Exhibit 10.7
Suite 2000, Guinness Tower, 1055 West Hastings Street
MADISON Vancouver, B.C., Canada V6E 2E9
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ENTERPRISES CORP. Tel(604) 331-8772 o Fax (604) 331-8773 or (604) 668-0063
May 23, 2002
Great American Minerals Exploration, LLC
9051 South 1075 West, Suite B-301
West Jordan, Utah U.S.A. 84088
Attention: D J. McDowell
Dear Don:
Re: Lewis Property, Lander County, Nevada
Further to our letter agreement dated May 1, 2002, our subsequent negotiations
with F.W. Lewis, Inc. ("Lewis") and our subsequent telephone conversations, this
letter agreement confirms the agreement of Madison Enterprises Corp. ("Madison")
and Great American Minerals Exploration, LLC ("GAME") respecting the Lewis
Property:
1. Madison and GAME will continue work together to negotiate and settle
the terms of the underlying agreement (the "Lewis Agreement") between
Lewis, Madison and GAME and to ensure that its terms are acceptable to
both parties. In particular, the parties will attempt to modify the
initial payment provisions so that the initial payment will be due on
Madison's receipt of regulatory approval of the agreement. If the Lewis
Agreement, in a form acceptable to both Madison and GAME, is not in
place by June 15, 2002, this letter agreement, other than the
provisions of paragraph 12 below, will terminate and be of no further
force and effect. The agreement of Madison and GAME set forth in this
letter agreement is predicated on the Lewis Agreement (as presently
proposed) providing that Madison and GAME can jointly acquire a 100%
interest in the Lewis Property free and clear of all encumbrances other
than a 5% gross royalty on gold and a 4% net smelter returns royalty
(collectively the "Royalty") on all other metals in favour of Lewis by:
(a) paying Lewis
(i) US$25,000 on execution of the Lewis Agreement;
(ii) US$2,000 per month from June 1, 2002 to December 1,
2002; and
(iii) US$3,000 per month thereafter until the purchase
option in the Lewis Agreement is terminated or
exercised; and
(iv) US$2,000,000 by December 31, 2007; and
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(b) incurring exploration expenditures of US$250,000 by December
31, 2002, exploration expenditures of US$150,000 by December
31, 2003, and at least US$250,000 every year thereafter until
the purchase option in the Lewis Agreement is terminated or
exercised, provided that GAME and Madison will be allowed to
credit excess expenditures in prior periods to subsequent
periods.
The Lewis Agreement as presently proposed requires an advance minimum
royalty of US$60,000 per year commencing on purchase of the Lewis
Property. The Lewis Agreement (as presently proposed) provides that the
Royalty can be purchased for US$4,000,000 for a period of one year
following the exercise of the purchase option. The Lewis Agreement (as
presently proposed) provides that the purchase price for the Royalty
increases by US$500,000 per annum on each anniversary of the date of
exercise of the purchase option.
2. Madison has an option to acquire a 51% interest in the Lewis Agreement
by paving GAME US$25,000 on CDNX approval, paying the property payments
anticipated to be due pursuant to the Lewis Agreement before December
31, 2004 as described in paragraph l(a) above (which total US$111,000)
and spending US$650,000 on exploration by December 31, 2004, in
accordance with the terms of the Lewis Agreement. In the event that
Madison fails to make the payments and incur the expenditures as set
out in this paragraph or otherwise terminates this letter agreement
prior to the exercise of this option, the option will terminate and
Madison shall have no interest whatsoever in the Lewis Agreement or the
Lewis Property, provided, however, that GAME shall indemnify and hold
Madison harmless from any claims, demands or liabilities arising from
the Lewis Agreement after termination of this letter agreement in the
event that GAME does not also terminate the Lewis Agreement.
3. Madison has an option to acquire a further 9% interest (60% in the
aggregate) by paying the property payments due pursuant to the Lewis
Agreement from January 1, 2005 to December 31, 2006 (which total
US$72,000) and spending a further US$500,000 on exploration by December
1,2006, with US$250,000 to be spent in each year. In the event that
Madison fails to make the payments and incur the expenditures as set
out in this paragraph, the option will terminate and Madison shall not
have acquired the additional 9% interest in the Lewis Agreement and its
interest will remain at 51%, subject to the provisions hereof
concerning dilution in the event that either party fails to contribute
its proportionate share of costs.
4. Madison must elect at 51% whether to acquire the further interests or
enter into a joint venture with GAME for future exploration and
development of the Lewis Property. If Madison elects to enter into a
joint venture, the joint venture agreement shall contain terms which
are standard in the mineral exploration business, including the
requirement that all costs be borne by the parties on a pro rata basis,
failing which the interest of the party not contributing will be
subject to dilution on a straight-line basis. If the interest
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of either party is diluted to 25% or less, its interest will convert to
a 25% net profits interest.
5. If Madison elects to acquire the additional 9% interest (60% in the
aggregate), GAME will have 120 days after Madison acquires the
additional interest to elect whether to participate on a 60/40 joint
venture basis (on the terms set out above) or to allow Madison to
acquire a further 15% interest (75% in the aggregate) by completing an
industry standard bankable feasibility study and arranging on behalf of
GAME non-recourse project financing for GAME'S remaining 25% interest.
If GAME elects to permit Madison to acquire an additional interest,
Madison will then have 120 days to elect whether to participate on a
60/40 joint venture basis or to acquire the further 15% interest on the
terms set out above.
6. Madison will be entitled to accelerate exploration expenditures at any
time. If it does so and completes the expenditure requirement for the
earn-in stage at which it has elected to move to a joint venture, GAME
will be required to be begin contributing to all costs except the
property payments due pursuant to the Lewis Agreement and referred to
above which shall be solely Madison's responsibility.
7. Madison will provide GAME with copies of all data and analyses
respecting the Lewis Property and will consult with GAME on all
exploration programs during the currency of the agreement and all
exploration decisions will be made by a technical committee comprised
of one representative of Madison and one representative of GAME, with
Madison's representative having the deciding vote in the case of a
deadlock.
8. During periods of active exploration, Madison agrees to engage Don
McDowell as a exploration consultant to assist with exploration at
daily rate of US$300, plus all reasonable expenses which have received
advance approval. Madison agrees to engage Don McDowell for a minimum
of ten days in each of the six months following CDNX approval of the
agreement.
9. Madison and GAME shall use their best efforts to expeditiously and in
good faith settle the terms of and execute a joint venture agreement to
take effect upon Madison exercising its option and acquiring a 51%
interest or a 60% interest, as the case may be, in the Lewis Property.
The joint venture agreement will contain terms which are generally
standard in the North American mining industry in addition to the
specific terms outlined herein.
10. The Lewis Agreement provides that the obligation to incur exploration
costs for a calendar year is incurred unless the Lewis Agreement is
terminated prior to the beginning of such calendar year. Madison may
not terminate this letter agreement as to the payments and exploration
work required under the Lewis Agreement during the calendar year ending
December 31, 2002. Madison may terminate this letter agreement and
thereby not be required to make the payments and exploration work
required under the Lewis Agreement during and after calendar year 2003
by giving GAME notice of termination no later than November 30, 2002.
Such termination will be effective on the
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earlier of Madison's completion of all 2002 obligations under the Lewis
Agreement or December 31, 2002. For subsequent years, Madison may
similarly terminate this letter agreement by giving GAME notice of
termination no later than November 15 of the calendar year, such
termination to be effective on the earlier of completion of all
obligations under the Lewis Agreement for the calendar year in which
notice was given or December 31 of the calendar year in which notice
was given.
11. If the parties are required to indemnify Lewis pursuant to Section
4.4(E) of the Lewis Agreement solely as a result of the use of the
Lewis Information by only one of the parties, the party whose use of
the information resulted in the indemnification obligation shall
indemnify and hold harmless the other party from and against all
resulting claims, liabilities and damages.
12. If the Lewis Agreement, in a form acceptable to both Madison and GAME,
is not in place by June 15, 2002, or if Madison does not obtain or
waive CDNX approval, Madison agrees that it shall not, without the
written consent of GAME, acquire any interest in the Lewis Property for
a period of two years following the date of this letter agreement.
13. Our agreement is subject to CDNX approval on the part of Madison, which
Madison must obtain by June 30, 2002.
If the foregoing accords with your understanding of our agreement, please
acknowledge your acceptance of, and agreement to be bound by, the terms and
conditions of this letter agreement by signing the enclosed copy hereof in the
space provided and returning same to us. We confirm that this letter agreement
may be executed in two counterparts each of which will be deemed to be an
original and both of which will be deemed to constitute one agreement.
Yours Truly,
MADISON ENTERPRISES CORP.
/s/ J.G. Stewart
Agreed to and accepted this 23rd day
per: J.G. Stewart, of May, 2002.
Secretary
JGS:ea /s/ Donald James McDowell, Manager
---------------------------------------
Great American Minerals
Exploration, LLC
Per: Don McDowell
FIRST AMENDMENT TO EXPLORATION AGREEMENT
WITH OPTION TO PURCHASE
THIS FIRST AMENDMENT TO EXPLORATION AGREEMENT WITH OPTION TO PURCHASE
(the "First Amendment") is made effective this 7th day of January 2003 (the
"Effective Date") by and between F. W. LEWIS, INC., a Nevada corporation
("Lewis"); MADISON ENTERPRISES CORP., a British Columbia corporation ("MNP");
and GREAT AMERICAN MINERALS EXPLORATION (NEVADA), LLC, a Nevada limited
liability company ("GAME").
RECITALS
A. Effective June 1 , 2002 Lewis, Madison, and GAME entered into an
"Explo ration Agreement with Option to Purchase" (the "Agreement") affecting
various real property interests in Lander County, Nevada.
B. The parties wish to amend Section 1.11 of the Agreement relating to
assignment of the Agreement.
THEREFORE, the parties have agreed as follows:
1 . Amendments to Section 1.11. The parties hereby agree that Section
1.11 of the Agreement shall be amended as follows:
a. Section 1.1 l(a) shall henceforth read as follows:
a. Payment to Lewis often percent (10%) of any fees, payments, or other
consideration with a cash value (including stock) received by MNP or GAME, as
the case may be, for the Transfer, except in the case of transfer to a
wholly-owned subsidiary or affiliate of MNP or GAME, as the case may be.
However, the payment often percent shall not apply to any work obligation prom-
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ised by an assignee to MNP or GAME, as the case may be, provided that such work
is actually performed on the Property.
b. The following new paragraph shall be inserted after Section 1.11
(c):
The foregoing requirements shall not apply to any Transfer by MNP or
GAME or both, as the case may be, to any wholly-owned subsidiary
corporation or limited liability company. In the case of an assignment
by MNP or GAME or both to a wholly-owned subsidiary, assigning party
shall give written notice to Lewis and any other non-assigning party of
the assignment, together with the name, address, and state of
incorporation/organization of the assignee, and the names and addresses
of all officers and directors of the subsidiary corporation or LLC.
2. Continuing Effect. All other provisions of the Agreement shall
consider in full force and effect, except as modified by this First Amendment.
3. Counterparts and Facsimile Signatures. This First Amendment may be
executed in counterparts, and signature pages transmitted by facsimile shall be
treated as original and binding signatures, provided, however, that a
fully-executed original First Amendment shall be delivered to Lewis within
fourteen (14) days of the Effective Date.
IN WITNESS WHEREOF, the parties have executed this First Amendment to
Exploration Agreement with Option to Purchase on the day and year first above
written.
