Document:

Untitled Document

 

Exhibit
10.5

 

AMENDMENT

TO

LONGSTREET PROPERTY OPTION
AGREEMENT

 

This Property
Option Agreement Amendment (the “2016 Amendment”) is
executed this 5th day of January, 2016 by and between MinQuest,
Inc., a Nevada corporation (“MinQuest’) and Star Gold
Corp., a Nevada corporation (“Star Gold”) (each a
“Party”
and together the “Parties”).

 

RECITALS

 

	
 

	
A.

	
MinQuest and Star
Gold entered into a Property Option Agreement (the
“Option
Agreement”), dated January 15, 2010, for the property
referred to in the Option Agreement as the “Longstreet
Property” (the “Property”);

 

	
 

	
B.

	
Minquest and Star
Gold subsequently entered into an Amendment to Longstreet Property
Option Agreement (the “2014 Amendment), dated December 10,
2014:

 

	
 

	
C.

	
Section 4 of the
Option Agreement requires Star Gold to incur certain levels of
Expenditures on the Property, make certain cash payments to
MinQuest and issue to MinQuest certain numbers of options to
purchase Star Gold common stock (the “Options”), according to
the schedules set forth therein;

 

	
 

	
D.

	
Section 2 of the
2014 Amendment adjusts the timing and amounts of the required
Expenditures, cash payments and option grants in the original
Option Agreement;

 

	
 

	
E.

	
The Parties now
desire to further revise portions of the 2014 Amendment to adjust
the timing and amounts of the required Expenditures, cash payments
and option grants required by Section 2 of the Option
Agreement,

 

NOW, THEREFORE, in
consideration of the covenants, agreements, representations and
warranties set forth in this 2015 Amendment, the Parties hereby
covenant, agree, represent and warrant as follows.

 

AGREEMENT

 

	
1.

	
DEFINITIONS.

 

All capitalized
terms not defined in this 2016 Amendment shall have the meaning
ascribed to those terms in the Purchase Agreement.

 

1

 

 

	
2.

	
AMENDMENTS.

 

Section 4 of the
Option Agreement shall be amended to provide for the following
schedule for Star Gold to incur the listed Expenditures, make the
listed cash payments and grant the listed Options to
MinQuest:

 

	
 

	
(a)

	
Between January 17,
2015 and January 16, 2016 Star Gold shall:

 

	
 

	
(i)

	
incur Expenditures
on the Property (including any surplus Expenditures incurred prior
to January 17, 2015) of one hundred thousand and no/100 dollars
($100,000.00); and

 

	
 

	
(ii)

	
make cash payments
to MinQuest (independent of any required cash payments made prior
to January 17, 2015) totaling twenty thousand and no/100 dollars
($20,000.00). Payment shall be made no later than January 16, 2016;
and

 

	
 

	
(iii)

	
grant MinQuest
twenty five thousand (25,000) Options (independent of any Options
previously granted) to be exercised at the Fair Market
Price.

 

	
 

	
(b)

	
Between January 17,
2016 and January 16, 2017 Star Gold shall:

 

	
 

	
(i)

	
incur Expenditures
on the Property (including any surplus Expenditures incurred prior
to January 17, 2016) of one hundred fifty thousand and no/100
dollars ($150,000.00); and

 

	
 

	
(ii)

	
make cash payments
to MinQuest (independent of any required cash payments made prior
to January 17, 2016) totaling twenty five thousand and no/100
dollars ($25,000.00). Payment shall be made no later than January
16, 2017; and

 

	
 

	
(iii)

	
grant MinQuest
twenty five thousand (25,000) Options (independent of any Options
previously granted) to be exercised at the Fair Market
Price.

 

	
 

	
(c)

	
Between January 17,
2017 and January 16, 2018 Star Gold shall:

 

	
 

	
(i)

	
incur Expenditures
on the Property (including any surplus Expenditures incurred prior
to January 17, 2017) of three hundred thousand and no/100 dollars
($300,000.00); and

 

	
 

	
(ii)

	
make cash payments
to MinQuest (independent of any required cash payments made prior
to January 17, 2017) totaling thirty five thousand and no/100
dollars ($35,000.00). Payment shall be made no later than January
16, 2018; and

 

	
 

	
(iii)

	
grant MinQuest
forty thousand (40,000) Options (independent of any Options
previously granted) to be exercised at the Fair Market
Price.

