Exhibit 10.8

 

HYDROCARBON AND MINERAL LEASE

 

This Lease is made and entered into as of the 23rd day of February, 2005, by and
between the parties listed on Exhibit A hereto, with respect to the interests
described therein, as the Lessor, hereinafter referred to as “Lessor,A” and
Bleeding Rock LLC., a limited liability company organized under the laws of the
State of Utah, hereinafter referred to as “Lessee.”

 

SECTION ONE

 

TERM AND PURPOSE

 

(a) Grant of Lease. Lessor, in consideration of the rents and royalties to be
paid and the covenants and conditions to be kept and performed by Lessee as
provided for in this instrument, leases to Lessee the land, hydcrocarbon and
mineral interests in Carbon County, Utah, more particularly described as Exhibit
A to this Lease (the “Premises”), for the purpose of exploring for, extracting,
mining, taking out, and removing by any mining or extraction method, including
open-pit mining and strip-mining, the merchantable tar sand, bituman, oil and
other hydrocarbon products (collectively, “Oil Products”), together with any
by-products derived in the process of extracting the foregoing products
therefrom (including, but not limited to, sand, gravel, gold, titanium, silver
and other minerals) which are, or to which subsequently may be found on,in, or
under the land. Together with the right to: (1) make all excavations or drilling
necessary for the purposes granted; (2) construct on the Premises all buildings,
extraction and separation facilities, openings, ditches, drains, railroads,
roads, pipelines, power facilities, tanks and other improvements that are or may
become suitable or necessary for the mining and removal, and/or separation and
extraction, of the products from the Premises; (3) cut and use the timber on the
Premises, as may be necessary for the usual purposes of the mining operations
and for Lessee’s own fuel; and (4) ingress and egress and to use to much of the
surface as is reasonably necessary to enjoy the estate granted. Lessee is to
exercise reasonable care to clean up and remove all combustible debris to
prevent any fires.

 

(b) Term. It is agreed that this Lease shall remain in force for a primary term
of six (6) years from this date (the "primary term") and if Lessee shall
commence mining of Oil Products within the primary term or any extension of it,
Lessee shall have the right to continue mining and the term shall extend
subsequently as long as Oil Products are continuously produced in commercial
quantities (Oil Products in amounts sufficient to produce 500 barrels of oil per
day, on average) by Lessee from the Premises, provided, however, that production
may be discontinued or interrupted if such interruption is due to the inability
of the Lessee to operate the mine or facilities on a commercially reasonable
basis due to temperatures, weather or snow-pack during the winter months.

 

SECTION TWO

 

MINING  EQUIPMENT AND IMPROVEMENTS

 

Lessee may install engines and machinery, build roads, pipelines and rail
tracks, and do such other things on the Premises as may be necessary or proper
to carry on the mining operations. Lessee shall have the right to use, free of
cost, gas, oil, and water produced on the land for Lessee's operation on the
land. Lessee shall have the right at any time up to 180 days after the
termination of this Lease to remove all machinery and fixtures placed on the
Premises. The mining of the Oil Products by Lessee shall be done in a manner as
is usual and customary in mining operations of similar character. Lessee shall
comply with all government regulations in its mining operations. Lessee shall
not remove or impair any roads, tracts, ditches, or improvements of a permanent
nature made by Lessee after the termination of this Lease.

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SECTION THREE

 

RENT AND ROYALTY

 

(a) Royalties. Lessee shall pay to Lessor a Production Royalty on Net Returns
from the sale of Oil Products. For purposes of this Agreement, the term
"Production Royalty on Net Returns" ("Net Returns Royalty") means an amount
equal to 10% of the Market Value of Minerals sold by Lessee, less the following,
to the extent and only to the extent that they are incurred by Lessee prior to
sale by Lessee of the Oil Products: Operating Costs, Transportation Costs,
Processing Costs, Value Added Costs and Extraction Taxes (collectively referred
to herein as "Costs and Taxes"). The term "Operating Costs" means expenses and
costs actually incurred in a calendar quarter (or royalty payment period as
defined in Section 3(b) hereto) for the extraction of the Oil Products from the
ground and mining and handling of the Oil Products, including maintenance and
repairs to equipment and depreciation, but excluding all costs of acquisition,
exploration, permitting, mine opening, other costs incident to placing the mine
in operating condition, and reclamation. The term "Transportation Costs" means
the expenses and charges actually incurred in transporting Oil Products, or
their derivatives, from the mine to the refinery or other place of processing
and/or sale, within a maximum radius from the mine to the Sinclair refinery at
Sinclair, Wyoming, or to refineries in Salt Lake City, Utah, whichever is the
greater radius. Such costs shall include, but not be limited to, wages, rent,
freight, shipment insurance, handling, port, delay, demurrage, lighterage, tug,
forwarding costs, and transportation and taxes. The term "Processing Costs"
means the expenses and costs actually incurred for separating, processing or
other benefication of the Oil Products, including maintenance and repairs to
equipment and depreciation. The term "Value Added Costs" means the expenses and
costs actually incurred in upgrading the Oil Products for sale, including,
refining, cracking, distillation, or by mixing or combining the Oil Products, or
any of them, with reagents or other materials, minerals, chemicals, compounds,
hydrocarbons or other substances of any kind or nature to achieve the products
or goods which are then sold by Lessee, including maintenance and repairs to
equipment and depreciation. The term "Extraction Taxes" means sales, use, gross
receipts, ad valorem, severance and other taxes due and payable in respect to
severance, production, removal, sale or disposition of the Oil Products, but
excluding any taxes on net income. Oil Products shall be deemed sold at the time
the money is actually received by Lessee unless transferred by Lessee to an
affiliate. The price received for the Oil Products sold in an "arms length
transaction" shall be presumed to be "Market Value" unless rebutted by a
preponderance of the evidence. For purpose of this paragraph, "arm's length
transaction" means a transaction that has been arrived at in the market place
between independent, nonaffiliated persons with opposing economic interests
regarding that transaction.

