Document:

Unassociated Document

 

OPTION TO PURCHASE AND ROYALTY AGREEMENT

 

THIS OPTION TO PURCHASE AND ROYALTY AGREEMENT (this “Agreement”) is made this 28th day of September, 2011, (the “Effective Date”) by and among SOUTHWEST EXPLORATION, INC, an Arizona corporation (“Optionor”) and STANDARD GOLD CORP., a Nevada corporation (“Optionee”).

 

RECITALS

 

A.           Optionor is the recorded and beneficial owner of an undivided 100% interest in certain unpatented mining claims and Arizona State Land Department mineral exploration permits situated in the County of Maricopa, the State of Arizona, United States, and in possession of all Data relating there to, known as the News Boy Gold Project, as detailed in the specific description of claims and permits attached hereto as Exhibit “A” (the “Property”).

 

B.           Optionor has agreed to grant, and Optionee desires to acquire, an option to earn a 100% right, title and interest in and to the Property on the terms and conditions set out herein;

 

NOW THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Optionor and Optionee agree as follows:

 

1.           DEFINITIONS

 

1.1           Definitions.  The following terms, wherever used in this Agreement, shall have the meanings set forth below:

 

	
(a)

	
“Closing” means the date to be mutually agreed upon between the parties.

 

	
(b)

	
“Data” means all information and knowledge, in whatever form, paper, electronic or otherwise, relating to the Property and Area of Interest, including but not limited to, geologic reports, drill core, assay results, geophysical reports, technical data, analysis, and compilations, feasibility reports, environmental reports, etc.

 

	
(c)

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

 

  

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(d)

	
“Mining Operations” means every kind of work done on or in respect of the Property or the product derived from the Property during the Term by, on the behalf of or under the direction of Optionee including, without limiting the generality of the foregoing, the work of assessment, geophysical, geochemical and geological surveys, studies and mapping, investigating, drilling, designing, examining, equipping, improving, surveying, bulk sampling and processing such samples, shaft-sinking, raising, cross-cutting and drifting, searching for, digging, trucking, sampling, working and procuring minerals, including stone, crushed rock or aggregate, ores and metals, surveying and bringing any mining claims to lease or patent, the construction and maintenance of necessary access roads, drill site preparation, and all other work usually considered to be prospecting, exploration, development and mining work; in paying wages and salaries of workers engaged in the work and in supplying food, lodging, transportation and other reasonable needs of the workers including the costs of creating and maintaining a camp on or near the Property; in paying assessments or premiums for workers’ compensation insurance, contributions for unemployment insurance or other pay allowances or benefits customarily paid in the district to those workers; in paying rentals, license renewal fees, taxes and other governmental charges required to keep the Property in good standing in accordance with the laws of the County of Maricopa, State of Arizona, United States, including the costs of claim renewal fees and permits; in purchasing or renting plant, buildings, machinery, tools, appliances, equipment or supplies and in installing, erecting, detaching and removing them; mining, milling, concentrating, rehabilitation, reclamation and environmental protection, including the cost of resolving any environmental problems associated with the work on the Property including from creating drill sites or access roads that may affect any grounds or waters surrounding the Property as may be required by any governmental agency or otherwise, and in the management of any work which may be done on the Property or in any other respect necessary for the due carrying out of the prospecting, exploration and development work;

 

	
(e)

	
“Net Smelter Return” means the proceeds received by Optionee from any smelter or other purchaser from the sale of any ores, concentrates or minerals produced from the Property;

 

	
(f)

	
“Option” means the right granted by Optionor to Optionee to acquire up to a 100% undivided right, title and interest in and to the Property as provided in Section 4 hereof;

 

	
(g)

	
“Royalty” means the 2% net smelter return royalty described in Exhibit “B” attached hereto;

 

	
(h)

	
“Term” means the period during the term of this Agreement from the Effective Date to and including the date of exercise of the Option;

 

1.2           Headings.  The headings of this Agreement and the exhibits are solely for convenience of reference and do not affect the interpretation of it or define, limit or construe the contents of any provision of this Agreement.

 

1.3           Number and Gender.  Words importing the singular number shall include the plural and vice versa, words importing the neuter gender shall include the masculine and feminine genders, and words importing persons shall include firms and corporations and vice versa.

 

1.4           Governing Law. This Agreement and the rights and obligations and relations of the parties shall be governed by and construed in accordance with the laws of the State of Arizona and the federal laws of the United States applicable therein (but without giving effect to any conflict of law rules). The parties agree that the courts of the State of Arizona shall have jurisdiction to entertain any action or other legal proceedings based on any provisions of this Agreement. Each party attorns to the jurisdiction of the courts of the State of Arizona.

 

  

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

 

2.           REPRESENTATIONS AND WARRANTIES

 

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

 

	
(a)

	
Optionor has been duly incorporated under the laws of the State of Arizona and validly exists as a corporation in good standing under the laws of that jurisdiction of incorporation;

 

	
(b)

	
Optionor is the registered and beneficial owner and, at the time of transfer to Optionee of an interest in the unpatented mining claims and mineral exploration permits comprising the Property, they will be the registered and beneficial owners of all of the unpatented mining claims and mineral exploration permits comprising the Property free and clear of all liens, charges and claims of others, save and except the Royalty, and no taxes or rentals are due in respect of any thereof;

 

	
(c)

	
the unpatented mining claims and mineral exploration permits comprised in the Property have been duly and validly located and recorded, and are in good standing in the office of the mining recorder or such other applicable regulatory agency having jurisdiction over the Property;

 

	
(d)

	
there are no known adverse claims or challenges against or to the ownership of or title to any of the unpatented mining claims and mineral exploration permits comprising the Property, nor to the knowledge of Optionor is there any basis therefore, and there are no outstanding agreements or options to acquire or purchase the Property or any portion thereof, and no known person having any royalty or other interest whatsoever in production from any of the unpatented mining claims and mineral exploration permits comprising the Property;

 

	
(e)

	
Optionor has duly obtained all corporate authorizations for the execution of this Agreement and for the performance of this Agreement by it, and the consummation of the transaction herein contemplated will not conflict with or result in any breach of any covenants or agreements contained in, or constitute a default under, or result in the creation of any encumbrance under the provisions of, the Articles, By-laws or the constating documents of Optionor or any shareholders’ or directors’ resolution, indenture, agreement or other instrument whatsoever to which Optionor is a party or by which it is bound or to which it may be subject, nor does it conflict with any applicable law by which Optionor is bound;

 

	
(f)

	
Optionor has duly obtained all authorizations for the execution of this Agreement and for the performance of this Agreement by it, and the consummation of the transaction herein contemplated will not conflict with or result in any breach of any covenants or agreements contained in, or constitute a default under, or result in the creation of any encumbrance under the provisions of any indenture, agreement or other instrument whatsoever to which Optionor is a party or by which it is bound or to which it may be subject nor does it conflict with any applicable law by which Optionor is bound;

 

  

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(g)

	
no proceedings are pending for, and Optionor is unaware of any basis for the institution of any proceedings leading to, the dissolution or winding up, or the placing of Optionor in bankruptcy or subject to any other laws governing the affairs of insolvent persons.

 

2.2           Waiver and Survival.  The representations and warranties contained in Section 2.1 are provided for the exclusive benefit of Optionee, have been relied upon by Optionee in entering into this Agreement and a breach of any one or more thereof may be waived by Optionee in whole or in part at any time without prejudice to its rights in respect of any other breach of the same or any other representation or warranty; and the representations and warranties contained in Section 2.1 will survive Closing hereunder.

