may in the alternative install 2 cattle guards of sufficient size and substance to bear the type of traffic necessary for its operations and capable of turning all domestic livestock. (g) SUMMO shall conduct no surface operations within three hundred (300) feet of the main dwelling house, if any, now located on the Property without first obtaining the written consent of Surface Owner. (h) Neither SUMMO nor its agents, employees, contractors, or subcontractors, nor their agents or employees, shall hunt or fish on the Property, nor shall any of them carry onto the property firearms or other equipment designed or adapted for such purposes. (i) SUMMO shall advise Surface Owner prior to final mailing facility site selections in order that Surface Owner may clear timber from the area before construction commences. COMPENSATION: SUMMO shall pay compensation to Surface Owner on the dates and in the amounts as follows: Signing bonus: $8,000.00, payable at signing. Rentals: Amount Date ------ ---- $5,600.00 Upon signing $5,600.00 December 30, 1996. $5,600.00 December 30, 1997. $7,200.00 December 30, 1998 and 1999. $8,400.00 December 30, 2000 Permanent Impact Compensation: At such time that SUMMO commences the permitting for the construction of a milling project, a one-time payment of $625.00/acre (or $325,000.00) will be made. If SUMMO has not diligently begun this permitting phase by December 30, 2001, this Agreement shall terminate. At the point when the one time payment is made, rentals shall increase as follows: Amount Date ------ ---- $12,000.00 December 30, 2001, 2002, and 2003 $13,600.00 December 30, 2004 and 2005. $22,000.00 December 30, 2006 $26,800.00 December 30, 2007, 2008, 2009, 2010 and 2011 3 $32,000.00 December 30, 2012, 2013, 2014, 2015 and 2016 $44,445.00 December 30, 2017, and each year thereafter. DAMAGES: (a) SUMMO shall pay to Surface Owner, as compensation for any crops or grasses damaged or destroyed, One Hundred Fifty Dollars ($150.00) for each exploration drill hole drilled on the Property. Drill hole compensation shall be paid within 30 days of the end of the month in which the holes are drilled. (b) Prior to the payment of the December 30, 2001 lump sum payment, SUMMO shall pay compensation for the use or damage to the Property, not already remunerated by the drill hole compensation, the amount of $500.00 for each acre damaged. (c) In addition to the compensation provided for in subparagraphs (a) and (b), above, SUMMO shall pay Surface Owner reasonable compensation for any damage to livestock or to fences, buildings, or other tangible improvements on the Property resulting from SUMMO's operations. PROTECTION FROM LIENS AND DAMAGES: SUMMO shall keep the Property free of liens for labor performed or materials or merchandise furnished for use on the Property under this Agreement, and shall hold Surface owner harmless from all costs, loss, or damage which may result from any work or operations of SUMMO or its occupancy of the property. AFTER-ACQUIRED INTEREST IN LOT 7: If during the term of this Agreement, Surface Owner acquires an interest in all or any part of the following described Property: TOWNSHIP 23 NORTH, RANGE 11 EAST, N.M.P.M. TAOS COUNTY, NEW MEXICO Section 17: Lot 7 the interest shall, at SUMMO's option, be deemed a part of the Property for the purposes of this Agreement, and the Compensation described above increased proportionately. Summo's option shall be exercised, if at all, within 20 years after the date of execution of this Agreement by all parties. ENVIRONMENTAL INDEMNITY: SUMMO shall indemnify, defend, and hold Surface Owner harmless for all claims, costs, loss, or damage resulting from (i) the presence of hazardous materials on the Property or the release of hazardous materials from the Property after the date of this Agreement and (ii) any violation after the date of this Agreement of any federal, state, or local law, rule, regulation, order, or ordinance regarding the protection of the environment or the remediation or reclamation of any 4 portion of the property. TERMINATION AND SURRENDER: (a) If SUMMO fails to comply with any of the provisions of this Agreement, and if SUMMO does not initiate and diligently pursue steps to correct the default within thirty (30) days after the notice has been given to it by Surface Owner specifying with particularity the nature of the default, then upon the expiration of the thirty-day period, all rights of SUMMO under this Agreement (except as provided in the paragraphs entitled "Removal of property" and "Access") shall terminate, and all liabilities and obligations of SUMMO (except liabilities existing on the date of termination) shall terminate. If SUMMO by notice to Surface Owner disputes the existence of a default, then this Agreement shall not terminate unless SUMMO does not initiate and diligently pursue steps to correct the default within thirty (30) days after the existence, of a default has been determined by decision of a court or arbitrators, or otherwise. (b) Subject to the right of Surface Owner to terminate this Agreement as provided in the foregoing subparagraph (a), controversy between the parties hereto shall not interrupt performance of this Agreement or the continuation of operations hereunder. In the event of any controversy, SUMMO may continue operations hereunder and shall make the payments provided for herein notwithstanding the existence of the controversy. Upon the resolution of the controversy, such payments or restitutions shall be made as required by the terms of the decision of the court or arbitrators, or otherwise. (c) SUMMO may at any time terminate this Agreement as to all or any part of the property by delivering to Surface owner or by filing for record in the appropriate office (with a copy to Surface Owner) a good and sufficient Surrender of this Agreement or a Partial Surrender describing that portion of the Property as to which this Agreement is surrendered. Upon mailing the Surrender or Partial Surrender to Surface owner or to the appropriate office, all rights of SUMMO under this Agreement with respect to the portion of the Property as to which this Agreement is terminated (except as provided in the paragraphs entitled "Removal of Property" and "Access") shall terminate and all liabilities and obligations of SUMMO with respect to the portion of the property as to which this Agreement is terminated (except liabilities existing on the date of termination) shall terminate. REMOVAL OF PROPERTY: For a period of six (6) months after the termination of this Agreement, SUMMO shall have the right to remove from the Property all buildings, structures, machinery, equipment, personal property, fixtures, and improvements owned by SUMMO or erected or placed on or in the Property by SUMMO. Any broken or stockpiled ore, minerals, concentrates, or other products, dumps, tailings, and residue remaining on the Property shall be left in as neat, safe, and sightly a condition as possible. Upon termination of this Agreement, SUMMO shall dispose 5 of all rubbish, junk, and unused materials, and shall leave the Property, and all buildings, structures, machinery, equipment, personal property, fixtures, and improvements remaining on the Property, in a neat and safe condition. SUMMO may keep one or more watchmen on the Property during the six-month period. An equitable rental, consistent with then current rental rates, shall be agreed on and paid to Surface Owner during the time in which one or more watchmen occupy the Property. ACCESS: For as long as necessary after termination of this Agreement, SUMMO shall have the right of access to and across the Property for reclamation purposes, and rent shall be paid at the rate that is foregoing at that time. NOTICES: All notices and other communications to either party shall be in writing and shall be sufficiently given if delivered in person or sent by certified or registered mail, return receipt requested, addressed as hereinafter set forth. Any notice given by or to Nelson Pacheco, with a copy to Gilbert Pacheco, shall be notice by or to all Surface Owners. Notices given by mail shall be deemed delivered as of the date of mailing. Until a change of address is communicated as indicated above, all notices to Surface Owner shall be addressed: Nelson Pacheco 9833 4th St. N.W. #B Albuquerque, New Mexico 87114 with a copy to: Gilbert Pacheco 2610 Westchester Dr. Denver, Colorado 80221 and all notices to SUMMO shall be addressed: Greg Hahn, President SUMMO USA CORPORATION 1776 Lincoln Street, Suite 900 Denver, Colorado 80203 ASSIGNMENT: The rights of either party hereunder may be assigned in whole or in part by providing written notice of the assignment to the non-assigning party. A fully executed memorandum of assignment in recordable form shall be delivered to the non-assigning party by the assigning party within ten (10) days after the assignment takes effect. 6 INDEMNIFICATION: SUMMO shall hold Surface Owner free from all costs, loss, or damage which may result from any work or operations of SUMMO or its occupancy of the Property. INSURANCE: SUMMO shall carry at all times during the term of this Agreement worker's compensation and other insurance required by state laws and mining regulations, or SUMMO may self-insure as to such matters if it qualifies as a self-insurer under the appropriate laws and regulations. Copies of insurance certificates will be provided to Surface Owner by SUMMO. PERFORMANCE: SUMMO agrees that whenever possible it shall use its best efforts to obtain labor from the local area. BANKRUPTCY: In the event that SUMMO enters into bankruptcy proceedings, it shall provide Surface Owner with written notification by of such within five days. DISPUTE RESOLUTION: All disputes arising under or in connection with this Agreement which cannot be resolved by agreement between the parties shall be resolved in accordance with applicable law. INUREMENT: All covenants, conditions, limitations, and provisions herein contained apply to and are binding upon the parties hereto, their heirs, representatives, successors, and assigns. MODIFICATION: No modification, variation, or amendment of this Agreement shall be effective unless the modification, variation, or amendment is in writing and is signed by Surface Owner and SUMMO. WAIVER: No waiver of any breach or default under this Agreement shall be effective unless the waiver is in writing and signed by the party against whom the waiver is claimed. No waiver of any breach or default shall be deemed to be a waiver of any other or subsequent breach or default. ENTIRE AGREEMENT: This Agreement sets forth the entire agreement of the parties and, except as herein expressly provided, supersedes all previous and contemporaneous agreements, representations, warranties, or understandings, written or oral. CONSTRUCTION: The paragraph headings are for convenience only, and shall not be used in the construction of this Agreement. The term "Surface Owner" shall be deemed to be singular or plural, and shall be deemed to be masculine or feminine, or both, or neuter, whenever the construction of the Agreement so requires. GOVERNING LAW: The formation, interpretation, and performance of this Agreement shall be governed by the law of the State of New Mexico. 7 INVALIDITY: The invalidity of any provision of this Agreement shall not affect the enforceability of any other provision of this Agreement. COUNTERPARTS: This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original. If any person named as one of the Surface owners does not execute this Agreement, it nevertheless shall be binding upon those persons executing it. ADDITIONAL DOCUMENTS: Surface Owner will provide SUMMO with such additional documents as may be necessary to carry out the purposes of this Agreement. If conditions change by reason of conveyances, assignments, or other matters relating to the title to or description of the Property, Surface Owner and SUMMO shall execute amendments of this Agreement and the Short Form of Agreement, and any other documents which may be necessary to reflect such changed conditions. The Short Form of Agreement shall not supersede the long form of Surface Agreement. OTHER: Surface Owner will have the opportunity to buy or bid on buildings and other equipment or machinery upon termination of the Agreement. SUMMO shall hold regular briefings with Surface Owner, or representatives, prior to site selections to discuss site plans and other items pertinent to the Agreement. Upon consent of SUMMO, Surface Owner shall have the right to construct or make improvements to the Property as long as such improvements do not interfere with SUMMO'S operations. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. - ---------------------------------- ----------------------------------- JOE HENRY PACHECO SUSIE PACHECO - ---------------------------------- ----------------------------------- JAMES PACHECO LIBBIE PACHECO - ---------------------------------- ----------------------------------- RODOLFO RODRIGUEZ GLADYS RODRIGUEZ - ---------------------------------- ----------------------------------- JERRY SANCHEZ MARY SANCHEZ 8 ADDITIONAL DOCUMENTS: Surface Owner will provide SMO with such additional documents as may be necessary to carry out the purposes of this Agreement. If conditions change by reason of conveyances, assignments, or other matters relating to the title to or description of the Property, Surface Owner and SUMMO shall execute amendments of this Agreement and the Short Form of Agreement, and any other documents which may be necessary to reflect such changed conditions. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. /s/ Joe Henry Pacheco /s/ Susie Pacheco - ---------------------------------- ----------------------------------- JOE HENRY PACHECO SUSIE PACHECO /s/ James Pacheco /s/ Libbie Pacheco - ---------------------------------- ----------------------------------- JAMES PACHECO LIBBIE PACHECO /s/ Rodolfo Rodriguez /s/ Gladys Rodriguez - ---------------------------------- ----------------------------------- RODOLFO RODRIGUEZ GLADYS RODRIGUEZ /s/ Jerry Sanchez /s/ Mary Sanchez - ---------------------------------- ----------------------------------- JERRY SANCHEZ MARY SANCHEZ /s/ Henry Atencio /s/ Virginia Atencio - ---------------------------------- ----------------------------------- HENRY ATENCIO VIRGINIA ATENCIO /s/ Nelson Pacheco /s/ Vickie Pacheco - ---------------------------------- ----------------------------------- NELSON PACHECO VICKIE PACHECO /s/ Gilbert Pacheco /s/ Kathy Pacheco - ---------------------------------- ----------------------------------- GILBERT PACHECO KATHY PACHECO /s/ Johnny Gurule - ---------------------------------- JOHNNY GURULE 8 SUMMO USA CORPORATION By: /s/ Gregory A. Hahn -------------------------------- Gregory A Hahn, President 9 STATE OF NEW MEXICO ) ) ss: County of Bernalillo) The foregoing instrument was acknowledged before me this 26 day of September, 1996, by JOE HENRY and SUSIE PACHECO, the persons named in and who executed the foregoing instrument. /s/ Sylvia Garcia ----------------------------------- Notary Public My Commission Expires: 1/31/97 --------------------------------- STATE OF NEW MEXICO) ) ss: County of Taos ) The foregoing instrument was acknowledged before me this 15th day of September, 1996, by JAMES PACHECO and LIBBIE PACHECO, the persons named in and who executed the foregoing instrument. /s/ Elberta Rodriguez ----------------------------------- Notary Public My Commission Expires: 6/17/97 --------------------------------- STATE OF NEW MEXICO) ) ss: County of Taos ) The foregoing instrument was acknowledged before me this 15th day of September, 1996, by RODOLFO RODRIGUEZ and GLADYS RODRIGUEZ, the persons named in and who executed the foregoing instrument. /s/ Elberta Rodriguez ----------------------------------- Notary Public My Commission Expires: 6/17/97 --------------------------------- 10 STATE OF NEW MEXICO) ) ss: County of Taos ) The foregoing instrument was acknowledged before me this 15th day of September, 1996, by JERRY SANCHEZ and MARY SANCHEZ, the persons named in and who executed the foregoing instrument. /s/ Elberta Rodriguez ----------------------------------- Notary Public My Commission Expires: 6/17/97 --------------------------------- STATE OF NEW MEXICO) ) ss: County of Taos ) The foregoing instrument was acknowledged before me this 15th day of September, 1996, by HENRY ATENCIO and VIRGINIA ATENCIO, the persons named in and who executed the foregoing instrument. /s/ Elberta Rodriguez ----------------------------------- Notary Public My Commission Expires: 6/17/97 --------------------------------- STATE OF NEW MEXICO ) ) ss: County of Bernalillo) The foregoing instrument was acknowledged before me this 30 day of September, 1996, by NELSON PACHECO and VICKIE PACHECO, the persons named in and who executed the foregoing instrument. /s/ Sylvia Garcia ----------------------------------- Notary Public My Commission Expires: 1/31/97 --------------------------------- 11 STATE OF COLORADO ) ) ss: County of Adams ) The foregoing instrument was acknowledged before me this 3rd day of October, 1996, by GILBERT PACHECO and KATHY PACHECO, the persons named in and who executed the foregoing instrument /s/ Susan K. Novak ----------------------------------- Notary Public 7401 Federal Bldg Westminster, CO [NOTARY SEAL] My Commission Expires: 3/13/99 -------------------------------------- STATE OF NEW MEXICO) ) ss: County of Taos ) The foregoing instrument was acknowledged before me this 15th day of September, 1996, by JOHNNY GURULE, the person named in and who executed the foregoing instrument. /s/ Elberta Rodriguez ----------------------------------- Notary Public My Commission Expires: 6/17/97 --------------------------------- STATE OF COLORADO) ) ss: County of Denver ) The foregoing instrument was acknowledged before me this 4 day of October, 1996, by GREGORY A. HAHN, the President of SUMMO USA CORPORATION, on behalf of the corporation. /s/ Michelle Hebert ---------------------------------- Notary Public My Commission Expires: 3/18/99 --------------------------------- 12 EXHIBIT A PROPERTIES 100% interest in and to the following surface estate in Township 23 North, Range 11 East, Section 17, Taos County, New Mexico: PROPERTY OWNER ACREAGE -------- ----- ------- Lot 1 Joe Henry Pacheco and Susie Pacheco 65 Lot 2 James Pacheco and Libbie Pacheco 65 Lot 3 Gladys Rodriguez and Rodolfo Rodriguez 65 Lot 4 Mary Sanchez and Jerry Sanchez 65 Lot 5 Virginia Atencio and Henry Atencio 65 Lot 6 Nelson Pacheco and Vickie Pacheco 65 Lot 8 Johnny Gurule 65 Lot 9 Gilbert Pacheco and Kathy Pacheco 65 2 NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the premises and of the covenants and agreements herein contained the parties hereto covenant and agree as follows: 1. From the date hereof, and for so long as the Optionee shall be an employee of the Company, the Optionee shall have and be entitled to and the Company hereby grants to the Optionee an option to purchase all or any portion of SIXTY-SEVEN THOUSAND, FIVE HUNDRED (67,500) fully paid and non-assessable common shares (the "SHARES") of the Company from the treasury on or before APRIL 30, 2001 at the price of ONE DOLLAR AND FIFTY-ONE CENTS ($1.51) per share provided that: (a) no more than 25% of the Shares may be purchased on or before April 30, 1997; (b) no more than a total of 50% of the Shares may be purchased on or before April 30,1998; and (c) no more than a total of 75% of the Shares may be purchased on or before April 30, 1999. 2. The right to take up shares pursuant to the option herein granted is exercisable by notice in writing to the Company accompanied by a certified cheque in favour of the Company for the full amount of the purchase price of the shares being then purchased. When such payment is received, the Company covenants and agrees to issue and deliver to the Optionee share certificates in the name of the Optionee for the number of shares so purchased. 3. This is an option agreement only and does not impose upon the Optionee any obligation to take up and pay for any of the shares under option. 4. Subject to paragraph 5 hereof, the option herein granted shall cease and become null and void following the tenth day after which the Optionee ceases to act as an employee of the Company. 5. The Optionee hereby acknowledges that in the event the Optionee is an insider of the Company, the option herein granted may not be exercised in full or in part until this agreement has been approved by the members at a general meeting of the Company. 6. The Company hereby covenants that it will seek the approval of the members to any amendments to the incentive stock option herein granted, at the next general meeting of the company prior to exercise thereof by the Optionee, in accordance with the requirements of The Toronto Stock Exchange, and the Optionee warrants that he will not exercise all or any portion of the subject option, if amended, until such approval is obtained. 7. If at any time during the continuance of this agreement, the parties hereto deem it necessary or expedient to make any alteration or addition to this agreement, they may do so by means of a written agreement between them which will be supplemental hereto and form part hereof and which may be subject to the approval of the securities regulatory bodies having jurisdiction. EX-10.29 38 EXHIBIT 10.29 EXHIBIT 10.29 DIRECTOR'S/EMPLOYEE INCENTIVE STOCK OPTION AGREEMENT (PLAN) THIS AGREEMENT is made as of the 26th day of March, 1996, BETWEEN: SUMMO MINERALS CORPORATION, a company duly incorporated under the laws of the Province of British Columbia, having its registered office at 860-625 Howe Street, Vancouver, B.C., V6C 2T6 (hereinafter called the "COMPANY") OF THE FIRST PART AND: GREGORY A. HAHN, of Suite 1100, 1776 Lincoln Street, Denver, Colorado, U.S.A. 80203 (hereinafter called the "OPTIONEE") OF THE SECOND PART. WHEREAS: A. the Optionee is a director and employee of the Company and requires as a condition of holding such position that the parties enter into this Incentive Stock Option Agreement on the terms and conditions hereinafter set forth; B. this incentive stock option is granted by the Company in reliance on the exemptions from registration and prospectus requirements contained in Sections 31(2)(l0) and 55(2)(9) of the SECURITIES ACT (British Columbia) and Sections 35(1)(19) and 72(1)(n) of the SECURITIES ACT (Ontario); C. the Company has been classified as a "Resource" company by the Vancouver Stock Exchange and as a "Non-Exempt" resource company by the Toronto Stock Exchange; D. the directors of the Company passed a resolution at their board meeting held January 15, 1996 implementing an Incentive Stock Option Plan (the "PLAN"), subject to shareholder ratification, a copy of which is attached hereto as "Schedule "A"; E. the option herein granted is subject to the terms and conditions of the Plan; 2 NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the premises and of the covenants and agreements herein contained the parties hereto covenant and agree as follows: 1. From the date hereof, and for so long as the Optionee shall be an employee of the Company, the Optionee shall have and be entitled to and the Company hereby grants to the Optionee, on the terms and conditions hereinafter set out, an option to purchase all or any portion of an aggregate of ONE HUNDRED AND TWENTY THOUSAND (120,000) fully paid and non-assessable common shares of the Company from the treasury on or before MARCH 25, 2001 at the price of ONE DOLLAR AND TEN CENTS ($1.10) per share. 2. The right to exercise the option herein granted is based upon the progress of permitting, financing and completion of construction of the Company's principal mining property situated near Moab, Utah, and known as the Lisbon Valley Project (the "PROJECT"), since the Optionee is part of senior management of the Company and in such position is materially responsible for bringing the Project into commercial production as a mine. 3. The Optionee shall have the right to purchase 30,000 shares of the Company subject to this agreement (the "FIRST TRANCHE") only if, on or before December 31, 1996, all material permits have been issued by the applicable federal, state, county and other regulatory bodies to allow the commencement of construction for the Project. 4. Whether or not the Optionee becomes entitled to purchase the First Tranche, the Optionee shall have the right to purchase an additional 40,000 shares of the Company subject to this agreement (the "SECOND TRANCHE") only if, on or before June 30, 1997, agreements have been entered into between the Company and third parties which, on completion, will provide financing for the completion of construction for the Project. 5. Whether or not the Optionee becomes entitled to purchase the First Tranche and/or the Second Tranche, the Optionee shall have the right to purchase an additional 50,000 shares of the Company subject to this agreement (the "THIRD TRANCHE") only if, on or before the first anniversary of the production of cathode copper at the Project, the Company has substantially satisfied all of the conditions established for the commercial completion of the Project by the senior lending institutions providing the financing. 6. The determination as to whether the conditions have been met for the purchase by the Optionee of each of the First Tranche, the Second Tranche and the Third Tranche shall be made by the directors of the Company, and prompt notice of such determination shall be given to the Optionee. 7. Notwithstanding that none or only some of the conditions set out in paragraphs 3, 4 and 5 hereof have been met, the Optionee shall become immediately entitled to purchase any unexercised part of the 120,000 shares subject to this agreement in the event that the Company undergoes a "Change of Control" (as that term is hereinafter defined). For the purposes of this Agreement, a "CHANGE OF CONTROL" shall be deemed to have occurred at any time following the effective date of this agreement when: (a) a person becomes a new control person (as that term is defined in the SECURITIES ACT of British Columbia) of the Company; or 3 (b) a majority of the directors elected at any annual or special general meeting of shareholders of the Company are not individuals nominated by the Company's then-incumbent board of directors. 