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(b) Royalty Guarantee on Commercial Production. At such time as the mine has
produced Oil Products in commercial quantities during any portion of three
consecutive calendar years, Lessee shall be entitled to, and Lessee herewith
guarantees, a royalty during the third year of commercial production equal to
the greater of the Net Returns Royalty provided in Section 3(a) hereto and one
million dollars ($1,000,000.00) ("Guaranteed Royalty"). Said Guaranteed Royalty
shall continue for each succeeding lease year thereafter.

 

(c) Payment of Royalties. Calculations and payments of the Net Returns Royalty
shall be made quarterly, on the 15th day of each January, April, July, and
October in each year, commencing on the quarterly date following the first full
or partial quarter in which Oil Products have been mined and extracted and sold
from the Premises. If the calculation of Net Returns from the sale of Oil
Products for any calendar quarter results in a negative number, no production
royalty shall be payable with respect to that calendar quarter, but such
negative number shall not be used to offset Net Returns from the sale of Oil
Products for any future calendar quarter Payments shall be made to each Lessor
at the address or addresses set forth on the signature page hereof, or as
otherwise directed by a Lessor in writing. Lessee shall, on a quarterly basis
and in conjunction with each quarterly Net Returns Royalty payment, transmit to
Lessor an accurate statement of the amount of Oil Products removed and sold
during the quarter for which royalties are paid, and the amount of Costs and
Taxes. The refinery receipts shall be prima facie evidence of the amounts so
sold during each quarter. Lessor may inspect and review the refinery receipts
upon request at reasonable times. Any errors shall be corrected accordingly.
Lessor shall at all times have a lien on all Oil Products mined, and on all
improvements made, on the Premises as security for any unpaid balance of rents,
royalties, or taxes due and payable.

 

Calculation and payment of the Guaranteed Royalty shall be made at the end of
third year in which commercial production is achieved, at which time Lessee
shall reconcile the difference, if any, between the $1,000,000.00 guarantee and
the Net Returns Royalty actually paid during the year and shall tender the
Guaranteed Royalty to Lessor on the quarterly payment date for Net Returns next
following the end-of-year reconciliation. Notwithstanding any provision in this
Lease to the contrary, the Guaranteed Royalty due Lessor shall not be
proportionately reduced either to the interest in any production unit to which
the Lease is pooled or unitized or to Lessor's interest in the lands hereunder
leased.

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(d) Bonus and Rent. Upon execution of this Lease, Lessee shall pay to Lessor the
sum of $101,472 as a bonus payment hereunder. Thereafter, beginning January 1,
2006, and annually thereafter, as rent under this Lease, Lessee shall pay to
Lessor the amount of $101,472. If the property has not reached commercial
production of Oil Products (Oil Products in amounts sufficient to produce 500
barrels of oil per day, on average) by the 5th anniversary hereof, and such
delay is not due to a force majeure event under the provisions of Section 14(e)
below, the advance rent shall increase to $150,528 per year, or Lessor, at such
time may terminate this Lease. Any lawsuit against development of the property
shall toll any increase in the rent and any termination right on the part of
Lessor, so long as Lessee is diligently pursuing the lawsuit. Rent due hereunder
shall be excused for any year as to which the royalties paid hereunder for the
prior year exceed the rental amount. In the event that Oil Products are
exhausted from the Premises or that production ceases to be commercial as herein
defined and operations are still being conducted on the Premises in support of
mining by Lessee on adjacent lands, annual rentals shall resume at the rate set
forth herein at the rate of $150,578.00 regardless of whether the Lease is in
its primary or extended terms. In such an event, rentals shall be prorated for
the year production ceases.

 

(d) Apportionment of Royalties and Rents. (1) The stated amounts of royalties to
be paid by Lessee hereunder are based upon a 100-percent interest in and to the
mineral estate as to all of the Premises. If any party comprising Lessor owns
less than the interest in all of the Premises described in the preceding
sentence, all royalty payments to be made by Lessee to such party hereunder,
excepting only the Guaranteed Royalty provided in Section 3(b) above, shall be
reduced in the same proportion thereof as the interest of such party in the
Premises bears to the interest described for such party in the preceding
sentence. (2) The stated amounts of rents to be paid by Lessee hereunder are
based upon the undivided interests in the mineral estate as to all of the
Premises stated to be owned by each party comprising Lessor as set forth in
Exhibit A attached hereto. If any party comprising Lessor owns less than the
interest in all of the Premises described in the preceding sentence for such
party, all rent payments to be made by Lessee to such party hereunder shall be
reduced in the same proportion thereof as the interest of such party in the
Premises bears to the interest described for such party in the preceding
sentence

 

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(e) Royalty on By-Products. The royalty on by-products as defined above shall be
two (2) percent of market value on all other minerals. Royalty on by products
shall be paid in the same manner as provided for Net Returns Royalties.

