U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1 TO FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Utah Clay Technology, Inc.
(Name of small business issuer in its charter)
Utah 1400 87-0520575
- -------------- ---------------------------- --------------
(state of (Primary Standard Industrial (IRS Employer
incorporation) Classification Code Number) I.D. Number)
3985 South 2000 East
Salt Lake City, UT 84124
801-424-0223
-------------------------------------------------------
(Address and telephone number of registrant's principal
executive offices and principal place of business)
Dennis S. Engh
3985 South 2000 East
Salt Lake City, UT 84124
801-424-0223
---------------------------------------------------------
(Name, address and telephone number of agent for service)
Copies to:
Thomas J. Kenan, Esq., Fuller, Tubb, Pomeroy & Stokes
201 Robert S. Kerr Avenue, Suite 1000
Oklahoma City, OK 73102
Approximate date of proposed sale to the public: As soon as practicable
after the Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(c) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<PAGE>
Calculation of Registration Fee
Title of Proposed Proposed
each class maximum maximum
of securities Amount offering aggregate Amount of
to be to be price offering registration
registered registered per unit price fee
- --------------------------------------------------------------------------------
Common Stock 590,000 (1) (1) $103(1)
================================================================================
(1) These 590,000 shares are to be offered by three selling shareholders
from time to time at fluctuating market prices. The registration fee for
these shares is based on the average of a bid price of $0.5 and an ask
price of $0.656 on March 30, 2000 on the OTC Bulletin Board. Reg.
230.457(c).
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission acting pursuant to said section 8(a)
may determine.
2
<PAGE>
PROSPECTUS
UTAH CLAY TECHNOLOGY, INC.
590,000 Shares of Common Stock
590,000 shares of Common Stock are being offered by three selling
security holders, Dennis S. Engh, James Groscost and the law firm of McKay,
Burton and Thurman, all of Salt Lake City, Utah. None of the proceeds of sale
will go to the company. All proceeds will go to the selling security holders and
for the payment of their brokerage commissions. Mr. Engh is the chief executive
officer and a director of the company.
The selling security holders will offer the 590,000 shares from time to
time in the over-the-counter market through brokers at fluctuating market
prices. They may also offer the shares in negotiated transactions, through the
writing of options on the securities, a combination of such methods of sale, or
otherwise. Sales may be made at fixed prices which may be changed, at market
prices prevailing at the time of sale, or at negotiated prices.
-------------------------
Our Common Stock trades on the OTC Bulletin Board.
Its trading symbol is "UTCL".
-------------------------
The purchase of these shares involves Neither the Securities and Exchange
a high degree of risk. See "Risk Commission nor any state securities
Factors" beginning on page 1. commission has approved or disapproved
these securities or determined if this
offering memorandum is truthful or
complete. Any representation to the
contrary is a criminal offense.
Utah Clay Technology, Inc.
3985 South 2000 East
Salt Lake City, UT 84124
Telephone 801-424-0223
April _, 2000
<PAGE>
TABLE OF CONTENTS
Page
Summary ................................................................. 1
The Company ..................................................... 1
Risk Factors ............................................................ 1
Utah Clay's mines are not in commercial
production ............................................... 1
Utah Clay requires, but does not have,
approximately $15 million to achieve
its business plan ........................................ 2
Our estimates of profits to be derived from
future mining operations are not based
on actual experience ..................................... 2
The loss of one or more of our executive and
operating officers could have a
materially adverse effect on our company ................. 2
The market for our common stock is poorly
developed. Purchasers of the securities
offered herein should anticipate a
thin but volatile market ................................. 2
Use of Proceeds ......................................................... 2
Determination of Offering Prices ........................................ 3
The Selling Security Holders ............................................ 3
Plan of Distribution .................................................... 4
Legal Proceedings ....................................................... 5
Directors, Executive Officers, Promoters and
Control Persons ................................................. 5
Significant Consultants and Other Personnel ..................... 7
Securities Ownership of Certain Beneficial
Owners and Management ........................................... 8
Description of Securities ............................................... 8
Common Stock .................................................... 9
Voting Rights ............................................ 9
Dividend Rights .......................................... 9
Liquidation Rights ....................................... 9
Preemptive Rights ........................................ 9
Registrar and Transfer Agent ............................. 9
Dissenters' Rights ....................................... 9
Preferred Stock ................................................. 9
Series A Preferred Stock ........................................ 10
<PAGE>
Interest of Named Experts and Counsel ................................... 10
Indemnification ......................................................... 10
Description of Business ................................................. 11
Business Development ............................................ 11
Utah Clay's Business ............................................ 12
Utah Caly's Properties .......................................... 12
Kaolin .......................................................... 12
The Mineral Deposits ............................................ 13
Processing the Kaolin .................................... 13
Principal Products .............................................. 14
The Paint Market ......................................... 15
The Ceramics Market ...................................... 16
The Cement Market ........................................ 16
Distribution Methods ............................................ 16
Competitive Conditions in the Industry .......................... 17
Our Competitive Position Within the Industry .................... 17
Source and Availability of Raw Materials ........................ 18
Dependence of One or a Few Major Customers ...................... 18
Patents ......................................................... 18
Government Approval of Principal Products ....................... 18
Government Regulations .......................................... 19
Research and Development ........................................ 19
Costs and Effects of Complying with
Environmental Laws ....................................... 19
Employees ....................................................... 19
Reports to Security Holders ..................................... 20
Plan of Operations ...................................................... 20
Working Capital Requirements .................................... 20
Product Research and Development During
the Next Twelve Months ................................... 21
Additional Employees ............................................ 21
Description of Property ................................................. 21
Location and Means of Access to the
Properties ............................................... 21
Description of Our Title ........................................ 22
History of Operations ........................................... 24
Present Condition of the Properties ............................. 25
Plant and Equipment ............................................. 26
Rock Formations and Mineralizations ............................. 26
Certain Relationships and Related Transactions .......................... 26
Market for Common Equity and Related
Stockholder Matters ............................................. 28
Holders ......................................................... 28
Dividends ....................................................... 28
Penny Stock Regulations ................................................. 29
<PAGE>
The Penny Stock Suitability Rule ................................ 29
The Penny Stock Disclosure Rule ................................. 30
Effects of the Rule ............................................. 30
Potential De-Listing of Common Stock ............................ 30
Executive Compensation .................................................. 31
Stock Options ................................................... 31
Directors ....................................................... 31
Employment Contracts ............................................ 31
Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure ............................. 32
Legal Matters ........................................................... 32
Additional Information .................................................. 32
Financial Statements .................................................... 32
<PAGE>
SUMMARY
The Company. Our company, Utah Clay Technology, Inc., is an
------------
exploration-stage mining corporation organized to mine, process and market
pigments from ore bodies under our White Mountain and Oro Blanco Mountain leases
and three other properties under option to lease to us. All properties are in
the State of Utah.