8. The right to take up shares pursuant to the option herein granted is exercisable by notice in writing to the Company accompanied by a certified cheque in favour of the Company for the full amount of the purchase price of the shares being then purchased. When such payment is received, the Company covenants and agrees to issue and deliver to the Optionee share certificates in the name of the Optionee for the number of shares so purchased. 9. This is an option agreement only and does not impose upon the Optionee any obligation to take up and pay for any of the shares under option. 10. Subject to paragraph 11 hereof, the option herein granted shall cease and become null and void following the tenth day after which the Optionee ceases to act as a director of the Company. 11. The Optionee hereby acknowledges that in the event the Optionee is an insider of the Company, the option herein granted may not be exercised in full or in part until this agreement has been approved by the members at a general meeting of the Company. 12. The Company hereby covenants that it will seek the approval of the members to the incentive stock option herein granted, together with any amendments thereto, at the next general meeting of the Company prior to exercise thereof by the Optionee, in accordance with the requirements of The Toronto Stock Exchange, and the Optionee warrants that he will not exercise all or any portion of the subject option until such approval is obtained. 13. The Company hereby covenants and agrees to and with the Optionee that it will reserve in its treasury sufficient shares to permit the issuance and allotment of shares to the Optionee upon full exercise of the option herein granted. 14 If at any time during the continuance of this agreement, the parties hereto deem it necessary or expedient to make any alteration or addition to this agreement, they may do so by means of a written agreement between them which will be supplemental hereto and form part hereof and which may be subject to the approval of the securities regulatory bodies having jurisdiction. 15. This agreement may be executed in several parts in the same form and such parts as so executed will together constitute one original agreement, and such parts, if more than one, will be read together as if all the signing parties hereto had executed one copy of this agreement. 16. This agreement shall enure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, and successors. 17. Wherever the plural or masculine are used throughout this agreement, the same shall be construed as meaning singular or feminine or neuter or the body politic where the context of the parties thereto require. 18. The Optionee hereby acknowledges and confirms that he has obtained independent legal advice with respect to this agreement and understands and is aware that the securities of the 4 Company have not been registered under the Securities Act of 1933, as amended. The Optionee covenants with and to the Company that he will exercise the option herein granted, and dispose of the shares thereby acquired, only in accordance with all applicable laws. 19. In this agreement, all references to money are references to Canadian dollars. IN WITNESS WHEREOF the parties have hereunto caused these presents to be executed as of the day and year first above written. The COMMON SEAL of ) SUMMO MINERALS CORPORATION ) in the presence of: ) /s/ [Illegible] ) - ------------------------ ) c/s, Authorized signatory ) Corporate Sec'y SIGNED, SEALED AND DELIVERED ) by GREGORY A. HAHN ) in the presence of: ) /s/ Michelle Hebert ) /s/ Gregory A. Hahn - ------------------------ --------------------------------- Witness GREGORY A. HAHN This is page 3 to that certain Incentive Stock Option Agreement between SUMMO MINERALS CORPORATION and GREGORY A. HAHN dated as of the 26th day of March, 1996. Schedule "A" - -------------------------------------------------------------------------------- SUMMO MINERALS CORPORATION EMPLOYEE INCENTIVE STOCK OPTION PLAN 1. PURPOSE The purpose of the Employee Incentive Stock Option Plan (the "Plan") is to promote the profitability and growth of SUMMO MINERALS CORPORATION ("Summo") by facilitating the efforts of Summo and its subsidiaries to obtain and retain key individuals. The Plan provides an incentive for and encourages ownership of Summo's shares by its key individual so that they may increase their stake in Summo and benefit from increases in the value of Summo's shares. 2. ADMINISTRATION The Plan will be administered by a committee (the "Committee") of Summo's Board of Directors (the "Board"), which will consist of two or more members. All members of the Committee shall be non-employee directors who a "Disinterested Persons" with regard to Plan administration, within the meaning of Rule 16b-3 as promulgated and amended from time to time by the United States Securities and Exchange Commission. The Committee will be authorized, subject to the provisions of the Plan, to adopt such rules and regulations which it deems consistent with the Plan's provisions and, in its sole discretion, to designate options ("Options") to purchase shares of Summo pursuant to the Plan. The Committee may authorize one or more individuals of Summo to execute, deliver and receive documents on behalf of the Committee. 3. ELIGIBILITY All directors and officers and employees of Summo and its subsidiaries will be eligible to receive Options. The term "subsidiaries" for the purpose of the Plan will include Summo U.S.A. Corporation, which definition may be varied by the Committee to conform with the changing interests of Summo. Nothing in the Plan or in any option shall confer any right on any individual to continue in the employ of or association with Summo or its subsidiaries or will interfere in any way with the right of Summo or subsidiaries to terminate at any time the employment of a person who is an optionee ("Optionee") under an Option. 4. SHARES SUBJECT TO OPTION The shares to be optioned under the Plan will be authorized but unissued Common Shares without par value ("Shares") of Summo. At no time will more than 2,000,000 Shares be under option either pursuant to the Plan or pursuant to other incentive stock options issued by Summo. The number of Shares under option at any specific time to any one Optionee shall not exceed 5% of the issued and outstanding common share capital of Summo, subject to adjustment under Section 12 below. Shares subject to and not delivered under an Option which expires or terminates shall again be available for option under the Plan. The maximum number of Shares which may be issued pursuant to 2 the Plan shall not however exceed 2,000,000 Shares. 5. GRANTING OF OPTIONS The Committee may from time to time at its discretion, subject to the provisions of the Plan, determine those eligible individuals to whom Options will be granted, the number of Shares subject to such Options, the dates on which such Options are to be granted and the expiration of such Options. The Committee may, at its discretion, with respect to any Option, impose additional terms and conditions which are more restrictive on the optionee than those provided for in the Plan. Each Option will be evidenced by a written agreement between, and executed by, Summo and the individual containing such terms and conditions established by the Committee with respect to such Option and will be consistent with the provisions of the Plan. Options shall be granted to directors only according to the following formula: (i) Each director who was a member of the Board of Directors prior to January 1, 1996, shall upon adoption of this Plan be issued Options for that number of Shares necessary to bring the aggregate number of Shares underlying incentive options issued to such director to 150,000 Shares. The exercise price of such Options shall be determined as provided in Section 6 hereof. (ii) Each director who becomes a member of the Board of Directors after January 1, 1996, shall be granted Options for 50,000 Shares upon his or her election or appointment to the Board. The exercise price shall be determined as provided in Section 6 hereof. (iii) Upon the expiration date of any Options issued to a director (regardless of whether such Options were exercised on or prior to the expiration date), such director shall be issued Options for an additional 50,000 Shares. The exercise price shall be determined as provided in Section 6 hereof. The provisions of this paragraph (iii) shall also apply upon the expiration date of any other incentive stock options issued to a director if at the time of such expiration date, the director holds incentive options, including Options, for fewer than an aggregate of 50,000 Shares underlying such options, in which case the director shall be issued that number of Options necessary to bring the aggregate number of Shares underlying incentive options issued to such director at such time to 50,000 Shares. The calculation of incentive options held by any director shall not include any warrants to purchase Summo shares held by a director provided such warrants were issued by Summo in connection with securities offered by Summo. (iv) The foregoing formulas shall not be amended more than once every six months other than to comport with changes in the Internal Revenue Code, the Employee Retirement Income Security Act, or the rules thereunder. (v) Additional options may be granted to directors at the discretion of the Committee, 3 provided that no director may receive additional options while serving on the Committee if the receipt of such options would cause him to cease to be a Disinterested Person. 6. OPTION PRICE The price per Share at which Shares may be purchased upon the exercise of an Option (the "Option Price") will not be lower that the "market price" of the Shares on The Toronto Stock Exchange (the "TSE") at the time of grant. In the context of the Plan, "market price" means the closing price of Summo's shares on the TSE at the close of trading which immediately preceded the time that the option was granted. If the shares of Summo do not trade on such day, the "market price" shall be the average of the bid and ask prices on the previous trading day. 7. TERM OF OPTION The maximum term of any Option will be 10 years. The Option Price will be paid in full at the time of exercise of the Option and no Shares will be delivered until full payment is made. An Optionee will not be deemed the holder of the Shares subject to his Option until the Shares are delivered to him. 8. TRANSFERABILITY OF OPTIONS An Option may not be assigned. During the lifetime of an Optionee, the Option may be exercised only by the Optionee. 9. TERMINATION OF EMPLOYMENT Upon termination of employment for any reason except death or retirement or failure of reelection as a director or failure to be re-appointed an officer of Summo, an Optionee may, at any time within 30 days after the date of termination but not later than the date of expiration of the Option, exercise the Option to the extent the Optionee was entitled to do so on the date of termination. Any option or portions of Options of terminated individuals not so exercised will terminate and again be available for future Options under the Plan. A change of employment will not be considered a termination so long as the Optionee continues to be employed by Summo or its subsidiaries. 10. DEATH Notwithstanding any other provision of this Plan other than the maximum of 10 years provided for in Section 7, if any Optionee shall die holding an Option which has not been fully exercised, his personal representative, heirs or legatees may, at any time within 60 days of grant of probate of the will or letters of administration of the estate of the decedent or within one year after the date of such death, whichever is the lesser time, exercise the Option with respect to the unexercised balance of the Shares subject to the Option. 4 11. RETIREMENT Notwithstanding any other provision of this Plan, if any Optionee shall retire or terminate his employment with the consent of the Board under circumstances equating retirement, while holding an Option which has not been fully exercised, such Optionee may exercise the Option at any time during the unexpired term of the Option. 