 

SECTION FOUR

 

TERM EXTENSION

 

If mining of Oil Products is not commenced on the lands on or before the 6th
anniversary of the commencement date of this Lease in commercial quantities (Oil
Products in amounts sufficient to produce 500 barrels of oil per day, on
average), this Lease shall terminate as to both parties, unless (a) otherwise
agreed by Lessor in writing or (b) prior to the scheduled Lease termination
date, commencement or interruption of production results from Lessee's inability
to operate the mine due to temperature, inclement weather, or snow pack; or the
failure to commence operations is excused by the force majeure provisions of
Section 14(e) below, in which case the term of this Lease shall be extended in
accordance with the provisions of said Section 14(e)

 

SECTION FIVE

 

EXPLORATION AND DEVELOPMENT COMMITMENT

 

Lessee agrees to expend or cause to be expended during the term of this Lease, a
minimum of $150,000 per year on the development of the Premises, until
commercial production of Oil Products (Oil Products in amounts sufficient to
produce 500 barrels of oil per day, on average, provided, however, that
production may be discontinued or interrupted if such interruption is due to the
inability of the Lessee to operate the mine or facilities on a commercially
reasonable basis due to temperatures, weather or snow-pack during the winter
months) is reached. For this purpose, the following expenditures would qualify:
expenditures on prospecting and searching for or production of Oil Products on,
in or under the property, drilling, examining, measuring and sampling the
deposit of bitumen, when found, to gain knowledge of its size, shape, position
and characteristics to determine the value thereof, research, engineering, test
work, feasibility studies and other development and construction work directly
benefiting the property, work performed on mineral lands contiguous to the
property if it directly benefits the property, legal fees associated with
permitting, opening, or operating the mine, engineering and consulting fees and
salaries and other expenses relating to Lessee's personnel directly involved in
the project and all other similar activity or work performed with respect to the
property or its development, and fees and expenditures on other projects which
benefit the Sunnyside project or reduce the expenditures which would otherwise
be incurred in connection with the Sunnyside project. All expenditures for
exploration and development in excess of the respective minimums required in
each year shall be applied to the exploration commitment described in the next
succeeding year or years.

 

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SECTION SIX

 

PROPERTY TAXES

 

Lessee shall pay promptly before delinquency all property taxes and assessments,
that may be levied or assessed during the term of this Lease upon the Premises.
All such taxes for the year in which this Lease terminates shall be prorated
between Lessor and Lessee, except that neither Lessor nor Lessee shall be
responsible for the payment of any taxes which are based upon production from
the Premises accruing solely to the other party. Lessee shall have the right to
contest, in the courts or otherwise, in its own name or in the name of Lessor,
the validity or amount of any such taxes or assessments, if it deems the same
unlawful, unjust, unequal or excessive, or to take such other steps or
proceedings as it may deem necessary to secure a cancellation, reduction,
readjustment or equalization thereof, before it shall be required to pay the
same. Lessee shall not permit or suffer the Premises or any part thereof to be
conveyed, or title lost to Lessor, as the result of nonpayment of such taxes or
assessments. Lessee shall upon request furnish to Lessor duplicate receipts for
all such taxes and assessments when paid. Lessee shall not be liable for any
taxes levied on or measured by income, or other taxes applicable to Lessor,
based upon payments under this Lease. Nothing in the foregoing shall be
construed to obligate Lessee to pay such portion of any tax as is based upon the
value of improvements, structures or personal property made, placed and used on
any part or parts of the Premises by or for Lessor or by an owner or lessee of
surface rights other than Lessee after the date hereof. If Lessor receives tax
bills or claims which are the responsibility of Lessee hereunder, the same shall
be promptly forwarded to Lessee for appropriate action.

 

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SECTION SEVEN

TERMINATION

 

(a) Automatic Termination. This lease shall terminate automatically for Lessee's
failure to achieve commercial production pursuant to Section Four of this Lease.

 

(b) Termination by Lessor. In the event of any default by Lessee in the
performance of its obligations hereunder, including all obligations to make
payments of money to Lessor, Lessor shall give to Lessee written notice
specifying the default. If (a) a default involving matters other than the
payment of money to Lessor is not cured within sixty (60) days after Lessee has
received the notice, or if Lessee has not within the time begun action to cure
the default and does not diligently prosecute such action to completion, or (b)
if a default involving the payment of money to Lessor is not cured within
fifteen (15) business days after Lessee has received notice of non payment,
Lessor may terminate this Lease by delivering to Lessee written notice of such
termination, subject to Lessee's right to remove its property and equipment from
the Premises as hereinafter provided.