F. W. LEWIS, INC.
By: /s/ Frank W. Lewis
-------------------------
FRANK W. LEWIS, President
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GREAT AMERICAN MINERALS
EXPLORATION (NEVADA), LLC, a
Nevada limited liability company
By: /s/ Donald McDowell
Name: Donald McDowell
Title: Manager
MADISON ENTERPRISES CORP., a British
Columbia corporation
By: /s/ Chet Idziszek
Name: Chet Idziszek
Title: President
STATE OF NEVADA )
) ss.
COUNTY OF WASHOE )
On this 18th day of February, 2003 personally appeared before me, a
Notary Public, Frank W. Lewis, a duly qualified and acting officer of F. W.
LEWIS, INC., personally known or proved to me to be the person whose name is
subscribed to the above instrument who acknowledged to me that he executed the
above instrument on behalf of said corporation.
/s/ Hillary H. Reister
--------------------------------
Notary Public
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STATE OF UTAH )
) ss.
COUNTY OF SALT LAKE )
On this 25 day of February, 2003 personally appeared before me, a
Notary Public, Donald McDowell, a duly qualified and acting officer of GREAT
AMERICAN MINERALS EXPLORATION (NEVADA), LLC. a Nevada limited liability company,
personally known or proved to me to be the person whose name is subscribed to
the above instrument who acknowledged to me that he executed the above
instrument on behalf of said corporation.
/s/ Tammy L. Fontana
--------------------------------
Notary Public
PROVINCE OF BRITISH COLUMBIA )
) ss.
CITY OF VANCOUVER )
On this 24th day of February, 2003 personally appeared before me, a
Notary Public, Chet Idziszek, a duly qualified and acting officer of MADISON
ENTERPRISES CORP., a British Columbia corporation, personally known or proved to
me to be the person whose name is subscribed to the above instrument who
acknowledged to me that he executed the above instrument on behalf of said
corporation.
/s/ James G. Stewart
--------------------------------
Notary Public
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EXPLORATION AGREEMENT WITH OPTION TO PURCHASE
between
F. W. LEWIS, INC., a Nevada
corporation
and
MADISON ENTERPRISES CORP., a British Columbia
corporation
and
GREAT AMERICAN MINERALS EXPLORATION (NEVADA), LLC,
a Nevada corporation
TABLE OF CONTENTS
RECITALS.................................................................... 1
SECTION ONE - Exploration Agreement......................................... 2
1.1 - Term.................................................................. 2
1.2 - Minimum Royalty....................................................... 2
1.3 - Work Commitment....................................................... 3
1.4 - Environmental Evaluation ............................................. 7
1.5 - Right to Explore Only................................................. 7
1.6 - Data.................................................................. 8
1.7 - Area of Interest...................................................... 8
1.8 - Conduct of Work....................................................... 8
1.9 - Liability and Insurance .............................................. 9
1.10 - Liens................................................................ 9
1.11 - Assignment........................................................... 10
1.12 - Installation of Equipment............................................ 11
1.13 - Acquisition of Permits............................................... 11
1.14 - Inspection of Property............................................... 12
1.15 - Taxes ............................................................... 12
1.16 - Maintenance of Claims ............................................... 13
1.17 - Relocation, Amendment and Patent .................................... 14
1.18 - Mining Law Revision.................................................. 14
1.19 - Termination ......................................................... 14
1.20 - Default ............................................................. 15
1.21 - Obligations Following Termination ................................... 16
SECTION TWO - Option to Purchase the Property............................... 16
2.1 - Grant of Option to Purchase Property.................................. 16
2.2 - Purchase Price........................................................ 17
2.3 - Right to Develop and Mine ............................................ 17
2.4 - Advance Minimum Royalty .............................................. 18
2.5 - Production Royalty.................................................... 20
2.6 - Commingling .......................................................... 21
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TABLE OF CONTENTS
2.7 - Accounting........................................................... 21
2.8 - Late Payments........................................................ 22
2.9 - Reclamation.......................................................... 23
SECTION THREE - Option to Purchase the Royalty............................. 23
3.1 - Grant of Option to Purchase Royalty ................................. 23
3.2 - Royalty Purchase Price............................................... 24
3.3 - Effect of Exercising Royalty Purchase Option......................... 24
3.4 - Right of Lewis to Sell Royalty....................................... 24
SECTION FOUR - Miscellaneous Provisions.................................... 24
4.1 - Notices............................................................. 25
4.2 - Payments in U. S. Currency ....................................... 26
4.3 - Title ............................................................ 26
4.4 - No Warranties or Representations as to Value........................ 27
4.5 - Bankruptcy of Madison............................................... 28
4.6 - Abandonment ...................................................... 28
4.7 - Binding Effect...................................................... 29
4.8 - Applicable Law...................................................... 29
4.9 - Attorney Fees and Costs .......................................... 30
4.10 - Entire Agreement.................................................... 30
4.11 - Memorandum of Agreement............................................. 30
4.12 - Void or Invalid Provisions.......................................... 30
4.13 - Waiver.............................................................. 31
4.14 - Amendment........................................................... 31
4.15 - Tune of Essence..................................................... 31
4.16 - No Partnership or Implied Covenants................................. 31
4.17 - Force Majeure....................................................... 31
4.18 - Confidentiality..................................................... 32
4.19 - Counterparts and Facsimile Signatures ............................ 34
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TABLE OF CONTENTS
Exhibit A - Property Description
Exhibit B - Quitclaim Deed with Reserved Royalty
Exhibit C - Quitclaim Deed Relinquishing Royalty Interests
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EXPLORATION AGREEMENT WITH OPTION TO PURCHASE
THIS EXPLORATION AGREEMENT WITH OPTION TO PURCHASE (the "Agreement") is
entered into effective this 1st day of June, 2002 (the "Effective Date") by and
between F. W. LEWIS, INC., a Nevada corporation, located at 120 Greenridge
Drive, Reno, Nevada 89509 ("Lewis"); and MADISON ENTERPRISES CORP., a British
Columbia corporation ("MNP"), whose address is Suite 2000, Guinness Tower, 1055
W. Hastings Street, Vancouver, British Columbia, Canada V6C 2E9, and GREAT
AMERICAN MINERALS EXPLORATION (NEVADA), LLC, a Nevada limited liability company
("GAME"), located at 9051 South 1075 West, Suite B 301, West Jordan, Utah 84088
(referred to collectively as "Madison").
RECITALS
A. Lewis owns the property more particularly described in Exhibit A
attached hereto and incorporated herein, which property, together with all ores,
minerals and materials thereon and thereunder, and all right, title and interest
of Lewis in and to the surface of said property, and all water rights on the
property, improvements, easements, licenses, rights-of-way and other interests
appurtenant thereto, shall hereinafter be collectively referred to as the
"Property".
B. Madison wishes to obtain a right to explore the Property and an
option to purchase the Property (the "Purchase Option" as defined in Section 2.
1), subject to an overriding royalty interest (the "Royalty" as defined in
Section 2.5) with the further option to purchase the Royalty (the "Royalty
Purchase Option" as defined in Section 3.1), and
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Lewis wishes to grant such a right, Purchase Option and Royalty Purchase Option,
all on the terms and conditions hereinafter set forth.
C. The rights of MNP and GAME between themselves regarding the interest
in the Property which may be acquired hereunder from Lewis are governed by that
certain letter agreement dated May 23, 2002 (the "Madison Joint Venture
Agreement") between MNP and GAME, as the same may be amended from time to time.
NOW THEREFORE, the parties agree as follows:
SECTION ONE
Exploration Agreement
1.1 Term. Lewis hereby grants to Madison the exclusive right to explore
the Property, together with the exclusive option to purchase the Property, for
an initial period from the Effective Date, June 1, 2002, through December 31,
2007; and with a continuing option to purchase the Royalty for a term of thirty
five (35) years after exercise of the Purchase Option.
1.2 Minimum Royalty. Unless and until this Agreement is sooner
terminated or Madison exercises the Purchase Option as provided herein, Madison
shall pay Lewis the following "Minimum Royalty, " it being expressly understood
that should this Agreement be terminated or the Purchase Option exercised,
Madison shall have no obligation to pay any Minimum Royalty pursuant to this
Section, the due date of which occurs after termination or exercise of the
Purchase Option:
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Date of Payment Amount of Payment
--------------- -----------------
Upon execution of this Agreement: $27,000.00
From July 1, 2002 through December 1, 2002: $ 2,000.00 per month
From January 1, 2003 until the Property is
purchased or this Agreement is terminated
by Madison $ 3,000.00 per month
Madison shall pay the Minimum Royalty in advance on the first day of
each month, commencing July 1, 2002.
1.3 Work Commitment. Madison shall spend, as the "Initial Work
Commitment," TWO HUNDRED FIFTY THOUSAND DOLLARS ($250,000.00) in "On Site
Expenditures" (hereinafter defined) on the Property, in accordance with the
following schedule, which Initial Work Commitment shall be completed, or payment
made to Lewis in lieu thereof, regardless of any termination of this Agreement:
Period On Site Expenditures
------ --------------------
Between Effective Date and December 31, 2002: $250,000.00
If this Agreement remains in effect after January 1, 2003, Madison
shall spend ONE HUNDRED FIFTY THOUSAND DOLLARS ($150,000.00) in "On Site
Expenditures" or make payment to Lewis in lieu thereof, regardless of any
termination of this Agreement.
Thereafter, unless and until this Agreement is sooner terminated or
Madison exercises the Purchase Option as provided herein, for each calendar year
in which this Agreement remains in effect after January 1, 2004, Madison shall
spend, as an "Additional Work Commitment, " TWO HUNDRED FIFTY THOUSAND DOLLARS
($250,000.00)
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in On Site Expenditures. It is expressly understood that should this Agreement
be terminated or the Purchase Option exercised prior to January 1 of any year,
Madison shall have no obligation to make the Additional Work Commitment for that
or any subsequent calendar year.
Excess On Site Expenditures in any period shall be carried forward and
credited against the amount of any and all future On Site Expenditures due in
any subsequent period(s). If Madison fails to spend the required amount of
Initial Work Commitment by December 31, 2002, or subsequently fails to spend the
required amount of any Additional Work Commitment, Madison shall, within thirty
(30) days of the end of such work commitment period, pay the shortfall to Lewis
and thereby satisfy the expenditure commitment as to such shortfall.
"On Site Expenditures" as used herein shall include:
a. Actual field salaries and wages (or the allocable portion
thereof), including benefit costs and payroll taxes, of employees or contractors
of Madison actually performing On Site Expenditures and related activities.
b. Costs and expenses for the use of machinery, facilities,
equipment and supplies required for On Site Expenditures, reclamation, and
related activities.
c. Travel expenses and transportation of employees and
contractors, materials, equipment and supplies necessary or convenient for the
conduct of On Site Expenditures.
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d. All payments to contractors for On Site Expenditures,
reclamation, and related activities.
e. Costs of assays and other costs incurred to determine the
quality and quantity of minerals.
f. Costs incurred to obtain permits, rights-of-way and other
similar rights as may be incurred in connection with On Site Expenditures.
g. Costs incurred in preparation and acquisition of
environmental permits necessary to commence, carry out or complete On Site
Expenditures.
h. Costs and expenses of performing feasibility and other
studies to evaluate the economic feasibility of mining.
i. All costs of insurance incurred by Madison pursuant to
Section 1.9.
j. All personal and real property taxes assessed against the
Property by the Lander County Assessor or other government entity and paid by
Madison pursuant to Section 1.15.
k. All federal claim maintenance fees and county recording
fees paid by Madison pursuant to Section 1.16.
On Site Expenditures shall not include off-site corporate costs,
corporate legal fees, accounting fees, officers' salaries, or promotional
expenses of any kind. However, to the extent that corporate officers are
qualified to provide geological or mining-related services, their salaries,
pro-rated to account for time spent for benefit of the Property, shall qualify
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as On Site Expenditures. Geological or engineering work done off-site for the
benefit of the Property shall also be included as On Site Expenditures.