12. CHANGE IN SHARES In the event the authorized common share capital of Summo as presently constituted is consolidated into a lesser number of Shares or subdivided into a greater number of Shares, the number of Shares for which Options are outstanding will be decreased or increased proportionately as the case may be and the Option Price will be adjusted accordingly and the Optionee will have the benefit of any stock dividend declared during the period within which the said Optionee held his Option. Should Summo amalgamate or merge with any other company or companies (the right to do so being expressly reserved) whether by way of arrangement, sale of assets and undertakings or otherwise, then and in each such case the number of shares of the resulting corporation to which an Option relates will be determined as if the Option has been fully exercised prior to the effective date of the amalgamation or merger and the Option Price will be correspondingly increased or decreased, as applicable. 13. CANCELLATION AND RE-GRANTING OF OPTIONS The Committee may, with the consent of the Optionee, cancel any existing Option, and re-grant the Option at an Option Price determined in the same manner as provided in Section 6 hereof, subject to the prior approval of the TSE. 14. AMENDMENT OR DISCONTINUANCE The Board may alter, suspend or discontinue the Plan, but may not, without the approval of the shareholders of Summo and the TSE, may any alteration which would (a) increase the aggregate number of Shares subject to Option under the Plan except as provided in Section 12 or (b) decrease the Option Price except as provided in Section 12. Notwithstanding the foregoing, the terms of an existing Option may not be altered, suspended or discontinued without the consent in writing of the Optionee. 15. INTERPRETATION The Plan will be construed according to the laws of the Province of British Columbia. 16. LIABILITY No member of the Committee or any director, officer or employee of Summo will be personally liable for any act taken or omitted in good faith in connection with the Plan. EX-10.30 39 EXHIBIT 10.30 INCENTIVE STOCK OPTION AGREEMENT (PLAN) THIS AGREEMENT is made as of the 30th day of April, 1996, BETWEEN: SUMMO MINERALS CORPORATION, a company duly incorporated under the laws of the Province of British Columbia, having its registered office at 860-625 Howe Street, Vancouver, B.C., V6C 2T6 (hereinafter called the "Company") OF THE FIRST PART AND: MATTHEW J. MASON, of 860-625 Howe St. ---------------- ------------------------------------------------- Vancouver, BC V6C 2T6 ---------------------------------------------------------------------- (RESIDENTIAL ADDRESS, INCLUDING POSTAL (ZIP) CODE) (hereinafter called the "Optionee") OF THE SECOND PART. WHEREAS: A. the Optionee is a director of the Company and requires as a condition of holding such position that the parties enter into this Incentive Stock Option Agreement on the terms and conditions hereinafter set forth; B. this incentive stock option is granted by the Company in reliance on the exemptions from registration and prospectus requirements contained in Sections 31(2)(10) and 55(2)(9) of the SECURITIES ACT (British Columbia) and Sections 35(1)(19) and 72(1)(n) of the SECURITIES ACT (Ontario); C. the Company has been classified as a "Resource" company by the Vancouver Stock Exchange and as a "Non-Exempt" resource company by The Toronto Stock Exchange; D. the directors of the Company passed a resolution at their board meeting held January 15, 1996 implementing an Incentive Stock Option Plan (the "PLAN"), subject to shareholder ratification, a copy of which is attached hereto as "Schedule "A"; E. the option herein granted is subject to the terms and conditions of the Plan; 3 8. This agreement may be executed in several parts in the same form and such parts as so executed will together constitute one original agreement, and such parts, if more than one, will be read together as if all the signing parties hereto had executed one copy of this agreement. 9. This agreement shall enure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, and successors. 10. Wherever the plural or masculine are used throughout this agreement, the same shall be construed as meaning singular or feminine or neuter or the body politic where the context of the parties thereto require. 11. The Optionee hereby acknowledges and confirms that he has obtained independent legal advice with respect to this agreement and understands and is aware that the securities of the Company have not been registered under the Securities Act of 1933, as amended. The Optionee covenants with and to the Company that he will exercise the option herein granted, and dispose of the shares thereby acquired, only in accordance with all applicable laws. 12. In this agreement, all references to money are references to Canadian dollars. IN WITNESS WHEREOF the parties have hereunto caused these presents to be executed as of the day and year first above written. The COMMON SEAL of ) SUMMO MINERALS ) CORPORATION ) in the presence of: ) ) [illegible] ) - ----------------------------- ) c/s Authorized signatory ) SIGNED, SEALED AND DELIVERED ) by MATTHEW J. MASON ) in the presence of: ) [illegible] ) /s/ Matthew J. Mason - ----------------------------- ) ------------------------------------ Witness Matthew J. Mason This is page 3 to that certain Incentive Stock Option Agreement between SUMMO MINERALS CORPORATION and MATTHEW J. MASON dated as of the 30th day of April, 1996. Schedule "A" - -------------------------------------------------------------------------------- SUMMO MINERALS CORPORATION EMPLOYEE INCENTIVE STOCK OPTION PLAN 1. PURPOSE The purpose of the Employee Incentive Stock Option Plan (the "Plan") is to promote the profitability and growth of SUMMO MINERALS CORPORATION ("Summo") by facilitating the efforts of Summo and its subsidiaries to obtain and retain key individuals. The Plan provides an incentive for and encourages ownership of Summo's shares by its key individual so that they may increase their stake in Summo and benefit from increases in the value of Summo's shares. 2. ADMINISTRATION The Plan will be administered by a committee (the "Committee") of Summo's Board of Directors (the "Board"), which will consist of two or more members. All members of the Committee shall be non-employee directors who a "Disinterested Persons" with regard to Plan administration, within the meaning of Rule 16b-3 as promulgated and amended from time to time by the United States Securities and Exchange Commission. The Committee will be authorized, subject to the provisions of the Plan, to adopt such rules and regulations which it deems consistent with the Plan's provisions and, in its sole discretion, to designate options ("Options") to purchase shares of Summo pursuant to the Plan. The Committee may authorize one or more individuals of Summo to execute, deliver and receive documents on behalf of the Committee. 3. ELIGIBILITY All directors and officers and employees of Summo and its subsidiaries will be eligible to receive Options. The term "subsidiaries" for the purpose of the Plan will include Summo U.S.A. Corporation, which definition may be varied by the Committee to conform with the changing interests of Summo. Nothing in the Plan or in any option shall confer any right on any individual to continue in the employ of or association with Summo or its subsidiaries or will interfere in any way with the right of Summo or subsidiaries to terminate at any time the employment of a person who is an optionee ("Optionee") under an Option. 4. SHARES SUBJECT TO OPTION The shares to be optioned under the Plan will be authorized but unissued Common Shares without par value ("Shares") of Summo. At no time will more than 2,000,000 Shares be under option either pursuant to the Plan or pursuant to other incentive stock options issued by Summo. The number of Shares under option at any specific time to any one Optionee shall not exceed 5% of the issued and outstanding common share capital of Summo, subject to adjustment under Section 12 below. Shares subject to and not delivered under an Option which expires or terminates shall again be available for option under the Plan. The maximum number of Shares which may be issued pursuant to 2 the Plan shall not however exceed 2,000,000 Shares. 5. GRANTING OF OPTIONS The Committee may from time to time at its discretion, subject to the provisions of the Plan, determine those eligible individuals to whom Options will be granted, the number of Shares subject to such Options, the dates on which such Options are to be granted and the expiration of such Options. The Committee may, at its discretion, with respect to any Option, impose additional terms and conditions which are more restrictive on the optionee than those provided for in the Plan. Each Option will be evidenced by a written agreement between, and executed by, Summo and the individual containing such terms and conditions established by the Committee with respect to such Option and will be consistent with the provisions of the Plan. Options shall be granted to directors only according to the following formula: (i) Each director who was a member of the Board of Directors prior to January 1, 1996, shall upon adoption of this Plan be issued Options for that number of Shares necessary to bring the aggregate number of Shares underlying incentive options issued to such director to 150,000 Shares. The exercise price of such Options shall be determined as provided in Section 6 hereof. (ii) Each director who becomes a member of the Board of Directors after January 1, 1996, shall be granted Options for 50,000 Shares upon his or her election or appointment to the Board. The exercise price shall be determined as provided in Section 6 hereof. (iii) Upon the expiration date of any Options issued to a director (regardless of whether such Options were exercised on or prior to the expiration date), such director shall be issued Options for an additional 50,000 Shares. The exercise price shall be determined as provided in Section 6 hereof. The provisions of this paragraph (iii) shall also apply upon the expiration date of any other incentive stock options issued to a director if at the time of such expiration date, the director holds incentive options, including Options, for fewer than an aggregate of 50,000 Shares underlying such options, in which case the director shall be issued that number of Options necessary to bring the aggregate number of Shares underlying incentive options issued to such director at such time to 50,000 Shares. The calculation of incentive options held by any director shall not include any warrants to purchase Summo shares held by a director provided such warrants were issued by Summo in connection with securities offered by Summo. (iv) The foregoing formulas shall not be amended more than once every six months other than to comport with changes in the Internal Revenue Code, the Employee Retirement Income Security Act, or the rules thereunder. (v) Additional options may be granted to directors at the discretion of the Committee, 3 provided that no director may receive additional options while serving on the Committee if the receipt of such options would cause him to cease to be a Disinterested Person. 6. OPTION PRICE The price per Share at which Shares may be purchased upon the exercise of an Option (the "Option Price") will not be lower that the "market price" of the Shares on The Toronto Stock Exchange (the "TSE") at the time of grant. In the context of the Plan, "market price" means the closing price of Summo's shares on the TSE at the close of trading which immediately preceded the time that the option was granted. If the shares of Summo do not trade on such day, the "market price" shall be the average of the bid and ask prices on the previous trading day. 7. TERM OF OPTION The maximum term of any Option will be 10 years. The Option Price will be paid in full at the time of exercise of the Option and no Shares will be delivered until full payment is made. An Optionee will not be deemed the holder of the Shares subject to his Option until the Shares are delivered to him. 8. TRANSFERABILITY OF OPTIONS An Option may not be assigned. During the lifetime of an Optionee, the Option may be exercised only by the Optionee. 9. TERMINATION OF EMPLOYMENT Upon termination of employment for any reason except death or retirement or failure of re-election as a director or failure to be re-appointed an officer of Summo, an Optionee may, at any time within 30 days after the date of termination but not later than the date of expiration of the Option, exercise the Option to the extent the Optionee was entitled to do so on the date of termination. Any option or portions of Options of terminated individuals not so exercised will terminate and again be available for future Options under the Plan. A change of employment will not be considered a termination so long as the Optionee continues to be employed by Summo or its subsidiaries. 10. DEATH Notwithstanding any other provision of this Plan other than the maximum of 10 years provided for in Section 7, if any Optionee shall die holding an Option which has not been fully exercised, his personal representative, heirs or legatees may, at any time within 60 days of grant of probate of the will or letters of administration of the estate of the decedent or within one year after the date of such death, whichever is the lesser time, exercise the Option with respect to the unexercised balance of the Shares subject to the Option. 