 

(c) Termination by Lessee. Lessee shall have the right, at any time, to
terminate this Lease by giving 180 days' written notice to Lessor, either in
person or by mail addressed to Lessor at the address given in this Lease, and on
payment of the rent, royalty and other sums as may be due, this Lease shall be
deemed terminated. When this Lease terminates, regardless of the cause, Lessee
shall quietly and peacefully surrender possession of the Premises to Lessor or
Lessor's agents, and Lessee shall enter, or cause to be entered, a certificate
of the termination of this Lease in the proper books of record in Carbon County,
Utah, and record them, as may be necessary to clear the record title and divest
Lessee of all rights and title given or acquired under this Lease.

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SECTION EIGHT

MINING

 

(a) Mining Practices. All of Lessee's operations hereunder shall be conducted in
accordance with accepted practices of the mineral industry, and in compliance
with all applicable local, state and federal laws and regulations. It shall rest
in the sole discretion of the Lessee whether and in what manner it shall mine,
remove, transport, and deliver Oil Products to a processing plant or refinery
for physical, chemical or other treatment or shall treat the same in place.
Whenever Lessee deems it necessary or advisable, Lessee may discontinue or
resume exploration, development, mining and production operations from time to
time during the term hereof, so long as it meets its obligations hereunder.

 

(b) Adjacent Property Mining Activities. Lessee is hereby granted the right, if
it so desires, to mine and remove Oil Products, and such other materials as are
incident thereto, from the Premises through or by means of shafts, openings or
pits which may be made in or upon adjoining property owned or controlled by
Lessee, to the extent that Lessor can grant such rights. Lessee may, if it so
desires, use the Premises and any shafts, openings and pits therein for the
mining, removal, treatment and transportation of Oil Products and materials from
adjoining property, or for any purpose connected therewith, so long as minerals
are actually being recovered from the Premises or if minerals on the Premises
are exhausted or cannot be produced in commercial quantities as defined herein,
so long as rental obligations hereunder are resumed. In addition, the operations
of Lessee upon the Premises and upon any and all other adjoining lands to which
Lessee has mining rights, may be conducted as a single mining operation, to the
same extent as if all such properties constituted a single tract of land.
Nothing herein shall relieve Lessee from its obligations for payments or reports
as set forth in this Lease.

 

(c) Stockpiling. Lessee shall have the right, at any time during the term
hereof, to stockpile any Oil Products or other materials mined or produced from
the Premises at such place or places as Lessee may elect, either upon the
Premises or upon any other adjoining lands owned or controlled by Lessee, its
successors and assigns. The rights and liens of Lessor in and to any such Oil
Products stockpiled on such other lands shall not be divested by the removal
thereof from the Premises but shall be the same in all respects as though such
materials had been stockpiled on the Premises. The stockpiling of OilProducts
from the Premises on such other lands shall not be deemed a removal or shipment
thereof requiring payment in respect of Lessor's interest.

 

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(d) Treatment. Lessee shall have the right, but shall not be required, to
process, separate, extract, beneficiate, concentrate, smelt, refine. leach and
otherwise treat, in any manner, any Oil Products and other materials mined or
produced from the Premises and from other adjoining lands. Such treatment may be
conducted wholly or in part at a plant or plants established or maintained on
the Premises or on such other lands. The tailings and residue from such
treatment shall be deemed waste and may be deposited on the Premises or on such
other lands. Lessor shall have no right, title or interest in said tailings or
residue; provided, however, that any said tailings or residue remaining on the
Premises or on such other lands for a period of sixty (60) days after the date
on which this Lease has expired, or has been terminated by Lessee as to all of
the Premises, shall be deemed abandoned by Lessee and thereupon may be claimed
by Lessor, if and only if Lessor so elects. Nothing contained herein shall be
construed to relieve Lessee from its responsibility for satisfaction of all
obligations with respect to environmental protection laws, mined land
reclamation laws or other applicable federal, state or local laws and
regulations.

 

(e) Overburden Deposits. Waste, overburden, surface stripping and other
materials from the Premises may be deposited on or off the Premises, to the
extent Lessor can grant such right and subject to all applicable local, state
and federal laws and regulations. Such materials from other adjoining lands may
be deposited on the Premises only if the same will not interfere with mining or
oil and gas operations on the Premises.

 

(e) Inspection Rights of Lessor. Lessor reserves to itself and its agents the
right, at any time, to enter the Premises or any part of it, to inspect and
survey the Premises, and to measure the quantity of Oil Products that may be in
or on the Premises or that shall have been mined or removed from the Premises,
without unnecessarily or unreasonably hindering or interrupting the work or
operations of Lessee.

 

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SECTION NINE

 

RECORDS

 

Lessee shall keep books of account, in accordance with generally accepted
accounting principles, consistently applied, showing the amount of Oil Products
shipped and sold, and the amount of money received from the sale of the Oil
Products. The books of account shall be open at all reasonable times to Lessor
and its representatives. Lessor or its authorized agents shall have a right to
audit and inspect Lessee's accounts and records to verify the calculation of the
payments to Lessor hereunder, which right may be exercised as to each payment at
any reasonable time during a period of two (2) years from and after the date on
which the payment was made by Lessee. If no such audit is performed during such
period, such accounts, records and payments shall be deemed to be true, accurate
and correct.

 

SECTION TEN

 

EFFECT OF AGREEMENT

 

The covenants, agreements, and conditions of this Lease shall run with the land,
and shall bind the heirs, legal representatives, successors, and assigns of all
parties to this Lease.

