EMPLOYEE LEASING AGREEMENT


 


This EMPLOYEE LEASING
AGREEMENT (this "Agreement") is made and entered into as of August 1, 2011 (the "Effective Date")
between Montana Tunnels Mining, Inc. ("Lessor") and Elkhorn Goldfields, Inc. ("Elkhorn"). Elkhorn and Lessor
are referred to herein individually as a "Party" and collectively as the "Parties".


 


RECITAL


 


WHEREAS, , Elkhorn
desires to retain the services of certain employees of Lessor, and Lessor desires to provide the services of such employees to
Elkhorn, on the terms and subject to the conditions set forth in this Agreement.


 


AGREEMENT


 


NOW, THEREFORE, in
consideration of the mutual agreements set forth in this Agreement and for other good and valuable consideration, the receipt and
sufficiency of which are acknowledged, the Parties agree as follows:


 


1.           Term;
Termination.


 


1.1           The
term of this Agreement shall commence on the Effective Date of this Agreement and continue until it is terminated by either Party,
as provided in this Agreement (the "Term").


 


1.2           Lessor
or Elkhorn may terminate this Agreement at any time by providing written notice of such termination to the other Party at least
ten (10) days prior to the effective date of the termination, unless such notice period is waived by the recipient.


 


2.           Services.
On the terms and subject to the conditions set forth in this Agreement, Lessor agrees to lease the employees set forth on Exhibit
A ("Employees") to Elkhorn to perform services for Elkhorn, with the allocation of time (i.e., the percentage)
by such Employees between Lessor and Elkhorn to be determined by Elkhorn. Subject to Section 3 of this Agreement, Lessor
will continue to be responsible for all wages, salary, compensation, employee benefits, insurance, workers' compensation coverage,
unemployment compensation coverage, taxes, withholdings, contributions, expenses, employee-related reporting, filing and disclosure
obligations, compliance with all employment laws, and all other employment-related liabilities for Employees that arise during
the term of this Agreement.


 


3.           Compensation.


 


3.1           Elkhorn
shall pay to Lessor, during the Term, the proportionate percentage (as set forth on Exhibit A) of the Lessor's wages and
employee benefit costs associated with each Employee immediately prior to the entry into this Agreement (the "Compensation")
for so long as such Employee performs services for Elkhorn. Lessor agrees that it shall not increase the amount of Compensation
(including employee benefits) without the prior written consent of Elkhorn.


 



    	 



    	 



    

 


3.2           Lessor
shall provide Elkhorn with an invoice within five (5) days following the end of each month setting forth the Compensation. Lessor
shall promptly provide Elkhorn such additional information regarding the Compensation and the calculation thereof as Elkhorn may
request. Elkhorn shall make the payments required under this Section 3 to Lessor on or before the last day of the month next following
the month in which the Employee performs services for that Company pursuant to this Agreement.


 


4.           Supervision.
During the Term, Lessor agrees that the Employees will perform services at Elkhorn’s Sourdough mine and such other services
as may be mutually agreed upon by Lessor and Elkhorn. Elkhorn shall not act as an employer with respect to the Employees and shall
have no responsibility, authority, or liability as such. Lessor reserves the right and authority, in its capacity as employer,
to direct, supervise, and discipline (including hire, retain, and terminate) the Employees. Elkhorn, however, shall be permitted
to reasonably request that Lessor replace any Employee, which request shall be promptly considered by Lessor. Elkhorn shall have
the authority to designate tasks to be performed, and shall have the authority to instruct and oversee the Employees in the manner,
means, and method of accomplishing such tasks for Elkhorn.


 


5.           Wage
and Salaries. Lessor shall be responsible for the payment of all amounts to Employees. Subject to Section 3, all withholding
and payroll taxes due with respect to such payments, as well as any other legally required contributions (such as in the nature
of social security payments) shall be the sole responsibility of Lessor. Elkhorn shall not be obligated to pay any wage, salary,
or compensation to the Employees directly, nor shall Elkhorn be responsible for any withholding taxes or contributions due with
respect to such payments.


 


6.           Personnel
Policies. Except as specified in this Agreement, all terms and conditions of employment or service applicable to the Employees
shall be governed by Lessor's personnel policies and practices in effect at the execution of this Agreement, or as amended from
time to time.


 


7.           Workers'
Compensation. Lessor shall provide workers' compensation insurance for the Employees during the Term; provided, however, that
Elkhorn shall reimburse Lessor for any and all claims and premiums associated with such coverage for each Employee who performs
services for Elkhorn pursuant to this Agreement.