 

2.3           Optionee’s Representations, Warranties and Covenants.  Optionee represents and warrants to Optionor that:

 

	
(a)

	
Optionee has been duly incorporated and validly exists as a corporation in good standing under the laws of the State of Nevada;

 

	
(b)

	
it has duly obtained all corporate authorizations for the execution of this Agreement and for the performance of this Agreement by it, and the consummation of the transaction herein contemplated will not conflict with or result in any breach of any covenants or agreements contained in, or constitute a default under, or result in the creation of any encumbrance under the provisions of, the Articles or the constating documents of Optionee or any shareholders’ or directors’ resolution, indenture, agreement or other instrument whatsoever to which Optionee is a party or by which it is bound or to which it may be subject, nor does it conflict with any applicable law by which Optionee is bound; and

 

	
(c)

	
no proceedings are pending for, and Optionee is unaware of any basis for the institution of any proceedings leading to, the dissolution or winding up of Optionee or the placing of Optionee in bankruptcy or subject to any other laws governing the affairs of insolvent persons.

 

2.4           Waiver and Survival. The representations and warranties contained in Section 2.3 are provided for the exclusive benefit of Optionor, have been relied upon by Optionor in entering into this Agreement and a breach of any one or more thereof may be waived by Optionor in whole or in part at any time without prejudice to it rights in respect of any other breach of the same or any other representation or warranty; and the representations and warranties contained in Section 2.3 will survive Closing hereunder.

 

  

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3.           ACQUISITION AND EXERCISE OF THE OPTION

 

3.1           Grant of Option.  Optionor hereby grants to Optionee the sole and immediate working right and option with respect to the Property, for the period from the date of this Agreement until June 30, 2017, to earn a One Hundred Percent (100%) interest in and to the Property (the “Option”) free and clear of all charges encumbrances and claims, save and except for the Royalty.

 

3.2           Exercise of the Option. In order to maintain in force the working right and Option granted to it, and to exercise the Option, Optionee must:

 

	
(a)

	
pay to Optionor a sum total of Three Million Four Hundred Twenty-Five Thousand Dollars US (3,425.000.00), in cash, as follows:

 

	
  

	
(i)

	
on January 1, 2012, the sum of US $150,000.00; July 1, 2012 the sum of US $150,000.00;

	
  

	
(ii)

	
on January 1, 2013, the sum of US $200,000.00; July 1, 2013 the sum of US $200,000.00;

	
  

	
(iii)

	
on January 1, 2014, the sum of US $250,000.00; July 1, 2014 the sum of US $250,000.00;

	
  

	
(iv)

	
on January 1, 2015, the sum of US $300,000.00; July 1, 2015 the sum of US $300,000.00;

	
  

	
(v)

	
on January 1, 2016, the sum of US $350,000.00; July 1, 2016 the sum of US $350,000.00; and

	
  

	
(vi)

	
on January 1, 2017, the sum of US $425,000.00.

 

Upon Optionee making all cash payments to Optionor as set forth above, Optionee shall have exercised the Option and shall have earned a one hundred percent (100%) interest in and to the Property free and clear of all charges encumbrances and claims, save and except for the Royalty.  Upon exercise of the Option, Optionor shall deliver to Optionee, or such designee as Optionee may designate, within thirty (30) days an executed and recorded version of the Quitclaim Deed and Reservation of Royalty Interest in substantially the same form as set forth in Exhibit “B” (the “Recorded Quitclaim Deed”).

 

3.3           Acknowledgment of Prior Cash Payment Received by Optionor. Optionor acknowledges receipt of cash payments totaling $500,000.00 paid on June 30, 2011 by an affiliate of Aurum pursuant to the terms of the Original Option Agreement, as amended by that certain First Amendment to Option to Purchase and Royalty Agreement, dated June 30, 2011.

 

3.4           Royalty. Upon Optionor’s delivery of the Recorded Quitclaim to Optionee, Optionee shall pay to Optionor a Royalty as set forth in the Recorded Quitclaim Deed.  Notwithstanding the forgoing, at Optionee’s sole and absolute discretion, Optionee shall have the right at any time to purchase all or part of the Royalty from Optionor by making payments of $1,000,000.00 per 1% of royalty to Optionor but to be exercised only in whole percentage points.  In the event that Optionee exercises the right to purchase the Royalty, Optionor shall deliver to Optionee any documents as Optionee may require, in its sole and absolute discretion, evidencing such reduction or termination of Optionor’s Royalty interest.  For clarification, the parties understand that any royalty payments made by Optionee to Optionor prior to the election to purchase the Royalty do not count toward this purchase price.

 

  

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3.5           Working Right.  During the Term, Optionee shall have the sole and exclusive working right to enter on and conduct the Mining Operations on the Property as Optionee in its sole discretion may decide. Optionee shall have quiet and exclusive possession from the date of this agreement and thereafter during the currency of the working right and option, with full power and authority to Optionee, its servants, agents, workers or contractors, to carry on Mining Operations in searching for minerals in such manner as Optionee in its discretion may determine, including the right to erect, bring and install on the Property all buildings, plant, machinery, equipment, tools, appliances or supplies as Optionee shall deem necessary and proper and the right to remove therefrom reasonable quantities of rocks, ores and minerals and to transport them for the purposes of sampling, metallurgical testing and assaying. All Mining Operations conducted by Optionee shall be in accordance with good exploration, development and mining practice, and in compliance with all applicable legislation.

 

3.6           Operator.  During the Term, Optionee shall be the Operator of the work to be carried out on the Property and shall be free to contract out such parts of the work as it should choose in its sole discretion.

 

3.7           Maintaining the Property. During the Term, Optionee shall pay all of the applicable property taxes and fees necessary to keep the Property in good standing and file such assessment material as may be required under the laws of the County of Maricopa, the State of Arizona and the United States.  Notwithstanding the forgoing, and in acknowledgement that record title of the Property shall remain in the name of Optionor until such time as exercise of the Option, Optionor shall cooperate with and assist Optionee with the preparation of documentation required for the payment of such taxes and fees, and assessment filings.  In the event that Optionor fails to cooperate with and assist Optionee with the preparation of documentation required for the payment of such taxes and fees, and assessment filings, Optionor hereby grants Optionee the full power of attorney to make all such payments and take all actions necessary or prudent, in Optionee’s sole and absolute discretion, to preserve the property, and any such payments made as well any reasonable costs incurred by Optionee shall be deducted from any cash payments due Optionor pursuant to Section 3.2(a) hereunder.

 

3.8           Option to Purchase Property Only.  This Agreement is an option to purchase only.  Optionee shall not earn any interest in the Property until it has completed all of the payments in Section 3.2 herein.

 

3.9           Area of Interest.

 

	
(a)

	
There shall be an area of mutual interest which shall comprise that area which is within ten kilometres of the outermost boundary of each of the unpatented mining claims and mineral exploration permits which constitute the Property (the “Area of Interest”) as at the date of this Agreement.

 

  

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(b)

	
If at any time during the Term, any party (in this section only called the “Acquiring Party”) stakes, locates or otherwise acquires, directly or indirectly, any right to or interest in any unpatented mining claim, license, lease, grant, concession, permit, patent or other mineral property located wholly or partly within the Area of Interest, the Acquiring Party shall forthwith give notice to the other parties of that staking or acquiring, the costs thereof and all details in possession of that party with respect to the nature of the property and the known mineralization.

 

	
(c)

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

 

	
(d)

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

 

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

 

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

 

4.           OBLIGATIONS OF OPTIONEE DURING OPTION PERIOD

 

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

 

4.2           Annual Report of Results. During the Term, Optionee will deliver to Optionor on or before July 1 in each year a full report (including up-to-date maps if there are any) describing the results of work done in the last completed calendar year;

 

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

 

  

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

 

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

 

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

 

4.7           Assessment Work. Optionee shall, with the assistance of and in consultation with Optionor, file the necessary documentation for maintenance of claims, 60 days prior to the due date.

 

4.8           Insurance.

 

	
(a)

	
Optionee shall provide, maintain and pay for the following insurance which shall be placed with an insurance company or companies and in a form as may be acceptable to Optionor:

 

	
  

	
(i)

	
The usual form of insurance available to the mining industry in Arizona for exploration and development operations protecting Optionee and Optionor and their respective employees, agents, contractors, invitees and licensees against damages arising from personal injury (including death) and from claims for property damage which may arise directly or indirectly out of the operations of Optionee and Optionor under this Agreement;

 

	
(b)

	
Each policy of insurance contemplated in this Section 4.8 shall be in an amount acceptable to Optionor; and

 

  

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(c)

	
Optionee shall provide Optionor with such evidence of insurance as Optionor may request.