 

SECTION ELEVEN

 

PROPORTIONATE REDUCTION

 

Royalties and rents provided for in this Lease shall be subject to proportionate
reduction in accordance with the provisions of Section 3(d) above, except as to
the Guaranteed Royalty that shall not be proportionately reduced.

 

SECTION TWELVE

 

DIVIDED INTERESTS

 

If the Premises are now or later shall be owned in severalty or in separate
tracts, the Premises, nevertheless, shall be developed and operated as one lease
and all royalties accruing under this Lease shall be treated as an entirety and
shall be divided among and paid to such separate owners in the proportion that
the acreage owned by each separate owner bears to the entire leased acreage. If,
however, the Premises consist of two or more non-abutting tracts, this section
shall apply separately to each non-abutting tract, and if a portion of the
Premises is later consolidated with other lands for the purpose of operating the
consolidated tract as one lease, this section shall be inoperative as to the
portion so consolidated.

 

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SECTION THIRTEEN

 

WARRANTY OF TITLE

 

Each of the parties comprising Lessor, to the extent and only to the extent of
the ownership interest set forth for that party on Exhibit A attached hereto,
warrants and agrees to defend the title to the lands described in this Lease
against burdens and claims arising by, through or under such party, but not
otherwise. Lessor agrees that Lessee shall have the right at any time to redeem,
for Lessor, by payment of any mortgage, taxes, or other liens on the lands in
the event of default of payment by Lessor, and be subrogated to the rights of
the holder, and Lessor, on behalf of Lessor and the heirs, successors, and
assigns of Lessor, surrenders and releases all rights of dower and homestead in
the Premises described in this Lease, insofar as the right of dower and
homestead may in any way affect the purposes for which this Lease is made.

 

SECTION FOURTEEN

 

GENERAL CONDITIONS

(a) Attorneys' Fees. If Lessor or Lessee shall commence an action against the
other arising out of or in connection with this Lease, the prevailing party
shall be entitled to recover its costs of suit and reasonable attorneys' fees.

 

(b) Notices. All notices and demands, which may or are to be required or
permitted to be given hereunder shall be in writing. All notices and demands
shall be sent by receipted hand delivery, by confirmed facsimile, by United
States mail, postage prepaid, or by an express delivery service which maintains
records of deliveries, freight prepaid, addressed to Lessor or Lessee, at the
address or addresses set forth on the signature page hereof.

 

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(c) Indemnity. Each party shall hold harmless, reimburse, indemnify, and defend
the other party from and against any and all losses, injury, obligations,
claims, damages, judgments, and injuries of any nature resulting from, arising
out of, or related in any respect to the falsity or inaccuracy of any
representation or warranty made by the indemnifying party and/or obligations
arising under or in connection with this, including without limitation
reasonable attorneys' fees, costs, and expenses of any nature incurred as a
result of or related to such false or inaccurate representations and/or
warranties.

 

(d) Governing Law. This Lease shall be governed by and construed in accordance
with the laws of the State of Utah.

 

(e) Force Majeure. Lessee shall not be liable for failure to perform any of its
obligations hereunder (except for payments which have become due to Lessor)
during periods in which performance is prevented by any cause reasonably beyond
Lessee's control (except for payments of money), which causes hereinafter are
called "force majeure". For purposes of this Lease, the term "force majeure"
shall include, but shall not be limited to, fires, floods, windstorms and other
damage from the elements, strikes, riots, action of governmental authority,
litigation, acts of God and acts of the public enemy. The performance by Lessee
of its obligations hereunder shall be suspended, and the duration of this Lease
shall be extended, for a period equal to the period for which performance is
reasonably suspended by reason of force majeure. All periods of force majeure
shall be deemed to begin at the time Lessee stops performance hereunder by
reason of force majeure. Lessee shall notify Lessor of the beginning and ending
date of each such period.

 

(f) Paragraph Headings. The paragraph headings as to the contents of particular
paragraphs herein are inserted only for convenience and are in no way to be
construed as part of such paragraph or as a limitation on the scope of the
particular paragraph to which they refer.

 

(g) Assignment; Change of Ownership. Lessee and Lessor may sell, convey, assign
or transfer their rights and interests in this Lease in whole or in part without
the prior written consent of the other party; provided that the assignor assumes
all obligations of the respective party, in writing, and furnishes a copy of
such assignment to the Lessee or Lessor, as the case may be. However, no such
assignment shall operate to relieve the assignor of any liability or obligation
under this Lease which arose prior to such assignment. In addition, no change of
ownership of the Premises shall be binding upon Lessee, whether Lessee has
actual or constructive knowledge of such change of ownership, until thirty (30)
days after Lessee shall have been furnished by certified or registered United
States mail at Lessee's office address as set out herein with a certified copy
of the recorded instrument or instruments satisfactory in the opinion of Lessee
to evidence such change of ownership and to establish the right, title or
interest of the claiming party and the extent thereof.