Laboratory tests conducted by independent laboratories have determined
that our properties, to the extent drilled and analyzed to date, contain highly
commercial mineral composition of hydrothermal kaolin, a white aluminum
silicate, with smaller inclusions of alunite, a white potassium aluminum
sulphate and white amorphous opaline silica. The commercial deposits occur in
beds ranging in thickness from 15 feet to more than 125 feet with typical widths
of 400 feet and up to 1,500 feet in length.
Independent laboratory studies and 200 tons of our processed kaolin have
demonstrated the equivalence or superiority of the kaolin deposits on our
properties to those currently in commercial production in Georgia and elsewhere
in the U.S. Once development and production are commenced, our primary product
line will consist of the following materials:
o Hydrous (uncalcined) and calcined white pigments
for paints and plastics;
o Main ingredient in high-end ceramics; and
o Reinforcing components in high strength cements
being federally mandated for roads, bridges and
building substructures.
RISK FACTORS
------------
The following principal factors make the offering described herein
speculative and one of high risk. An investment in the shares offered herein
should not be made by persons who cannot afford the loss of their entire
investment.
Utah Clay's mines are not in commercial production.
The efforts of our founders and then of our company after its
incorporation in 1994 have been to locate the principal kaolin deposits in Utah,
place them under lease, conduct exploratory mining for property appraisal
purposes, and test the extracted minerals both in the laboratory and with
commercial buyers. We have no revenues.
1
<PAGE>
Utah Clay requires, but does not have, approximately $15 million to
achieve its business plan.
We will be able to commence commercial operations with
approximately $3 million in additional equity or debt capital. These operations
would utilize nearby processing plants not owned by us. An additional $12
million will be required to build our own processing plant, which would realize
for us the greatest profit from operations.
We have not identified the sources for these capital needs.
Our estimates of profits to be derived from future mining operations are
not based on actual experience.
Until actual mining operations commence, there can never be
assurance in the mining business that conditions encountered beneath the surface
will be as expected. Costs in excess of estimated costs could be encountered,
and our estimates of profits could be adversely affected by unknown conditions.
The loss of one or more of our executive and operating officers could
have a materially adverse effect on our company.
We depend greatly on the day-to-day services of Dennis S. Engh,
our chief executive officer; Thomas F. Harrison, a vice president; and Carmen J.
(Tony) Lotito, director of marketing. They currently serve without receiving a
monthly salary check. It could be difficult to replace any of them unless the
company obtains the liquid resources to pay salaries.
The market for our common stock is poorly developed. Purchasers of the
securities offered herein should anticipate a thin but volatile market.
There are many days when our common stock does not trade at all
in the over-the-counter market. The spread between the quoted bid and ask prices
is usually great. The stock has never traded above $5, the price required to
remove certain trading requirements imposed on Bulletin Board "penny stocks."
Until these trading requirements are removed, many brokerage firms will not
allow their brokers to recommend our stock for purchase by their customers.
USE OF PROCEEDS
All proceeds from the sale of the 590,000 shares of common stock offered
herein will go to the selling security holders for their own personal use after
the payment of any brokerage commissions.
2
<PAGE>
DETERMINATION OF OFFERING PRICES
Each of the selling security holders proposes to sell the shares offered
herein primarily through broker-dealers at prevailing market prices. They may
also offer the securities in private transactions at negotiated prices.
THE SELLING SECURITY HOLDERS
There are three selling security holders of the 590,000 shares of
common stock of Utah Clay offered hereby - Dennis S. Engh, 500,000 shares; James
Groscost, 10,000 shares and the law firm of McKay, Burton and Thurman, 80,000
shares
Dennis S. Engh has been a director and the chief executive
officer of Utah Clay Technology since its organization in 1994. All of the
company's mining leases and options to acquire mining leases were acquired from
entities under the direct control and partial ownership of Mr. Engh and other
members of his family.
James Groscost is the owner of a trucking company in the Salt
Lake City, Utah area. He is not affiliated with Utah Clay.
McKay, Burton and Thurman is a Salt Lake City, Utah law firm that
has represented Utah Clay in many matters over the past several years. It is not
affiliated with Utah Clay.
The selling security holders' ownership of the company's common
stock, both before and after the offering, is as follows:
<TABLE>
<CAPTION>
Percent
Selling Security Holder Amount of Total
----------------------- ------- --------
Dennis S. Engh:
--------------
<S> <C> <C>
Owned now 4,641,197 19.89
Owned after sale of
500,000 shares offered
herein 4,141,197 17.75
James Groscost:
--------------
Owned now 10,000 0.04
Owned after sale of
10,000 shares offered
herein 0 0
McKay, Burton & Thurman:
-----------------------
Owned now 80,000 0.34
</TABLE>
3
<PAGE>
Owned after sale of
80,000 shares offered
herein 0 0
PLAN OF DISTRIBUTION
Each of the selling security holders may effect sales from time to time
in transactions in the over-the-counter market at market prices prevailing at
the time of sale or in negotiated transactions at negotiated prices. Sales could
be made at fixed prices which each could change.
Each of the selling security holders may effect such transactions by
selling the securities directly to a purchaser, through broker-dealers acting as
agents or to broker-dealers who may purchase the securities as principals and
thereafter sell the securities from time to time in the over-the-counter market,
in negotiated transactions or otherwise. Such broker-dealers, if any, may
receive compensation in the form of discounts, concessions or commissions from
the selling security holders or the purchaser for whom such broker-dealers may
act as agents or to whom they may sell as principals (which compensation as to a
particular broker-dealer may be in excess of customary commissions).
The selling security holders and broker-dealers, if any, acting in
connection with any such sale might be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act, and any commission received by
them and any profit on the resale of the securities might be deemed to be
underwriting discounts and commissions under the Securities Act.
With respect to the plan of distribution for the sale by the
selling security holders as stated above,
o to the extent that the securities are sold at a fixed price or by
option at a price other than the prevailing market price, such
price would need to be set forth in this Prospectus;
o if the securities are sold in block transactions and the
purchaser wishes to resell the securities purchased, such
arrangements would need to be described in this Prospectus; and
o if the compensation paid to broker-dealers is other than usual
and customary discounts, concessions or commissions, disclosure
of the terms of the transaction in this Prospectus would be
required.