 

5.           COVENANTS OF OPTIONEE AND OPTIONOR

 

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

 

	
(a)

	
It will maintain the Property in good standing and will pay all rentals, rates, duties, royalties, assessments, fees, taxes or other government charges levied with respect to the Property or Optionee’s operations thereon which shall fall due during the Term.  Notwithstanding the forgoing, and in acknowledgement that record title of the Property shall remain in the name of Optionor until such time as exercise of the Option, Optionor shall cooperate with and assist Optionee with the preparation of documentation required for the payment of such rentals, rates, duties, royalties, assessments, fees, taxes or other government charges levied with respect to the Property or Optionee’s operation thereon which shall fall due during the Term.  In the event that Optionor fails to cooperate with and assist Optionee with the preparation of documentation required for the payment of such rentals, rates, duties, royalties, assessments, fees, taxes or other government charges levied with respect to the Property or Optionee’s operation thereon which shall fall due during the Term, Optionor hereby grants Optionee the full power of attorney to make all such payments and take all actions necessary or prudent, in Optionee’s sole and absolute discretion, to preserve the property, and any such payments made as well any reasonable costs incurred by Optionee shall be deducted from any cash payments due Optionor pursuant to Section 3.2(a) hereunder;

 

	
(b)

	
It will carry out its operations on the Property in a careful and miner-like manner and in accordance with applicable laws and regulations of the State of Arizona;

 

	
(c)

	
It will properly pay all accounts of every nature and kind for wages, supplies, Workers’ Compensation Assessments, or the equivalent under Arizona law, income tax deductions, and all other accounts and indebtedness incurred by it so that no claim or lien arises thereon or upon the ore or minerals contained therein and it will indemnify Optionor and save them harmless from any and all loss, costs, actions, suits, damages or claims which may be made against Optionor in respect of the operations on the Property, provided however, that Optionee shall have the right to contest the validity of any such lien or claim of lien;

 

	
(d)

	
Upon termination of this Agreement, it will leave the Property in a safe condition in accordance with the applicable regulatory requirements;

 

	
(e)

	
It will at all times maintain and keep true and correct records of all production and the disposition thereof and of all costs and expenditures incurred as well as all other data necessary or proper for the settlement of accounts between the parties hereto in connection with their rights and obligations under this Agreement;

 

  

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(f)

	
It will obtain all necessary environmental permits prior to commencing operations on the Property and it will be responsible for any environmental assessments made by the governmental bodies as a result of operations on the Property; and

 

	
(g)

	
It will indemnify and save harmless Optionor from any and all liability arising in relation to the Property including, but not limited to, any liability from environmental damage during the Term, unless such liability was caused by the fault of Optionor, or either of them, or their directors, officers, employees, agents or consultants.

 

5.2           Covenants of Optionor. Optionor covenants and agrees with Optionee that:

 

	
(a)

	
During the Term, should Optionor receive any notice, assessment, permit or any other documentation from the applicable regulatory authorities relating to the Property or the Operations of Optionee thereon, Optionor will promptly forward a true copy of the same to Optionee.

 

6.           TERMINATION OF OPTION

 

6.1           Notice of Termination. This Option shall terminate upon Optionee giving thirty (30) days written notice to Optionor of termination, leave in good standing for a period of at least one year from the termination date of the Option those unpatented mining claims comprised in the Property that are in good standing on the date hereof and any other unpatented mining claims comprised in the Property that Optionee acquires after the date hereof, and deliver at no cost to Optionor within 90 days of such termination copies of all reports, maps, assay results and other relevant technical data compiled by or in the possession of Optionee with respect to the Property and not theretofore furnished to Optionor.

 

6.2           Equipment.  In the event that Optionee abandons the working right and Option granted to it under Section 3 or terminates the Option pursuant to Section 6.1, all buildings, plant, equipment, machinery, tools, appliances and supplies which Optionee may have brought on the Property, either before or during the period of the working right and Options, may be removed by Optionee at any time not later than six months after the abandonment of the working right and Options.  Any buildings, plant, equipment, machinery, tools, appliances and supplies left on the Property during the six-month period shall be at Optionee’s sole risk and, if not removed after the six-month period, shall become the property of Optionor.

 

6.3           Information. If Optionee abandons the working right and Option granted to it under Section 3, Optionee shall, on request, provide Optionor, at no cost to Optionor, with a copy of all non-interpretative reports, maps, plans, drill logs and surveys of all work pertaining to the Property provided that Optionee does not warrant the accuracy of those reports, maps, plans, drill logs and surveys and shall not be liable for any inaccuracies contained in them.

 

7.           CONFIDENTIAL INFORMATION

 

7.1           Treatment of Information.  No information furnished by Optionee to Optionor hereunder in respect of the activities carried out on the Property by Optionee, or related to the sale of product derived from the Property, will be published by Optionor without the written consent of Optionee, but such consent in respect of the reporting of factual data will not be unreasonably withheld, and will not be withheld in respect of information required to be publicly disclosed pursuant to applicable securities or corporation laws.

 

  

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8.           ARBITRATION

 

8.1           Matters for Referral to Arbitration.  All questions or matters in dispute with respect to the accounting of moneys expended by Optionee as provided herein, or with respect to the calculation of or amounts taken into account in the determination of Net Smelter Returns or other products sales and any share of the proceeds of the sale of Minerals or other products from the Property will be submitted to arbitration pursuant to the terms hereof.

 

8.2           Notice of Referral to Arbitration.  It will be a condition precedent to the right of any party to submit any matter to arbitration pursuant to the provisions hereof, that any party intending to refer any matter to arbitration gives not less than 30 days’ prior written notice of its intention so to do to the other party together with particulars of the matter in dispute.

 

8.3           Expiry of Notice.  On the expiration of such 30 days, the party who gave such notice may proceed to refer the dispute to arbitration as provided in Section 8.4.

 

8.4           Appointment of Arbitrators.  The party desiring arbitration will appoint one arbitrator, and will notify the other party of such appointment, and the other party will, within 15 days after receiving such notice, appoint an arbitrator, and the two arbitrators so named, before proceeding to act, will, within 15 days after the appointment of the last appointed arbitrator, unanimously agree on the appointment of a third arbitrator to act with them and be chairman of the arbitration herein provided for.

 

8.5           Failure to Act.  If the other party will fail to appoint an arbitrator within 15 days after receiving notice of the appointment of the first arbitrator, and if the two arbitrators appointed by the parties will be unable to agree on the appointment of the chairman, the chairman will be appointed by the County of Maricopa or by the State of Arizona.

 

8.6           Arbitration Procedures.  Except as specifically otherwise provided in this Section 8, the arbitration procedures herein provided for will be conducted in accordance with the laws of the State of Arizona.

 

8.7           Fixing Time and Place. The chairman, or in the case where only one arbitrator is appointed, the single arbitrator, will fix a time and place in Phoenix, Arizona, for the purpose of hearing the evidence and representations of the parties, and he will preside over the arbitration and determine all questions of procedure not provided for under the laws of the State of Arizona or this Section 8.

 

8.8           Award in Writing.  After hearing any evidence and representations that the parties may submit, the single arbitrator, or the arbitrators, as the case may be, will make an award and reduce it to writing, and deliver one copy thereof to each of the parties.

 

  

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8.9           Expenses.  The prevailing party in the arbitration award shall be entitled to recover from the other party all legal fees, costs and expenses reasonably relate to such award.

 

8.10           Binding Award.  The parties may agree that the award of a majority of the arbitrators, or in the case of a single arbitrator, of such arbitrator, will be final and binding upon each of them.