 

	
 

	
(d)

	
Between January 17,
2018 and January 16, 2019 Star Gold shall:

 

	
 

	
(i)

	
incur Expenditures
on the Property (including any surplus Expenditures incurred prior
to January 17, 2018) of five hundred thousand and no/100 dollars
($500,000.00); and

 

	
 

	
(ii)

	
make cash payments
to MinQuest (independent of any required cash payments made prior
to January 17, 2018) totaling forty thousand and no/100 dollars
($40,000.00). Payment shall be made no later than January 16, 2019;
and

 

	
 

	
(iii)

	
grant MinQuest
forty five thousand (45,000) Options (independent of any Options
previously granted) to be exercised at the Fair Market
Price.

 

2

 

 

	
 

	
(e)

	
Between January 17,
2019 and January 16, 2020 Star Gold shall:

 

	
 

	
(i)

	
incur Expenditures
on the Property (including any surplus Expenditures incurred prior
to January 17, 2019) of seven hundred thousand and no/100 dollars
($700,000.00); and

 

	
 

	
(ii)

	
make cash payments
to MinQuest (independent of any required cash payments made prior
to January 17, 2019) totaling forty thousand and no/100 dollars
($40,000.00). Payment shall be made no later than January 16, 2020;
and

 

	
 

	
(iii)

	
grant MinQuest
fifty thousand (50,000) Options (independent of any Options
previously granted) to be exercised at the Fair Market
Price.

 

	
 

	
(f)

	
Upon satisfaction
of cumulative required Expenditures and transfer of property to
Star Gold Corp. by MinQuest, Star Gold shall:

 

	
 

	
(i)

	
make cash payments
to MinQuest totaling eighty five thousand and no/100 dollars
($85,000.00). Payment shall be made no later than January 16,
2021.

 

	
3.

	
MISCELLANEOUS.

 

3.1       No
Third Parties Benefited. This Amendment is between and for
the sole benefit of Star Gold and MinQuest and their successors and
assigns, and creates no rights whatsoever in favor of any other
person or entity and no other person or entity will have any rights
to rely hereon.

 

3.2       Notices.
All notices or other written communications hereunder will be
deemed to have been properly given (i) upon delivery, if delivered
in person or by facsimile transmission with receipt of an
electronic confirmation thereof, (ii) one Business Day after having
been deposited for overnight delivery with any reputable overnight
courier service, or (iii) three Business Days after having been
deposited in any post office or mail depository regularly
maintained by the U.S. Postal Service and sent by registered or
certified mail, postage prepaid, return receipt requested,
addressed as follows:

 

	
If to Star
Gold:

	
Attn: Lindsay E.
Gorrill

611 E. Sherman Avenue

Coeur d’ Alene, ID 83814

Phone: (208) 664-5066

Fax: (208) 765-8520

	
 

	
 

	
With a copy
to:

	
Parsons/Burnett/Bjordahl/Hume,
LLP

Attn: Robert J. Burnett

505 W. Riverside Avenue, Suite 500

Spokane, Washington 99201

Phone: (509) 252-5066

Fax: (509) 252-5067

	
 

	
 

	
If to
MinQuest:

	
Attn:
Richard Kern

4325
Christy Way

Reno,
NV 89519

Phone:
(775) ______________

Fax: (___) ________________

 

	
With a copy
to:

	
Herb Duerr

1680 Greenfield Drive

Reno, NV 89509

Phone: (775) 825-8215

 

3

 

 

3.3       Additional
Documents. Each Party shall execute such additional
documents as may reasonably be requested by the other Party to
effectuate the provisions of this Amendment.

 

3.4       Assignment.
No Party may assign its rights or obligations under this Amendment
without the prior written consent of the other Party. Any purported
assignment without the other Party’s prior written consent
will be void ab initio.

 

3.5       Authorization;
Binding Effect. Each Party represents to the other that its
execution of this Amendment has been authorized by all necessary
corporate action and that this Amendment constitutes a binding
obligation of such Party. Each individual who executes this
Amendment on behalf of a Party represents to all Parties that he or
she is authorized to do so. This Amendment will bind each
Party’s successors and permitted assigns.

 

3.6       Attorneys’
Fees. If a Party is in default under this Amendment the
other Party will have the right, at the expense of the defaulting
Party, to retain an attorney to make demand, enforce remedies, or
otherwise protect or enforce the rights of the non-defaulting
Party. A Party in default shall pay all attorneys’ fees and
costs so incurred.