The company has been advised that the selling security holders
understand the prospectus delivery requirements for sales made pursuant to this
Prospectus and that, if there are changes
4
<PAGE>
to the stated plan of distribution or if additional information as noted above
is needed, a post-effective amendment with current information would need to be
filed before offers are made and no sales could occur until such amendment is
declared effective.
LEGAL PROCEEDINGS
Neither Utah Clay Technology nor any of its property is a party to or
the subject of a pending legal proceeding.
The company is unaware of any proceeding that a governmental authority
is contemplating that would involve the company or any of its property.
The company is unaware of any material proceeding to which any director,
officer or affiliate of the company, any owner of record or beneficially of more
than five percent of any class of voting securities of the company, or security
holder is a party adverse to the company or has a material interest adverse to
the company.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
A list of the current officers, directors and significant consultants
appears below. The directors of the company are elected annually by the
shareholders. The officers serve at the pleasure of the Board of Directors. The
directors do not receive fees or other remuneration for their services.
<TABLE>
<CAPTION>
Position
Held
Person Office Since
-------------------------- ---------------------------------- ---------
<S> <C> <C>
Dennis S. Engh, 60 President and Director 1994
Thomas F. Harrison, 48 Vice President and Director 1994
Daniel H. Engh, 49(1) Vice President and Director 1994
Darin D. Engh, 29(2) Secretary, Treasurer and Director 1994
Carmen J. (Tony) Lotito, 55 Director of Marketing and Director 1994
Robert F. Conley, Ph.D., 65 Consultant 1994
-------------------------
</TABLE>
(1) Daniel H. Engh is the brother of Dennis S. Engh.
(2) Darin D. Engh is the son of Dennis S. Engh and the nephew of
Daniel H. Engh.
Dennis S. Engh. Mr. Engh studied botanical science and business at the
--------------
University of Utah. After college he became the manager for Engh Floral
Corporation, a family-owned business,
5
<PAGE>
advancing to president over a ten-year period. In 1981 he became president of
Dienco Oil Development, Inc., an oil well development company later purchased by
a company in Texas. In 1986 he became president of The Clothes Link, a
seven-store women's clothing store system in Utah. From 1985 to 1990 he also
supervised all land acquisition for industrial minerals for Pioneer Minerals,
Inc., a Utah corporation. He then became president of that company. During that
same period he also organized and operated a landscape and grounds maintenance
business which performed contract work in Utah, Idaho and Nevada. He organized
Utah Clay Technology in 1994 and has served as its president since its
organization.
Thomas F. Harrison. Mr. Harrison received a bachelor of science degree
------------------
in biology in 1972 and a master's of business administration degree from the
University of Utah in 1988. He was a microfilming supervisor for Mineral
Records, Inc. from 1976 to 1979. He served as the executive vice president and
the director of program development for CompHealth, Inc. from 1980 to 1992. In
this capacity he supervised the operations of 200 persons in three offices.
There were approximately 300 physicians working for the company at any one time.
Since 1995 Mr. Harrison has been president of Buffalo Energy Corp., which
develops energy projects for Indian Nations.
Daniel H. Engh. Mr. Engh received a bachelor of science degree in
---------------
accounting from the University of Utah in 1973. Upon graduation he joined the
Engh Floral Corporation where he managed the accounts, payroll, receivables and
handled tax matters. He trained personnel in numerous phases of accounting and
supervised a staff of 130 persons in this $3 million-a-year business. In 1984 he
became controller and buyer for Della's Flower & Gifts, Inc. He than joined the
staff of The Clothes Link where he was responsible for lease negotiations,
personnel and overseeing various store operations. In 1988 he became the
secretary and treasurer for Pioneer Minerals, Inc. and was in charge of all
accounting costs, controls, lease procurement and title operations. Since the
formation of that organization Mr. Engh has been active in the field work,
exploration and assessment of industrial minerals in the State of Utah. Mr. Engh
has served since 1985 as a tax audit manager for the Utah Tax Commission.
Darin D. Engh. Darin D. Engh is President of Engh Flowers, Inc., a
-------------
retail and wholesale garden center and nursery stock outlet which was organized
in 1990, expanded to four locations along the Wasach Front of Utah, has 40
employees, and has gross annual sales today of approximately $1 million. Mr.
Engh has received a bachelor of science in political geography at the University
of Utah.
Carmen J. (Tony) Lotito. Mr. Lotito received a bachelor of science
-----------------------
degree in accounting in 1967 from the University of Southern California. He
joined the accounting firm of Pannell,
6
<PAGE>
Kerr, Forester & Co. as the senior accountant in charge of management and audit
services for that company's San Diego, California office. In 1974 he formed his
own management and financial services organization. In this respect, he provides
direct management assistance and consulting financial services to oil and gas
industry clients, retail operations, and food manufacturing and distribution
companies. In 1988 he joined ConAgra, Inc. in San Antonio, Texas where he
oversaw research and development, sales and marketing of specialty products
under development. In 1994 he joined Utah Clay Technology and has served and
still serves as its director of marketing.
Significant Consultants and Other Personnel.
- -------------------------------------------
Robert F. Conley, Ph.D.. Dr. Conley acts as a consultant to the company.
-----------------------
He received a bachelor of science degree in chemistry, a masters of science
degree in electro-chemistry and a doctor of philosophy degree in inorganic
chemistry and mineralogy, all from Indiana University. He was employed for four
years at the Indiana Geological Survey in evaluating industrial minerals and
development technologies. Then, he joined the Georgia Kaolin Company and was in
charge of research into high technology processes, electrochemical studies, and
research into a variety of new products. At the request of the Engineering
Conference, he developed a series of lectures on the mechanics and chemistry of
delamination grinding. He continues to give annual seminars in the U.S. and in
Europe on this topic. In 1974 Dr. Conley formed Mineral and Resource Technology
with three other scientists to perform contract research on minerals and to
develop new products, especially pigments. He is the author of approximately 30
patents on mineral and specialty material systems, their process of generation
and separation. He is the coauthor of two books on industrial fine grinding and
chemical treatment of mineral systems for Polymer Corporation. In 1977 Dr.
Conley developed the electric process for producing ultra high purity solder now
used by most electronic circuit board manufacturers in the U.S. From 1978
through 1981 Dr. Conley worked under contract by the Federal Power Commission in
Mexico to design a system and to work with the mineral reserves in Mexico to
produce alumina and aluminum metal from low-grade mexican ores. Dr. Conley is
active in the general area of high technology and has been an annual guest
lecturer for 15 years for the chemistry department at Kent State University on
mineral pigment development, dispersion techniques and other aspects of pigment
processing for the paint, plastics and polymer industries.