 

9.           DEFAULT AND TERMINATION

 

9.1           Notice of Default.  Notwithstanding Section 4, if at any time during the Option Period Optionee fails to perform any obligation required to be performed hereunder or is in breach of a warranty or covenant given herein, which failure or breach materially interferes with the implementation of this Agreement, Optionor may terminate this Agreement but only if

 

	
(a)

	
it first gives to Optionee a notice of default containing particulars of the obligation which Optionee has not performed, or the warranty or covenant breached, and

 

	
(b)

	
Optionee does not, within 30 days after delivery of such notice of default, cure such default or commence proceedings to cure such default by appropriate payment or performance (Optionee hereby agreeing that should Optionee so begin to cure any default Optionee will prosecute such curing to completion without undue delay).

 

9.2           Termination.  Should Optionee fail to comply with the provisions of Section 9.1(b) Optionor may thereafter terminate this Agreement, and the provisions of Section 6 will then be applicable.

 

10.           GENERAL

 

10.1           Encumbrances.  During the Term, Optionor and Optionee shall not pledge, mortgage, charge or otherwise encumber their beneficial interest in the Property or their rights under this Agreement.

 

10.2           Further Assurances.  The parties shall, without further consideration, from time to time execute and deliver, or cause to be executed and delivered, further instruments and assurances as may be reasonably required for registering or recording changes in ownership interests in the Property in accordance with the regulatory requirements of the United States, the State of Arizona, or otherwise as required to carry out the true intent and purpose of this Agreement.

 

10.3           Limitation of Obligations of Optionee. It is understood and agreed that:

 

	
(a)

	
nothing contained in this Agreement, nor any payment made, Mining Operations conducted incurred by Optionee on or in connection with the Property or part of it, nor the doing of any act or thing by Optionee under the terms of this Agreement shall obligate Optionee to do anything else under this Agreement other than to, make payments and maintain the Property to the extent that it may have expressly undertaken to do so pursuant to the terms of this Agreement;

 

  

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(b)

	
subject to the terms of this Agreement, Optionee may at any time abandon the working right and Option granted to it under Section 3.1 and may at any time after exercising the Option granted herein abandon the working right  granted to it under Section 3.5; and

 

	
(c)

	
in the event that Optionee abandons the Option granted to it under Section 3.1, or the working right Section 3.5, the liabilities and obligations of Optionee shall cease with respect to the Property except that Optionee shall remain liable for any and all liabilities or obligations arising directly or indirectly from the actions of Optionee in conducting work or having conducted work on the Property and the provisions of Section 6 herein.

 

10.4           Time.  Time shall be of the essence of this Agreement and of every part of it and no extension or variation of this Agreement shall operate as a waiver of this provision.

 

10.5           Entire Agreement.  With respect to the subject-matter of this Agreement, this Agreement:

 

	
(a)

	
sets forth the entire agreement between the parties and any persons who have in the past or who are now representing either of the parties;

 

	
(b)

	
supersedes all prior understandings and communications between the parties or any of them, oral or written; and

 

	
(c)

	
constitutes the entire agreement between the parties.

 

Each party acknowledges that this Agreement is entered into after full investigation and that no party is relying on any statement or representation made by any other which is not embodied in this Agreement. Each party acknowledges that it shall have no right to rely on any amendment, promise, modification, statement or representation made or occurring subsequent to the execution of this Agreement unless it is in writing and executed by each of the parties.

 

10.6           Notices. All payments and communications which may be or are required to be given by either party to the other shall (in the absence of any specific provision to the contrary) be in writing and delivered or sent by prepaid registered mail to the parties, at following respective addresses:

 

	
Optionor: 

	
SOUTHWEST EXPLORATION, INC.

3266 W Galveston Dr. #107

Apache Junction, Arizona  85220

Attention: Floyd Bleak

 

	
Optionee: 

	
STANDARD GOLD CORP.

3266 West Galveston Road #101

Apache Junction, Arizona  85120

Attention: Joshua Bleak

 

  

13

  

 

and if any payment or communication is sent by prepaid registered mail, it shall, subject to the following sentence, be conclusively deemed to have been received on the third business day following the mailing of it and, if delivered, it shall be conclusively deemed to have been received at the time of delivery. Notwithstanding the foregoing provisions with respect to mailing, in the event that it may be reasonably anticipated that, due to any strike, lock-out or similar event involving an interruption in postal service, any payment or communication will not be received by the addressee by no later than the third business day following the mailing of it, then the mailing of any payment or communication as mentioned shall not be an effective means of sending it but rather any payment or communication must then be sent by an alternative means of transportation which it may reasonably be anticipated will cause the payment or communication to be received reasonably expeditiously by the addressee. Either party may from time to time change its address by notice to the other in accordance with this Section 10.6.

 

10.7           Counterparts.  This Agreement may be executed in as many counterparts as may be necessary and may be delivered originally or by facsimile and each such counterpart so executed, whether delivered originally or by facsimile, are deemed to be an original and such counterparts and facsimile copies together will constitute one and the same instrument.

 

10.8           Benefit of Successors.  This Agreement shall inure to the benefit of and be binding on the parties and their respective heirs, executors, administrators, successors and assigns.

 

 

[Signature page follows]

 

  

14

  

 

IN WITNESS WHEREOF, this Option to Purchase and Royalty Agreement has been duly executed and delivered by the parties hereto as of the date first above written.

 

 

	 	
OPTIONOR:

  

SOUTHWEST EXPLORATION, INC, an Arizona corporation

	 
	 	 	 	 
	
 

	
By: 

	 
/s/ Daniel Bleak

	 
	 	
Name: 

	
Daniel Bleak

	 
	 	
Its: 

	
President, Director and Shareholder

	 
	 	 	 	 
	 	
By: 

	 
/s/ Floyd R. Bleak

	 
	 	
Name: 

	
Floyd R. Bleak

	 
	 	
Its: 

	
Secretary, Director and Shareholder

	 
	 	 	 	 
	 	
By: 

	 
/s/ Joshua Bleak

	 
	 	
Name: 

	
Joshua Bleak

	 
	 	
Its: 

	
Shareholder

	 
	 	 	 	 
	 	 	 	 
	 	
OPTIONEE:

  

STANDARD GOLD CORP., a Nevada corporation

	 
	 	 	 	 
	 	
By: 

	 
/s/ Oliver Lindsay

	 
	 	
Name: 

	
Oliver Lindsay

	 
	 	
Its: 

	
Executive Vice President

	 

 

 

15

 

  

  

  

 

EXHIBIT “A”

(Property Description)

I.           Unpatented Mining Claims:

The following unpatented mining claims and sites are situated in an unknown mining district in Sections 6, 7, 8, 9, 15, 16, 17, 20, 21, 22 and 28, Township 6 North, Range 4 West; and Sections 1 and 12, Township 6 North, Range 5 West; G&SRB&M, Maricopa County, Arizona.  The Location Notices of which are of record in the office of the County Recorder of Maricopa County, Arizona, and the Bureau of Land Management serial numbers are filed at Phoenix, Arizona.

	
No.

	
Name of Claim

	
Instrument No.

	
BLM Serial No.

	
1

	
NB # 1

	
2008-0828553

	
394725

	
2

	
NB # 2

	
2008-0828554

	
394726

	
3

	
NB # 3

	
2008-0828555

	
394727

	
4

	
NB # 4

	
2008-0828556

	
394728

	
5

	
NB # 5

	
2008-0828557

	
394729

	
6

	
NB # 6

	
2008-0828558

	
394730

	
7

	
NB # 7

	
2008-0828559

	
394731

	
8

	
NB # 8

	
2008-0828560

	
394732

	
9

	
NB # 9

	
2008-0828561

	
394733

	
10

	
NB # 10

	
2008-0828562

	
394734

	
11

	
NB # 11

	
2008-0828563

	
394735

	
12

	
NB # 12

	
2008-0828564

	
394736

	
13

	
NB # 13

	
2008-0828565

	
394737

	
14

	
NB # 14

	
2008-0828566

	
394738

	
15

	
NB # 15

	
2008-0828567

	
394739

	
16

	
NB # 16

	
2008-0828568

	
394740

	
17

	
NB # 17

	
2008-0828569

	
394741

	
18

	
NB # 19

	
2008-0893976

	
394940

	
19

	
NB # 20

	
2008-0893977

	
394941

	
20

	
NB # 21

	
2009-0349876

	
396845

	
21

	
NB # 22

	
2009-0349877

	
396846

	
22

	
NB # 23

	
2009-0349878

	
396847

	
23

	
NB # 24

	
2009-0349879

	
396848

	
24

	
NB # 25

	
2009-0349880

	
396849

	
25

	
NB # 26

	
2009-0349881

	
396850

	
26

	
NB # 27

	
2009-0349882

	
396851

	
27

	
NB # 28

	
2009-0349883

	
396852

	
28

	
NB # 29

	
2009-0349884

	
396853

	
29

	
NB # 30

	
2009-0349885

	
396854

	
30

	
NB # 31

	
2009-0349886

	
396855

	
31

	
NB # 32

	
2009-0349887

	
396856

 

  

  

  

 

	
No.