 

3.7       Consents
and Approvals. Unless specifically stated to the contrary in
this Amendment (i.e., by stating that a Party’s consent or
approval may be granted or withheld in its sole discretion),
whenever any provision of this Amendment requires a Party to
provide its consent or approval, such Party will not unreasonably
condition, withhold or delay such consent or approval, provided
that the Party seeking the consent is not in default under the
Agreement.

 

3.8       Consent
Required to Amend or Waive. No amendment or modification of
any provision of this Amendment will be effective unless made in
writing and signed by each of the Parties.

 

3.9       Counterparts.
This Amendment may be executed in counterparts each of which will
be deemed an original and such counterparts when taken together
shall constitute but one agreement.

 

 

 

 

 

 

 

4

 

 

3.10       Entire
Agreement. This Amendment sets forth the entire
understanding of the Parties with respect to the subject matter of
this Amendment and supersedes all prior agreements and
understandings between the Parties regarding the subject matter of
this Amendment. No other amendments to the Option Agreement are
contemplated or intended by this Amendment except such other
amendments as may be required to carry out the specific terms and
intent of this Amendment.

 

3.11       Governing
Law; Consent to Jurisdiction. This Amendment and its
interpretation and enforcement are governed by the laws of the
state of Nevada. Each Party agrees that venue for any dispute
arising out of or in connection with this Amendment will be in
Mineral County, Nevada and each Party waives any objections it may
now or hereafter have regarding such venue.

 

3.12       No
Waiver. No waiver by any Party of any right or default under
this Amendment will be effective unless in writing and signed by
the waiving Party. No such waiver will be deemed to extend to any
prior or subsequent right or default or affect in any way any
rights arising by virtue of any prior or subsequent such
occurrence.

 

3.13       Relationship
of the Parties. The relationship of the Parties is strictly
one of Optionor and Optionee. This Amendment is neither intended
to, nor will it be construed as, an agreement to create a joint
venture, partnership, or other form of business association between
the Parties.

 

3.14       Severability.
If for any reason any provision of this Amendment is determined by
a tribunal of competent jurisdiction to be legally invalid or
unenforceable, the validity of the remainder of the Amendment will
not be affected and such provision will be deemed modified to the
minimum extent necessary to make such provision consistent with
applicable law and, in its modified form, such provision will then
be enforceable and enforced.

 

3.15       Terminology.
Unless specifically indicated to the contrary: (i) wherever from
the context it appears appropriate, each term stated in either the
singular or the plural will include the plural and the masculine
gender will include the feminine and neuter genders; (ii) the term
“or” is not exclusive; (iii) the term
“including” (or any form thereof) will not be limiting
or exclusive; (iv) the words “Amendment,”
“herein,” “hereof,”
“hereunder,” or other words of similar import refer to
this Amendment as a whole, including exhibits and schedules (if
any), as the same may be modified, amended or supplanted. The
headings in this Amendment have no independent
meaning.

 

3.16       Disclaimer—Preparation
of Amendment. This Amendment was originally prepared by
counsel for Star Gold. The Parties agree, however, that this fact
shall not create any presumption in favor or against any Party in
respect of the interpretation or enforcement of this Amendment.
Each other Party is advised to have this Amendment reviewed by
independent legal and tax counsel prior to its execution. By
executing this Amendment each such Party represents (i) that it has
read and understands this Amendment, (ii) that it has had the
opportunity to obtain independent legal and tax advice regarding
this Amendment and (iii) that it has obtained such independent
advice or has freely elected not to do so.

 

5

 

 

 

 

 

 

 

[SIGNATURE PAGE TO
FOLLOW - AMENDMENT TO LONGSTREET PROPERTY

OPTION AGREEMENT]

 

[SIGNATURE PAGE -
AMENDMENT TO LONGSTREET PROPERTY OPTION

AGREEMENT]

 

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

 

	
STAR GOLD
CORP.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
BY:

	
 

	

	
 

	
 

	
 

	
Lindsay E. Gorrill,
Chairman

	
 

	
 

	
 

	
 

	
 

	
MINQUEST,
INC.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
BY:

	
 

	

	
 

	
 

	
 

	
Richard R.
Kern

	
 

	
 

	
 

	
 

	
 

	
MINQUEST,
INC.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
BY:

	
 

	

	
 

	
 

	
 

	
Herb
Duerr

 

 

 

 

 

 

 

 

 

	
 

 

6

 

 

EXHIBIT A – PAYMENT SCHEDULE

 

The schedule of
payments in Exhibit A is presented for purposes of clarification.
The overriding payment schedule is the narrative described in Sec 2
(a) to (f).