The entire depths of all holes shall be assayed for gold and silver on
5-foot intervals. At Madison's discretion, Madison may assay holes at shorter
intervals. Any drill hole sample showing greater than 0.01 ounce per ton gold or
0.75 ounce per ton silver and not initially assayed by fire assay shall be
check-assayed by fire assay methods.
All drill holes shall have the collar locations surveyed, including
elevations, by a Nevada registered land surveyor. Any reverse circulation drill
hole greater than 800 feet deep and all core holes regardless of depth shall
have down hole surveys taken at regular intervals, not to exceed 200 feet.
Copies of all data generated for the Property, including, but not
limited to, drill hole logs, exploration information, including interpretive
information, maps, metallurgical studies, geophysical studies, all assay data,
drill hole check assays, survey records, down hole surveys and other information
of any sort (the "Data") shall be provided to Lewis on a semi-annual basis. At
Madison's discretion, Madison may furnish Data to Lewis on a more frequent
basis. To the extent practical all Data shall be provided in electronic format
as well as hard copy. All colored maps shall be furnished in color. Madison
makes no representation or warranty, express or implied, of any kind or nature
whatsoever with respect to the accuracy or reliability of the Data. All Data
provided hereunder is Confidential Information, subject to the provisions of
Section 4.18 of this Agreement.
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In the event that Madison does not exercise the Purchase Option, upon
termination of this Agreement all core and drill sample pulps not consumed in
assaying or metallurgical tests shall be delivered to Lewis at an address in
Reno, Nevada specified by Lewis. Duplicates of all sample cuttings shall be
saved in a building or in tightly closed barrels on the Property, or at such
other location as may be mutually acceptable to the parties.
1.4 Environmental Evaluation. Madison has completed an environmental
evaluation of the Property and accepts the Property in its current environmental
condition. In the event Madison exercises the Purchase Option, Madison shall
assume all of Lewis' environmental reclamation and clean-up liability on the
Property, if any, which pre-dates the Effective Date of this Agreement. In the
event Madison does not exercise the Purchase Option, Madison shall be
responsible solely for that reclamation and clean-up liability on the Property
associated with Madison's activities under this Agreement.
Madison shall reclaim any disturbance, including drilling, created by
its activities under this Agreement in accordance with applicable rules and
regulations of the appropriate state and federal agencies.
1.5 Right to Explore Only. Upon execution of this Agreement, Madison
shall have the exclusive right to explore the Property, including, without
limitation, the right to conduct geological and geophysical investigations and
surveys, drilling, trenching, and related activities to evaluate the mineral
potential of the Property. Madison shall not have the right to develop or mine
the Property in any form prior to exercising the Purchase
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Option. Madison may take samples up to five hundred (500) pounds each for
metallurgical testing.
1.6 Data. Upon execution of this Agreement Lewis shall make available,
for copying by Madison, all maps, deeds, and other documents pertaining to the
title, boundaries, prior work, production history, and similar material
associated with the Property which Madison requests and which are in Lewis'
possession (but subject to the warranty disclaimers of Sections 4.3 and 4.4
below). All copies shall be made at Madison's expense.
1.7 Area of Interest. Should Madison locate any fractional claims
("Fractional Claims") within the perimeter of the claims comprising the
Property, the Fractional Claims shall be located in the name of Lewis, and Lewis
hereby appoints Madison as its agent to perform such claim staking. The
Fractional Claims shall become part of the Property, subject to all terms and
conditions of this Agreement. Lewis and Madison shall execute such additional
agreements as necessary to document the addition of the Fractional Claims to
this Agreement.
1.8 Conduct of Work. Madison shall perform its exploration activities
under this Agreement and any mining activities on the Property after exercise of
the Purchase Option in accordance with all applicable laws and regulations
relating to the performance of exploration and mining operations on the
Property, including those relating to environmental reclamation and clean-up,
and in compliance with applicable workers' compensation laws of the State of
Nevada.
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Madison shall have the sole right to determine the nature, scope and
extent of On Site Expenditures conducted to satisfy its Initial Work Commitment
and any Additional Work Commitment.
1.9 Liability and Insurance. During the term of this Agreement and
after exercise of the Purchase Option, Madison shall indemnify and hold Lewis
harmless from any claims, demands, liabilities or liens arising out of Madison's
activities on the Property, unless arising from the sole negligence of Lewis.
During the term of this Agreement, Madison shall obtain and carry a policy of
public liability insurance in the amount of at least ONE MILLION DOLLARS
($1,000,000) for personal injury and ONE HUNDRED THOUSAND DOLLARS ($100,000) for
property damage, protecting Lewis against any claims for injury to persons or
damage to property resulting from Madison's activities under this Agreement. The
insurance policy shall name Lewis as an additional insured and evidence of such
shall be delivered to Lewis within thirty (30) days of the Effective Date of
this Agreement.
1.10 Liens. Madison shall keep the Property free and clear from any and
all mechanics' or laborers' liens arising from labor performed on, or material
furnished to the Property at Madison's request. However, a lien on the Property
shall not constitute a default if Madison, in good faith, disputes the validity
of the claim, in which case the existence of the lien shall constitute a default
thirty (30) days after the validity of the lien has been adjudicated adversely
to Madison. Lewis shall record a Notice of Non- Responsibility on behalf of
Lewis in accordance with applicable law.
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1.11 Assignment. Prior to exercising the Purchase Option, MNP or GAME,
as the case may be, may license, sell, assign, sublease or joint venture
("Transfer") this Agreement or interests therein to another party ("Transferee")
only upon the occurrence of all of the following:
a. Payment to Lewis of ten percent (10 %) of any fees or
payments received by MNP or GAME, as the case may be, for the Transfer, except
in the case of transfer to a wholly-owned subsidiary or affiliate of MNP or
GAME, as the case may be.
b. Approval by Lewis of the mining expertise of the
Transferee; and
c. Approval by Lewis of the fiscal responsibility of the
Transferee.
Notwithstanding anything herein to the contrary, no Transfer of the
Property shall relieve MNP or GAME, as the case may be, of its responsibility
for performance of all obligations under this Agreement. MNP or GAME, as the
case may be, and each Transferee shall be jointly and severally liable for the
performance of all obligations hereunder of MNP or GAME, as the case may be.
In the event Lewis determines that the expertise or fiscal
responsibility of the Transferee does not meet acceptable commercial standards,
Lewis may withhold approval of the Transfer and such Transfer shall be void. It
is understood between the parties that the payment to Lewis of a portion of the
payments received by MNP or GAME, as the case may be, for the Transfer shall not
constitute a penalty for Transfer, but shall constitute payment to Lewis for
investigation of the professional expertise and financial trustworthiness of the
proposed Transferee.
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Prior to exercise of the Purchase Option, no Transfer shall be effected
without full compliance with the provisions of this Section, including the
written consent of Lewis. Notwithstanding anything contained in this Section 1.
11 to the contrary, this Section 1.11 shall not apply to transfers between MNP
and GAME pursuant to the Madison Joint Venture Agreement or any successor
agreement thereto.
After exercise of the Purchase Option, MNP and GAME, as the case may
be, may Transfer any and all interest in the Property without approval or
restriction or payment to Lewis, but MNP or GAME, as the case may be, shall be
subject to the terms and conditions set forth in the Deed described in Section
2.2 below.
1.12 Installation of Equipment. During the term of this Agreement,
Madison may install, maintain, replace, and remove any and all mining machinery,
equipment, tools and facilities ("Equipment") which it places on the Property to
use in connection with its exploration activities under the Agreement or mining
activities after exercise of the Purchase Option. In the event Madison does not
exercise the Purchase Option, upon termination of this Agreement for any reason
Madison shall have a period of thirty (30) days following such termination
during which it shall remove all of the Equipment at its sole cost and expense.
1.13 Acquisition of Permits. Madison shall acquire all federal, state
and local permits required for its operations under this Agreement, including
without limitation those pertaining to reclamation and the posting of a
reclamation bond, as may be required by law.
-11-
Madison shall simultaneously deliver to Lewis copies of all permit
applications filed with regulatory agencies pertaining to the Property or its
operations hereunder. Madison shall, promptly upon their receipt, deliver to
Lewis copies of all permits, amendments, and modifications issued for the
Property or its operations hereunder.
1.14 Inspection of Property. Lewis, or its authorized agents or
representatives, shall be permitted to enter the Property at all reasonable
times for the purpose of inspection, surveying and sampling, but shall enter the
Property at their own risk and so as not to unreasonably hinder the operations
of Madison. Lewis shall give reasonable notice before any visit and shall
indemnify and hold Madison harmless from any damage, claim or demand by reason
of injury to Lewis or its agents or representatives, including death or damage
to or destruction of any property of Lewis or said agents or representative
while on the Property or the approaches thereto.
1.15 Taxes. Madison shall pay all taxes levied or assessed against the
Property and any improvements placed on the Property by Madison. Lewis shall
provide promptly to Madison copies of all documents relating to such taxes.
Madison may take such action, at its expense, as it deems proper to obtain a
reduction or refund of taxes paid or payable by it, and Lewis shall cooperate in
such action, including but not limited to allowing such action to be taken and
prosecuted in Lewis' name. In the event Madison does not exercise the Purchase
Option, upon termination of this Agreement, taxes shall be apportioned between
Lewis and Madison on a calendar year basis for the remaining portion of the
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calendar year. Lewis shall not be liable for taxes on any Equipment placed on
the Property under this Agreement.
1.16 Maintenance of Claims. Madison shall be responsible for the
payment of all required federal claim maintenance fees, or performance and
filing of assessment work (if such should ever be reinstated), and payment of
the necessary fees and recordation of the required documents with the
appropriate county offices for all unpatented mining claims included in the
Property (including those which may be located under Section 1.7 of this
Agreement) for the assessment year ending September 1, 2003 (i. e., 2002-2003),
and for the year ending September 1, 2004 (i. e., 2003-2004), and for every
assessment year thereafter in which Madison continues this Agreement beyond
January 1 of the assessment year. The BLM fees due September 1, 2002 shall be
paid by Madison to Richard Harris, Attorney, in trust, within thirty (30) days
of signing this Agreement and is an allowable credit to the minimum work
commitment expenditure. Madison shall deposit the BLM fees due in 2003 with
Richard Harris, Attorney, in trust; this payment shall be made to Mr. Harris
within one hundred eighty (180) days following the Effective Date.
Madison shall make the federal claim maintenance fee payments at least
ninety (90) days prior to the due date, and shall file in the appropriate county
office, at least thirty (30) days prior to the due date, an affidavit of such
compliance required by federal or state law. Copies of all such filings and
recordings shall be furnished to Lewis within fifteen (15) days of their
receipt.
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In the event that assessment work is required in the future, Madison
shall complete the work at least sixty (60) days prior to the date that the work
is required by statute to be completed, and the necessary filings and/or
recordings with the BLM and county shall be made at least sixty (60) days prior
to the date that such filings and recordings are required. Copies of all such
filings and recordings shall be furnished to Lewis within fifteen (15) days of
their receipt.
Notwithstanding anything herein to the contrary, Madison shall pay all
federal maintenance rental payments and make the required filings associated
therewith for the assessment year ending September 1, 2003.
1.17 Relocation, Amendment and Patent. During the term of this
Agreement Madison may, at Madison's sole expense and subject to Lewis' prior
written consent, relocate, amend, or apply for patent on any of the unpatented
claims included in the Property. Any such relocated, amended or patented claims
shall be deemed to be part of the Property, subject to all terms of this
Agreement.