 

 

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(h) Benefit of Agreement Recording. The covenants and agreements contained in
the within Lease shall apply to, inure to the benefit of, and be binding upon
the parties hereto and upon their respective successors in interest and legal
representatives, subject to the restrictions contained herein on assignments. If
requested by Lessee or Lessor, the parties hereto shall execute a memorandum or
short recording counterpart of this Lease, which counterpart shall be in a form
sufficient to constitute notice of this Lease to third parties under the laws of
Utah, but which counterpart shall not contain the amounts or rates of payment
hereunder, or other terms of this Lease which Lessee or Lessor may elect not to
disclose of record. The execution and recording of the above recording
counterpart shall not limit, decrease or increase, or in any manner affect, any
of the terms of this Lease, or any rights, interests or obligations of the
parties hereto.

 

(i) No Interruption of Operations. Disputes or differences between the parties
hereto shall not interrupt performance of this Lease or the continuation of
operations hereunder unless a continuation of operations would cause irreparable
harm to the Lessor. In the event of any dispute or difference, and subject to
the foregoing, operations may be continued, and settlements and payments may be
made hereunder in the same manner as prior to such dispute or difference, until
the matters in dispute have been finally determined between the parties, and
thereupon such payments or restitutions shall be made as may be required under
the terms of the settlement or final determination of the dispute.

 

(j) Waiver. The failure of a party to insist upon strict performance of any of
the terms, covenants, conditions or agreements contained herein shall not be
deemed a waiver of any rights or remedies that said party may have, and shall
not be deemed a waiver of any subsequent breach of default in the performance of
any of the terms, covenants, conditions, or agreements contained herein.

 

IN WITNESS WHEREOF, this Lease has been executed and delivered by the
undersigned as of the date first above written.

 

 

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EXHIBIT A

Legal Description and Ownership Interests

LAND DESCRIPTION:

Township 14 South, Range 14 East, SLM

Section 2: All.

Section 3: E/2, NW/4.

Containing 1120.00 acres, more or less

OWNERSHIP INTERESTS:

Osterbroen Family Limited Partnership - undivided 10-percent ownership of
mineral estate; no ownership of surface estate

Dress Investments, undivided 10-percent ownership of mineral estate; no
ownership of surface estate

Steven Ladle, undivided 10-percent ownership of mineral estate; no ownership of
surface estate

Gary Pestorious, undivided 10-percent ownership of mineral estate; no ownership
of surface estate

 

 

16

 

 

NOTICE OF ASSIGNMENT

 

This is to give notice of the assignment by Bleeding Rock LLC to GreenRiver
Resources, Inc of a Lease Agreement ("Lease") dated as of February 23, 2005, by
and between Osterbroen Family Limited Partnership as to an undivided 10-percent
ownership of mineral estate; Dress Investments as to an undivided 10-percent
ownership of mineral estate; Steven Ladle, as to an undivided 10-percent
ownership of mineral estate; and Gary Pestorious, as to an undivided 10-percent
ownership of mineral estate; and Bleeding Rock LLC, a Utah company,. The real
property involved is as follows:

Township 14 South, Range 14 East, SLM

Section 2: All.

Section 3: E/2, NW/4.

Containing 1120.00 acres, more or less

 

 

Bleeding Rock LLC

 

By: /s/ William C. Gibbs

William C. Gibbs, Manager/CEO

 

 

STATE OF UTAH

 

COUNTY OF SALT LAKE

 

The Foregoing instrument was acknowledged before me this 8th day of November,
2005 by William C. Gibbs, known to me to be the person described in and who
executed the within and foregoing instrument and acknowledged to me that he
executed the same on behalf of Bleeding Rock L.L.C.

 

/s/ Whitney Boyer   Notary Public

 

17

 

 

ADDENDUM TO HYDROCARBON AND MINERAL LEASE

 

This Addendum to Lease is made and entered into as of the 16th day of January,
2009, by and between the parties set forth on the signature page below as
“Lessor”, hereinafter referred to as "Lessor", and GreenRiver Resources, Inc., a
Utah corporation, hereinafter referred to as "Lessee".

 

Recitals

 

Whereas, Lessor entered into a Hydrocarbon and Mineral Lease, dated February 23,
2005, with BleedingRock LLC, as lessee (the "Lease") and

 

Whereas, BleedingRock LLC assigned all of its rights and obligations under such
Lease to Lessee.; and

 

Whereas, Lessor and Lessee desire to extend the payment date for rental payments
due December 31, 2008 and extend the primary term. of the Lease to December 31,
2013.

 

Agreement

 

1.The Rent due under Section 3 (c) on January 1, 2009 will be due and payable on
February 15, 2009.

 

2.The "primary term" under Section 1 (b) shall be extended until December 31,
2013.

 

3.All other terms and conditions shall remain the same.

 

IN WITNESS WHEREOF, this Addendum to Lease has been executed and delivered by
the undersigned as of the date first above written.

 

 

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19

 

 

 

SECOND ADDENDUM TO HYDROCARBON AND MINERAL LEASE

 

This Second Addendum to Lease is made and entered into as of the 26th day of
June, 2009, by and between the parties set forth on the signature page below as
“Lessor”, hereinafter referred to as “Lessor”, and GreenRiver Resources, Inc., a
Utah corporation, hereinafter referred to as “Lessee”.