 

	
Required annual

expenditure between:

	
 

	
Required

expenditure

	
 

	
 

	
Annual stock

option grant to

Minquest

	
 

	
 

	
Annual

Payment Due to

Minquest

	
 

	
 

	
Annual stock

option grant and

Payment to

Minquest due

date

	
1/17/15

	
 

	
1/16/16

	
 

	
$

	
100,000

	
 

	
 

	
 

	
25,000

	
 

	
 

	
$

	
20,000

	
 

	
 

	
1/16/16

	
1/17/16

	
 

	
1/16/17

	
 

	
$

	
150,000

	
 

	
 

	
 

	
25,000

	
 

	
 

	
$

	
25,000

	
 

	
 

	
1/16/17

	
1/17/17

	
 

	
1/16/18

	
 

	
$

	
300,000

	
 

	
 

	
 

	
40,000

	
 

	
 

	
$

	
35,000

	
 

	
 

	
1/16/18

	
1/17/18

	
 

	
1/16/19

	
 

	
$

	
500,000

	
 

	
 

	
 

	
45,000

	
 

	
 

	
$

	
40,000

	
 

	
 

	
1/16/19

	
1/17/19

	
 

	
1/16/20

	
 

	
$

	
700,000

	
 

	
 

	
 

	
50,000

	
 

	
 

	
$

	
45,000

	
 

	
 

	
1/16/20

	
Upon transfer of
property

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
$

	
85,000

	
 

	
 

	
Payment due upon
transfer but no later than 1/16/21

	
TOTAL

	
 

	
$

	
1,750,000

	
 

	
 

	
 

	
185,000

	
 

	
 

	
$

	
250,000

	
 

	
 

	
 

 

All allowable
expenditures in excess of the required annual expenditure shall be
carried-over to the subsequent year.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7Exhibit
10.6

 

	
The undersigned hereby
affirms that there is no Social Security number contained in this
document

	
 

	
 

	
 

	
RECORDING REQUESTED
BY:

Stone Cabin Company,
LLC

P.O. Box 109

Boardman, OR
97818

	
 

	
 

	
 

	
AFTER RECORDATION RETURN
TO:

Stone Cabin Company,
LLC

P.O. Box 109

Boardman, OR
97818

	
 

	
 

	
SPACE ABOVE THIS LINE FOR RECORDER’S
USE

 

OPTION AND LEASE OF WATER
RIGHTS

 

By

 

Stone Cabin Company, LLC

of Boardman, OR

 

and

 

Star Gold Corporation

of Coeur d’Alene, ID

 

 

 

 

 

 

 

 

 

 

 

 

 

OPTION AND LEASE OF WATER
RIGHTS

 

	
1.

	
Background

	
1

	
2.

	
STONE CABIN
Obligations

	
1

	
3.

	
Term

	
2

	
4.

	
Rental

	
3

	
5.

	
Beneficial
Use

	
3

	
6.

	
Liability and
Indemnity

	
4

	
7.

	
Default

	
4

	
8.

	
Miscellaneous
Provisions

	
5

	
 

	
8.1

	
Notices

	
5

	
 

	
8.2

	
Sharing of
Documents

	
5

	
 

	
8.3

	
Inspection of
Facilities

	
5

	
 

	
8.4

	
Applicable
Law

	
5

	
 

	
8.5

	
Waiver

	
6

	
 

	
8.6

	
Taxes

	
6

	
 

	
8.7

	
Entire
Agreement

	
6

	
 

	
8.8

	
Captions

	
6

	
 

	
8.9

	
Expenses of
Enforcement

	
6

	
 

	
8.10

	
Pronouns

	
6

 

 

 

OPTION AND LEASE OF WATER
RIGHTS

 

For good and
valuable consideration, Stone Cabin Company, LLC (STONE CABIN) of
Boardman, Oregon and Star Gold Corporation (STAR GOLD) of Coeur
d’Alene, Idaho hereby make this Option and Lease of Water
Rights as of this 30th day of December,
2016 (“Effective Date”)

 

	
1.