1.18 Mining Law Revision. In the event the General Mining Law is
repealed or substantially changed, Madison shall have whatever rights may be
afforded to Lewis under the new laws, including, but not limited to, whatever
preferred right Lewis might have to a lease or other form of tenure in the lands
covered by the Property, all of which rights shall be subject to the terms of
this Agreement.
1.19 Termination. Subject to the other terms of this Agreement, Madison
shall have the right to terminate this Agreement at its sole discretion at any
time after com-
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pleting the Initial Work Commitment by providing written notice to Lewis. Upon
termin-tion Lewis shall retain all payments previously made and this Agreement
shall cease and terminate. Within thirty (30) days after termination, Madison
shall provide to Lewis all Data developed by Madison about the Property. To the
extent practical all Data shall be provided in electronic format as well as hard
copy. Madison makes no representation or warranty, express or implied of any
kind or nature whatsoever with respect to the accuracy or reliability of the
Data. Termination by Madison shall be effective as of the date Madison transmits
to Lewis a written notice of termination and a quitclaim deed conveying to Lewis
all of Madison's right, title and interest in the Property and to any additional
claims located pursuant to Section 1.7.
1.20 Default. Prior to exercise of the Purchase Option or termination
by Madison, if Madison fails to perform its obligations under this Agreement,
and in particular fails to make any payment due Lewis hereunder, Lewis may
declare Madison in default by giving Madison written notice specifying the
obligation(s) which Madison has failed to perform. If Madison fails to remedy a
default in payment within fifteen (15) days of receiving notice of such default,
or has not begun to cure any other default within thirty (30) days and
thereafter diligently prosecute such action to completion, Lewis may terminate
this Agreement and Madison shall peaceably surrender possession of the Property
to Lewis. However, if Madison disputes in writing that any default has occurred,
the matter shall be determined by litigation in a court of competent
jurisdiction. If Madison is found to be in default hereunder, Madison shall have
a reasonable time to cure such default, and if so
-15-
cured, Lewis shall have no right to terminate this Agreement by reason of such
default. Madison shall promptly respond in writing to any notice of default
served on Madison, either by curing the default or providing a written
explanation as to why, in Madison's opinion, a condition of default does not
exist.
1.21 Obligations Following Termination. In the event of any termination
of this Agreement, except a termination under Section 4.6 hereof, Madison shall
surrender possession of the Property to Lewis. In the event of any termination
of this Agreement, Madison shall have no further liability or obligations under
this Agreement, except for any obligations: (1) to pay its apportioned share of
taxes as provided in Section 1.15 hereof, (2) to pay any production royalty or
other payments owed to Lewis upon the effective date of termination, (3) to
remove Equipment as provided in Section 1.12, hereof, (4) to fulfill its
reclamation obligations pursuant to Sections 1.4 and 2.9, hereof, and (5) to
satisfy any other accrued obligations or liabilities imposed by this Agreement
or by operation of law.
SECTION TWO
Option to Purchase the Property
2.1 Grant of Option to Purchase Property. At any time, on or before
December 31, 2007, Madison shall have the exclusive right and option to purchase
all of Lewis' right, title and interest in and to the Property (the "Purchase
Option"), by giving written notice as provided in this Agreement. Upon receipt
of such notice, Lewis and Madison shall set a closing date (the "Purchase
Closing Date"), which shall in no event be later than thirty (30) days from the
receipt of such notice. The Purchase Option will be deemed to
-16-
have been exercised on the date that Madison transmits to Lewis a written notice
of exercise of the Purchase Option.
2.2 Purchase Price. The purchase price shall be TWO MILLION DOLLARS
($2,000,000.00), which shall be paid in cash on the Purchase Closing Date, upon
delivery by Lewis to Madison of a Quitclaim Deed with Reserved Royalty in the
form attached hereto as Exhibit B, conveying Lewis' title (as specified in
Section 4.3) to the Property, free and clear of all liens and encumbrances
except those noted in Section 4.3, subject only to a reservation to Lewis of the
Production Royalty (the "Royalty"), as defined in Section 2.5 below, and those
terms of this Agreement which expressly continue after exercise of the Purchase
Option.
2.3 Right to Develop and Mine. Upon exercise of the Purchase Option,
Madison shall have exclusive ownership of the Property together with all rights,
title (as noted in Section 4.3), and privileges incident thereto, subject only
to the Royalty interest retained by Lewis under Section 2.5 hereof and the right
of Lewis to reacquire the Property in the event Madison elects to abandon it in
accordance with Section 4.6 hereof. Madison shall have no obligation to develop
the Property, and any decision as to the scope or timing of any development of
the Property shall be at Madison's sole discretion.
If Madison stockpiles any concentrates or dorebullion produced from the
Property for a period greater than two (2) months, then Madison shall pay to
Lewis the Royalty described in Section 2.5 below with respect to such
concentrates or dore bullion. For
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purposes of calculating the Royalty due hereunder, the value of any stockpiled
concentrate or dore shall be the same price for which Madison sold its last
concentrate or dore.
Madison may, at its sole discretion, stockpile any mineralized rock
mined from the Property in separate stockpiles situated on the Property or upon
other property owned by Madison, provided that Madison shall provide Lewis, in
writing, with the location, tonnage and grade of any such stockpile, and
provided further that if the stockpile is not situated on the Property, Madison
agrees to recognize the interest of Lewis, pursuant to the terms of this
Agreement, in any such stockpile.
Madison shall be responsible to Lewis for its Royalty from the theft or
loss of any bullion, precipitate or other product, while the material is in the
care of Madison, its agents, assigns or contractors.
2.4 Advance Minimum Royalty. Unless and until Madison exercises the
Royalty Purchase Option or Madison gives notice under Section 4.6 hereof (either
of which is referred to as the "Advance Minimum Royalty Termination Notice"),
Madison shall pay to Lewis, commencing on the Purchase Closing Date and annually
on each anniversary thereafter, an Advance Minimum Royalty of SIXTY THOUSAND
DOLLARS ($60,000.00). It is expressly understood that Madison shall have no
obligation to make any Advance Minimum Royalty payment, the due date of which
occurs after the date of the Advance Minimum Royalty Termination Notice.
Notwithstanding the preceding, if Lewis notifies Madison within thirty (30) days
of receiving the Advance Minimum Royalty Termination Notice that Madison has
failed to make any payment to Lewis as required
-18-
under the Agreement, in order to be relieved of Advance Royalty payment due
after such Advance Minimum Royalty Termination Notice, Madison must, within
thirty (30) days of receiving such notice from Lewis: i) make such payment, or
ii) notify Lewis in writing, that it disputes that such payment is delinquent
and promptly thereafter pursue resolution of such dispute in a court of
competent jurisdiction in Reno, Nevada.
The Advance Minimum Royalty payments shall be credited against any
Royalty due from production in the same Contract Year, defined as each
twelve-month period beginning on the anniversary of the Effective Date set forth
in Section 1.1 above. Madison shall not be allowed to carry forward to future
Contract Years any unrecaptured amounts of the Advance Minimum Royalty payment.
No other costs or payments of any kind or form may be deducted from the Royalty
payable hereunder.
Commencing with the first Advance Minimum Royalty due after exercise of
the Purchase Option, each Advance Minimum Royalty shall be adjusted annually by
a cost of living adjustment pursuant to the following formula:
R = $60,000.00 x A/P
Where "R" represents the adjusted Advance Minimum Royalty; "P"
represents the Consumer Price Index for all Urban Consumers, "All Items"
("CPI"), as published last previous to the Effective Date of this Agreement by
the United States Department of Labor for the San Francisco-Oakland Area; and
"A" represents the same CPI published last previous to the date of the current
Advance Minimum Royalty payment. Should such CPI be discontinued or modified,
the parties agree that the most nearly similar index shall be
-19-
used or, in the absence of a similar index, then as set by arbitration in
accordance with the Uniform Arbitration Act of Nevada, taking into consideration
changes in the cost of living. Unless and until Madison exercises the Royalty
Purchase Option or Madison gives notice under Section 4.6 hereof, in no event
shall the Advance Minimum Royalty be reduced below SIXTY THOUSAND DOLLARS
($60,000.00).
2.5 Production Royalty. Upon commencing production of valuable minerals
from the Property, Madison shall pay Lewis a royalty on production as follows:
a. Madison shall pay to Lewis a Royalty on all gold or silver
produced, or shipped, or sold by Madison from the leased premises of FIVE
PERCENT (5%) of the metal produced delivered to the refiner and deposited into
the account of Lewis free and clear of any costs.
b. For all other minerals such as lead, zinc, copper, etc.,
Lewis shall receive a royalty of FOUR PERCENT (4%) of the Net Smelter Return.
Net smelter return shall be defined as the sum received by Madison for any lot
of ore or concentrates from the custom mill, custom smelter, or custom reduction
works purchasing the ores or concentrates after deducting the costs of usual
treatment charges. In the event ores or concentrates are shipped to a mill,
smelter, or reduction works owned or controlled by Madison and/or a Joint
Venture associated with Madison directly or indirectly, as parent, subsidiary,
either wholly-owned or through ownership of shareholder interests, then in that
event no deductions shall be made from Lewis' share of royalty and Lewis shall
receive Lewis' FOUR PERCENT (4%) share of product or payment produced from
these premises
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free and clear of all costs of any kind. The refiner or smelter shall be
instructed by Lewis to pay Lewis' FOUR PERCENT (4%) Royalty directly into the
account of Lewis or as Lewis may otherwise direct.
c. Lewis shall pay its share of the Nevada State Net Proceeds
of Mines tax and its own income taxes. All other taxes, charges, assessments,
fees, and fines of any nature assessed or imposed by any agency or entity shall
be borne by Madison.
The refiner or smelter shall make payment of production royalties
directly into Lewis' account. All payments shall be accompanied by a statement
explaining the manner in which the payment was calculated.
2.6 Commingling. Madison shall not commingle any ores from the Property
with ores from other properties unless and until Madison has negotiated a
separate Commingling Agreement with Lewis. However, this provision shall not
obligate Lewis to enter into a commingling agreement.
2.7 Accounting. Lewis shall be entitled to hire such accountants and
engineers as Lewis requires to evaluate Madison's payment procedures and to
ensure that Lewis is properly paid its Royalty. At Lewis' request, Madison and
Lewis shall jointly agree on an engineering company (the "Royalty Consultant")
such as Kappes Cassiday to audit the computation and payment of the Royalty to
Lewis. The Royalty Consultant shall be engaged to perform audits annually to
ensure that Lewis is properly paid its Royalty. At Lewis' option, the Royalty
Consultant shall certify in writing to Lewis annually that Lewis has been
properly and adequately paid its Royalty, in the Royalty Consultant's opinion.
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In the event that an annual shortage of payment to Lewis of one-half percent
(0.5%) or more is found to exist in payments due Lewis and provided such
shortage is a result of Madison's error, then in that event, Madison shall
reimburse Lewis for all reasonable costs of such accountants and engineers, or
other necessary professionals for that year, including the Royalty Consultant.
Madison shall maintain books of account relating to production from the
Property and make them available to Lewis, or its agent, on request at Reno,
Nevada. The books shall show the amount of ores and minerals shipped, sold or
treated, and the amount of money received or receivable from the sale of said
ores and minerals from the Property. Said books of account, as well as Madison's
maps, assays, mill and smelter returns, and all other records pertaining to the
Property shall be made available at all reasonable times during normal business
hours to Lewis and Lewis' representatives for the purpose of ascertaining and
checking the compliance of Madison with the terms of this Agreement. Copies of
accounting, production and sales records and net proceeds of mines relating to
the Property shall be furnished promptly to Lewis quarterly. Madison shall
provide Lewis, on a quarterly basis, a financial report relating to Madison's
production operations on the Property. Madison shall maintain its records in
accordance with generally accepted accounting principles. Madison shall perform
an annual audit of accounts, using an accounting firm of national reputation or
such other firm as Lewis may agree to in writing.