4 11. RETIREMENT Notwithstanding any other provision of this Plan, if any Optionee shall retire or terminate his employment with the consent of the Board under circumstances equating retirement, while holding an Option which has not been fully exercised, such Optionee may exercise the Option at any time during the unexpired term of the Option. 12. CHANGE IN SHARES In the event the authorized common share capital of Summo as presently constituted is consolidated into a lesser number of Shares or subdivided into a greater number of Shares, the number of Shares for which Options are outstanding will be decreased or increased proportionately as the case may be and the Option Price will be adjusted accordingly and the Optionee will have the benefit of any stock dividend declared during the period within which the said Optionee held his Option. Should Summo amalgamate or merge with any other Company or companies (the right to do so being expressly reserved) whether by way of arrangement, sale of assets and undertakings or otherwise, then and in each such case the number of shares of the resulting corporation to which an Option relates will be determined as if the Option has been fully exercised prior to the effective date of the amalgamation or merger and the Option Price will be correspondingly increased or decreased, as applicable. 13. CANCELLATION AND RE-GRANTING OF OPTIONS The Committee may, with the consent of the Optionee, cancel any existing Option, and re-grant the Option at an Option Price determined in the same manner as provided in Section 6 hereof, subject to the prior approval of the TSE. 14. AMENDMENT OR DISCONTINUANCE The Board may alter, suspend or discontinue the Plan, but may not, without the approval of the shareholders of Summo and the TSE, may any alteration which would (a) increase the aggregate number of Shares subject to Option under the Plan except as provided in Section 12 or (b) decrease the Option Price except as provided in Section 12. Notwithstanding the foregoing, the terms of an existing Option may not be altered, suspended or discontinued without the consent in writing of the Optionee. 15. INTERPRETATION The Plan will be construed according to the laws of the Province of British Columbia, 16. LIABILITY No member of the Committee or any director, officer or employee of Summo will be personally liable for any act taken or omitted in good faith in connection with the Plan. EX-10.31 40 EXHIBIT 10.31 EXHIBIT 10.31 INCENTIVE STOCK OPTION AGREEMENT (NON-PLAN) THIS AGREEMENT is made as of the 30th day of April, 1996, BETWEEN: SUMMO MINERALS CORPORATION, a company duly incorporated under the laws of the Province of British Columbia, having its registered office at 860-625 Howe Street, Vancouver, B.C., V6C 2T6 (hereinafter called the "Company") OF THE FIRST PART AND: MATTHEW J. MASON, of 860-625 Howe St. ----------------------------------- Vancouver, B.C. V6C 2T6 -------------------------------------------------------- (RESIDENTIAL ADDRESS, INCLUDING POSTAL (ZIP) CODE) (hereinafter called the "Optionee") OF THE SECOND PART. WHEREAS: A. the Optionee is a director or an employee of the Company and requires as a condition of holding such position that the parties enter into this Incentive Stock Option Agreement on the terms and conditions hereinafter set forth; B. this incentive stock option is granted by the Company in reliance on the exemptions from registration and prospectus requirements contained in Sections 31(2)(10) and 55(2)(9) of the SECURITIES ACT (British Columbia) and Sections 35(1)(19) and 72(1)(n) of the SECURITIES ACT (Ontario); and C. the Company has been classified as a "Resource" company by the Vancouver Stock Exchange and as a "Non-Exempt" resource company by The Toronto Stock Exchange (the "TSE"). NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the premises and of the covenants and agreements herein contained the parties hereto covenant and agree as follows: 1. From the date hereof, and for so long as the Optionee shall be an employee of the Company, the Optionee shall have and be entitled to and the Company hereby grants to the 2 Optionee an option to purchase all or any portion of EIGHTY-TWO THOUSAND, FIVE HUNDRED (82,500) fully paid and non-assessable common shares (the "SHARES") of the Company from the treasury on or before April 30, 2001 at the price of ONE DOLLAR AND FIFTY-ONE CENTS ($1.51) per share provided that: (a) no more than 25% of the Shares may be purchased on or before April 30, 1997; (b) no more than a total of 50% of the Shares may be purchased on or before April 30, 1998; and (c) no more than a total of 75% of the Shares may be purchased on or before April 30, 1999. 2. The right to take up shares pursuant to the option herein granted is exercisable by notice in writing to the Company accompanied by a certified cheque in favour of the Company for the full amount of the purchase price of the shares being then purchased. When such payment is received, the Company covenants and agrees to issue and deliver to the Optionee share certificates in the name of the Optionee for the number of shares so purchased. 3. This is an option agreement only and does not impose upon the optionee any obligation to take up and pay for any of the shares under option. 4. The option herein granted shall be non-transferable and non-assignable by the Optionee otherwise than by Will or the law of intestacy and the option may be exercised during the lifetime of the Optionee only by the Optionee. 5. If the Optionee should die while he is either a director or an employee of the Company the option herein granted may then be exercised by his legal heirs or personal representatives to the same extent as if the Optionee were alive and either a director or an employee of the Company for a period of six (6) months after the death of the Optionee but only for such shares as the Optionee was entitled to at the date of the death of the Optionee. 6. The Optionee represents and warrants that he is either a director or an employee of the Company or an affiliate thereof. Subject to paragraph 5 hereof, the option herein granted shall cease and become null and void following the tenth day after which the Optionee ceases to act as either a director or an employee of the Company. 7. The provisions of this agreement and the exercise of the rights hereinbefore granted to the Optionee are subject to the approvals of the British Columbia Securities Commission or, if listed thereon, the TSE and the Vancouver Stock Exchange; PROVIDED, HOWEVER, THAT in the event that such approvals are not obtained within 12 months of the date of this agreement, then this agreement shall from that date be null and void and of no further force and effect. 8. The Optionee hereby acknowledges that in the event the Optionee is an insider of the Company, the option herein granted may not be exercised in full or in part until this agreement has been approved by the members at a general meeting of the Company. 3 9. The Company hereby covenants that it will seek the approval of the members to the incentive stock option herein granted, together with any amendments thereto, at the next general meeting of the Company prior to exercise thereof by the Optionee, in accordance with the requirements of the TSE, and the Optionee warrants that he will not exercise all or any portion of the subject option until such approval is obtained. 10. In the event of any subdivision, consolidation or other change in the share capital of the Company while any portion of the option hereby granted is outstanding, the number of shares under option to the Optionee and the price thereof shall be deemed adjusted in accordance with such subdivision, consolidation or other change in the share capital of the Company. 11. The Company hereby covenants and agrees to and with the Optionee that it will reserve in its treasury sufficient shares to permit the issuance and allotment of shares to the Optionee in the event the Optionee exercises the option herein granted. 12. If at any time during the continuance of this agreement the parties hereto deem it necessary or expedient to make any alteration or addition to this agreement, they may do so by means of a written agreement between them which will be supplemental hereto and form part hereof and which will be subject to the approval of the Exchange and the members at a general meeting of the Company and/or any requirements of the securities regulatory bodies in effect at that time. 13. This agreement may be executed in several parts in the same form and such parts as so executed will together constitute one original agreement, and such parts, if more than one, will be read together and construed as if all the signing parties hereto had executed one copy of this agreement. 14. This agreement shall enure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, and successors. 15. Wherever the plural or masculine are used throughout this agreement, the same shall be construed as meaning singular or feminine or neuter or the body politic where the context of the parties thereto require. IN WITNESS WHEREOF the parties have hereunto caused these presents to be executed as of the day and year first above written. The COMMON SEAL of ) SUMMO MINERALS CORPORATION ) in the presence of: ) ) /s/ illegible ) - -------------------------- ) c/s Authorized signatory 4 SIGNED, SEALED AND DELIVERED ) by MATTHEW J. MASON ) in the presence of: ) ) /s/ illegible ) /s/ Matthew J. Mason - ---------------------------- ---------------------------- Witness Matthew J. Mason This is page 4 to that certain Incentive Stock Option Agreement between SUMMO MINERALS CORPORATION and MATTHEW J. MASON dated as of the 30th day of April, 1996. EX-10.32 41 EXHIBIT 10.32 EXHIBIT 10.32 INCENTIVE STOCK OPTION AGREEMENT (NON-PLAN) THIS AGREEMENT is made as of the 9th day of June, 1996, BETWEEN: SUMMO MINERALS CORPORATION, a company duly incorporated under the laws of the Province of British Columbia, having its registered office at 860-625 Howe Street, Vancouver, B.C., V6C 2T6 (hereinafter called the "Company") OF THE FIRST PART AND: GREGORY A HAHN of Suite 1100, 1776 Lincoln Street, Denver, Colorado, U.S.A. 80203 (hereinafter called the "Optionee") OF THE SECOND PART. WHEREAS: A. the Optionee is a director or an employee of the Company and requires as a condition of holding such position that the parties enter into this Incentive Stock Option Agreement on the terms and conditions hereinafter set forth; B. this incentive stock option is granted by the Company in reliance on the exemptions from registration and prospectus requirements contained in Sections 31(2)(10) and 55(2)(9) of the SECURITIES ACT (British Columbia) and Sections 35(1)(19) and 72(1)(n) of the SECURITIES ACT (Ontario); and C. the Company has been classified as a "Resource" company by the Vancouver Stock Exchange and as a "Non-Exempt" resource company by The Toronto Stock Exchange (the "TSE"). NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the premises and of the covenants and agreements herein contained the parties hereto covenant and agree as follows: 2 1. From the date hereof, and for so long as the Optionee shall be an employee of the Company, the Optionee shall have and be entitled to and the Company hereby grants to the Optionee an option to purchase all or any portion of FIFTY THOUSAND (50,000) fully paid and non-assessable common shares (the "Option Shares") of the Company from the treasury on or before June 9, 2001 at the price of TWO DOLLARS AND TEN CENTS ($2.10) per share provided that: (i) no more than 25% of the Option Shares may be purchased on or before June 9, 1997; (ii) no more than a total of 50% of the Option Shares may be purchased on or before June 9, 1998; and (iii) no more than a total of 75% of the Option Shares may be purchased on or before June 9, 1999. 2. The right to take up shares pursuant to the option herein granted is exercisable by notice in writing to the Company accompanied by a certified cheque in favour of the Company for the full amount of the purchase price of the shares being then purchased. When such payment is received, the Company covenants and agrees to issue and deliver to the Optionee share certificates in the name of the Optionee for the number of shares so purchased. 3. This is an option agreement only and does not impose upon the Optionee any obligation to take up and pay for any of the shares under option. 4. The option herein granted shall be non-transferable and non-assignable by the Optionee otherwise than by Will or the law of intestacy and the option may be exercised during the lifetime of the Optionee only by the Optionee. 