	
 Background

 

1.1     STONE
CABIN is the owner with regard to certain water rights (the
“Water Rights”) listed on the annexed Exhibit A. STAR
GOLD desires to lease these Water Rights for purpose of mining and
milling use. The amount of water leased is 571.00 acre feet per
annum. STONE CABIN has appropriated the water which is the basis of
the Water Rights by means of underground sources which are located
at the Nevada State Engineer (State Engineer) approved points of
diversion.

 

1.2     The
State Engineer has approved irrigation use for the Water Rights.
STAR GOLD desires to obtain approval of the State Engineer to apply
the Water Rights to other places of use and points of diversion for
mining and milling uses.

 

1.3     STONE
CABIN desires to assure itself that the Water Rights will be
beneficially used for the life of the within lease in accordance
with the terms of this lease.

 

1.4     STAR
GOLD desires to assure itself that the Water Rights can be
beneficially used for its mining and milling purposes

 

1.5    STAR
GOLD desire to lease the Water Rights from STONE CABIN and the
parties are willing to lease the Water Rights under the terms of
this Agreement.

 

	
2.

	
 STONE CABIN
Obligations

 

STONE CABIN agrees
to the following:

 

2.1     To
support STAR GOLD’S activities by filing applications for
permits to change the point(s) of diversion, place of use, and
manner of use of the Water Rights as necessary to allow STAR GOLD
to fully utilize the Water Rights for any lawful purpose during the
term of this Agreement, at no cost to STONE CABIN.  STAR GOLD
shall furnish STONE CABIN with information regarding the point(s)
of diversion, place(s) of use of the Water Rights as necessary for
the Water Rights to be used by STAR GOLD for its
purposes.

 

2.2     STONE
CABIN, or an agent of its choosing, will be fully responsible for
all aspects of water rights management of the approved permits to
change the point(s) of diversion, place of use, and manner of use
of the Water Rights as necessary to allow STAR GOLD to fully
utilize the Water Rights for any lawful purpose during the term of
this Agreement, at no cost to STONE CABIN. This includes all State
Engineer requirements, but not limited to filing proof of
completion, proof of beneficial use, extensions of time, pumping
data submissions, and monitoring requirements. STONE CABIN will be
reimbursed by STAR GOLD for the on-going management of the water
rights.  STONE CABIN agrees to use experienced Nevada water
rights firms for the work who will charge customary
rates.

 

1

 

 

2.3     STONE
CABIN will not be responsible for any costs associated with
transferring water rights for use by STAR GOLD. STONE CABIN will be
responsible for the costs associated with transferring the water
rights back to use by STONE CABIN after the termination of this
lease.

 

2.4     STONE
CABIN will coordinate with STAR GOLD and allow it to fully review
and approve, using reasonable judgement, any and all documentation
required to be submitted to the State Engineer for all aspects of
water rights management for permits to change the point(s) of
diversion, place of use, and manner of use of the Water
Rights.

 

	
3.

	
 Term

 

3.1     The
primary term of this lease is for ten (10) years commencing on the
date from which the first ore is placed on the leach
pad.

 

3.2     STAR
GOLD is hereby granted the option of extending the lease for one
additional ten-year term. The option to extend the lease shall be
exercised by written notice to STONE CABIN given by STAR GOLD not
more than 24 months and not less than 12 months prior to the end of
the current term.

 

3.3     Should
STAR GOLD fail to notify STONE CABIN of STAR GOLD’S intent to
exercise the option of extending the lease for an additional ten
year term pursuant to the terms or conditions outlined in Section
3.2, this lease shall expire at the end of the first term. All
rights to the appropriation of the water which are the subject
matter of this lease then will revert to STONE CABIN.

 

3.4     STAR
GOLD may cancel this lease if the State Engineer denies permits to
change the point(s) of diversion, place of use, and manner of use
of the Water Rights, or if mine operating permits are not obtained
within three (3) years from the Effective Date of this lease
agreement.

 

3.5     STAR
GOLD shall pay costs incurred in applying for and obtaining
approval of any permits it needs to utilize the water leased under
this Agreement, including without loss of generality any permits
from the State Engineer for transferring the Water Rights to STAR
GOLD’S project location. These separate costs incurred are to
be paid within thirty (30) days of receipt of invoices for such
costs by STAR GOLD and are not included as part of the rents for
lease of Water Rights.