No executive officer, director, person nominated to become a director,
promoter or control person of the company has been involved in legal proceedings
during the last five years such as bankruptcy, criminal proceedings (excluding
traffic violations and other minor offenses), or proceedings permanently or
temporarily enjoining, barring, suspending or otherwise limiting his involvement
in any type of business, securities or banking
7
<PAGE>
activities, or been found by a court of competent jurisdiction in a civil
action, or the Securities and Exchange Commission or the Commodity Futures
Trading Commission to have violated a federal or state securities or commodities
law.
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The table below sets forth the beneficial ownership of securities of the
company by the officers and directors, individually, and as a group, and each
person who is known to the company to be the beneficial owner of more than five
percent of any class of the company's voting securities:
<TABLE>
<CAPTION>
Shares of
Shares of Series A
Common Stock Percent Preferred Stock Percent
<S> <C> <C> <C> <C>
Dennis S. Engh 4,641,197 19.8 27,180 32.0
Thomas F. Harrison 4,555,592 19.5 51,037 60.2
Daniel H. Engh 4,786,307 20.4 - -
Carmen J. (Tony) Lotito 2,447,492 10.4 6,600 7.8
Darin D. Engh 100,000 0.4 - -
Robert and Jeannette Nelson(1) 1,312,500 5.6 - -
Officers and Directors as a
group (5 persons) 16,530,588 70.6 84,817 100.0
- ------------------------
</TABLE>
(1) Jeannette Nelson is the sister of Dennis S. Engh and
Daniel H. Engh and the aunt of Darin D. Engh.
There are no arrangements which may result in a change in control of the
company.
DESCRIPTION OF SECURITIES
-------------------------
The company is authorized to issue 30 million shares of Common Stock,
$0.001 par value and 10 million shares of Preferred Stock, $0.001 par value. The
presently outstanding 23,421,874 shares of Common Stock and 84,817 shares of
Preferred Stock are fully paid and nonassessable.
8
<PAGE>
Common Stock
- ------------
Voting Rights. Holders of shares of Common Stock are entitled to one
--------------
vote per share on all matters submitted to a vote of the shareholders. Shares of
Common Stock do not have cumulative voting rights, which means that the holders
of a majority of the shareholder votes eligible to vote and voting for the
election of the Board of Directors can elect all members of the Board of
Directors.
Dividend Rights. Holders of record of shares of Common Stock are
----------------
entitled to receive dividends when and if declared by the Board of Directors out
of funds of the company legally available therefor.
Liquidation Rights. Upon any liquidation, dissolution or winding up of
------------------
the company, holders of shares of Common Stock are entitled to receive pro rata
all of the assets of the company available for distribution to shareholders
after distributions are made to the holders of the company's Preferred Stock.
Preemptive Rights. Holders of Common Stock do not have any preemptive
-----------------
rights to subscribe for or to purchase any stock, obligations or other
securities of the company.
Registrar and Transfer Agent. The company's registrar and transfer agent
----------------------------
is Interwest Transfer Company, Inc., 1981 East Murray Holladay Road, Suite 100,
Salt Lake City, Utah 84117.
Dissenters' Rights. Under current Utah law, a shareholder is afforded
-------------------
dissenters' rights which, if properly exercised, may require the company to
purchase his shares. Dissenters' rights commonly arise in extraordinary
transactions such as mergers, consolidations, reorganizations, substantial asset
sales, liquidating distributions, and certain amendments to the company's
certificate of incorporation.
Preferred Stock
- ---------------
The company is also authorized to issue 10 million shares of Preferred
Stock, $0.001 par value. Some 84,817 shares of Series A Preferred Stock have
been issued.
The Preferred Stock or any series thereof shall have such designations,
preferences and relative, participating, optional or special rights and
qualifications, limitations or restrictions thereof as shall be expressed in the
resolution or resolutions providing for the issue of such stock adopted by the
board of directors and may be made dependent upon facts ascertainable outside
such resolution or resolutions of the board of directors, provided that the
manner in which such facts shall operate upon such designations, preferences,
rights and qualifications, limitations or restrictions of such class or series
of stock is
9
<PAGE>
clearly and expressly set forth in the resolution or resolutions providing for
the issuance of such stock by the board of directors.
Series A Preferred Stock
- ------------------------
The company has issued 84,817 shares of Series A Preferred Stock at
$5.00 a share for a total of $424,085, which stock (i) is entitled to annual
dividends of $0.50 a share payable only from earnings of the company and
cumulative if payable but missed, (ii) is non-voting, (iii) does not carry
preemption rights and (iv) is preferred over the company's Common Stock in the
event of the liquidation and dissolution of the company. The Series A Preferred
Stock is neither convertible into Common Stock nor redeemable at the option of
the holder but is redeemable at the option of the company.
There are no provisions in the company's charter or bylaws that would
delay, defer or prevent a change in control of the company.
INTEREST OF NAMED EXPERTS AND COUNSEL
Thomas J. Kenan is named in the Registration Statement of which this
Prospectus is a part as having given an opinion on the validity of the
securities offered herein. His spouse, Marilyn C. Kenan, is the trustee and sole
beneficiary of the Marilyn C. Kenan Trust, which is the record owner of 764,194
shares of common stock of the company. Mr. Kenan disavows any beneficial
interest in the shares owned of record by such trust.
INDEMNIFICATION
Under Utah corporation law, a corporation is authorized to indemnify
officers, directors, employees and agents who are parties or threatened to be
made parties to any civil, criminal, administrative or investigative suit or
proceeding by reason of the fact that they are or were a director, officer,
employee or agent of the corporation or are or were acting in the same capacity
for another entity at the request of the corporation. Such indemnification
includes reasonable expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement if they acted in good faith and in a manner
reasonably believed to be in or not opposed to the best interests of the
corporation.
With respect to any criminal action or proceeding, these same
indemnification authorizations apply if these persons had no reasonable cause to
believe their conduct was unlawful.
In the case of any action by the corporation against such persons, the
corporation is authorized to provide similar indemnification, but if any such
persons should be adjudged to be liable for negligence or misconduct in the
performance of duties
10
<PAGE>
to the corporation, the court conducting the proceeding must determine that such
persons are nevertheless fairly and reasonably entitled to indemnification.