5. If the Optionee should die while he is either a director or an employee of the Company the option herein granted may then be exercised by his legal heirs or personal representatives to the same extent as if the Optionee were alive and either a director or an employee of the Company for a period of six (6) months after the death of the Optionee, but only for such shares as the Optionee was entitled to at the date of the death of the Optionee. 6. The Optionee represents and warrants that he is either a director or an employee of the Company or an affiliate thereof. Subject to paragraph 5 hereof, the option herein granted shall cease and become null and void following the tenth day after which the Optionee ceases to act as an employee of the Company. 7. The provisions of this agreement and the exercise of the rights hereinbefore granted to the Optionee are subject to the approvals of the British Columbia Securities Commission or, if listed thereon, the TSE and the Vancouver Stock Exchange; PROVIDED, HOWEVER, THAT in the event that such approvals are not obtained within 12 months of the date of this agreement, then this agreement shall from that date be null and void and of no further force and effect. 3 8. The Optionee hereby acknowledges that in the event the Optionee is an insider of the Company, the option herein granted may not be exercised in full or in part until this agreement has been approved by the members at a general meeting of the Company. 9. The Company hereby covenants that it will seek the approval of the members to the incentive stock option herein granted, together with any amendments thereto, at the next general meeting of the Company prior to exercise thereof by the Optionee, in accordance with the requirements of the TSE, and the Optionee warrants that he will not exercise all or any portion of the subject option until such approval is obtained. 10. In the event of any subdivision, consolidation or other change in the share capital of the Company while any portion of the option hereby granted is outstanding, the number of shares under option to the Optionee and the price thereof shall be deemed adjusted in accordance with such subdivision, consolidation or other change in the share capital of the Company. 11. The Company hereby covenants and agrees to and with the Optionee that it will reserve in its treasury sufficient shares to permit the issuance and allotment of shares to the Optionee in the event the Optionee exercises the option herein granted. 12. If at any time during the continuance of this agreement the parties hereto deem it necessary or expedient to make any alteration or addition to this agreement, they may do so by means of a written agreement between them which will be supplemental hereto and form part hereof and which will be subject to the approval of the Exchange and the members at a general meeting of the Company and/or any requirements of the securities regulatory bodies in effect at that time. 13. This agreement may be executed in several parts in the same form and such parts as so executed will together constitute one original agreement, and such parts, if more than one, will be read together and construed as if all the signing parties hereto had executed one copy of this agreement. 14. This agreement shall enure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, and successors. 15. Wherever the plural or masculine are used throughout this agreement, the same shall be construed as meaning singular or feminine or neuter or the body politic where the context of the parties thereto require. 16. The Optionee hereby acknowledges and confirms that he has obtained independent legal advice with respect to this agreement and understands and is aware that the securities of the Company have not been registered under the Securities Act of 1933, as amended, and that the granting of this option is conditional upon it being exempt from the application of the Securities Act of 1933 and any applicable state laws. The Optionee covenants with and to the Company that he will exercise the option herein granted, and dispose of the shares thereby acquired, only in accordance with all applicable laws. 4 17. In this agreement, all references to money are references to Canadian dollars. IN WITNESS WHEREOF the parties have hereunto caused these presents to be executed as of the day and year first above written. The COMMON SEAL of ) SUMMO MINERALS CORPORATION ) in the presence of: ) /s/ illegible ) - ------------------------- ) c/s Authorized signatory ) SIGNED, SEALED AND DELIVERED ) by GREGORY A. HAHN ) in the presence of: ) ) /s/Michelle Hebert ) /s/Gregory A Hahn - ------------------------- -------------------------- Witness GREGORY A. HAHN This is page 4 to that certain Incentive Stock Option Agreement between SUMMO MINERALS CORPORATION and GREGORY A. HAHN dated as of the 9th day of June, 1996. EX-10.33 42 EXHIBIT 10.33 EXHIBIT 10.32 INCENTIVE STOCK OPTION AGREEMENT (NON-PLAN) THIS AGREEMENT is made as of the 9th day of June, 1996, BETWEEN: SUMMO MINERALS CORPORATION, a company duly incorporated under the laws of the Province of British Columbia, having its registered office at 860-625 Howe Street, Vancouver, B.C., V6C 2T6 (hereinafter called the "Company") OF THE FIRST PART AND: GREGORY A HAHN of Suite 1100, 1776 Lincoln Street, Denver, Colorado, U.S.A. 80203 (hereinafter called the "Optionee") OF THE SECOND PART. WHEREAS: A. the Optionee is a director or an employee of the Company and requires as a condition of holding such position that the parties enter into this Incentive Stock Option Agreement on the terms and conditions hereinafter set forth; B. this incentive stock option is granted by the Company in reliance on the exemptions from registration and prospectus requirements contained in Sections 31(2)(10) and 55(2)(9) of the SECURITIES ACT (British Columbia) and Sections 35(1)(19) and 72(1)(n) of the SECURITIES ACT (Ontario); and C. the Company has been classified as a "Resource" company by the Vancouver Stock Exchange and as a "Non-Exempt" resource company by The Toronto Stock Exchange (the "TSE"). NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the premises and of the covenants and agreements herein contained the parties hereto covenant and agree as follows: 2 1. From the date hereof, and for so long as the Optionee shall be an employee of the Company, the Optionee shall have and be entitled to and the Company hereby grants to the Optionee an option to purchase all or any portion of FIFTY THOUSAND (50,000) fully paid and non-assessable common shares (the "Option Shares") of the Company from the treasury on or before June 9, 2001 at the price of TWO DOLLARS AND TEN CENTS ($2.10) per share provided that: (i) no more than 25% of the Option Shares may be purchased on or before June 9, 1997; (ii) no more than a total of 50% of the Option Shares may be purchased on or before June 9, 1998; and (iii) no more than a total of 75% of the Option Shares may be purchased on or before June 9, 1999. 2. The right to take up shares pursuant to the option herein granted is exercisable by notice in writing to the Company accompanied by a certified cheque in favour of the Company for the full amount of the purchase price of the shares being then purchased. When such payment is received, the Company covenants and agrees to issue and deliver to the Optionee share certificates in the name of the Optionee for the number of shares so purchased. 3. This is an option agreement only and does not impose upon the Optionee any obligation to take up and pay for any of the shares under option. 4. The option herein granted shall be non-transferable and non-assignable by the Optionee otherwise than by Will or the law of intestacy and the option may be exercised during the lifetime of the Optionee only by the Optionee. 5. If the Optionee should die while he is either a director or an employee of the Company the option herein granted may then be exercised by his legal heirs or personal representatives to the same extent as if the Optionee were alive and either a director or an employee of the Company for a period of six (6) months after the death of the Optionee, but only for such shares as the Optionee was entitled to at the date of the death of the Optionee. 6. The Optionee represents and warrants that he is either a director or an employee of the Company or an affiliate thereof. Subject to paragraph 5 hereof, the option herein granted shall cease and become null and void following the tenth day after which the Optionee ceases to act as an employee of the Company. 7. The provisions of this agreement and the exercise of the rights hereinbefore granted to the Optionee are subject to the approvals of the British Columbia Securities Commission or, if listed thereon, the TSE and the Vancouver Stock Exchange; PROVIDED, HOWEVER, THAT in the event that such approvals are not obtained within 12 months of the date of this agreement, then this agreement shall from that date be null and void and of no further force and effect. 3 8. The Optionee hereby acknowledges that in the event the Optionee is an insider of the Company, the option herein granted may not be exercised in full or in part until this agreement has been approved by the members at a general meeting of the Company. 9. The Company hereby covenants that it will seek the approval of the members to the incentive stock option herein granted, together with any amendments thereto, at the next general meeting of the Company prior to exercise thereof by the Optionee, in accordance with the requirements of the TSE, and the Optionee warrants that he will not exercise all or any portion of the subject option until such approval is obtained. 10. In the event of any subdivision, consolidation or other change in the share capital of the Company while any portion of the option hereby granted is outstanding, the number of shares under option to the Optionee and the price thereof shall be deemed adjusted in accordance with such subdivision, consolidation or other change in the share capital of the Company. 11. The Company hereby covenants and agrees to and with the Optionee that it will reserve in its treasury sufficient shares to permit the issuance and allotment of shares to the Optionee in the event the Optionee exercises the option herein granted. 12. If at any time during the continuance of this agreement the parties hereto deem it necessary or expedient to make any alteration or addition to this agreement, they may do so by means of a written agreement between them which will be supplemental hereto and form part hereof and which will be subject to the approval of the Exchange and the members at a general meeting of the Company and/or any requirements of the securities regulatory bodies in effect at that time. 13. This agreement may be executed in several parts in the same form and such parts as so executed will together constitute one original agreement, and such parts, if more than one, will be read together and construed as if all the signing parties hereto had executed one copy of this agreement. 14. This agreement shall enure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, and successors. 15. Wherever the plural or masculine are used throughout this agreement, the same shall be construed as meaning singular or feminine or neuter or the body politic where the context of the parties thereto require. 16. The Optionee hereby acknowledges and confirms that he has obtained independent legal advice with respect to this agreement and understands and is aware that the securities of the Company have not been registered under the Securities Act of 1933, as amended, and that the granting of this option is conditional upon it being exempt from the application of the Securities Act of 1933 and any applicable state laws. The Optionee covenants with and to the Company that he will exercise the option herein granted, and dispose of the shares thereby acquired, only in accordance with all applicable laws. 4 17. In this agreement, all references to money are references to Canadian dollars. IN WITNESS WHEREOF the parties have hereunto caused these presents to be executed as of the day and year first above written. The COMMON SEAL of ) SUMMO MINERALS CORPORATION ) in the presence of: ) /s/ illegible ) - ------------------------- ) c/s Authorized signatory ) SIGNED, SEALED AND DELIVERED ) by GREGORY A. HAHN ) in the presence of: ) ) /s/Michelle Hebert ) /s/Gregory A Hahn - ------------------------- -------------------------- Witness GREGORY A. HAHN This is page 4 to that certain Incentive Stock Option Agreement between SUMMO MINERALS CORPORATION and GREGORY A. HAHN dated as of the 9th day of June, 1996. EX-10.34 43 EXHIBIT 10.34 EXHIBIT 10.34 ** Portions of this Exhibit Redacted ** [LETTERHEAD] BY FAX March 4, 1997 Mr. Gregory A. Hahn President and C.E.O. Summo Minerals Corporation 900 Denver Center Building 1776 Lincoln St. Denver, CO 80203 Re: Commitment - Lisbon Valley Copper Project (the "Project") $45 Million Financing Dear Mr. Hahn: We are pleased to inform you that we have received credit approval for the above referenced $45 million project financing facility (the "Facility"). This letter will serve as ING (US) Capital Corporation's ("ING Capital") commitment to underwrite $27.5 million of the Facility, subject to the terms and conditions set forth in the attached Definitive Term Sheet and completion of ING Capital's legal and technical due diligence. It is our understanding that the Facility's co-underwriter, Heller Financial, Inc. has also received the requisite credit approvals and will, under separate cover, confirm to you their firm commitment to underwrite $17.5 million of the Facility. As discussed, the attached Definitive Term Sheet incorporates the revisions agreed to by ING Capital, including the following: 1. The Ore Reserves will be increased to permit at least two additional years of production as a condition of Commercial Completion. 