2.8 Late Payments. After exercise of the Purchase Option, in the event
that any payments due to Lewis, whether Advance Minimum Royalty, Royalty or
otherwise,
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become delinquent by more than thirty (30) days, Lewis shall have the right, in
addition to any other remedies available in law or at equity, to charge interest
on the delinquent amount at the rate of two percent (2%) per month from the date
due of such delinquent payment; provided, however, that if Madison shall dispute
that payment is delinquent, no interest shall be due unless and until the
payment is adjudicated delinquent by a court of competent jurisdiction.
2.9 Reclamation. During the term of this Agreement, Madison shall
conduct its activities on the Property in accordance with all applicable
federal, state and local laws and regulations, including, without limitation,
those regulations pertaining to permitting, bonding and reclamation.
SECTION THREE
Option to Purchase the Royalty
3.1 Grant of Option to Purchase Royalty. At any time, for a period of
thirty-five (35) years after exercise of the Purchase Option, Madison shall have
the exclusive right and option to purchase the Royalty (the "Royalty Purchase
Option"), by giving written notice as provided in this Agreement. Upon receipt
of such notice, Lewis and Madison shall set a closing date (the "Royalty Closing
Date"), which shall in no event be later than thirty (30) days from the receipt
of such notice. The Royalty Purchase Option shall be deemed to have been
exercised on the date that Madison transmits to Lewis a written notice of
exercise of the Royalty Purchase Option.
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3.2 Royalty Purchase Price. From the date of exercise of the Purchase
Option until one year (1) thereafter, the purchase price for the Royalty (the
"Royalty Purchase Price") shall be FOUR MILLION DOLLARS ($4,000,000.00).
Commencing on the first anniversary of the exercise of the Purchase
Option, and on each anniversary thereafter, the Royalty Purchase Price shall be
increased by FIVE HUNDRED THOUSAND DOLLARS ($500,000.00).
The Royalty Purchase price shall be paid in cash on the Royalty Closing
Date, upon delivery by Lewis to Madison of a Quitclaim Deed Relinquishing
Royalty Interest in the form attached hereto as Exhibit C, conveying all right
title and interest in the Royalty, free and clear of all liens and encumbrances
caused by Lewis.
3.3 Effect of Exercising Royalty Purchase Option. In the event Madison
exercises the Royalty Purchase Option, this Agreement shall terminate in its
entirety, and Lewis will have no further rights or interest in the Property, or
obligations in the Property, except those obligations that have accrued prior to
such date. No Royalty shall be due Lewis after the Royalty Purchase Option has
been exercised by Madison, except for Royalty on minerals received by the
refiner or other purchaser prior to such exercise date.
3.4 Right of Lewis to Sell Royalty. Prior to Madison's exercising the
Royalty Purchase Option, Lewis shall be free to sell the Royalty to any buyer;
provided, however, that such conveyance of the Royalty shall be subject to all
of the obligations of Lewis set forth in this Agreement, including without
limitation Madison's Royalty Purchase Option.
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SECTION FOUR
Miscellaneous Provisions
The following miscellaneous provisions shall apply to all parts of this
Agreement.
4.1 Notices. All notices to MNP or GAME, as the case may be, or Lewis
shall be in writing and may be delivered or sent by Federal Express, or similar
overnight delivery service, or certified or registered mail, return receipt
requested, to the addresses below, and such notices shall be deemed effective:
i) if by Federal Express, or similar overnight delivery service, the day after
it is deposited with such service, postage prepaid; or ii) if by certified or
registered U. S. mail, the date it is received or three (3) days after
deposited, postage prepaid, whichever first occurs. Notice of any change in
address shall be given in the same manner.
TO LEWIS: F. W. Lewis, Inc.
120 Greenridge Drive
Reno, NV 89509-3927
TO GAME: Great American Minerals Exploration (Nevada), LLC
9051 South 1075 West, Suite B 301 West
Jordan, Utah 84088
TO MNP: Madison Enterprises Corp.
Suite 2000, Guinness Tower 1055
W. Hastings Street Vancouver,
British Columbia Canada V6E 2E9
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4.2 Payments in U. S. Currency. All payments shall be made in U. S.
currency by check or wire transfer of immediately available funds, payable to
Lewis at the address above.
4.3 Title. Lewis represents and warrants that the Property is not, by
any act or instrument of Lewis, nor to Lewis' knowledge as to any act or
instrument of any other party, subject to (1) any prior existing agreement,
encumbrance, burden or restriction; (2) any liens and encumbrances and other
adverse claims by third parties or (3) any royalties, overriding royalties, net
profits interests, or payments on production, excepting as noted herein.
a. An Agreement with Duval Corporation entered into August 27,
1982 establishing a vertical boundary agreement of some of the claims that
abutted Duval. See Document Number 113805 at Book 215 Page 544; Book 244 Page
390; Book 393 Page 244. These recordings are in Lander County, Nevada.
b. An Agreement of perpetual easement granted to Battle
Mountain Gold Company recorded at Book 423 Page 050; and also the deed recorded
at Book 423, Page 046 relating to the Alps, October, Hoosac, and Weimer Burr
patented claims deeded to Lewis that reserved certain easements and other rights
to Battle Mountain Gold including easements. There are also easements over
portions of the Buena Vista 7, 8, 12, and 13, Surprise 9 and Surprise 10
unpatented claims recorded at Book 423, Pages 046. A copy of these agreements
are on file with Lewis and Madison is invited to study these documents. All of
these filings are in Lander County, Nevada.
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c. Lewis purchased the Styles patented land from an estate.
With respect to the Styles' water rights, one of the family heirs may not have
signed a quitclaim deed to Lewis conveying the water rights.
Madison will take title to the Property in reliance upon
Madison's own investigation of Lewis' title. Madison further agrees there shall
be no recourse against Lewis by suit, setoff, recoupment, or otherwise in the
event of any title deficiencies which result in litigation or loss of any of the
Property.
4.4 No Warranties or Representations as to Value. From time to time,
Lewis and other parties have prepared estimates of cash flow and mineral value
with respect to portions of the Property. This information shall be made
available to Madison following exectution of this Agreement.
WITH RESPECT TO SUCH INFORMATION AND DATA, MADISON ACKNOWLEDGES AND
AGREES, AS A CONDITION OF THIS AGREEMENT, THAT:
A. LEWIS MAKES NO WARRANTY OR REPRESENTATION WHATSOEVER AS TO THE
COMPLETENESS OR ACCURACY OF THE INFORMATION AND DATA PERTAINING TO THE REAL
PROPERTY AND PERSONAL PROPERTY.
B. MADISON AND ANY THIRD PARTIES SHALL MAKE THEIR OWN INDEPENDENT
ASSESSMENT AND EVALUATION REGARDING ASSAYS, ORE
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VALUES, ECONOMIC PROJECTIONS REGARDING THE REAL PROPERTY AND PERSONAL PROPERTY.
C. MADISON AND ANY THIRD PARTIES SHALL NOT RELY UPON INFORMATION
SUPPLIED BY LEWIS OR AVAILABLE IN THE LEWIS FILES.
D. ANY INFORMATION FURNISHED BY MADISON TO THIRD PARTIES, INCLUDING
PROSPECTIVE INVESTORS AND STOCK EXCHANGES, SHALL INCLUDE THE FOLLOWING EXPRESS
LIMITATION WITH REGARD TO LEWIS, WHICH SHALL BE IN THE FORM OF A SHEET ATTACHED
TO EACH DOCUMENT, MAP, ASSAY REPORT, AND OTHER INFORMATION:
CAUTION: THE INFORMATION CONTAINED HEREIN DOES NOT CONSTITUTE ANY
REPRESENTATION OF ECONOMIC VALUE OR DEVELOPMENT POTENTIAL BY F. W.
LEWIS, INC., FRANK W. LEWIS, SHARON LEWIS, OR THE SF LEWIS TRUST.
E. MADISON WILL DEFEND, INDEMNIFY, AND HOLD LEWIS HARMLESS FROM ANY
CLAIMS, DEMAND, OR LIABILITIES ARISING FROM USE OF THE INFORMATION.
4.5 Bankruptcy of Madison. In the event the business or assets of both
MNP and GAME are taken over by an assignee for the benefit of creditors or by a
receiver or other court custodian and remains unreleased for twenty (20) days,
Lewis may, at its option, terminate this Agreement.
4.6 Abandonment. After exercise of the Purchase Option and before
exercise of the Royalty Purchase Option, if Madison decides to abandon the
Property it shall offer,
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at least ninety (90) days prior to such abandonment, to quitclaim its interest
in the Property to Lewis, free and clear of any cost. Lewis shall have a period
of thirty (30) days after such notice to elect to accept the quitclaim on the
Property. Such election to accept the Property will be indicated by Lewis
recording the deed. In the event Lewis does not make such an election, this
Agreement shall terminate and Madison shall be free to abandon the Property, at
its sole discretion.
4.7 Binding Effect. This Agreement shall inure to the benefit of, and
be binding upon, the parties hereto, their respective successors and assigns.
4.8 Applicable Law. The terms and provisions of this Agreement shall be
governed by and interpreted in accordance with the laws of the State of Nevada
applicable to agreements made and to be performed wholly within such State. With
respect to any litigation proceedings arising between the parties under this
Agreement or relating to the Property, the parties each irrevocably submit to
the exclusive jurisdiction of either the Second Judicial District Court for the
State of Nevada, in Reno, Nevada, or the United States District Court for the
District of Nevada, in Reno, Nevada. Each party waives any claim that such
proceedings have been brought in an inconvenient forum and further waives the
right to object, with respect to such proceedings, that such courts do not have
personal jurisdiction over such party; provided, however, that neither party
waives the right to seek the removal of any proceeding initiated in the Second
Judicial District Court for the State of Nevada to the United States District
Court for the District of Nevada. The parties may conduct discovery pursuant to
the Nevada Rules of Civil Procedure or the
-29-
Federal Rules of Civil Procedure and any other applicable local rules, as
applicable. The parties may elect to resolve their dispute by arbitration, in
which case the arbitration proceedings shall be governed by the rules of the
American Arbitration Association, or otherwise as the parties shall mutually
agree.
4.9 Attorney Fees and Costs. Should any litigation arise out of this
Agreement, the prevailing party shall be entitled to reasonable attorneys' fees
and court costs, in addition to any other relief the court may grant.
4.10 Entire Agreement. This Agreement terminates and replaces all prior
agree ments, either written, oral or implied between the parties hereto, and
constitutes the entire agreement between the parties.
4.11 Memorandum of Agreement. The parties hereto agree to execute a
memor andum of this Agreement, which shall be recorded in the official records
of Lander County, Nevada for the purpose of providing constructive notice of
this Agreement, pursuant to the laws of the State of Nevada.
4.12 Void or Invalid Provisions. If any term, provision, covenant or
condition of this Agreement, or any application thereof, should be held by a
court of competent jurisdiction to be invalid, void or unenforceable, all
remaining provisions, covenants and conditions of this Agreement, and all
applications thereof, not held invalid, void or unenforceable, shall continue in
full force and effect and shall in no way be affected, impaired or invalidated
thereby.
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4.13 Waiver. No waiver of any breach of any covenant herein shall be
construed to be a waiver of the covenant itself, or any subsequent breach
thereof.
4.14 Amendment. All amendments of this Agreement must be in writing
signed by all parties.
4.15 Time of Essence. Time is of the essence in this Agreement and
each and every part thereof.