To the extent any such persons are successful on the merits in defense
of any such action, suit or proceeding, Utah law provides that they shall be
indemnified against reasonable expenses, including attorney fees. A corporation
is authorized to advance anticipated expenses for such suits or proceedings upon
an undertaking by the person to whom such advance is made to repay such advances
if it is ultimately determined that such person is not entitled to be
indemnified by the corporation.
Indemnification and payment of expenses provided by Utah law are not
deemed exclusive of any other rights by which an officer, director, employee or
agent may seek indemnification or payment of expenses or may be entitled to
under any bylaw, agreement, or vote of stockholders or disinterested directors.
In such regard, a Utah corporation may purchase and maintain liability insurance
on behalf of any person who is or was a director, officer, employee or agent of
the corporation.
As a result of such corporation law, Utah Clay may, at some future time,
be legally obligated to pay judgments (including amounts paid in settlement) and
expenses in regard to civil or criminal suits or proceedings brought against one
or more of its officers, directors, employees or agents, as such.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the company pursuant to the foregoing provisions or otherwise, the company has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable.
DESCRIPTION OF BUSINESS
Business Development
Utah Clay Technology, Inc. was incorporated on March 1, 1994 in the
State of Utah. Since its organization it has been engaged in the process of
locating the principal kaolin deposits in Utah, obtaining the legal right to
mine these deposits, conducting exploratory mining operations, testing the
extracted minerals in the laboratory and selling samples of the processed form
of our kaolin to commercial companies for market evaluation. We have financed
these activities by the sale of capital stock for money, advances by
shareholders and by the exchange of capital stock for services rendered to the
company and for the company's mining properties.
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Utah Clay's Business
Utah Clay Technology has the right to mine, extract and sell an
industrial mineral called kaolin from two properties containing kaolin in
western Utah. It also owns options to acquire leases on three other properties
in central and western Utah.
Utah Clay's Properties
We own two leases and have options to acquire three other leases from
affiliated companies and from the founders of the company. The names of the
properties and the nature of our ownership are set forth below:
Nature of
Property Name Our Ownership
-------------- ---------------
White Mountain Lease
Oro Blanco Lease
Kimberly Option to Lease
Koosharem Option to Lease
Topaz Option to Lease
The above properties are located in western and central Utah, near the
Union Pacific rail lines and interstate trucking routes I-70 and I-15.
The geology that created the Utah deposits is unusual. Kaolin deposits
in Utah were formed by hot acidic solutions being forced up through fault lines
to strongly alter the volcanic tuffs. They solidified into veins. The highest
concentrations of hydrothermal kaolin occur on either side of the center section
of these veins.
The overburden at our lease sites is minimal. The kaolin is just a few
feet below the surface. The veins are wide and have the potential for a
consistent quality throughout.
Mining can be done with an excavator. The clay from the ground is
similar to a hard chalk, so the need to blast is rare. The trucks can be loaded
directly from the excavator.
The brightness of the kaolin directly from the ground is a G.E.
brightness of 80 to 94 on a scale of 0-100. Grinding raises the brightness of
the kaolin on the lower end of the scale. There is also an undertone bluish
color, which makes the clay brighter to the eye. This means that very little has
to be done to the clay in the processing, besides grinding, to meet the
brightness required by the market.
Kaolin
Kaolin is a clay in the form of hydrated aluminum silica. It is commonly
known as "china clay". Kaolin is an industrial
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mineral used primarily as an inert filler. Customers combine it with other raw
materials, called formulations, and have developed over 600 different
applications. The largest single application is for coating paper to hide the
pulp strands and to give it a gloss finish. Another major use is in the paint
industry as an extender to reduce the amount of titanium dioxide needed to
reflect light. Kaolin is also used in refractory clays, plastics, ceramics,
rubber and fiberglass.
The total market for kaolin use worldwide is about 31 million tons per
year. The market has grown at an average of four percent per year.
The United States is the largest single producer of kaolin in the world.
Currently, ninety percent of the U.S. production comes from deposits in Georgia
and South Carolina. It has been mined from this area for over 90 years. Most of
the standards for the world industry are based on the kaolin from this area. The
characteristics of the clay from Utah will be compared to these standards.
The Mineral Deposits
There appear to be two major deposits of kaolin in western Utah. These
deposits are located west of Milford, Utah. The area was drilled extensively in
the 1960s by a consortium of companies that were looking for alunite, which is a
cousin mineral to kaolin. Their interest was to mine the alunite as a low grade
aluminum ore. They discovered what appear to be extensive deposits of both
alunite and kaolin.
Processing the Kaolin. The differences in the Utah deposits and the Georgia
- ----------------------
deposits that set the world standards require us to process the kaolin in a way
different than the way Georgia deposits are processed. Our process does not
address brightness, because of the natural high brightness of the Utah ore.
However, the solidification of the original hydrothermal solutions requires more
grinding to attain the desired particle sizes.
The process is as follows:
o The ore is put into a primary crusher to reduce the size of the
large chunks. A second crusher takes the ore stream to reduce the
size to about two inches in diameter for the grinder feeds.
o The output of the second grinder is put into a dryer to remove
any excess water. The output of the dryer is split into two
streams.
o The feed is sent to a roller mill. This mill reduces the size of
the feed to a (minus) -325 mesh, a portion of which is -5 microns
and -10 microns. This makes up
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some of the uncalcined clay stock and goes to the bagger. Each of
the mills has a classifier associated with it. The classifier
separates out the various particle sizes by an airstream blown
into a cyclone chamber.
o The remainder of the over -10 microns output from the roller
mill goes to a jet mill. This mill reduces the particle size to
the -5 and the -2 micron size for commercial use. It uses high
temperature and high-pressure steam to increase the efficiency of
the process.
o Part of this stream is fed to the calciner, and the rest is
bagged as high-end uncalcined product.
o The calciner output is cooled and sent to the bagger.
The advantage of this process is that it is a completely dry process.
This makes it cheaper to operate than the processes employed in Georgia, and the
initial capital cost is relatively low. The process also eliminates the
environmental impacts of wastewater disposal.
The final output is a range of calcined and uncalcined clays of varying
particle sizes. The process line is flexible enough to vary the amounts of the
product mix to meet market demand.
The company's process was first developed on a laboratory scale and then
was refined at the pilot plant scale with a number of equipment manufacturers.
The complete process has been run on a full production scale basis. A number of
tons of the uncalcined clay have been delivered to satisfied users.
There are processing plants in Utah and surrounding states available to
do the needed grinding and classifying. Eventually, Utah Clay will need its own
plant to make all the products that it needs in the proper proportions.