 

3.6     It
is expected that permanent change applications are to be filed with
the State Engineer’s Office to change the point(s) of
diversion, place of use, and manner of use of Water Rights as
necessary to allow STAR GOLD to fully utilize the Water Rights for
any lawful purpose during the term of this Agreement. STAR GOLD can
at its costs and discretion decide to have STONE CABIN file
temporary change applications for Water Rights. Such a request must
be submitted in writing.

 

2

 

 

3.7     If
applications to change the point(s) of diversion, place of use, and
manner of use of Water Rights are protested, STAR GOLD is solely
responsible for addressing and/or litigating said protests.
 STAR GOLD may litigate the protests but is not obligated to
do so.

 

3.8     Water
Rights and any change applications of Water Rights will remain in
STONE CABIN’s name for the duration of this
lease.

 

3.9     A
copy of this Agreement will be filed at the State Engineer’s
Office for its records.

 

	
4.

	
 Rental

 

4.1     STAR
GOLD shall pay STONE CABIN for Water Rights at the rate of $190.00
per acre-foot per annum, as adjusted. This amounts to an obligation
of $108,490.00 per
year ($27,122.50 per quarter), as adjusted, as rental for the Water
Rights. One-quarter of the annual rent shall be paid on the first
day of each quarter (January 1st, April 1st, July 1st, and October
1st), without grace, to Stone Cabin Company, LLC, P.O. Box 109,
Boardman, OR 97818. Changes to Payment Address shall be provided to
STAR GOLD in writing by STONE CABIN, no less than thirty (30) days
prior to the next scheduled payment. The first quarterly lease
payment will commence from and be paid within 10 days of the
date of the first ore being placed on the leach pad. This first
payment will be prorated according to the number of days left in
the quarter, but not more than $27,122.50. All future payments will
be made on the quarterly schedule in the amounts listed above. The
last payment of the ten year term will be $27,122.50 minus (-) the
prorated first payment amount.

 

4.2     STAR
GOLD shall pay $20,000.00 to STONE CABIN on the
Effective Date for a three (3) year option to commence lease. This
option money is not refundable. If mine operating permits are not
obtained in three (3) years from the Effective Date of this Option
and Lease, Star Gold at its sole discretion, may continue the
option and lease annually with another $20,000 payment each year
for up to three (3) additional years.  These additional
$20,000.00 payments are not refundable.

 

4.3     If
the lease is renewed at the end of the initial ten (10) year
period, the Consumer Price Index (CPI) for the previous 10 years
will be analyzed and used to calculate a new lease cost for the
next 10 years.

 

4.4     If
the Water Rights are reduced due to any regulatory reason, the
adjusted or unadjusted annual rent shall be reduced proportional to
the reduction of the Water Rights effective on the date of the
reduction.

 

4.5     STAR
GOLD shall have the right to terminate this Agreement by written
notice to STONE CABIN, if at any time during the term of this
Agreement, STAR GOLD is prevented from using the Water Rights
obtained hereunder because of judicial orders, court decrees or
local, state or federal laws, rules or regulations now or
hereinafter in effect.

 

	
5.

	
 Beneficial Use

 

5.1     STAR
GOLD shall make every effort to fully beneficially use all of the
leased Water Rights to keep them in good standing.  Until full
beneficial use is made, STAR GOLD shall provide required
information to STONE CABIN which shall file necessary applications
for extension of time.

 

3

 

 

5.2     STAR
GOLD must provide monthly pumping volume data and well level data
of all leased Water Rights (or change applications of leased Water
Rights) to STONE CABIN on a regular basis, or as requested by STONE
CABIN. STONE CABIN, or an agent of its choosing, will then analyze
this data prior to any submission of data to the State
Engineer’s Office.

 

5.3     If
STAR GOLD fails to place all 571.00 acre-feet annum of Water Rights
to beneficial use, and it has determined that it will never place
all 571.00 acre-feet annum of Water Rights to beneficial use, and
are ready to file a Proof of Beneficial Use form with the State
Engineer, then STONE CABIN has the right to file change
applications for the unused portions of the said 571.00 acre-feet
annum of Water Rights and use said unused portions as it desires.
Additionally, proof of beneficial use will not be filed until said
change applications of unused portions are approved by the State
Engineer. If STAR GOLD fails to place all 571.00 acre-feet annum of
Water Rights to beneficial use, this failure does not change the
rental charges listed in Section 4.1 of this Agreement for the
Water Rights which are put to beneficial use.