4.16 No Partnership or Implied Covenants. This Agreement shall not be
construed under any circumstances as creating a partnership between Lewis and
Madison or either of them and any other party. There shall be no implied
covenants or duties under this Agreement, except for the covenant of good faith
and fair dealing.
4.17 Force Majeure. If Madison should be prevented or delayed from
performing any of the obligations of this Agreement, in whole or in part, by
reason or act of nature, strike, fire, flood, delay in transportation, war
insurrection or mob violence, requirement or regulation of government,
unavoidable casualties, unavoidable accidents, any local, state or federal law,
regulation or order, the judgment or order of any court, any such failure to
perform shall not be deemed a breach of this Agreement, but performance of said
obligations shall be suspended during such period of disability and performance
of said obligations shall be resumed immediately after such disability has been
removed. Force majeure shall not be applicable to the obligations of Madison (1)
to perform assessment work or to pay the federal claim maintenance fees and
county recording fees, as prescribed in Section 1.16; (2) to make the minimum
royalty or advance minimum royalty payments
-31-
described in this Agreement; and (3) to make all other payments due to Lewis
pursuant to this Agreement.
4.18 Confidentiality. Except for the recording of a Memorandum of
Agreement, as provided in Section 4.11, and except as otherwise provided in this
Section, the terms and conditions of this Agreement, and all data, reports,
records, and other information of any kind whatsoever developed or acquired by
any party in connection with this Agreement shall be treated by the parties as
confidential (hereinafter called "Confidential Information") and no party shall
reveal or otherwise disclose such Confidential Information to third parties
without the prior written consent of the other party. Confidential Information
that is available or that becomes available in the public domain, other than
through a breach of this provision by a party, shall no longer be treated as
Confidential Information.
The foregoing restrictions shall not apply to the disclosure of
Confidential Information to any affiliate; to any public or private financing
agency or institution; to any contractors or subcontractors which the parties
may engage; to employees and consultants of the parties; or to any third party
to which a party contemplates the transfer, sale, assignment, encumbrance or
other disposition of all or part of its interest in this Agree-meet; provided,
however, that in any such case only such Confidential Information as such third
party shall have a legitimate business need to know shall be disclosed and the
person or company to whom disclosure is made shall first undertake in writing to
protect the
-32-
confidential nature of such information at least to the same extent as the
parties are obligated under this Section.
In the event that a party is required to disclose Confidential
Information to any federal, state or local government, any court, agency or
department thereof, or any stock exchange, to the extent required by applicable
law, rule or regulation, or in response to a legitimate request for such
Confidential Information, the party so required shall immediately notify the
other party hereto of such requirement and the terms thereof, and the proposed
form and content of the disclosure prior to such submission. The other party
shall have the right to review and comment upon the form and content of the
disclosure and to object to such disclosure to the court, agency, exchange or
department concerned, and to seek confidential treatment of any Confidential
Information to be disclosed on such terms as such party shall, in its sole
discretion, determine.
Madison has been informed that the S. F. Lewis Trust, which owns all of
the stock of F. W. Lewis, Inc., is presently offering to sell all of the stock
of F. W. Lewis, Inc. to interested parties. Such parties, after signing a
Confidentiality Agreement to protect the confidential nature of such information
at least to the same extent as the parties are obligated under this Section,
shall be entitled to review all Confidential Information which relates to the
Property: i) in the possession of Lewis and ii) to which Lewis is entitled under
the terms of this Agreement but which Confidential Information Lewis has not yet
received, provided that such review shall be made in accordance with the
provisions of this
-33-
Section 4.18. The purpose of such examination shall be to assist in valuation of
the stock of F. W. Lewis, Inc.
4.19. Counterparts and Facsimile Signatures. This Agreement may be
executed in counterparts, and signature pages transmitted by facsimile shall be
treated as original and binding signatures (provided, however, that a
fully-executed original Agreement is delivered to Lewis within fourteen (14)
days of the Effective Date).
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.
F. W. LEWIS, INC.
By: /s/ Frank W. Lewis
---------------------------------
FRANK W. LEWIS, President
GREAT AMERICAN MINERALS
EXPLORATION (NEVADA), LLC, a
Nevada limited liability company
By: /s/ Donald James McDowell
-------------------------------------
Name: Donald James McDowell
Title: Manager
MADISON ENTERPRISES CORP., a British
Columbia corporation
By: /s/ Chet Idziszek
-------------------------------------
Name: Chet Idziszek
Title: President
-34-
STATE OF NEVADA )
) ss.
COUNTY OF WASHOE )
On this 4th day of June, 2002, personally appeared before me, a Notary
Public, Frank W. Lewis, a duly qualified and acting officer of F. W. LEWIS,
INC., personally known or proved to me to be the person whose name is subscribed
to the above instrument who acknowledged to me that he executed the above
instrument on behalf of said corporation.
/s/ Richard W. Harris
---------------------------------
Notary Public
STATE OF NEVADA )
) ss.
COUNTY OF WASHOE )
On this 5th day of June, 2002, personally appeared before me, a Notary
Public, Donald James McDowell duly qualified and acting officer of GREAT
AMERICAN MINERALS EXPLORATION (NEVADA), LLC, a Nevada limited liability company,
personally known or proved to me to be the person whose name is subscribed to
the above instrument who acknowledged to me that he executed the above
instrument on behalf of said corporation.
/s/ Richard W. Harris
---------------------------------
Notary Public
PROVINCE OF BRITISH COLUMBIA )
) ss.
CITY OF VANCOUVER )
On this 5th day of June, 2002, personally appeared before me, a Notary
Public, Chet Idziszek a duly qualified and acting officer of MADISON ENTERPRISES
CORP., a British Columbia corporation, personally known or proved to me to be
the person whose name is subscribed to the above instrument who acknowledged to
me that he executed the above instrument on behalf of said corporation.
/s/
---------------------------------
Notary Public
-35-
Battle Mt
EXHIBIT A
LANDER COUNTY, NEVADA
BATTLE MOUNTAIN MINING DISTRICT
Patented property of F. W. Lewis, Inc.
New Silver dream #6 U. S. Survey No. 5048
Robert Emmett U. S. Survey No. 59 Parcel No. 98-702-21
Eureka U. S. Survey No. 60 Parcel No. 98-702-22
October U. S. Survey No. 4380 Parcel No. 98-702-41
Alps Mine and Company U. S. Survey No. 3742 Parcel No. 98-701-95
Weimer Burr US. Survey No, 3074 Parcel No. 98-702-37
Hoosac Lode and Company U. S. 3742 (excepting a small portion of this claim that
is South and not contiguous to the other property) Parcel No. 98-701-94
Styles Farm Parcel No. 10-420-01. Approximately 5 acres with water rights as
follows: T. 31, N, R. 43 E., MDBM, Section 11 SE 1/4 NW 1/4 SW 1/4 SW 1/4; N 1/2
NE 1/4 SW 1/4 SW 1/4 SW 1/4; E 1/2 SW 1/4 NW 1/4 SW 1/4 SW 1/4.
Unpatented property of F. W. Lewis, Inc.
- ----------------------------------------
Claim Names Book Page NMC
- ----------- ---- ---- ---
Antler Ext. No. 1 275 417 385042
Antler Ext. No. 2 275 418 385043
Antler Ext. No. 3 275 419 385044
Antler Ext. No. 4 275 420 385045
Antler Ext. No. 5 275 421 385046
Antler Ext. No. 6 275 422 385047
Antler Ext. No. 7 275 423 385048
Antler Ext. No. 8 275 424 385049
Antler Ext. No. 9 275 425 385050
Antler Ext. No. 10 275 426 385051
Antler No. 1 189 443 181854
Antler No. 2 189 444 181855
Antler No. 3 189 445 181856
Antler No. 4 189 446 181857
Antler No. 5 189 447 181858
1
Antler No. 6 189 448 181859
Antler No. 7 189 449 181860
Antler No. 8 189 450 181861
Antler No. 9 189 451 181862
Antler No. 10 189 452 181863
Antler No. 11 189 453 181864
Antler No. 12 189 454 181865
Antler No. 13 189 455 181866
Antler No. 14 189 456 181867
Antler No. 15 189 457 181868
Antler No. 16 189 458 181869
Antler No. 17 189 459 181870
Antler No. 18 189 460 181871
Antler No. 19 189 461 181872
Antler No. 20 189 462 181873
Antler No. 21 189 463 181874
Antler No. 22 189 464 181875
Antler No. 23 189 465 181876
Antler No. 24 189 466 181877
Antler No. 25 189 467 181878
Antler No. 26 189 468 181879
Antler No. 27 189 469 181880
Antler No. 28 196 278 200025
Antler No. 29 196 279 200026
Antler No. 30 196 280 200027
Antler No. 31 196 281 200028
Antler No. 32 196 282 200029
Antler No. 33 196 283 200030
Antler No. 34 196 284 200031
Antler No. 35 196 285 200032
Antler No. 36 196 286 200033
AP No. 1 PL 212 344 241342
AP No. 2 PL 212 345 241343
AP No. 3 PL 212 346 241344
AP No. 4 PL 212 347 241345
AP No. 5 PL 212 348 241346
April 4 64 97906
Battle 210 185 241290
Battle No. 1 210 186 241291
Battle No. 2 210 187 241292
Bear Paw 9 281 102415
2
Amended 221 553
Bear Paw No. 1 9 282 102416
Amended 221 554
Bear Paw No. 2 210 190 241293
Bear Paw No. 3 210 191 241294
Bear Paw No. 4 9 373 102417
Amended 221 557
Bear Paw No. 5 9 374 102418
Amended 221 558
Bear Paw No. 6 11 400 102419
Amended 221 559
Buena Vista Fr. No. 1 214 197 245427
Buena Vista Fr. No. 2 214 198 245428
Buena Vista Fr. No. 3 221 412 260267