	
Name of Claim

	
Instrument No.

	
BLM Serial No.

	
32

	
NB # 33

	
2009-0349888

	
396857

	
33

	
NB # 34

	
2009-0349889

	
396858

	
34

	
NB # 37

	
2009-0349892

	
396859

	
35

	
NB # 38

	
2009-0349893

	
396860

	
36

	
NB # 39

	
2009-0349894

	
396861

	
37

	
NB # 40

	
2009-0769505

	
397225

	
38

	
NB # 41

	
2009-0769506

	
397226

	
39

	
NB # 42

	
2009-0769507

	
397227

	
40

	
NB # 43

	
2009-0769508

	
397228

	
41

	
NB # 44

	
2009-0769509

	
397229

	
42

	
NB # 45

	
2009-0769510

	
397230

	
43

	
NB # 48

	
2010-0403382

	
400320

	
44

	
NB # 49

	
2010-0403383

	
400321

	
45

	
NB # 50

	
2010-0403384

	
400322

	
46

	
NB # 51

	
2010-0403385

	
400323

	
47

	
NB # 52

	
2010-0403386

	
400324

	
48

	
NB # 53

	
2010-0403387

	
400325

	
49

	
NB # 54

	
2010-0403388

	
400326

	
50

	
NB # 55

	
2010-0403389

	
400327

	
51

	
NB # 56

	
2010-0403390

	
400328

	
52

	
NB # 57

	
2010-0403391

	
400329

	
53

	
NB # 58

	
2010-0403392

	
400330

	
54

	
NB # 59

	
2010-0403393

	
400331

	
55

	
NB # 60

	
2010-0403394

	
400332

	
56

	
NB # 61

	
2010-0403395

	
400333

	
57

	
NB # 62

	
2010-0403396

	
400334

	
58

	
NB # 63

	
2010-0403397

	
400335

	
59

	
NB # 64

	
2010-0403398

	
400336

	
60

	
NB # 65

	
2010-0403399

	
400337

	
61

	
NB # 66

	
2010-0403400

	
400338

	
62

	
NB # 67

	
2010-0403401

	
400339

	
63

	
NB # 68

	
2010-0403402

	
400340

	
64

	
NB # 69

	
2010-0403403

	
400341

	
65

	
NB # 70

	
2010-0403404

	
400342

	
66

	
NB # 71

	
2010-0403405

	
400343

	
67

	
NB # 72

	
2010-0403406

	
400344

	
68

	
NB # 73

	
2010-0403407

	
400345

	
69

	
NB # 74

	
2010-0403408

	
400346

	
70

	
NB # 75

	
2010-0403409

	
400347

	
71

	
NB # 76

	
2010-0403410

	
400348

	
72

	
NB # 77

	
2010-0403411

	
400349

	
73

	
NB # 78

	
2010-0403412

	
400350

	
74

	
NB # 79

	
2010-0403413

	
400351

	
75

	
NB # 80

	
2010-0403414

	
400352

 

  

  

  

 

	
No.

	
Name of Claim

	
Instrument No.

	
BLM Serial No.

	
76

	
NB # 81

	
2010-0403415

	
400353

	
77

	
NB # 82

	
2010-0403416

	
400354

	
78

	
NB # 83

	
2010-0403417

	
400355

	
79

	
NB # 84

	
2010-0403418

	
400356

	
80

	
NB # 85

	
2010-0403419

	
400357

	
81

	
NB # 86

	
2010-0403420

	
400358

	
82

	
NB # 87

	
2010-0403421

	
400359

	
83

	
NB # 88

	
2010-0403422

	
400360

	
84

	
NB # 89

	
2010-0403423

	
400361

	
85

	
NB # 90

	
2010-0403424

	
400362

	
86

	
NB # 91

	
2010-0403425

	
400363

	
87

	
NB # 92

	
2010-0403426

	
400364

	
88

	
NB # 93

	
2010-0403427

	
400365

	
89

	
NB # 94

	
2010-0403428

	
400366

	
90

	
NB # 95

	
2010-0403429

	
400367

	
91

	
NBP 1

	
2008-0893978

	
394930

	
92

	
NBP 2

	
2008-0893979

	
394931

	
93

	
NBP 3

	
2008-0893980

	
394932

	
94

	
NBP 4

	
2008-0893981

	
394933

	
95

	
NBP 5

	
2008-0893982

	
394934

	
96

	
NBP 6

	
2008-0893983

	
394935

	
97

	
NBP 7

	
2008-0893984

	
394936

	
98

	
NBP 8

	
2008-0893985

	
394937

	
99

	
NBP 9

	
2008-0893986

	
394938

	
100

	
NBP 10

	
2008-0893987

	
394939

	
101

	
SWP 3

	
2009-0349874

	
396843

	
102

	
SWP 5

	
2009-0349875

	
396844

II.           Arizona State Land Department Mineral Exploration Permits

	
Acreage

	
T/R/S

	
Permit #

	
Date of Issuance

	
560 Acres

	
T6N, R4W, S21

	
08-113437

	
December 4th, 2008

	
480 Acres

	
T6N, R4W, S27

	
08-113438

	
December 4th, 2008

	
320 Acres

	
T6N, R4W, S10

	
08-113501

	
June 26th, 2009

	
160 Acres

	
T6N, R4W, S15

	
08-113502

	
June 26th, 2009

 

  

  

  

 

EXHIBIT “B”

(Form of Quitclaim Deed and Reservation of Royalty Interest)

After recording, return to:

Southwest Exploration, Inc

3266 W Galveston Dr. #107

Apache Junction, AZ 85220

QUITCLAIM DEED

AND RESERVATION OF ROYALTY INTEREST

FOR AND IN CONSIDERATION of royalties reserved hereunder and the promises made under the terms of that certain Option Agreement and Royalty Agreement made and entered into as of the ____ day of September, 2011, SOUTHWEST EXPLORATION, INC, an Arizona corporation, whose address is 3266 West Galveston Drive #107, Apache Junction, Arizona, 85220 (“Grantor”), does hereby quitclaim unto _____________________________________ [STANDARD GOLD CORP., a Nevada corporation, or such designee as Standard Gold Corp. may designate], whose address is _____________________________________] (“Grantee”), all of the right, title and interest in and to the following unpatented mining claims and mineral exploration permits located in Maricopa County, Arizona (the “Claims”), the location notices of which are of record in the official records of Maricopa County and in the Arizona State Office of the Bureau of Land Management as follows:

SEE EXHIBIT “A” ATTACHED HERETO [Insert Property Description at Exhibit “A” to executable version of Quitclaim Deed and Reservation of Royalty Interest]

EXCEPTING AND RESERVING UNTO GRANTOR, a royalty (the “Royalty”) equal to two percent (2%) of the proceeds from the sale or other disposition of all minerals, received from any purchaser of any mineral derived from the ore mined from the Claims after deducting therefrom all charges and penalties (imposed by the purchaser) and the cost of transportation to any processing facility, insurance premiums, sampling and assaying charges incurred after concentrates have left the concentrator and all appropriate sales taxes.  If minerals other than precious metals are mined and sold from the Claims, the Royalty provided herein shall likewise apply to such minerals and shall be calculated as set forth above based on payment received from a purchaser after the creation of a concentrate or otherwise marketable product.  In no case shall the cost of mining, transportation or concentrating costs prior to the creation of the first marketable product be deducted from the selling price in the calculation of Royalty.  If any portion of the precious metals or other minerals extracted and derived from the ore mined from the Claims are sold to a purchaser owned or controlled by the Grantee or treated by a facility owned or controlled by Grantee, the actual proceeds received shall be deemed to be an amount equal to what could be obtained from a purchaser or facility not so owned or controlled by the Grantee after deducting therefrom a charge equal to the transportation cost which would have been incurred had the material been transported to such third party.