 

	
6.

	
 Liability and
Indemnity

 

6.1     STAR
GOLD hereby indemnifies STONE CABIN, its officers, employees,
servants, agents, subsidiaries or affiliates and agrees to hold
them harmless against all claims, demands, damages, personal
injury, illness, death, property damage or loss incurred by any
person, animal, fish, plant or geological or meteorological feature
as a result of or in connection with STAR GOLD’S use of the
Water Rights.

 

6.2     STAR
GOLD shall comply with all laws and regulations, whether of
federal, state or local jurisdictions, applicable to the subject
matter of this Agreement. STAR GOLD shall have sole responsibility
to dispose of water it produces hereunder. STAR GOLD is solely
responsible for all environmental and any other regulatory
requirements regarding the use of Water Rights under this
lease.

 

6.3     STONE
CABIN hereby indemnifies STAR GOLD, its officers, employees,
servants, agents, subsidiaries or affiliates and agrees to hold
them harmless against all claims, damages and losses of any kind as
a result of loss of use of the Water Rights, or any of them by
virtue of STONE CABIN’s failure to make timely filings with
the State Engineer as required herein.

 

	
7.

	
 Default

 

In the event STAR
GOLD defaults in the payment of money required hereunder and does
not cure said default within 20 days after written notice, in
addition to any other remedies provided by law, STONE CABIN may
retake possession of the water, and apply the water to other uses
at its discretion. Such retaking possession of the water and
application of the water to other uses shall not terminate this
lease, and the rental reserved hereunder shall continue to fall due
from month to month until the end of the lease, and the rental
hereunder shall only be reduced by the amount that remains after
cash revenues obtained by STONE CABIN from the use or leasing of
the Water Rights have been applied to attorney fees, costs of
repossession, costs of proceeding before the State Engineer to
reestablish beneficial uses of the water, costs incurred under this
Agreement, and costs of equipment, labor and engineering needed to
apply the water to beneficial use.

 

4

 

 

	
8.

	
 Miscellaneous
Provisions

 

	
 

	
8.1

	
 Notices.

 

All notices and
other communications required or permitted hereunder shall be in
writing and shall be deemed to have been properly given when
delivered in person to the person to whom the notice is directed or
three days after deposit in the United States mail, certified mail,
return receipt requested (addressee only), first-class postage
prepaid, postmarked no later than three days prior to the effective
day of the notice, or by telegram, cable, or acknowledged telefax,
charges prepaid, to the party addressed (or to such other address
or attention as the party to be given such notice may designate by
notice to the other party in the manner herein prescribed) as
follows:

 

If to STONE
CABIN:

Stone Cabin Company, LLC

P.O. Box 109

Boardman, OR 97818

 

If to STAR
GOLD:

Lindsay Gorrill, Chairman

Star Gold Corporation

611 East Sherman Avenue

Coeur d’Alene, ID 83814

 

	
 

	
8.2

	
 Sharing of
Documents.

 

STONE CABIN shall
furnish STAR GOLD, and STAR GOLD shall furnish STONE CABIN with
copies of all papers it submits to the State Engineer or any other
tribunal with respect to the Water Rights at the same time it
serves the papers upon parties to a proceeding or files them,
whichever is earlier.

 

	
 

	
8.3

	
 Inspection of
Facilities.

 

STONE CABIN or an
agent of its choosing may upon reasonable notice inspect the
facilities of STAR GOLD for use in management of Water
Rights.

 

	
 

	
8.4

	
 Applicable Law.

 

This Agreement
shall be construed under the laws of the state of Nevada. Except as
otherwise provided herein, all remedies at law, in equity, by
statute, or otherwise shall be cumulative and may be enforced
concurrently therewith or from time to time and the election of
anyone or more shall not constitute a waiver of the right to pursue
other available remedies.

 

5

 

 

	
 

	
8.5

	
 Waiver.

 

Forbearance in
enforcing any remedy granted by this Agreement shall not be deemed
a waiver thereof nor shall it be the basis of an inference that a
party hereto has waived any provision hereof or that a party has
waived a remedy available at law or in equity. No consent by any
party to any departure from here shall be effective unless in
writing, and then only to the extent stated in such writing. No
notice in any particular circumstance shall entitle a party to
notice in the same or similar circumstance unless notice is
required hereunder.