2. The Economic Test for Commercial Completion will require achieving the following Debt Coverage Ratios: Life of Loan at least 1.50 Life of Reserves at least 1.75 3. Following Commercial Completion, distributions of Cash Flow Participation will be permitted so long as there exist no events of default and the Debt Coverage Ratio is at least 1.50. We are at this time not able to commit to the $7.0 million hedging facility. We see this facility as being in the best long term interest of the Borrower. We propose to revisit this matter and to give it consideration within the next twelve months. ING GROUP 135 East 57h Street New York, New York 10022-2101 Telephone: (212) 446-1500 Fax: (212) 644-0428 Telex: TRT 177792 RCA INTL 238686 ITT INTL 428379 Mr. Gregory A. Hahn March 4,1997 Page 2 of 2 If you are in agreement with the foregoing and the terms and conditions provided for in the attached Definitive Term Sheet, please sign in the space provided below and return a signed copy to my attention prior to the close of business on March 7, 1997. Please be advised that the contents of this letter (including the attached Definitive Term Sheet) are confidential and may not be disclosed to any third party (other than your legal or accounting advisors) without the prior written consent of ING Capital and Heller. In addition, by signing below, you agree to jointly and severally indemnify and hold harmless ING Capital and each of its directors, officers, employees and affiliates (collectively, the "Indemnified Parties") from and against any damages, losses, claims, liabilities, demands, charges, suits, costs and expenses (including court costs and reasonable attorneys' fees and expenses) (collectively, the "Indemnifiable Costs"), which any Indemnified Parties may sustain, or to which any of the Indemnified Parties may be subject, or which in any way relate to or result from the Project, this letter, the attached Definitive Term Sheet or the financing contemplated thereby (other than those Indemnified Costs which result primarily from the gross negligence or willful misconduct of such Indemnified Parties). The provisions of this paragraph shall survive any termination of this letter or the attached Definitive Term Sheet. Again we are pleased to lead this transaction and very much look forward to working with you and your team on this exciting project. Sincerely, ING (U.S.) Capital Corporation /s/ Ricardo M. Campoy Ricardo M. Campoy Managing Director AGREED AND ACCEPTED AGREED AND ACCEPTED: this 5th day of March 1997 this 5th day of March 1997 on behalf of SUMMO MINERALS CORPORATION on behalf of SUMMO USA CORPORATION By: /s/ Gregory D. Hahn By: /s/ James D. Hahn ----------------------- --------------------- Name: Gregory D. Hahn Name: James D. Hahn ----------------------- --------------------- Title: President and CEO Title: V.P. Finance and CFO ----------------------- --------------------- cc: Mr. Mark Condon James H. Dunnett Hovey Kemp [LETTERHEAD] March 5, 1997 Summo Minerals Corporation Summo USA Corporation 900 Denver Center Building 1776 Lincoln Street Denver, CO 80203 Attn: Mr. Gregory A. Hahn Re: Commitment - Lisbon Valley Copper Project (the "Project") $45 Million Financing Dear Mr. Hahn: We are pleased to inform you that we have received credit approval for the above referenced $45 million project financing facility (the "Facility"). This letter will serve as Heller Financial Inc.'s ("Heller") commitment to underwrite $17.5 million of the Facility, subject to the terms and conditions set forth in the attached Definitive Term Sheet and completion of Heller's legal and technical due diligence. If you are in Agreement with the foregoing and the terms and conditions provided for in the attached Definitive Term Sheet presented by Heller and ING (U.S.) Capital Corporation ("ING Capital"), please sign in the space provided below and return a signed copy to my attention prior to the close of business on March 7, 1997. Please be advised that the contents of this letter (including the attached Definitive Term Sheet) are confidential and may not be disclosed to any third party (other than your legal or accounting advisers) without the prior written consent of Heller and ING Capital. In addition, by signing below, you agree to jointly and severally indemnify and hold harmless Heller and each of its directors, officers, employees and affiliates (collectively, the "Indemnified Parties") from and against any damages, losses, claims, liabilities, demands, charges, suits, costs and expenses (including court costs and reasonable attorneys' fees and expenses) (collectively, the "Indemnifiable Costs"), which any Indemnified Parties may sustain, or to which any of the Indemnified Parties may be subjected, or which in any way relate to or result from the Project, this letter, the attached Definitive Term Sheet or the financing contemplated thereby (other than those Indemnifiable Costs which result primarily from the gross negligence or willful misconduct of such Indemnifiable Parties). The provisions of this paragraph shall survive any termination of this letter or the attached Definitive Term Sheet. Mr. Gregory A. Hahn March 5, 1997 Page 2 Again, we are pleased to be taking part in this transaction and very much look forward to working with you and your team on this exciting project. Sincerely, HELLER FINANCIAL. INC. /s/ Mark S. Condon Mark S. Condon Vice President AGREED AND ACCEPTED: SUMMO MINERALS CORPORATION By: /s/ Gregory A. Hahn ----------------------------- Name: Gregory A. Hahn ----------------------- Title: President and CEO ----------------------- SUMMO USA CORPORATION By: /s/ James D. Frank ----------------------------- Name: James D. Frank ----------------------- Title: V.P. Finance and CFO ----------------------- cc: Ricardo M. Campoy DEFINITIVE TERM SHEET THE PROJECT: The development, construction, and operation of copper mining facilities within the mining claims at Lisbon Valley in east central Utah, as described in the October 1996 Update of Feasibility Study prepared by Roberts & Schaefer (the "Feasibility Study"). BORROWER: A newly formed special purpose company, as sole owner and operator of the Project. GUARANTORS: Summo USA Corporation, a US corporation, and; Summo Minerals Corporation, a Canadian corporation. AGENT & ING Capital. ARRANGER: UNDERWRITERS: ING Capital and Heller Financial, Inc. LENDERS: ING Capital and Heller Financial, Inc. and one or more financial institutions acceptable to the Underwriters, the Borrower, and the Guarantors. FACILITY: The Underwriters commit to provide their respective share for up to a $45.0 million senior credit facility as detailed below: ING Capital $27.5 million Heller Financial, Inc. $17.5 million EQUITY: The Borrower will place, in cash, a minimum of $13.2 million into the Proceeds Account to satisfy the Lenders that these funds are available for the Project prior to drawdown of the Facility. PURPOSE: Drawdowns to be used solely to fund expenditures identified in the following Sources and Uses: SOURCES: MILLION USES: MILLION ------------------- --------------------------------------- Equity 13.2 Construction Costs $42.0 Debt facility 45.0 Working Capital & Preprodn 4.6 Capitalized Interest & Fees 3.0 Contingency 3.6 ---- 53.2 Debt Service Reserve 5.0 ---- Total $58.2 Total $58.2 ----- ---- ----- ---- AVAILABILITY: The Facility will be drawn on the basis of an agreed Development and Operating Plan, each draw being no more frequently than monthly, and each draw to be approved/certified by the Independent Engineer. Page 1 of 9 FINAL No later than December 31, 2005. MATURITY: SCHEDULED Facility repayments shall be in quarterly installments REPAYMENTS: commencing six months after Commercial Completion, but not later than March 31, 1999. The anticipated repayment schedule (Exhibit I) is structured in recognition of the Project's currently projected Cash Available for Debt Service. MANDATORY Mandatory Repayments equal to the Prescribed Percentage of REPAYMENTS: Excess Cash Flow will be made quarterly within 45 days of quarter-end. Mandatory Repayments will be applied to Scheduled Repayments in their inverse order of maturity. Following achievement of Commercial Completion, the Prescribed Percentage will be 50%, except that, if the then Ore Reserves provide for a mine life of 24 months or more beyond Final Maturity, then, if the lower of the Debt Coverage Ratio and Historic Debt Coverage Ratio is between 1.5 and 2.0, the Prescribed Percentage for that quarter will be 25%, and if it is greater than 2.0, then 0%. VOLUNTARY The Borrower may prepay all or a portion of outstandings REPAYMENTS: without penalty, such prepayments to be applied in their inverse order of maturity. The Borrower will reimburse Lenders for funding costs associated with making repayments on non-interest rollover dates. EXCESS CASH Cash Available for Debt Service less Debt Service. FLOW: CASH AVAILABLE Gross revenue less all associated royalties, cash FOR DEBT production costs, taxes, non-discretionary capital SERVICE: expenditures, and working capital changes. DEBT SERVICE: Scheduled principal and interest payments. ORE RESERVES: Those ore reserves certified by the Independent Engineer as being proven and probable. CAPITAL Those expenses necessary for the development of the Project EXPENDITURES: and which will be more fully described in the Development Plan. DEBT COVERAGE Debt Coverage Ratio shall be the ratio of Cash Available RATIO: For Debt Service plus the balance in the Debt Service Reserve to Debt Service through the Facility's Final Maturity as projected under the Development and Operating Plan. Gross revenue will be calculated using the actual hedged price for all future hedged production, and the unhedged price for the balance. The unhedged price will be the lesser of (1) the average of the historic 12 monthly spot price, (2) the then spot price and (3) the average of the future 12 month LME forward price. Page 2 of 9 ** Portions of this Page Redacted ** HISTORIC DEBT Historic Debt Coverage Ratio shall be the ratio of Cash COVERAGE Available for Debt Service to Actual Debt Service (interest RATIO: due and scheduled principal due) over the prior four-quarter period to date of calculation. PROCEEDS All proceeds for project development derived from Equity ACCOUNT & and the Facility, operating cash flows, commodity hedges, PRIORITY: sales of assets, insurance payments, etc., will be deposited in the Borrower's Proceeds Account. During construction a construction sub-account will be operative. During the operating phase all transactions will be shifted to the operating sub-account. All disbursements from these sub-accounts will be made in the following priority: (i) taxes; (ii) project development costs, Contingency, and initial Debt Service Reserve; (iii) all operating and maintenance costs, working capital, and non-discretionary capital requirements; (iv) debt service; (v) top up of Debt Service Reserve (if deficient) or reimbursement to Summo of excess over its initial $5.0 million funding; (vi) reimbursement to Summo of unused Contingency amount; (vii) cash flow split to Underwriters and Summo; and (viii) discretionary expenditures. INTEREST RATE: LIBOR plus a margin of [**Redacted -- Confidential Treatment Sought**]% p.a. prior to Commercial Completion and [**Redacted -- Confidential Treatment Sought**]% p.a. following Commercial Completion. The Borrower may select interest periods of 1, 2, 3, or 6 months. Interest to be paid on the last day of each interest period, but at least quarterly. ACCEPTANCE A $[**Redacted -- Confidential Treatment Sought**] fee was FEE: paid to the Underwriters on the basis of the Guarantors' acceptance of the Definitive Term Sheet under cover letter dated December 26, 1996. With delivery of the Underwriters' firm commitment, this fee has been earned. AGENT FEE: $[**Redacted -- Confidential Treatment Sought**] p.a. will be paid to the Agent annually in advance at Closing and annually thereafter. ARRANGEMENT [**Redacted -- Confidential Treatment Sought**]% of the FEE: Facility to be paid at Closing to the Arranger (i.e. $[**Redacted -- Confidential Treatment Sought**]). FRONT END FEE: [**Redacted -- Confidential Treatment Sought**]% of the principal