 


8.           Indemnification.


 


8.1           Lessor
shall indemnify, defend and hold harmless Elkhorn, its agents, affiliates, and their respective officers, directors and employees
from and against any and all losses, damages, injuries, claims, demands, liabilities, costs, and expenses (including reasonable
attorneys' and other professionals' fees and expenses and in this Agreement collectively referred to as ("Losses") attributable
to, arising from or caused by (i) any breach of this Agreement, (ii) by Lessor's willful misconduct or gross negligence in the
performance of the services rendered by the Employees, (iii) any violation of any law in respect of the Employees, or (iv) any
claims by the Employees against Elkhorn, except for Losses attributable to, arising from or caused by a material breach of this
Agreement by Elkhorn or Elkhorn 's willful misconduct or gross negligence.


 



    	 



    	 



    

 


9.           Notification
and Defense of Claim.


 


9.1           In
the event of any claim or other assertion of liability by third parties with respect to which Elkhorn is entitled to indemnification
pursuant to this Agreement, the Party seeking indemnification (the "Indemnified Party") shall notify the indemnifying
Party (the "Indemnifying Party") in writing, promptly after the Indemnified Party receives notice of such claim,
and in no event later than fifteen (15) days after receipt of a summons from or a complaint filed in any court or other governmental
agency or body; provided, however, that failure to give such notice shall not affect the rights of the Indemnified
Party hereunder except to the extent that such failure has materially prejudiced the Indemnifying Party's ability to defend such
claim. The Indemnifying Party may use counsel of its own choosing, and the Indemnified Party shall reasonably cooperate with the
Indemnifying Party in the defense of such claim, including the settlement of the matter on the basis stipulated by the Indemnifying
Party (with the Indemnifying Party remaining responsible for all costs and expenses of such settlement). The Indemnifying Party
shall keep the Indemnified Party reasonably advised of the progress of any proceedings related to such claim, and of any settlement
discussions or proposals with respect thereto. If the Indemnifying Party fails to defend any such claim within a reasonable time
after notice thereof or if counsel to the Indemnified Party advises the Indemnifying Party that a conflict of interest with respect
to the joint defense exists, the Indemnified Party shall be entitled to undertake the defense, compromise or settlement of such
claim at the expense of and for the account and risk of the Indemnifying Party.


 


9.2           If
there is a reasonable probability that such claim may materially and adversely affect the Indemnified Party, other than as a result
of money damages or other money payments totally covered by the Indemnifying Party, the Indemnified Party shall have the right,
at its sole expense, to participate in the defense, compromise or settlement of such claim, and the Indemnifying Party shall not
take any action materially affecting the defense, compromise or settlement of such claim without the consent of the Indemnified
Party, which consent shall not be unreasonably withheld or delayed.


 


9.3           If
the facts giving rise to indemnification hereunder shall involve a possible claim by the Indemnified Party against any third party,
the Indemnified Party shall have the right, at its sole expense, to undertake the prosecution, compromise and settlement of such
claim.


 


10.        
Limitation of Liability. NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN THIS AGREEMENT, NEITHER PARTY SHALL BE LIABLE
TO THE OTHER PARTY OR ANY OTHER PERSONS FOR ANY INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES OR LOSSES (INCLUDING DAMAGES
FOR LOSS OF BUSINESS, LOSS OF PROFITS, OR THE LIKE), WHETHER BASED ON BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE), PRODUCT
LIABILITY OR OTHERWISE, EVEN IF A PARTY OR ITS REPRESENTATIVES HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.


 


11.         No
Partnership. Nothing contained in this Agreement shall be construed to create a partnership or joint venture between Lessor
and Elkhorn.


 



    	 



    	 



    

 


12.         No
Third Party Beneficiaries. Lessor and Elkhorn acknowledge that this Agreement is solely for their benefit and, subject to provisions
in this Agreement regarding assignment, that of their successors and assigns; and that no third party shall have any rights or
claims arising hereunder nor is it intended that any third party shall be a third party beneficiary of any provisions hereof


 


13.         Force
Majeure. Neither Party shall be deemed to be in default hereunder or have failed or delayed to perform any obligation hereunder
if it is prevented from, or delayed in, performing any such obligation by reason of force majeure, act of God, labor strike, civil
unrest or similar occurrence which is beyond the control of such Party. The Party affected by any of the foregoing shall advise
the other Party as soon as possible about any threatened or existing circumstance that may result in a failure or delay in performance,
and use such Party's commercially reasonable efforts to commence or resume performance as soon as possible.