 

  

  

  

 

The Royalty reserved herein shall be subject to the following:

1.           PAYMENT OF ROYALTY

a.           Frequency of Payment of Royalty.  Payment of Royalty hereunder shall be due and payable within thirty (30) business days after the sale proceeds are received during each calendar quarter from any purchaser of minerals or other materials mined from the Claims.

b.           Method of Making Payments.  All payments required hereunder may be mailed or delivered to any single depository as Grantor may instruct.  The Grantee will have no responsibility as to the division of the Royalty payments among parties constituting the Grantor and if the Grantee makes a payment or payments on account of the Royalty in accordance with the provisions of this instrument, it will have no further responsibility for distribution of the Royalty.  All charges of the agent, trustee or depository will be borne solely by the parties receiving payments of Royalty.  The delivery or the deposit in the mail of any payment hereunder on or before the due date thereof shall be deemed timely payment hereunder.

2.           RECORDS AND REPORTS

a.           Records, Inspection and Audit.  Within ninety (90) days following the end of each calendar year, commencing with the year in which the claims are brought into commercial production (not inclusive of any bulk sampling programs), the Grantee shall deliver to Grantor a statement of the Royalty paid for said calendar year.  The Grantor shall have the right within a period of three (3) months from receipt of such statements to inspect the Grantee’s books and records relating thereto and to conduct an independent audit of such books and records at its own cost and expense.

b.           Objections.  If Grantor do not request an inspection of Grantee’s books and records during the three-month period referred to in the preceding paragraph, all payments of Royalty for the annual period will be considered final and in full satisfaction of all obligations of the Grantee with respect thereto.  If Grantor dispute any calculation of Royalty, Grantor shall deliver to the Grantee a written notice (the “Objection Notice”) describing and setting forth a specific objection within sixty (60) days after receipt by the Grantor of the final statement.  If such audit determines that there has been a deficiency or an excess in the payment made to the Grantor, such deficiency or excess will be resolved by adjusting the next payment due hereunder.  The Grantor will pay all the costs and expenses of such audit unless a deficiency of five (5%) percent or more of the amount due is determined to exist.  The Grantee will pay the costs and expenses of such audit if a deficiency of five (5%) percent or more of the amount due is determined to exist.  All books and records used and kept by the Grantee to calculate the Royalty due hereunder will be kept in accordance with generally accepted accounting principles.

 

  

  

  

 

c.           Evidence of Maintenance of the Claims.  Grantee shall deliver to Grantor, not later than the date fifteen (15) days prior to the date for the payment of annual claim maintenance fees (currently September 1), evidence that the fee has been timely paid, and shall thereafter, prior to December 1 of each year, deliver to Grantor a copy of a “Notice of intent to Hold” for the Claims as recorded in the official records of Maricopa County.

3.           INUREMENT

The Royalty reserved herein shall run with the land and be binding on all subsequent owners of the Claims, including any amendments, relocations, patents of the same or additional or alternative rights to mine as may be conferred by any changes in the mineral laws of the United States.

4.           NOTICES

All notices required or permitted to be given hereunder shall be given in writing and shall be sent by the parties by registered or certified mail, telex, facsimile transmission or by express delivery service to the address set forth in the identification of the parties in the headings of this Quitclaim Deed or to such other address as either party may later designate by like notice to the other.  All notices required or permitted to be given hereunder shall be deemed to have been given upon the earliest of (1) actual receipt, (2) acknowledgment in any form of receipt of telex or facsimile transmission, (3) the business day next following deposit with an express delivery service, properly addressed, or (4) seventy-two (72) hours after deposit with the U.S. Mails, properly addressed with postage prepaid.

5.           ASSIGNMENTS BY GRANTOR

Grantor may transfer, pledge, mortgage, charge or otherwise encumber all or any part of its right, title and interest in and to its Royalty reserved hereunder; provided, however, that Grantee shall be under no obligation to make its payments hereunder to such assignee, transferee, pledgee or other third party until Grantee’s receipt of Notice concerning the assignment or transfer.

6.           INTERPRETATION

a.           Governing Law; Venue.  The provisions and interpretation of this Quitclaim Deed shall be governed by the laws of the State of Arizona without regard to conflicts of laws principles.  Any dispute concerning this Quitclaim Deed shall be adjudicated in either the state or federal courts in and for the State of Arizona.

b.           Invalidity of Provisions.  If any term or other provision of this Quitclaim Deed is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Quitclaim Deed shall nevertheless remain in full force and effect so long as the economic and legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Quitclaim Deed so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible.

 

  

  

  

 

IN WITNESS WHEREOF, the Grantor has executed and delivered this Quitclaim Deed and Reservation of Royalty Interest as of the ____ day of ____________, 20____.

GRANTOR:

SOUTHWEST EXPLORATION, INC, an Arizona corporation

By:                                                                          

Name: Daniel Bleak

Its: President, Director and Shareholder

 

	
STATE OF _____________

	
)

	 
	 	
)

	
ss.

	
County of ______________

	
)   

	 

 

The foregoing instrument was acknowledged before me this _____ day of __________, 20___ by Daniel Bleak, President, Director and Shareholder of Southwest Exploration, Inc, on behalf of the corporation.

 

____________________________

Notary Public

By:                                                                          

Name: Floyd R. Bleak

Its: Secretary, Director and Shareholder

 

	
STATE OF _____________

	
)

	 
	 	
)

	
ss.

	
County of ______________

	
)   

	 

 

The foregoing instrument was acknowledged before me this _____ day of __________, 20___ by Floyd R. Bleak, Secretary, Director and Shareholder of Southwest Exploration, Inc, on behalf of the corporation.

 

By:                                                                          

Name: Joshua Bleak

Its: Shareholder

 

	
STATE OF _____________

	
)

	 
	 	
)

	
ss.

	
County of ______________

	
)   

	 

 

The foregoing instrument was acknowledged before me this _____ day of __________, 20___ by Joshua Bleak, Shareholder of Southwest Exploration, Inc, on behalf of the corporation.

 

The undersigned Grantee hereby accepts this Quitclaim Deed and Reservation of Royalty Interest made therein.

GRANTEE:

[STANDARD GOLD CORP., a Nevada corporation, or such designee as Standard Gold Corp. may designate]

By:                                                                          

Name:                                                                          

Its:                                                                          

 

	
STATE OF _____________

	
)

	 
	 	
)

	
ss.

	
County of ______________

	
)   

	 

 

The foregoing instrument was acknowledged before me this _____ day of __________, 20___ by _______________________, _________________ of __________________________ [Standard Gold Corp., or such designee as Standard Gold Corp. may designate], on behalf of the corporation.Unassociated Document

 

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

 

	
Principal Amount: $150,000 

	 	 	
Issue Date: August 30, 2011

 

SECURED CONVERTIBLE PROMISSORY NOTE

FOR VALUE RECEIVED, BULLFROG GOLD CORP., a Delaware corporation (hereinafter called “Borrower”), hereby promises to pay to the order of Barry Honig, at 4400 Biscayne Boulevard, Miami, FL 33137 (the “Holder”), without demand, the sum of One Hundred and Fifty Thousand Dollars ($150,000) (“Principal Amount”), with interest accruing thereon, on the sixth month anniversary of the Issue Date (the “Maturity Date”), if not sooner paid or converted.