 

	
 

	
8.6

	
 Taxes.

 

STAR GOLD shall pay
all taxes imposed upon the Water Rights during the term
hereof.

 

	
 

	
8.7

	
 Entire Agreement.

 

This Agreement
merges all previous negotiations between the parties hereto,
supersedes all prior discussions and correspondence between the
parties, and constitutes the entire Agreement and understanding
between the parties with respect to the subject matter of this
Agreement. No alteration, modification, or change of this Agreement
shall be valid except by a written instrument executed by the
parties.

 

	
 

	
8.8

	
 Captions.

 

The captions of
this Agreement are for convenience only and shall not control or
affect the meaning or construction of any of the provisions of this
Agreement.

 

	
 

	
8.9

	
 Expenses of
Enforcement.

 

If any party starts
an action to enforce any provision of this Agreement or for damages
by reason of an alleged breach hereof, the court shall award the
prevailing party judgment for all costs and expenses, including
reasonable attorney’s fees and costs, incurred in connection
with such action, to be paid by the other party
hereto.

 

	
 

	
8.10

	
 Pronouns.

 

In this Agreement,
the singular shall include the plural, the plural the singular, and
the use of any gender shall include all genders.

 

6

 

 

EXHIBIT A

 

Water Rights of
STONE CABIN to be leased by STAR GOLD

 

Stone Cabin
Company, LLC is the current owner of the following Underground
water rights located in the State of Nevada in Nevada Hydrographic
Area No. 149 - Stone Cabin Valley, and plans on leasing them to
Star Gold Corporation per the terms of this Agreement:

 

Nevada Water Right
Permits:

 

Permit 82612 -
144.44 AFA

Permit 82613 -
131.96 AFA

Permit 82614 -
152.20 AFA

Permit 82615-
142.40 AFA

 

TOTAL = 571.00
AFA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

A-1

 

 

IN WITNESS WHEREOF,
the parties hereto have executed this Agreement to be effective
once both parties have signed and delivered signed copies to one
another.

 

	
 

	
Star Gold
Corporation of Coeur d’Alene, ID

	
 

	
 

	
 

	
By  

	

	
 

	
Name  Lindsay
Gorrill

	
 

	
Title    Chairman

	
 

	
Date    Dec
30/2016

	
 

	
 

	
 

	
 

	
Stone Cabin
Company, LLC of Boardman, OR

	
 

	
 

	
 

	
 

	
By  

	

	
 

	
Name  Vernon
Frederickson

	
 

	
Title     Member

	
 

	
Date     1/19/17

 

	
STATE OF
IDAHO

	
)

	
 

	
:
 ss.

	
COUNTY OF
KOOTENAI

	
)

 

On this 30 day of
December, 2016, personally appeared before me Lindsay Gorrill,
personally known to me to be the authorized representative of Gold
Star Corporation of Coeur d’Alene, ID, who acknowledged to me
that she signed the foregoing instrument as Authorized Agent for
said Corporation, that the seal impressed on the within instrument
is the seal of said corporation, and the said Chairman acknowledged
to me that said Corporation executed the same.

 

	

	
 

	

	

	

	
NOTARY PUBLIC

Residing at: Coeur d’Alene

	
 

	
 

	
 

	
My Commission
Expires:

	
 

	
 

	
1/29/2022

 

 

 

 

	
 

	
 

 

7

 

 

	
STATE OF
OREGON

	
)

	
 

	
:
 ss.

	
COUNTY OF
MORROW

	
)

 

On this 19 day of
January, 2016, personally appeared before me Vernon Frederickson,
personally known to me to be the authorized representative of Stone
Cabin Company, LLC of Boardman, OR, who acknowledged to me that he
signed the foregoing instrument as Authorized Agent for said LLC,
that the seal impressed on the within instrument is the seal of
said LLC, and the said Member acknowledged to me that said LLC
executed the same.

 

	

	
 

	

	

	

	
NOTARY PUBLIC

Residing at: PO Box 1275 Umafilla, OR 97882

	
 

	
 

	
 

	
My Commission
Expires:

	
 

	
 

	
October 24,
2020

 

 

 

 

 

 

 

 

 

	
 

	
 

 

8

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