 

Recitals

 

Whereas, Lessor entered into a Hydrocarbon and Mineral Lease, dated February 23,
2005, with BleedingRock LLC, as lessee (the “Lease”); and

 

Whereas, BleedingRock LLC assigned all of its rights and obligations under such
Lease to Lessee; and

 

Whereas, Lessor and Lessee amended such Lease by an Addendum to lease dated
January 16, 2009 (the “First Addendum”); and

 

Whereas, Lessor and Lessee desire to acknowledge that a force majeure event has
occurred because of the financial and credit crisis which has severaly affected
Lessee’s ability to obtain financing, and therefore agree to extend the date for
rental payments due December 31, 2008 accordingly.

 

Now Therefore, it is hereby agreed as follows:

 

Agreement

 

1.The Rent due under Section 3(d) on January 1, 2009, which is for rentals
payable in advance for the 2009 calendar year, will be due and payable on or
about July 15, 2009.

 

2.All other terms and conditions shall remain the same.

 

 

IN WITNESS WHEREOF, this Addendum to Lease has been executed and delivered by
the undersigned as of the date first above written.

 

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20

 

 

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21

 

 

THIRD ADDENDUM TO HYDROCARBON AND MINERAL LEASE

 

This Third Addendum to Lease is made and entered into as of the 1st day of
September, 2009, by and between the parties set forth on the signature page
below as “Lessor”, hereinafter referred to as “Lessor”, and GreenRiver
Resources, Inc., a Utah corporation, hereinafter referred to as “Lessee”.

 

Recitals

 

Whereas, Lessor entered into a Hydrocarbon and Mineral Lease, dated February 23,
2005, with BleedingRock LLC, as lessee (the “Lease”); and

 

Whereas, BleedingRock LLC assigned all of its rights and obligations under such
Lease to Lessee; and

 

Whereas, Lessor and Lessee amended such Lease by certain Addendums to lease to
extend the 2009 rental payment date; and

 

Whereas, Lessee has offered Lessor the opportunity to use the rental payments
owed to Lessor to participate in a bridge financing by GreenRiver Resources
Corp.;

 

Whereas, Lessor has agreed to accept the Bridge Note, in the amount of the
outstanding rental payment, and associated Bridge Warrant, in full satisfaction
of the rental owing for 2009 under the Lease.

 

Now, Therefore, it is hereby agreed as follows:

 

Agreement

 

1.Upon execution of the Bridge Note and associated Bridge Warrant, attached
hereto as Exhibit A, the Rent due under Section 3(d) on January 1, 2009, which
is for rents payable in advance for the 2009 calendar year, is hereby fully
paid.

 

2.All other terms and conditions shall remain the same.

 

IN WITNESS WHEREOF, this Addendum to Lease has been executed and delivered by
the undersigned as of the date first above written.

 

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22

 

 

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23

 

 

 

FOURTH ADDENDUM TO HYDROCARBON AND MINERAL LEASE

 

This Fourth Addendum to Lease is made and entered into as of the 15th day of
December, 2009, by and between the parties set forth on the signature page below
as “Lessor”, hereinafter referred to as “Lessor”, and GreenRiver Resources,
Inc., a Utah corporation, hereinafter referred to as “Lessee”.

 

Recitals

 

Whereas, Lessor entered into a Hydrocarbon and Mineral Lease, dated February 23,
2005, with BleedingRock LLC, as lessee (the “Lease”); and

 

Whereas, BleedingRock LLC assigned all of its rights and obligations under such
Lease to Lessee; and

 

Whereas, Lessor and Lessee amended such Lease by certain Addendums to lease to
extend the 2009 rental payment date; and

 

Whereas, Lessor agreed to accept Bridge Notes, in the amount of the outstanding
rental payments for 2009 in full satisfaction of the renal owing for 2009 under
the Lease; and

 

Whereas, Lessor and Lessee desire to acknowledge that a force majeure event has
occurred because of the financial and credit crisis which has severaly affected
Lessee’s ability to obtain financing, and therefore agrees to extend the date
for the rental payment increase due to begin January 1, 2010.

 

Now, Therefore, it is hereby agreed as follows:

Agreement

 

1.The Rent increase due to begin under Section 3(d) on January 1, 2010, is for
rentals payable in advance for the 2010 calendar year, will be due and payable
upon completion of a financing of $6 million or more, as contemplated by the
current financing effort by Raymond James.

 

2.All other terms and conditions shall remain the same.

 

 

24

 

 

 

IN WITNESS WHEREOF, this Addendum to Lease has been executed and delivered by
the undersigned as of the date first above written.

 

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25

 

 

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26

 

 

FIFTH ADDENDUM TO HYDROCARBON AND MINERAL LEASE

 

This Fifth Addendum to Lease is made and entered into as of the 1st day of
January, 2011, by and between the parties set forth on the signature page below
as “Lessor”, hereinafter referred to as “Lessor”, and GreenRiver Resources,
Inc., a Utah corporation, hereinafter referred to as “Lessee”.

 

Recitals

 

Whereas, Lessor entered into a Hydrocarbon and Mineral Lease, dated February 23,
2005, with BleedingRock LLC, as lessee (the “Lease”); and

 

Whereas, BleedingRock LLC assigned all of its rights and obligations under such
Lease to Lessee; and

 

Whereas, Lessor and Lessee amended such Lease by certain Addendums to Lease with
respect to such Lease; and

 

Whereas, Lessor has agreed to accept common shares in GreenRiver Resources Corp.
at $0.20/share for the amount of the outstanding rental payments for 2011 in
full satisfaction of the rental owing for 2011 under the Lease;

 

Whereas, such common shares will be represented by a Special Warrant
Certificate, in the form attached as Exhibit A; and

 

Whereas, Lessor and Lessee desire to acknowledge that a force majeure event has
occurred because of the financial and credit crisis which has severely affected
Lessee’s ability to obtain financing.