Buena Vista Fr. No. 4 221 413 260268
Buena Vista Fr. No. 5 221 414 260269
Buena Vista Fr. No. 6 221 415 260270
Buena Vista Fr. No. 7 221 416 260271
Buena Vista No. 1 177 314 151268
Buena Vista No. 2 177 315 151269
Buena Vista No. 3 177 316 151270
Buena Vista No. 4 177 317 151271
Buena Vista No. 5 177 318 151272
Buena Vista No. 6 177 319 151273
Buena Vista No. 7 177 320 151274
Buena Vista No. 8 177 321 151275
Buena Vista No. 9 177 322 151276
Buena Vista No. 10 177 323 151277
Buena Vista No. 11 177 324 151278
Buena Vista No. 12 177 325 151279
Buena Vista No. 13 177 326 151280
Buena Vista No. 14 180 28 159544
Buena Vista No. 15 180 29 159545
Buena Vista No. 16 180 30 159546
Buena Vista No. 17 189 482 181887
Buena Vista No. 18 189 483 181888
Buena Vista No. 19 189 484 181889
Buena Vista No. 20 189 485 181890
Buena Vista No. 21 189 486 181891
Buena Vista No. 22 189 487 181892
Buena Vista No. 23 189 488 181893
3
BVD No. 1 PL 212 324 241352
BVD No. 2 PL 212 325 241353
BVD No. 3 PL 212 326 241354
BVD No. 4 PL 212 327 241355
BVD No. 5 PL 212 328 241356
BVD No. 6 PL 212 329 241357
BVD No. 7 PL 212 330 241358
BVD No. 8 PL 212 331 241359
BVD No. 9 PL 212 332 241360
BVD No. 10 PL 212 333 241361
BVD No. 11 PL 212 334 241362
Driscol Ext. No. 5 210 180 241287
Driscol Ext. No. 6 210 181 241288
Driscol Ext. No. 7 210 182 241289
Driscol Ext. No. 8 177 306 151260
Driscol Ext. No. 9 177 307 151261
Driscol Ext. No. 10 177 308 151262
Driscol Ext. No. 11 177 309 151263
Amended 224 300
Driscol Ext. No. 12 177 310 151264
Amended 224 301
Driscol Ext. No. 13 177 311 151265
Amended 224 302
Driscol Ext. No. 14 177 312 151266
Driscol Ext. No. 15 177 313 151267
Driscol Ext. No. 16 190 151 183430
Driscol Ext. No. 17 190 152 183431
Driscol Ext. No. 18 190 153 183432
Driscol Ext. No. 19 190 154 183433
Driscol Ext. No. 20 190 155 183434
Driscol Ext. No. 21 190 156 183435
Driscol Ext. No. 22 190 157 183436
Driscol Ext. No. 23 190 158 183437
Driscol Ext. No. 24 190 159 183438
Driscol Ext. No. 25 190 160 183439
Driscol Ext. No. 26 190 161 183440
Driscol Ext. No. 27 190 162 183441
Driscol Ext. No. 28 190 163 183442
Amended 224 303
Driscol Ext. No. 29 190 164 183443
Amended 224 304
4
Driscol Ext. No. 30 190 165 183444
Amended 224 305
Driscol Ext. No. 31 190 166 183445
Amended 224 306
Driscol Ext. No. 32 190 167 183446
Amended 224 307
Driscol Ext. No. 33 190 168 183447
Amended 224 308
Driscol Ext. No. 34 190 169 183448
Amended 224 309
Driscol Ext. No. 37 190 170 183449
Amended 224 310
Driscol Ext. No. 38 190 171 183450
Amended 224 311
Driscol Ext. No. 39 190 172 183451
Amended 224 312
Driscol Ext. No. 40 190 173 183452
Amended 224 313
Driscol Ext. No. 41 190 174 183453
Driscol Ext. No. 42 190 175 183454
Amended 224 314
Driscol Ext. No. 43 212 342 241347
Driscol Ext. No. 44 224 316 271305
Driscol Ext. No. 45 224 317 271306
Driscol Ext. No. 46 224 318 271307
Driscol Ext. No. 47 224 319 271308
Driscol Ext. No. 48 224 320 271309
Driscol Ext. No. 49 224 321 271310
Driscol High Grade 22 248 70523
Driscol No. 1 22 249 70524
Amended 221 560
Driscol No. 2 22 249 70525
Amended 221 561
Driscol No. 3 22 250 70526
Amended 221 562
Driscol No. 4 2 34 70527
Amended 221 563
Driscol No. 5 2 62 70528
Amended 221 564
Driscol No. 6 2 63 70529
Amended 221 565
5
Driscol No. 7 2 64 70530
Amended 221 566
Driscol No. 8 2 65 70531
Driscoll No. 9 7 234 70532
Driscoll No. 10 7 235 70533
Driscoll No. 11 7 236 70534
Driscoll No. 12 7 237 70535
Driscoll No. 13 7 238 70536
Amended 221 567
Driscoll No. 14 7 239 70537
Amended 221 568
Amended 408 467
Driscoll No. 15 7 240 70538
Amended 221 569
Duck Fraction 277 463 387880
Honey Bear No. 1 217 143 251629
Honey Bear No. 2 217 144 251630
Honey Bear No. 3 217 145 251631
Honey Bear No. 4 217 146 251632
Honey Bear No. 5 217 147 251633
Honey Bear No. 6 217 148 251634
Honey Bear No. 7 217 149 251635
Honey Bear No. 8 217 150 251636
Honey Bear No. 9 217 151 251637
Honey Bear No. 10 217 152 251638
Honey Bear No. 11 217 153 251639
Honey Bear No. 12 217 154 251640
Honey Bear No. 13 217 155 251641
Honey Bear No. 14 217 156 251642
Honey Bear No. 15 217 157 251643
Honey Bear No. 16 217 158 251644
Honey Bear No. 17 217 159 251645
Honey Bear No. 18 217 160 251646
Honey Bear No. 19 217 161 251647
Honey Bear No. 20 217 162 251648
Honey Bear No. 21 217 163 251649
Honey Bear No. 22 217 164 251650
Honey Bear No. 23 217 165 251651
Honey Bear No. 24 217 166 251652
LC No. 1 212 350 241315
LC No. 2 212 351 241316
6
LC No. 3A 212 352 241317
LC No. 3B 212 353 241318
LC No. 4 212 354 241319
LC No. 5 212 355 241320
LC No. 6 212 356 241321
LC No. 7 212 357 241322
LC No. 8 212 358 241323
Amended 224 295
LC No. 9 212 359 241324
Amended 224 359
LC No. 10 212 360 241325
LC No. 11 212 361 241326
LC No. 12 212 362 241327
LC No. 13 212 363 241328
LC No. 14 212 364 241329
LC No. 15 212 365 241330
LC No. 16 212 366 241331
LC No. 17 212 367 241332
LC No. 18 212 368 241333
LC No. 19 212 369 241334
LC No. 20 212 370 241335
LC No. 21 212 371 241336
LC No. 22 212 372 241337
LC No. 23 212 373 241338
LC No. 24 212 374 241339
LC No. 25 212 375 241340
Amended 224 297
LC No. 26 212 376 241341
Amended 224 298
LC No. 27 224 287 271311
LC No. 28 224 288 271312
LC No. 29 224 289 271313
LC No. 30 224 290 271314
LC No. 31 224 291 271315
LC No. 32 224 292 271316
NKL No. 1 190 214 183881
NKL No. 2 190 215 183882
NKL No. 3 190 216 183883
NKL No. 4 190 217 183884
NKL No. 5 190 218 183885
NKL No. 6 190 219 183886
7
NKL No. 7 190 220 183887
NKL No. 8 190 221 183888
NKL No. 9 190 222 183889
NKL No. 10 190 223 183890
NKL No. 11 190 224 183891
NKL No. 12 190 225 183892
NKL No. 13 190 226 183893
NKL No. 14 190 227 183894
NKL No. 15 190 228 183895
NKL No. 16 190 229 183896
NKL No. 17 190 230 183897
NKL No. 19 190 232 183899
NKL No. 20 190 233 183900
NKL No. 21 190 234 183901
NKL No. 22 212 339 241348
NKL No. 22 214 187 245418
NKL No. 23 212 340 241349
NKL No. 23 214 188 245419
NKP No. 1 PL 190 259 183860
NKL No. 2 PL 190 260 183861
NKL No. 3 PL 190 261 183862
NKL No. 4 PL 190 262 183863
NKL No. 5 PL 190 263 183864
NKL No. 6 PL 190 264 183865
NKL No. 7 PL 190 265 183866
NKL No. 8 PL 190 266 183867
NKL No. 9 PL 190 267 183868
NKL No. 10 PL 190 268 183869
NKL No. 11 PL 190 269 183870
NKL No. 12 PL 190 270 183871
NKL No. 13 PL 190 271 183872
NKL No. 14 PL 190 272 183873
NKL No. 15 PL 190 273 183874
NKP No. 16 PL 190 274 183875
NKL No. 17 PL 190 275 183876
NKL No. 19 PL 190 277 183878
NKL No. 20 PL 190 278 183879
NKL No. 21 PL 190 279 183880
NKL No. 22 PL 212 336 241350
NKL No. 23 PL 212 337 241351
Perspiration Ext. No. 1 275 409 385034
8
Perspiration Ext. No. 2 275 410 385035
Perspiration Ext. No. 3 275 411 385036
Perspiration Ext. No. 4 275 412 385037
Perspiration Ext. No. 5 275 413 385038
Perspiration Ext. No. 6 275 414 385039
Perspiration Ext. No. 7 275 415 385040
Perspiration Ext. No. 8 275 416 385041
Perspiration No. 1 2 66 97903
Perspiration No. 2 13 155 97904
Perspiration No. 3 13 156 97905
Perspiration No. 4 190 177 183455
Perspiration No. 5 190 178 183456
Perspiration No. 6 190 179 183457
Perspiration No. 7 190 180 183458
Perspiration No. 8 190 181 183459
Perspiration No. 9 190 182 183460
Perspiration No. 10 190 183 183461
Perspiration No. 11 190 184 183462
Perspiration No. 12 190 185 183463
Perspiration No. 13 190 186 183464
Perspiration No. 14 190 187 183465
Perspiration No. 15 190 188 183466
Perspiration No. 16 190 189 183467
Perspiration No. 17 190 190 183468
Perspiration No. 18 190 191 183469
Perspiration No. 19 190 192 183470
Perspiration No. 20 190 193 183471
Perspiration No. 21 190 194 183472
Perspiration No. 22 190 195 183473
Perspiration No. 23 190 196 183474
Perspiration No. 24 190 197 183475
Perspiration No. 25 190 198 183476
Perspiration No. 26 190 199 183477
Perspiration No. 27 190 200 183478
Perspiration No. 28 190 201 183479
Perspiration No. 29 190 202 183480
Perspiration No. 30 190 203 183481
Perspiration No. 31 190 204 183482
Perspiration No. 32 190 205 183483
Perspiration No. 33 190 206 183484
Perspiration No. 34 190 207 183485
9
Perspiration No. 35 190 208 183486
Perspiration No. 36 190 209 183487
Perspiration No. 37 190 210 183488
Perspiration No. 38 190 211 183489
Perspiration No. 39 190 212 183490
Roid No. 1 Fraction 293 28 418380
Roid No. 2 Fraction 293 29 418381
SC No. 1 224 270 271317
SC No. 2 224 271 271318
SC No. 3 224 272 271319
SC No. 4 224 273 271320
SC No. 5 224 274 271321
SC No. 6 224 275 271322
SC No. 7 224 276 271323
SC No. 8 224 277 271324
SC No. 9 224 278 271325
SC No. 10 224 279 271326
SC No. 11 224 280 271327
SC No. 12 224 281 271328
SC No. 13 224 282 271329
SC No. 14 224 283 271330
SC No. 15 224 284 271331
SC No. 16 224 285 271332
Silver Dream No. 1 213 261 243533
New Silver Dream No. 2 343 196 589457
New Silver Dream No. 3 343 198 589458
Silver Dream No. 4 213 264 243536
Silver Dream No. 5 213 265 243537
Silver Dream No. 7 213 266 243538
Silver Dream No. 8 213 267 243539
Silver Dream No. 9 177 302 151241
Silver Dream No. 10 177 303 151242
Silver Dream No. 11 177 304 151243
Surprise Fraction No. 1 214 190 245420
Surprise Fraction No. 2 214 191 245421
Surprise Fraction No. 3 214 192 245422
Surprise Fraction No. 4 214 193 245423
Surprise Fraction No. 5 214 194 245424
Surprise Fraction No. 6 214 195 245425
Surprise Fraction No. 7 214 196 245426
Surprise No. 5 180 24 159540
10
Surprise No. 6 180 25 159541
Surprise No. 7 180 27 159542
Surprise No. 8 180 28 159543
Surprise No. 9 181 584 166987
Amended 221 571
Surprise No. 10 181 585 166988
Amended 221 572
Amended 343 200
Willow Fraction 293 30 418382
Willow Fraction No. 1 293 31 418383
Willow Fraction No. 2 293 32 418384
Willow Fraction No. 3 293 33 418385
Goldfield Concentrates Mill Site 8 423 102449
McBear 1 408 582 700644
(360 unpatened)
Battle Mountain
Water rights Including the following:
Water right certificate to Galena Spring No. 7592
Water right certificate to Shiloh Shaft No. 759375
Styles water permits No. s 7665, 7684, 28960, 9811.
Water right applications No.s
49038, 49039, 49053.