 


14.         Notices.
All notices, consents, approvals, instructions and other communications required or permitted under this Agreement (collectively,
"Notice") shall be effective only if given in writing and shall be considered to have been duly given when (i) delivered
by hand, (ii) sent by telecopier (with receipt confirmed), provided that a copy is mailed (on the same date) by certified or registered
mail, return receipt requested, postage prepaid, or (iii) received by the addressee, if sent by Express Mail, Federal Express or
other reputable express delivery service (receipt requested), or by first class certified or registered mail, return receipt requested,
postage prepaid. Notice shall be sent in each case to the appropriate addresses or telecopier numbers set forth below (or to such
other addresses and telecopier numbers as a Party may from time to time designate as to itself by notice similarly given to the
other Parties in accordance herewith, which shall not be deemed given until received by the addressee). Notice shall be given:


 


(a)          to
Elkhorn at:


 


Elkhorn Goldfields, Inc.


1610 Wynkoop, STE #400


Denver, CO 80202


Attn: Eric Altman


Facsimile:
(303) 957-5536


 


(b)          to
Lessor at:


 


Montana Tunnels
Mining, Inc.


260 Montana
Tunnels Rd.


Jefferson City,
MT 59638


Attn: Rob
Trenaman 


Facsimile: (406) 933-8373


 


15.        Compliance
with Laws. Employment related statutes, laws; Each Party shall comply with and abide by all rules, regulations, requirements,
orders, notices, for determinations, and ordinances of any federal, state, county, or municipal government and appropriate departments,
commissions or boards.


 



    	 



    	 



    

 


16.         Assignment.
Neither Party to this Agreement may assign its rights hereunder without the prior written consent of the other Party.


 


17.         No
Waiver. The failure of a Party to insist on strict adherence to any term of this Agreement on any occasion shall not be considered
a waiver of, or deprive that Party of the right thereafter to insist upon strict adherence to, that term or any other term of this
Agreement. Any waiver must be in writing signed by the Party against which such waiver may be asserted. No waiver or consent to
any action on anyone occasion shall be deemed to be or imply a waiver or consent to other actions or similar actions not specifically
waived or consented to.


 


18.         Amendments
in Writing. Amendments to or modifications of this Agreement shall only be valid if made in writing and signed by the Parties
to this Agreement.


 


19.         Headings.
The headings in this Agreement are intended solely for convenience of reference and shall be given no effect in the construction
or interpretation of this Agreement.


 


20.         Severability.
In the event that any provision of this Agreement shall be unenforceable, in whole or in part, such provision shall be limited
to the extent necessary to render the same valid, or shall be excised from this Agreement, as circumstances require to effectuate
the intent of the Parties in entering into this Agreement, and this Agreement shall be construed as if said provision had been
incorporated in this Agreement as so limited, or as if said provision had not been included in this Agreement, as the case may
be.


 


21.         Entire
Agreement. This Agreement constitutes the entire agreement of the Parties to this Agreement with respect to the subject matter
of this Agreement and supersedes all prior agreements and undertakings, both written and oral.


 


22.         Governing
Law and Venue. This Agreement is made under and shall be governed by and construed in accordance with the laws of the State
of Colorado without giving effect to principles of conflicts of laws of that state. The Parties hereby submit to the exclusive
jurisdiction and venue of the courts of the State of Colorado for purposes of any legal action.


 


[Signature Pages Follow.]


 



    	 



    	 



    

 


IN WITNESS WHEREOF,
the Parties have caused this Agreement to be executed as of the date first above written.


 


	LESSOR:	 	ELKHORN
	 	 	 
	MONTANA TUNNELS MINING, INC.	 	ELKHORN GOLDFIELDS, INC.
	 	 	 
	By:	/s/ Robert Trenaman	 	By:	/s/ Eric Altman
	 	 	 	 	 
	Name:	Robert Trenaman	 	Name:	Eric Altman
	 	 	 	 	 
	Title:	President	 	Title:	CFO


 



    	 



    	 



    

 


Exhibit A


 


Leased Employees


(As of August 31, 2011)


 


Gretchen Garwood


Jerry Frohreich


Jerry Koon


Joe Wickens


Becky Quick


John Schaefer