The following terms shall apply to this Note:

ARTICLE I

GENERAL PROVISIONS

1.1           Interest Rate.   Interest payable on this Note shall accrue at the annual rate of ten percent (10%) and be payable on the Maturity Date, accelerated or otherwise, when the principal and remaining accrued but unpaid interest shall be due and payable, or sooner as described below.

1.2           Payment Grace Period.  The Borrower shall not have any grace period to pay any monetary amounts due under this Note.  During the pendency of an Event of Default (as described in Article III), a default interest rate of eighteen percent (18%) per annum shall be in effect.

1.3           Conversion Privileges.  The Conversion Rights set forth in Article II shall remain in full force and effect immediately from the date hereof and until the Note is paid in full regardless of the occurrence of an Event of Default.  This Note shall be payable in full on the Maturity Date, unless previously converted into Common Stock in accordance with Article II hereof.

1.4           Prepayment.  This Note may be prepaid by the Borrower in whole, at any time, or in part, from time to time, without penalty or premium, upon thirty (30) days prior written notice to the Holder.  Upon receipt of such notice, the Holder may determine to convert the Note pursuant to Article II.

  

1

  

 

ARTICLE II

CONVERSION RIGHTS

The Holder shall have the right to convert the principal and any interest due under this Note into Shares of the Borrower's Common Stock, $.0001 par value per share (“Common Stock”) as set forth below.

2.1.           Conversion into the Borrower's Common Stock. 

(a)           The Holder shall have the right from and after the date of the issuance of this Note and then at any time until this Note is fully paid, to convert any outstanding and unpaid principal portion of this Note, and accrued interest, at the election of the Holder (the date of giving of such notice of conversion being a "Conversion Date") into fully paid and non-assessable shares of Common Stock as such stock exists on the date of issuance of this Note, or any shares of capital stock of Borrower into which such Common Stock shall hereafter be changed or reclassified, at the Conversion Price (as defined in Section 2.1(b) hereof), determined as provided herein.  Upon delivery to the Borrower of a completed Notice of Conversion, a form of which is annexed hereto as Exhibit A, Borrower shall issue and deliver to the Holder within three (3) business days after the Conversion Date (such third day being the “Delivery Date”) that number of shares of Common Stock for the portion of the Note converted in accordance with the foregoing.  At the election of the Holder, the Borrower will deliver accrued but unpaid interest on the Note, if any, through the Conversion Date directly to the Holder on or before the Delivery Date.  The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined by dividing that portion of the principal of the Note and interest, if any, to be converted, by the Conversion Price.

(b)           Subject to adjustment as provided in Section 2.1(c) hereof, the conversion price per share shall initially be equal to $0.40 (“Conversion Price”).

(c)            The Conversion Price and number and kind of shares or other securities to be issued upon conversion determined pursuant to Section 2.1(a), shall be subject to adjustment from time to time upon the happening of certain events while this conversion right remains outstanding, as follows:

A.           Merger, Sale of Assets, etc.  If (A) the Borrower effects any merger or  consolidation of the Borrower with or into another entity, (B) the Borrower effects any sale of all or substantially all of its assets in one or a series of related transactions,  (C) any tender offer or exchange offer (whether by the Borrower or another entity) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, (D) the Borrower consummates a stock purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with one or more persons or entities whereby such other persons or entities acquire more than the 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by such other persons or entities making or party to, or associated or affiliated with the other persons or entities making or party to, such stock purchase agreement or other business combination), (E) any "person" or "group" (as these terms are used for purposes of Sections 13(d) and 14(d) of the 1934 Act) is or shall become the "beneficial owner" (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of 50% of the aggregate Common Stock of the Borrower, or (F) the Borrower effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (in any such case, a “Fundamental  Transaction”), this Note, as to the unpaid principal portion thereof and accrued interest thereon, shall thereafter be deemed to evidence the right to convert into such number and kind of shares or other securities and property as would have been issuable or distributable on account of such 

 

  

2

  

 

Fundamental Transaction, upon or with respect to the securities subject to the conversion right immediately prior to such Fundamental Transaction. The foregoing provision shall similarly apply to successive Fundamental Transactions of a similar nature by any such successor or purchaser.

B.           Reclassification, etc.  If the Borrower at any time shall, by reclassification or otherwise, change the Common Stock into the same or a different number of securities of any class or classes that may be issued or outstanding, this Note, as to the unpaid principal portion thereof and accrued interest thereon, shall thereafter be deemed to evidence the right to purchase an adjusted number of such securities and kind of securities as would have been issuable as the result of such change with respect to the Common Stock immediately prior to such reclassification or other change.

C.           Stock Splits, Combinations and Dividends.  If the shares of Common Stock are subdivided or combined into a greater or smaller number of shares of Common Stock, or if a dividend is paid on the Common Stock in shares of Common Stock, the Conversion Price shall be proportionately reduced in case of subdivision of shares or stock dividend or proportionately increased in the case of combination of shares, in each such case by the ratio which the total number of shares of Common Stock outstanding immediately after such event bears to the total number of shares of Common Stock outstanding immediately prior to such event.

           D.           Maturity Reset.   In the event this Note is not converted and the Borrower does not repay this Note in full on or prior to the Maturity Date, then the Conversion Price shall automatically be reduced (and under no circumstances increased) to 90% of the average of the closing bid prices of the Common Stock, as reported by Bloomberg L.P. for the principal market on which the Borrower’s shares of Common Stock are quoted, for the five trading days preceding (but not including) the date the Notice of Conversion is sent by the Holder.

(d)           Whenever the Conversion Price is adjusted pursuant to Section 2.1(c) above, the Borrower shall promptly mail to the Holder a notice setting forth the Conversion Price after such adjustment and setting forth a statement of the facts requiring such adjustment.

(e)           Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable.  Borrower agrees that its issuance of this Note shall constitute full authority to its officers, agents, and transfer agents who are charged with the duty of executing and issuing stock certificates to execute and issue the necessary certificates for shares of Common Stock upon the conversion of this Note.

2.2           Method of Conversion.  This Note may be converted by the Holder in whole or in part as described in Section 2.1(a) or Section 2.4 hereof.  Upon partial conversion of this Note, a new Note containing the same date and provisions of this Note shall, at the request of the Holder, be issued by the Borrower to the Holder for the principal balance of this Note and interest which shall not have been converted or paid.

2.3.           Maximum Conversion.  The Holder shall not be entitled to convert on a Conversion Date that amount of the Note in connection with that number of shares of Common Stock which would be in excess of the sum of (i) the number of shares of Common Stock beneficially owned by the Holder and its affiliates on a Conversion Date, (ii) any Common Stock issuable in connection with the unconverted portion of the Note, and (iii) the number of shares of Common Stock issuable upon the conversion of the Note with respect to which the determination of this provision is being made on a Conversion Date, which would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock of the Borrower on such Conversion Date.  For the purposes of the provision to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13d-3 thereunder.  Subject to the foregoing, the Holder 

 

  

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shall not be limited to aggregate conversions of 4.99%.  The Holder shall have the authority and obligation to determine whether the restriction contained in this Section 2.3 will limit any conversion hereunder and to the extent that the Holder determines that the limitation contained in this Section applies, the determination of which portion of the Notes are convertible shall be the responsibility and obligation of the Holder.  The Holder may waive the conversion limitation described in this Section 2.3, in whole or in part, upon and effective after 61 days prior written notice to the Borrower to increase such percentage to up to 9.99%.

2.4.           Qualified Financing.  In addition to the conversion rights set forth in Section 2.1, the Holder shall have the right to convert the principal and any interest due under this Note into shares of Common Stock of the Borrower as follows:  In the event of the closing by the Borrower of a Qualified Financing (as defined below) prior to the Maturity Date or the conversion of this Note, the Holder shall have the option to convert all or a portion of the outstanding principal of, and accrued interest on, this Note on a dollar-for-dollar basis into the shares of the Borrower issued and sold to the investors in the Qualified Financing (“QF Securities”) at a conversion price equal to the purchase price per share of the QF Securities paid by the investors in the Qualified Financing.  A “Qualified Financing” shall mean the closing of an equity investment in the form of the Borrower’s capital stock occurring after the date hereof in which the Borrower receives from one or more investors (which investors may include the Holder) with gross proceeds to the Company of at least $1,000,000.  Upon conversion of this Note in accordance with this Section 2.4, the Holder shall become party to a purchase agreement and all related agreements, each in customary form, along with the investors participating in such Qualified Financing.