amount of the Facility, less the Acceptance Fee payable to the Underwriters at Closing (i.e. $[**Redacted -- Confidential Treatment Sought**]). COMMITMENT [**Redacted -- Confidential Treatment Sought**]% p.a., payable FEE: quarterly in arrears, on the unutilized amounts under the Facility, but limited to the amounts not drawndown against an agreed drawdown schedule. CASH FLOW For underwriting the Facility, the Underwriters will be PARTICIPATION: granted additional consideration in the form of 13.5% (carried) of the Project's Excess Cash Flow calculated before income taxes over the first 382 million pounds of copper sold. Cash flow participations will be paid quarterly within 45 days of quarter-end and will be annually adjusted. Page 3 of 9 HEDGING No hedging requirements will be imposed on the Borrower. REQUIREMENTS: SECURITY: Prior to Commercial Completion to include, without limitation (except that if the Borrower is a newly formed LLC, then this security will be restructured appropriately): (1) First and floating priority liens and/or assignments on all of the Borrower's assets, construction/proceeds accounts, insurance policies, contracts, rights, permits that are required under the Facility, and are necessary to the Borrower's business, and to the Project's development, operations, and sale of Product. (2) Pledge of the Guarantors' stock in the Borrower. (3) The Guarantors' full and unconditional guarantee of the Borrower's obligations under the Facilities. (4) Negative pledge over Guarantors' other assets. Following Commercial Completion, to include, without limitation, only (1) and (2) above. DEBT SERVICE The Debt Service Reserve will be maintained with a balance RESERVE: at least equaling the next 2 quarters' Scheduled Debt Service and budgeted capital expenditures, but in any event not less than $5.0 million. Distributions from the Debt Service Reserve will be permitted to meet these obligations to the extent that funds are not available from other sources. PHYSICAL AND Subject to absence of Events of Default and of Material COMMERCIAL Adverse Effect, the date upon which the Independent COMPLETION: Engineer has determined to the Underwriters' satisfaction that the Project's construction and development is physically complete and that its operating performance over an agreed period of time (e.g. 90 consecutive days) generally accords with the Feasibility Study's projections upon which the Lenders' credit evaluation was predicated (see Exhibit II for examples). CONDITIONS The drawdown under the Facility shall be subject to certain PRECEDENT TO conditions, including, without limitation, absence of DRAWDOWN OF Events of Default and of Material Adverse Effect, and the THE FACILITY: Underwriters' satisfaction with the following: (1) Loan and Security documentation with related legal opinions. (2) Assurances as to the corporate existence and authority of the Borrower and the Guarantor. (3) The Independent Engineer's technical and environmental review of the Project. Page 4 of 9 (4) The Independent Insurance Advisor's opinion that there is usual and adequate insurance policies with respect to the Borrower's business and the Project's assets. (5) Evidence of the necessary regulatory approvals, licenses, authorizations, and permits having been issued for the Project. (6) Funding of Equity. (7) EPCM and contract mining contracts satisfactory to the Underwriters. EPCM contract to be fixed cost with respect to the Construction Costs and include liquidated damages equal to at least 15% of such Construction Costs. (8) A detailed project Development and Operating Plan. (9) Other documents and third party consents and approvals as the Underwriters and their Legal Counsel shall deem necessary or appropriate. BORROWER'S To include, without limitation: COVENANTS: (1) Usual reporting requirements including notifications, audited financials, monthly Project construction and operating reports, and quarterly operating plans. The Lenders reserve the right to have such information audited by the Independent Engineer. (2) No additional indebtedness, nor liens and encumbrances with respect to Security, except in regard to equipment lease finance attendant to the Brown & Root contract or, for reasonable purposes in the normal course of business. (3) Achieve Commercial Completion by no later than December 31, 1998. (4) Maintain the Debt Coverage Ratio greater than or equal to 1.25, calculated up to Final Maturity and a Historic Debt Coverage Ratio greater than or equal to 1.25. Failure to meet either test will result in the Prescribed Percentage being 100% of Excess Cash Flow and will be an Event of Default. (5) Distributions of Cash Flow Participation will be permitted after Commercial Completion so long as the Borrower is in compliance and the Debt Coverage Ratio is equal to or greater than 1.5OX. Other covenants to include: limits on hedging; conduct of business; no sale of assets; restricted payments (capital expenditures); and insurance proceeds. GUARANTORS' To include, without limitation: COVENANTS: (1) Until Commercial Completion, maintain a net worth of at least $20,000,000, such figure to be revised upward in the event of a successful equity offering prior to Closing. Page 5 of 9 (2) Until Commercial Completion, maintain current assets in excess of current liabilities of at least 3,000,000. (3) Until Commercial Completion, incur no additional indebtedness. (4) Maintain 100% ownership of the Borrower. (5) Assumption of the Borrower's income tax liabilities. OTHER TERMS & Representations & Warranties, Events of Default, Material CONDITIONS: Adverse Effect, and other terms and conditions usual for Facilities as described herein. EXPENSES: All consulting, legal, and any other out-of-pocket expenses incurred by the Lenders in connection with the Facility due diligence, credit preparation, negotiation, documentation, execution, administration, and enforcement shall be for the account of the Borrower. These expenses will remain the Borrower's responsibility in the event that for whatever reason the transaction does not close. EXCLUSIVITY The Borrower and the Guarantors undertake not to solicit or & COMMITMENT: negotiate with other parties for the provision of competing financing for the Project for a period of 120 days commencing on January 2, 1997 (i.e. from acceptance of the Definitive Term Sheet dated December 26, 1996). The Underwriters' commitment will terminate at the end of this period. CONFIDENTIALITY: Borrower, Guarantors, and any of their affiliates agree to not release any material terms contained herein to third parties not related to this transaction, without the written consent of the Underwriters, except as required by law. Any press releases regarding the Facility are to be agreed in advance with the Underwriters. INDEPENDENT The Winters Company. ENGINEER: LEGAL COUNSEL: Davis Graham & Stubbs. GOVERNING LAW/ This Definitive Term Sheet and all other subsequent credit JURISDICTION/ documentation among the Lenders, the Borrower, and the JURY TRIAL Guarantor will be governed by and construed in WAIVER: accordance with the laws of the State of New York (excluding any conflict of laws provisions). The parties hereto hereby waive all rights to a trial by jury with respect to the matters set forth herein. Page 6 of 9 EXHIBIT I REPAYMENT SCHEDULE ($ 000) TOTAL TOTAL YEAR # YEAR QUARTER QUARTER ANNUAL 1 1998 1st 2nd 3rd 4th -------------------------------------------- 2 1999 1st $1,250 2nd $1,250 3rd $1,250 4th $1,250 -------------------------------------------- $5,000 3 2000 1st $1,250 2nd $1,250 3rd $1,250 4th $1,250 -------------------------------------------- $5,000 4 2001 1st $1,250 2nd $1,250 3rd $1,250 4th $1,250 -------------------------------------------- $5,000 5 2002 1st $1,250 2nd $1,250 3rd $1,250 4th $1,250 -------------------------------------------- $5,000 6 2003 1st $1,750 2nd $1,750 3rd $1,750 4th $1,750 -------------------------------------------- $7,000 7 2004 1st $2,250 2nd $2,250 3rd $2,250 4th $2,250 -------------------------------------------- $9,000 8 2005 1st $2,250 2nd $2,250 3rd $2,250 4th $2,250 -------------------------------------------- $9,000 Total $45,000 ------------- ------------- Page 7 of 9 EXHIBIT II PHYSICAL COMPLETION EXAMPLE 1. The plant, equipment, and related infrastructure have been completed and installed essentially as described in the Feasibility Study [Development and Operating Plan and/or EPCM Contract] and shall have been commissioned. 2. All construction costs have been paid in full and the Project shall be free and clear of any lien, charge or encumbrance of any kind not permitted under the loan documents and free and clear of any materialmen's liens arising in connection with the construction of the Project. 3. All governmental, regulatory and third party permits, licenses, consents and approvals necessary for a continuous operation of the Project in accordance with the Feasibility Study are in full force and effect. 4. Management and a work force in appropriate numbers and with the appropriate qualifications are on the job in accordance with good mine operating practice. 5. The required insurance is in full force and effect as certified by the Independent Insurance Advisor. COMMERCIAL COMPLETION TEST EXAMPLES Commercial Completion shall occur on the date on which (a) there is no Default or Event of Default and (b) the Independent Engineer submits to the Agent a certificate stating that (i) the conditions set forth below have occurred and are correct and (ii) the conditions required for Physical Completion continue to be satisfied by the Borrower. 1. For 30 consecutive days, after pregnant leach solution ("PLS") strengths and flows have been built up to permit the continuous, full operation of the solvent extraction and electrowinning plants, the Project has produced at least [xx] tons of Class I copper cathodes meeting LME "A" Grade specifications ("Product") during which period such production has totaled at least [yy] tons for 10 consecutive days. 2. For 90 consecutive days following satisfaction of the test set forth in paragraph 1 above, cumulative production of Product has been no less than 90% of cumulative copper cathode production calculated in accordance with the Feasibility Study to be recoverable from the actual ore placed and leached on the heap leach pad since Physical Completion. page 8 of 9 3. The Ore Reserve as defined in the Feasibility Study has been increased in an amount sufficient to allow at least an additional two years of full production; 4. The cumulative grade, tonnage and contained copper of at least [X,000,000] consecutive tons measured by the plant head sampling systems have each been no less than 90 percent of the cumulative grade, tonnage and contained copper of Ore Reserves fed to the plant, such Ore Reserves, together with Ore Reserves within stockpiles and planned open pits, being sufficient to sustain no less than 90% of the ore and Product production forecasted by the Feasibility Study. 5. For 30 consecutive days within the test period referenced in paragraph 2 above, aggregate operating costs per ton of ore mined and processed and per pound of Product produced have each been less than 110% of the Feasibility Study's unescalated unit operating costs projected for the Ore Reserves mined and processed. Operating costs shall include all direct and indirect cash costs incurred by the Project toward the production and sale of Product. 6. For 30 consecutive days within the test period referenced in paragraph 3 above, at least (Y,000,000) tons of ore and waste have been mined and delivered to their respective crusher, stockpile and waste disposal areas during which time such mining rate has exceeded (Z,000) ton per day for 10 days. 7. For 30 consecutive days within the test period referenced in paragraph 3 above, at least (A,000) tons of ore has been crushed to 100% at minus (P) in. during which time such crushing rate has exceeded (B,000) tons per day for 10 days. 8. For 30 consecutive days within the test period referenced in paragraph 3 above, at least (C,000) tons of crushed ore has been conveyed and stacked on the heap leach pads during which time such delivery rate has exceeded (D,000) tons per day for 10 days. 9. For 30 consecutive days within the test period referenced in paragraph 3 above, the flowrate of PLS to the solvent extraction circuit shall average the equivalent of at least (H,000) kilograms per hour of copper contained in PLS. ECONOMIC TEST In lieu of the tests set forth in paragraphs 5 through 8 above, the Borrower may elect to satisfy an economic test to be agreed between the Borrower and the Lenders. For example, to meet the Economic Test, the Debt Coverage Ratio shall be shown to be in excess of 1.50 for the period remaining to Final Maturity and 1.75 for the period to end of reserve life. Page 9 of 9 EX-21.1 44 EXHIBIT 21.1 EXHIBIT 21.1 SUBSIDIARIES OF THE REGISTRANT Summo USA Corporation, a Colorado corporation -----END PRIVACY-ENHANCED MESSAGE-----