11
Recorded at the request of Exhibit B
and return to:
QUITCLAIM DEED WITH RESERVED ROYALTY
ON MINERAL PRODUCTION
THIS QUITCLAIM DEED WITH RESERVED ROYALTY ON MINERAL PRODUCTION is made
this_______________________day of_____________________, 200_ by and between F.
W. LEWIS, INC., a Nevada corporation ("Lewis"); and MADISON ENTERPRISES CORP., a
British Columbia corporation, and GREAT AMERICAN MINERALS EXPLORATION (NEVADA),
LLC., a Nevada limited liability company (referred to collectively as
"Madison").
WITNESSETH:
1. Conveyance of Real Property. Lewis, in consideration of Ten Dollars
and other valuable consideration paid to it by Madison, does hereby remise,
release and forever quitclaim to Madison all of Lewis' right, title and interest
in and to the patented and unpatented lode mining claims situated in Lander
County, Nevada, which are more particularly described on Exhibit A attached
hereto (the "Property").
TOGETHER with all and singular the tenements, hereditaments and
appurtenances thereunto belonging, or in anywise appertaining, and the reversion
and reversions, remainder and remainders, rents, issues and profits thereof.
-1-
TOGETHER with all minerals and all veins and lodes of mineral-bearing
rock therein and all dips, spurs and angles thereof.
TO HAVE AND TO HOLD all of the right, title and interest of Lewis in
and to the Property, together with the appurtenances, unto Madison, its
successors and assigns forever.
2. Minimum Advance Royalties. Commencing
on_____________________________________________, 200_____, and on every
anniversary thereafter, Madison will pay to Lewis minimum advance royalties in
the amount of SIXTY THOUSAND DOLLARS ($60,000.00) in cash. Madison shall be
allowed to deduct the SIXTY THOUSAND DOLLAR ($60,000.00) minimum advance
royalties from production royalties in the current Contract Year (defined as
each twelve-month period beginning on the anniversary of the Effective Date
of_______________________________________, 2002) in which such payment is made.
Madison shall not be allowed to carry forward any unrecaptured amounts of the
$60,000.00 minimum advance royalties or other payments hereunder. No other costs
or payments of any kind or form may be deducted from the production royal-ties
payable hereunder.
The cash amount of the advance royalties payable pursuant to this
Section 2 shall be adjusted annually pursuant to the following formula:
a. For the purpose of the adjustments referred to herein and
the application of the formula herein set forth, the base minimum royalty
payment shall be SIXTY THOUSAND DOLLARS ($60,000.00) per year.
-2-
b. The minimum royalty for the twelve months following the
adjustment shall be increased according to increases in the cost of living as
herein set forth. The formula for computing the adjusted annual payment
according to the cost of living fluctuation shall be as follows:
R = $60,000 x A/P
Where "R" represents the adjusted Advance Minimum Royalty; "P"
represents the Consumer Price Index for all Urban Consumers, "All Items"
("CPI"), as published last previous to the effective date of this Agreement by
the United States Department of Labor for the San Francisco-Oakland Area; and
"A" represents the same CPI published last previous to the date of the current
Advance Minimum Royalty payment. Should such CPI be discontinued or modified,
the parties agree that the most nearly similar index shall be used or, in the
absence of a similar index, then as set by arbitration in accordance with the
Uniform Arbitration Act of Nevada, taking into consideration changes in the cost
of living. Unless and until Madison exercises the Royalty Purchase Option or
abandons the property, in no event shall the Advance Minimum Royalty be reduced
below SIXTY THOUSAND DOLLARS ($60,000).
3. Reserved Royalty on Production. Upon commencing production of
valuable minerals from the Property, Madison shall pay Lewis a royalty on
production ("Royalty") as follows:
-3-
a. Madison shall pay to Lewis a royalty on all gold or silver
produced, shipped, or sold by Madison from the Property equal to five percent
(5%) of the value of gold and silver produced and delivered to a refiner, free
and clear of any costs.
b. For all other minerals such as lead, zinc, copper, etc.,
Lewis shall receive a royalty of four percent (4%) of the Net Smelter Returns.
The term "Net Smelter Returns" as used herein shall be the amount received by
Madison for any lot, ore or concentrates from the custom mill, smelter or
reductions works purchasing the ores or concentrates after deducting the costs
of usual treatment charges. In the event ores or concentrates are shipped to a
mill, smelter or reduction works owned or controlled by Madison and/or any joint
venture associated with Madison, directly or indirectly, as parent, subsidiary
or under common ownership, either wholly owned or through ownership of
shareholder interest, then in that event no deductions shall be made from the
Royalty to Lewis, and Lewis shall receive four percent (4%) of such minerals
produced from the Property free and clear of all costs. The refiner shall be
instructed by Lewis to pay the Royalty directly into the account of Lewis or as
Lewis may otherwise direct.
c. Lewis shall pay its share of the Nevada State Net Proceeds
of Mines tax and its own income taxes, and all other taxes, charges,
assessments, fees, and fines of any nature assessed or imposed by any agency or
entity shall be borne by Madison.
d. Payment of production royalties shall be made by the
refiner or smelter directly into Lewis' account or as Lewis may otherwise
direct. All payments
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shall be accompanied by a statement explaining the manner in which the payment
was calculated.
4. Commingling of Ore. Madison shall not commingle any ores from the
Property with ores from other properties unless and until Madison has negotiated
a separate Commingling Agreement with Lewis. However, this provision shall not
obligate Lewis to enter into a commingling agreement.
5. Accounting and Audits. Lewis shall be entitled to hire such
accountants and engineers as Lewis requires to evaluate Madison's payment
procedures and to ensure that Lewis is properly paid for minerals and ores. In
the event that an annual shortage of payment to Lewis of one-half percent (0.5%)
or more is found to exist in payments due to Lewis, Madison shall reimburse
Lewis for all costs of such accountants and engineers, or other necessary
professionals as a cost of the operation of the mine.
Madison shall maintain books of account relating to the production from
the Property and make them available to Lewis, or its agents, on request at
Reno, Nevada. The books shall show the amount of ores and minerals shipped, sold
or treated, and the amount of money received or receivable from the sale of said
ores and minerals. The books of account, as well as Madison's maps, assays, mill
and smelter returns, and all other records shall be made available at all
reasonable times to Lewis and its representatives for the purpose of
ascertaining and checking the compliance of Madison with the terms of this
Agreement.
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Copies of accounting, production and sales records and net proceeds of
mines statements relating to the Property shall be furnished promptly to Lewis
quarterly, and at other times on request. Madison shall provide Lewis, on a
quarterly basis, a financial report relating to Madison's production operations
on the Property. Madison shall maintain its records in accordance with generally
accepted accounting principles.
At Lewis' request, Madison and Lewis shall jointly agree on an
engineering company such as Kappes Cassiday to audit the computation and payment
of the Royalty to Lewis. The consultant shall be engaged to perform audits
annually or more often to ensure that Lewis is properly paid its Royalty. The
consultant shall be required to certify in writing to Lewis annually that Lewis
has been properly and adequately paid its Royalty, in the consultant's opinion.
The audit shall be an expense of Madison.
8. Late Payments. In the event that any payments due to Lewis, whether
advance royalties, production royalties, or otherwise, should become delinquent
by thirty (30) days or more, Lewis shall have the following options:
a. Lewis may charge interest at the rate of two percent (2%) per month
from the date or dates due; or,
b. In the event that there is a good faith dispute concerning the
amount of delinquency, Madison must (1) place the full amount in dispute into an
interest bearing escrow account within thirty (30) days, and (2) file a
declaratory relief action to determine the rights and obligations of the parties
in a court of competent jurisdiction within ninety (90) days of the amount
coming due.
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9. Reclamation. Madison shall conduct environmental reclamation as may
be required by statute, and, in addition, shall undertake all reclamation
measures which can be performed on the Property on any areas on which mining
shall have been completed, whether required by statute or not.
Prior to commencing mining operations, Madison shall obtain a bond
secured by cash, a bonding agency, or the Nevada Bond Pool to reclaim all areas
disturbed by Madison on the Property. In the event of posting a cash bond, the
cash may be released to contractors performing the reclamation.
10. Storage of Concentrates. If Madison stockpiles any ores, minerals,
con centrates, or dore bullion produced from the Property for a period greater
than two (2) months, then Madison shall pay to Lewis the Royalty described in
Paragraph 3 above with respect to such stockpiled ores, minerals, concentrates,
or dore bullion.
Madison shall be responsible to Lewis for its Royalty from the theft of
any bullion, precipitate or other product, while the material is in the care of
Madison, its agents, assigns or contractors.
11. Option to Purchase Royalty. Madison has the exclusive right and
option to purchase the royalty from Lewis for an initial price of FOUR MILLION
DOLLARS ($4,000,000.00) payable in cash and stock. The option shall continue for
35 years from _______________________________, 200_____. The purchase price for
the royalty shall increase by $500,000.00 on each anniversary
of____________________________________, 200_.
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12. Additional Claims. Any property or claims located or acquired by
Madison or its successors within the exterior boundary of the properties
described on Exhibit A shall be subject to the foregoing provisions and the
Royalty.
13. Covenants Running with the Land. The provisions set forth in
Paragraphs 2 through 12 above shall be covenants and conditions touching upon
the land, and such covenants and conditions shall be binding upon all successors
in interest.
IN WITNESS WHEREOF, Lewis has executed this Quitclaim Deed with
Reserved Royalty on Mineral Production the day and year first above written.
F. W. LEWIS, INC., a Nevada corporation
By_____________________________________
F. W. LEWIS, President
STATE OF NEVADA )
) ss
COUNTY OF WASHOE )
On the_____________day of______________________, 200______,
personally appeared before me, a Notary Public within and for said county,
personally appeared F. W. LEWIS, President of F. W. Lewis, Inc. who acknowledged
that he executed the foregoing QUITCLAIM DEED WITH RESERVED ROYALTY ON MINERAL
PRODUCTION, and to me known or proved to be the person described in and who
executed the same.
____________________________
NOTARY PUBLIC
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Recorded at the request of Exhibit C
and return to:
QUITCLAIM DEED RELINQUISHING ROYALTY INTEREST
THIS QUITCLAIM DEED RELINQUISHING ROYALTY INTEREST is made
this_________day of_____________________, 2002 by and between F. W. LEWIS, INC.,
a Nevada corporation ("Lewis"); and MADISON ENTERPRISES CORP., a British
Columbia corporation, and GREAT AMERICAN MINERALS EXPLORATION (NEVADA), LLC., a
Nevada limited liability company (referred to collectively as "Madison").
WITNESSETH:
1. Conveyance of Real Property. Lewis, in consideration of the sum of
Ten Dollars ($10.00) and other valuable consideration, hereby relinquishes and
conveys to Madison the reserved royalty on production set forth in the
"Quitclaim Deed with Reserved Royalty on Mineral Production" dated
_________________________________________________, 200_____and recorded in
Book____________________of the Official Records of Lander County,
Pages_______________________________ (Document No. _________________) (the
"Royalty Deed"). Lewis has no remaining right, title, or interest in the mining
claims described in the Royalty Deed or in any proceeds therefrom.
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IN WITNESS WHEREOF, Lewis has executed this Quitclaim Deed
Relinquishing Royalty Interest the day and year first above written.
F. W. LEWIS, INC., a Nevada corporation
By_____________________________________
F. W. LEWIS, President
STATE OF NEVADA )
) ss
COUNTY OF WASHOE )
On the_____________day of_______________________, 200_____,
personally appeared before me, a Notary Public within and for said county,
personally appeared F. W. LEWIS, President of F. W. Lewis, Inc. who acknowledged
that he executed the foregoing QUITCLAIM DEED RELINQUISHING ROYALTY INTEREST,
and to me known or proved to be the person described in and who executed the
same.
_____________________________
NOTARY PUBLIC
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