ARTICLE III

EVENT OF DEFAULT

The occurrence of any of the following events of default ("Event of Default") shall, at the option of the Holder hereof, make all sums of principal and interest then remaining unpaid hereon and all other amounts payable hereunder immediately due and payable, upon demand, without presentment, or grace period, all of which hereby are expressly waived, except as set forth below:

3.1           Failure to Pay Principal or Interest.  The Borrower fails to pay any installment of principal, interest or other sum due under this Note when due.

3.2           Breach of Covenant.  The Borrower breaches any material covenant or other term or condition of this Note in any material respect (other than a payment default described in Section 3.1) and such breach, if subject to cure, continues for a period of five (5) business days after written notice to the Borrower from the Holder.

3.3           Breach of Representations and Warranties.  Any material representation or warranty of the Borrower made herein or in any agreement, statement or certificate given in writing pursuant hereto shall be false or misleading in any material respect as of the date made.

3.4           Liquidation.   Any dissolution, liquidation or winding up of Borrower or any substantial portion of its business.

 

3.5           Cessation of Operations.   Any cessation of operations by Borrower or Borrower admits it is otherwise generally unable to pay its debts as such debts become due.

 

  

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3.6           Receiver or Trustee.  The Borrower or any Subsidiary of Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business; or such a receiver or trustee shall otherwise be appointed.

3.7           Bankruptcy.  Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings or relief under any bankruptcy law or any law, or the issuance of any notice in relation to such event, for the relief of debtors shall be instituted by or against the Borrower or any Subsidiary of Borrower.

3.8           Judgments.  Any money judgment, writ or similar final process shall be entered or filed against Borrower or any of its property or other assets for more than $50,000, unless stayed vacated or satisfied within thirty (30) days.

3.9           Non-Payment.   A default by the Borrower under any one or more obligations in an aggregate monetary amount in excess of $50,000 for more than twenty (20) days after the due date, unless the Borrower is contesting the validity of such obligation in good faith.

3.10           Delisting.   Delisting of the Common Stock from any Principal Market; failure to comply with the requirements for continued listing on a Principal Market for a period of five (5) consecutive trading days; or notification from a Principal Market that the Borrower is not in compliance with the conditions for such continued listing on such Principal Market.

3.11           Stop Trade.  An SEC or judicial stop trade order or Principal Market trading suspension that lasts for five or more consecutive trading days.

ARTICLE IV

INTENTIONALLY OMITTED

ARTICLE V

MISCELLANEOUS

5.1           Failure or Indulgence Not Waiver.  No failure or delay on the part of the Holder hereof in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege.  All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.

 

5.2           Notices.  All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice.  Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the first business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever 

 

  

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shall first occur.  The addresses for such communications shall be: (i) if to the Borrower to Bullfrog Gold Corp. 897 Quail Run Drive, Grand Junction, CO 81505, Attn: David Beling, President and CEO, facsimile: _______, with a copy by fax only to:  Harvey Kesner, Esq., Sichenzia Ross Friedman Ference LLP, 61 Broadway, 32nd Floor, New York, NY 10006, facsimile: (212) 930-9725, and (ii) if to the Holder, to the name, address and facsimile number set forth on the front page of this Note.

 

5.3           Waivers and Amendments.  The Borrower hereby waives presentment, demand for performance, notice of non-performance, protest, notice of protest and notice of dishonor.  No delay on the part of the Holder in exercising any right hereunder shall operate as a waiver of such right or any other right.  Any term of this Note may be amended or waived only with the written consent of the Borrower and the Holder.  Notwithstanding the foregoing, in the event that at any time prior to date that this Note is paid in full or converted into QF Securities, the Borrower issues any additional convertible bridge notes on terms more favorable to the holders thereof than contained in this Note, than the terms and conditions of this Note shall automatically be deemed to be revised to correspond to such more favorable terms.

 

5.4           Amendment Provision.  The term “Note” and all reference thereto, as used throughout this instrument, shall mean this instrument as originally executed, or if later amended or supplemented, then as so amended or supplemented.

 

5.5           Assignability.  This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to the benefit of the Holder and its successors and assigns.  The Borrower may not assign its obligations under this Note.

 

5.6           Cost of Collection.  If default is made in the payment of this Note, Borrower shall pay the Holder hereof reasonable costs of collection, including reasonable attorneys’ fees.

 

5.7           Governing Law.  This Note shall be governed by and construed in accordance with the laws of the State of New York without regard to conflicts of laws principles that would result in the application of the substantive laws of another jurisdiction.  Any action brought by either party against the other concerning the transactions contemplated by this Agreement must be brought only in the civil or state courts of New York or in the federal courts located in the State and county of New York.  Both parties and the individual signing this Agreement on behalf of the Borrower agree to submit to the jurisdiction of such courts.  The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs.  In the event that any provision of this Note is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or unenforceability of any other provision of this Note. Nothing contained herein shall be deemed or operate to preclude the Holder from bringing suit or taking other legal action against the Borrower in any other jurisdiction to collect on the Borrower's obligations to Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other decision in favor of the Holder.  This Note shall be deemed an unconditional obligation of Borrower for the payment of money and, without limitation to any other remedies of Holder, may be enforced against Borrower by summary proceeding pursuant to New York Civil Procedure Law and Rules Section 3213 or any similar rule or statute in the jurisdiction where enforcement is sought.  For purposes of such rule or statute, any other document or agreement to which Holder and Borrower are parties or which Borrower delivered to Holder, which may be convenient or necessary to determine Holder’s rights hereunder or Borrower’s obligations to Holder are deemed a part of this Note, whether or not such other document or agreement was delivered together herewith or was executed apart from this Note.

 

  

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5.8           Maximum Payments.  Nothing contained herein shall be deemed to establish or require the payment of a rate of interest or other charges in excess of the maximum rate permitted by applicable law.  In the event that the rate of interest required to be paid or other charges hereunder exceed the maximum rate permitted by applicable law, any payments in excess of such maximum rate shall be credited against amounts owed by the Borrower to the Holder and thus refunded to the Borrower.

 

5.9           Non-Business Days.   Whenever any payment or any action to be made shall be due on a Saturday, Sunday or a public holiday under the laws of the State of New York, such payment may be due or action shall be required on the next succeeding business day and, for such payment, such next succeeding day shall be included in the calculation of the amount of accrued interest payable on such date.

 

5.10           Redemption.  This Note may not be redeemed or called without the consent of the Holder.

5.11           Shareholder Status.  The Holder shall not have rights as a shareholder of the Borrower with respect to unconverted portions of this Note.

 

  

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IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by an authorized officer as of the 30th day of August, 2011.

 

	 	
BULLFROG GOLD CORP.

	 
	 	 	 	 
	 	
By: 

	
/s/ David Beling

	 
	 	 	Name:  David Beling	 
	 	 	Title:    President	 
	 	 	 	 

 

  

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NOTICE OF CONVERSION

(To be executed by the Registered Holder in order to convert the Note)

The undersigned hereby elects to convert $_________ of the principal and $_________ of the interest due on the Note issued by BULLFROG GOLD CORP. (the “Borrower”) on August 30, 2011 into shares of the Borrower’s Common Stock according to the conditions set forth in such Note, as of the date written below.

Date of Conversion:____________________________________________________________________

Conversion Price:______________________________________________________________________

Number of Shares of Common Stock Beneficially Owned on the Conversion Date:

___________________________________________

Shares To Be Delivered:_________________________________________________________________

Signature:____________________________________________________________________________

Print Name:___________________________________________________________________________

Address:_____________________________________________________________________________

____________________________________________________________________________________

 

 

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