Principal Products
The nature of the deposits in Utah defines the products that this kaolin
is best suited for. Utah kaolin has different characteristics than Georgia
kaolin. A number of characteristics are tested in kaolin. The most important are
the particle size and the brightness. The smaller the particle size, the more
costly it is and the greater the number of uses it has. The best grades of
kaolin have a median particle size of two microns. One micron is the size of the
particles in cigarette smoke. There are grades of "less than 5 microns", "less
than 10" and so on. Each grade has different applications.
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The brightness characteristic is a measure of the amount of light that
the kaolin reflects back to the measuring instrument. The scale is called the
"G.E. Brightness Scale" and ranges from 1 to 100. Most kaolin applications
require a brightness number over 87. 95 on the brightness scale is a high number
for calcined kaolin clay.
Once the kaolin is mined, it must be processed to meet the standards of
the particular target industry.
There are two broad groups of processed kaolin clays, calcined and
uncalcined. Calcination is the process of heating the small particles of kaolin
to about 1800 degrees Fahrenheit for about 45 minutes. This process "pops" the
structure of the kaolin molecule and increases the surface area. The brightness
goes up. The reflective characteristics are increased. This makes it especially
valuable to the paint industry. Chemists are able to take advantage of its new
structural properties and increase the uses for calcined clay. These added
values command a higher price that more than offsets the increased processing
costs.
The uncalcined clays also have characteristics that make them valuable
as extenders in paints and fillers in other industries. A feature of the
structure of the kaolin clays is that it forms platlets. These platlets act
together to effectively reflect the light in a paint formulation.
Utah kaolin is naturally very bright. Through processing, it becomes a
high quality calcined and uncalcined paint filler. The particle size can be
ground to any size that is required by the end user. These characteristics allow
Utah kaolin to be processed into high quality products for several markets.
The Paint Market. We have chosen to focus on the paint market. The
- ------------------
characteristics of Utah kaolin fit well the needs of paint formulations. Its
high brightness coupled with a blue undertone makes it ideal as an extender in
paint. Titanium dioxide is used in paint as an opacity agent. It is quite
expensive, and manufacturers keep its use to a minimum. The calcined clays are
the best extenders, but the uncalcined clays also have a role. The Utah
uncalcined clays are of sufficient quality that they can, in certain
formulations, compete directly with the Georgia calcined clays.
The amount of kaolin used in paint in the United States is about
1,000,000 tons a year. An additional 1,000,000 tons of calcined clay for other
applications are also sold in the United States each year. Canada and the Far
East are significant users of kaolin clays.
The prices of uncalcined clay vary from $125 to $275 a ton
f.o.b. the plant. The price depends on the brightness and the
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particle size. Calcined clays range in price from $300 to $800 a ton.
The processing cost advantage ranges from $50 a ton for the
high-particle size uncalcined clay to $100 for the finer uncalcined clays and
the calcined clays.
The cost to rail the clay from Georgia to the West Coast is about $90 a
ton. The freight cost from Utah is $30 a ton. This gives our company a $60
freight advantage over Georgia clay with regard to the West Coast. We have about
a $25 a ton freight advantage for rail shipments to Midwest paint companies.
Thus, our first concentration for sales efforts will be to those paint
companies where we have both a processing advantage and a freight cost
advantage.
Our second area of emphasis will be to the large, growing market in the
Pacific Rim. Utah clay should be appealing to these markets because of its high
quality and our ability to sell it at a lower price because of the freight
advantage.
The Ceramics Market. We are planning to conduct studies with a products
- ---------------------
consultant and with Alfred University in New York to test Utah clay for use in
the ceramics market. Initial indications are that it would be quite competitive
with the clay now being used. Most of the market for ceramics in the U.S. is in
New England, and the clay for the high-end segment of this market comes from New
Zealand. Utah clay will compete in terms of quality and will certainly do much
better than the New Zealand competition in terms of freight costs.
The Cement Market. Utah Clay is developing a partially calcined product for use
- -----------------
in the cement market. There are certain high strength cements mandated to be
used in certain amounts in the construction of roads, bridges and other uses.
The partially calcined kaolin from the Utah deposits can be added to this high
strength cement to make it more reactive. This means that the cement will set up
faster and be usable to the contractors sooner. This is a major advantage in the
overall cost of a project.
Distribution Methods
Our marketing of the kaolin products directly to customers will be done
through independent distributors. These distributors contact the customers, make
the sale, take possession of the product, pay the producer, warehouse it and
deliver it to the customer. They then collect the payment from the customer. The
cost for this service is typically a 10% commission. Each of these distributors
handles a line of industrial minerals and chemicals. They are already selling
products to our targeted customers and are positioned to add our kaolin products
to their sales mix.
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Utah Clay has five different distributors. They cover the main markets
in the United States and could introduce our products to the Pacific Rim
markets. They are familiar with our product line and have delivered our products
to some of their clients. Our products were well received. We have experts
available that will support the distributors with technical assistance to help
with individual customers' specific concerns.
Competitive Conditions in the Industry
Historically, 80 to 90 percent of kaolin products consumed in the world
have come from Georgia and South Carolina. A few large companies have provided
the kaolin and have strong, entrenched, competitive positions. The four largest
U.S. producers and their respective portions of a total 80% market share are
approximately as follows:
(1) IMETAL, SA (NYSE) 43%
(2) Englehard (NYSE) 14%
(3) J.M. Huber (Private) 12%
(4) Thiele Kaolin (Private) 11%
These companies are well financed, have plants and their own production and are
established in the market-place. We will have to compete with these companies'
products.
Our Competitive Position Within the Industry
Our ability to break into the kaolin industry and to compete with
entrenched companies depends on a number of factors:
o The high quality of the Utah kaolin.
o Cheaper processing costs.
o Lower capital costs to get into business.
o The strategic location of the Utah deposits relative to
the West Coast markets.
o The large, diverse market for the kaolin products.
The products made from the kaolin from Utah must meet the
characteristics of the clay from Georgia. Over the years, Georgia clay has set
the standards for the industry.
Georgia clay fundamentally differs from Utah clay. Georgia clay is found
in sedimentary deposits from ancient inland seas. The feldspar source rock
eroded as the Appalachian Mountains eroded and was deposited in shallow layers
in sedimentary beds. For every foot of kaolin, there is an average of nine feet
of overburden that must be removed. There is organic material mixed in the clay
that gives it a brown-orange color in the ground. The
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measure of brightness is 50 to 70 directly from the ground. The natural
undertone is tan. To the eye, this detracts from the brightness. However, one
advantage of Georgia clay is that the particle size is small because of the
erosion.