 

Now, Therefore, it is hereby agreed as follows:

 

Agreement

 

1.Lessor hereby accepts as payment of Rent for 2011, an aggregate of 752,640
shares of GreenRiver Resources Corp., represented by Special Warrant
Certificates in the form of Exhibit A. Each Lessor shall receive a certificate
for their proportionate number of shares, in the amount of 188,160.

 

2.All other terms and conditions shall remain the same.

 

 

 

27

 

 

 

IN WITNESS WHEREOF, this Addendum to Lease has been executed and delivered by
the undersigned as of the date first above written.

 

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28

 

 

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29

 

 

SIXTH ADDENDUM TO HYDROCARBON AND MINERAL LEASE

 

This Sixth Addendum to Lease is made and entered into as of this 15th day of
January, 2012, by and between the parties set forth on the signature page below
as “Lessor”, hereinafter referred to as “Lessor”, and GreenRiver Resources,
Inc., a Utah corporation, hereinafter referred to as “Lessee”.

Recitals 

 

Whereas, Lessor entered into a Hydrocarbon and Mineral Lease, dated February 23,
2005, with BleedingRock LLC, as lessee (the “Lease”) and

 

Whereas, BleedingRock LLC assigned all of its rights and obligations under such
Lease to Lessee; and

 

Whereas, Lessor and Lessee amended such Lease by certain Addendums to Lease with
respect to such Lease; and

 

Whereas, Lessor and Lessee desire to further amend the Lease as set forth below.

 

Now Therefore, it is hereby agreed as follows:

 

1. The following paragraph will be added to Section Three of the Lease:

 

(e) Pooling/Unitization of Interests. Lessee, at its option, is hereby given the
right and power to voluntarily pool, unitize or combine the acreage covered by
this Lease, or any portion thereof, as to Oil Products (a “Pooled Unit”),
together with any byproducts derived in the process of extracting Oil Products,
including, but not limited to, sand, gravel, timber, gold, titanium, silver and
other minerals (“Byproducts”), or separately for the production of either, when
in Lessee's judgment it is necessary or advisable to do so, and irrespective of
whether authority similar to this exists with respect to other land or leases in
the immediate vicinity thereof. The pooling or unitization in one or more
instances shall not exhaust the rights of Lessee hereunder to pool this Lease,
or portions thereof, into other units. Lessee shall file for record in the
county records of the county in which the lands are located an instrument
identifying and describing the pooled acreage. Lessee may at its election
exercise its pooling operation after commencing operations, but is not required
to include land or leases upon which a mine is capable of producing Oil
Products. Lessee shall not include acreage in a Pooled Unit if the Oil Products
contained therein are not capable of commercial production.

 

Production of Oil Products from any part of a Pooled Unit shall be considered as
operations for production of Oil Products from the land covered by this Lease,
whether or not actually located on the premises covered by this Lease.

 

If this Lease is pooled or unitized with other land or leases, Royalties
hereunder shall be computed on the basis of Net Returns as set forth in 3(a)
above, for the entire Pooled Unit, and allocated to the land covered by this
Lease and included in the Pooled Unit just as though such production were from
such land, with Lessor receiving a proportionate Royalty share based on the
amount of Oil Products reasonably believed to be contained on Lessor's Lease in
relation to the Oil Products contained in the entire Pooled Unit. By way of
example, if Lessor's portion of the estimated reserves on the leased Premises
are 60 million barrels, and the estimated reserves on the entire Pooled Unit are
100 million barrels, Lessor's Royalty would be reduced to 3/5 of the Royalty
otherwise payable hereunder, but would be payable on the reserves contained in
the entire Pooled Unit. For purposes of computing the Oil Products contained on
this Lease and any Pooled Unit hereunder, Lessee and Lessor agree that a
reserves estimate or resource report prepared by a recognized geology or
engineering firm selected by Lessee shall be determinative. As of the date of
this Amendment, Lessor hereby accepts the Resource Estimate prepared by Marston
& Marston with respect to the Oil Products contained on the Lease.

2.Section 3(e), "Royalty on By-products," will be renumbered accordingly.

3.Section 3(a) is hereby amended to clarify that costs of salaries for the
executives of Lessee shall not be included in "Operating Costs."

4.Rentals payable under Section 3 shall be increased by 20% beginning 2014.

5.The "primary term" under Section 1 (b) of the Leases shall be extended until
December 31, 2014.

6.Lessee hereby agrees to cooperate with Lessor, or any one of them, at their
expense, in connection with a like-kind exchange of property under Section 1031
of the Internal Revenue Code, and the regulations promulgated thereunder, with
respect to the property and/or royalties that are subject to the Lease.

7.All other terms and conditions shall remain the same.

IN WITNESS WHEREOF, this Addendum to Lease has been executed and delivered by
the undersigned as of the date first above written.

 

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30

 

 

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31

 

 

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