The processing that Georgia clay requires is more involved than is the
case with Utah clay, because it has to increase the brightness of the clay and
eliminate the contaminates (degritting). First, the clay is slurried or
"blunged" at the mine site. It is then piped to the plant. It goes through a
large electro-magnet to eliminate some of the iron compounds that color the ore.
It then has to go through a chemical leaching process to increase the
brightness. The kaolin is separated from the solution on large rotary filters.
The wet kaolin is sent to an apron dryer and then a pulverizer. It is now ready
for the calciner or the bagger. This is a much more involved and costly process
than is the case with Utah clay. The initial capital cost for Georgia clay is
significantly more than that of a comparable plant to process Utah clay.
The lower capital outlay and the significant, ongoing, process cost
savings are a distinct advantage for the Utah kaolin.
And, then, the proximity of our deposits to the West Coast markets gives
us an advantage in freight costs.
Source and Availability of Raw Materials
Our leases will produce the raw material.
Dependence on One or a Few Major Customers
There are many markets that can be targeted by the products of Utah
Clay. In each of these markets there are a number of potential customers. Our
independent distributors will help Utah Clay reach out to these customers
without a large marketing budget. We do not anticipate becoming dependent on one
or a few major customers.
Patents
Utah Clay has no patents. Our primary advantage over competitors is the
fact that we either own or have leased the great majority of the Utah deposits
of kaolin clay.
Government Approval of Principal Products
There is no need to obtain government approval to sell kaolin and kaolin
products. The mining leases of the company, owned or under option to lease, are
leases of lands owned by the U.S. Government or the State of Utah. Annual
rentals of $100 a claim for the federal mining claims must be paid to the Bureau
of Land
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Management. The annual lease payment to the State of Utah totals $3,406 for the
six leases.
Government Regulations
The permitting of exploration work and mining activities on U.S.
Government leases in Utah is subject to federal regulations that are
administered by the Utah State Division of Oil, Gas and Mining. A five-acre
small miner's permit can be obtained to cover a tract of disturbed ground no
larger than five acres. No reclamation bond need be posted for such a permit,
although reclamation of the mining sites is required. Mining permits to cover
larger tracts do require reclamation bonds. Because the kaolin veins on our
White Mountain and Oro Blanco leases are 75 to 100 feet thick, we believe we can
conduct our mining operations with small miner's permits.
The sites of White Mountain and Oro Blanco have been surveyed for
sensitive plant species. The survey was conducted by a certified environmental
firm retained by the company. No sensitive species were found on either site.
Processing facilities for our kaolin require air quality permits that
are issued by the Utah Division of Air Quality, which administers regulations of
the Environmental Protection Agency. We have no processing plant at this time,
but the processing plants we will use do have the necessary air quality permits.
Research and Development
We have spent approximately $50,000 on research and development in the
last two years.
Costs and Effects of Complying with Environmental Laws
There are costs involved in complying with environmental laws in the
mining of kaolin. Mine sites are required to be reclaimed after the ore is
extracted. Reclamation involves recovering the mine site and seeding and growing
a cover unless the area is arid.
Then costs are included in the mining plan.
Any plant that processes kaolin must obtain air quality permits. The
major factor for air quality is the small particle dust created in the grinding
process. Since this dust is a desirable end product, the cost of providing bag
houses and other devices to capture this dust provides its own rewards.
Employees
We have two full time employees and no part time employees.
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Reports to Security Holders
We will file reports with the Securities and Exchange Commission. These
reports are annual 10-KSB, quarterly 10-QSB and periodic 8-K reports. We will
furnish stockholders with annual reports containing financial statements audited
by independent public or certified accountants and such other periodic reports
as we may deem appropriate or as required by law. The public may read and copy
any materials we file with the SEC at the Public Reference Room of the SEC at
450 Fifth Street, N.W., Washington, D.C. 20549. The public may obtain
information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. Utah Clay is an electronic filer, and the SEC maintains an
Internet Web site that contains reports, proxy and information statements and
other information regarding issuers that file electronically with the SEC. The
address of such site is http://www.sec.gov.
PLAN OF OPERATIONS
While we have performed some mining of our ore deposits and have on
occasion contracted the processing of the ore at a nearby processing plant, this
processing plant is not configured to completely process the ore. We are
evaluating several plants with the goal of purchasing one of them and having it
process kaolin for us within the next twelve months. The purchase price of such
a plant should be in the range of $2.5 to $3.0 million.
Any of the plants we are evaluating could begin to process the kaolin
into a partial slate of products with little modification. The addition of a
fine grinding jet mill and a calciner for an additional $2.0 million would allow
us to produce a full slate of products for the paint industry.
In this regard, we are already having discussions with some of our Salt
Lake City friends who are potential investors in our company once we become
subject to the reporting requirements of the Securities Exchange Act of 1934.
This prospectus is part of a registration statement that, when effective at the
Securities and Exchange Commission, subjects us to these reporting requirements.
The cost of a new processing plant to be placed near our mines would be
approximately $12 million. It would take 18 to 24 months to put it into
operation. Should we be able to raise the additional capital to purchase a new
plant, we would do so, but our first priority would be to buy an existing plant.
Working Capital Requirements
We need little working capital to execute our day-to-day plan of
operations for the next twelve months. Most of the past compensation for
services performed for the company by its
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employees and consultants has been in the form of shares of common stock.
We have received commitments for the working capital for day-to-day
operations for the next twelve months. However, this commitment is not
sufficient to execute our full business plan without raising additional funds in
the next twelve months.
Product Research and Development During the Next Twelve Months
Subject to the availability of funds, we propose to perform
approximately $50,000 in research and development during the next twelve months
in an effort to determine the best calcination parameters for processing kaolin
for use in cement. We have been working with an industry partner with regard to
the use of partially calcined kaolin in cement. The addition of partially
calcined Utah kaolin to high strength cement makes the cement more reactive and
it sets faster. This saving of time on construction projects reduces the
contractor's costs. Industry requirements for partially calcined kaolin is large
and growing.
Additional Employees
Should we raise the capital needed to purchase a processing plant, we
would expect to hire ten employees to operate the plant and three employees to
perform administrative and marketing work.
DESCRIPTION OF PROPERTY
We have mining leases to extract minerals from mining claims in the White
Mountain area and the Oro Blanco area in western Utah. We have options to
acquire mining leases to extract minerals from mining claims in the Koosharem
area and the Kimberly area in central Utah and in the Topaz area in western
Utah.
Location and Means of Access to the Properties
White Mountain Claims. The White Mountain claims are located in Beaver
-----------------------
County, Utah approximately 25 miles west of Milford, Utah. Forty-one federal
placer and lode claims are located in Sections 4-10 in Township 29 South, Range
13 West and in Sections 1 and 12 in Township 29 South, Range 14 West.
Access to the area is provided by county gravel roads and unimproved,
Bureau of Land Management ("BLM") roads. Limited upgrade of the BLM roads would
be necessary to bring mining equipment to the White Mountain site.
Oro Blanco Claims. The Oro Blanco claims are located six miles west of the
-----------------
White Mountain claims in Beaver County, Utah. Ninety-one federal placer and lode
claims and six Utah State mineral leases covering these deposits are located in
Sections 13- 15, 21-24, 25-28, 32 and 34-36 in Township 29 South, Range 15 West
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and in Sections 1-3 and 10, 11 and 18 in Township 30 South, Range 15 West.
Access to the property is provided by county roads and unimproved BLM
roads. Limited upgrades of the BLM roads would be necessary to bring mining
equipment to the Oro Blanco site.
Koosharem Claims. The Koosharem claims are located in Piute and Sevier
-----------------
Counties, Utah. Twelve unpatented federal placer and lode claims are located on
lands managed by the National Forest Service in Townships 26 and 27 South,
Ranges 1 and 2 West.
Access to the area is provided by BLM roads. There is another mining
operation currently in operation adjacent to the deposit, and the road is
suitable for mining equipment.
Kimberly Claims. The Kimberly claims are located in Sevier County, Utah.
---------------
Twenty-six unpatented federal placer and lode claims are located on lands
managed by the National Forest Service in Township 26 South, Range 4.5 West.
Access to the site is provided by unimproved Forest Service roads. Limited
upgrade of the roads would be necessary to bring mining equipment to the site.
Topaz Claims. The Topaz claims are located in Juab County, Utah
-------------
approximately 40 miles west of Delta, Utah. Twenty-six federal placer and lode
claims are located on lands managed by the National Forest Service in Township
13 South, Ranges 10, 11 and 12 West and Township 14 South, Range 11 West.
Access to the area is provided by county gravel roads and unimproved BLM
roads. Limited upgrades to the BLM roads would be required to bring mining
equipment to the site.
Description of Our Title
White Mountain Claims. The lode mining claims are reserved from the BLM in
---------------------
the name of Don and Anola Fullmer, who are unaffiliated with our company.
The Fullmers have granted a mining lease to Dennis S. Engh and Daniel H.
Engh. Dennis Engh is president and a director of Utah Clay, and Daniel Engh is
a vice president and director of Utah Clay.
This lease from the Fullmers provides for an annual $5,000 minimum lease
payment and a minimum production requirement of 6,000 tons a year starting in
2005. There is a $2.50 per ton production royalty payment with a Consumer Price
Index annual escalator clause on the royalty. The lease also requires the
payment of all annual fees to the BLM to maintain the claims.
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The lease expires March 15, 2005, unless commercial production of at least
5,000 tons a year is being obtained from any or all of the claims subject to the
lease. The lease extends perpetually thereafter if the production minimums are
met. The Engh Family has incorporated the Fullmer lease with their own placer
claims into one lease assigned to Utah Clay as described below.
The White Mountain placer claims are held by the Engh family, who have
granted a mining lease to Utah Clay. These persons include Dennis and Judith
Engh, husband and wife; Daniel H. and Connie Engh, husband and wife; Darin D.
Engh, and Holly Engh Kingdon (the "Engh Family"). Dennis Engh is president and a
director of Utah Clay, the brother of Daniel Engh and the father of Darin Engh
and Holly Engh Kingdon. Daniel Engh is a vice president and a director of Utah
Clay. Darin Engh is a director of Utah Clay.
The Engh Family lease provides for a $5,000 minimum annual lease payment to
the Enghs or a $2.50 a ton production royalty payment with a Consumer Price
Index escalation clause, whichever is greater, a three percent royalty payment
on the gross value of all ores taken from the property, and the payment of all
fees required to maintain the claims with the BLM. In addition, all the terms of
the Engh lease with the Fullmers for the lode claims must be met by Utah Clay.
The term of the Engh Family lease is March 27, 2004 and thereafter as long
as commercial production is obtained.
Oro Blanco Claims. These 91 federal lode and placer claims and six Utah
------------------
State mineral leases are all held by the Engh family. A 5.5 percent production
royalty on ores taken from the six state leases must be paid to the State of
Utah.
The Engh family has granted a lease on these properties to Utah Clay. Utah
Clay is to pay all fees to the BLM to maintain the claims and a $5,000 minimum
annual lease payment to the Enghs or a $2.50 a ton production royalty payment
with a Consumer Price Index escalation clause, whichever is greater, and a
production royalty of three percent on the gross value of the ores taken from
the property. The term of the lease is March 27, 2004, and as long thereafter as
commercial production is maintained.
Koosharem, Kimberly and Topaz Claims. These claims are all reserved from
------------------------------------
the BLM in the name of Don and Anola Fullmer, who are unaffiliated with our
company. The Fullmers have granted leases on the claims to Daniel and Dennis
Engh, whose affiliation with Utah Clay is described above . Daniel and Dennis
Engh have granted options to Kaolin of the West, LLC, for it to obtain an
assignment of the leases. The members and owners of Kaolin of the West, LLC, are
Dennis S. Engh, Daniel H. Engh, Thomas F. Harrison and Carmen J. (Tony) Lotito.
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The royalty payments for the leases are identical to those of the White
Mountain mining claims, including the royalty payments to the Enghs and the
Fullmers.
Each of the three options expires March 27, 2004. A payment of $10,000
for each option - $5,000 to the Fullmers and $5,000 to the Enghs - must be paid
by June 10 of each year to extend the options past that date as well as the
payment of all federal and state rentals, taxes and other payments associated
with the mining claims. To exercise each option, Utah Clay must pay to the
owners of Kaolin of the West, LLC, in cash or in common stock of the company, an
amount of cash or common stock equal to the fair market value of the premises
subject to the optioned leases. The fair market value will be determined by
reference to an evaluation of any kaolin reserves as determined by an
independent engineer.
The mining claims of the three leases under option to the company expire
on March 27, 2004 unless by such date commercial production of at least 5,000
tons a year is being obtained from any or all of the claims subject to each of
the leases. Once the required level of commercial production has been obtained,
the term of each lease is extended for so long as the production requirement is
met.
History of Operations
White Mountain. Earth Sciences conducted some exploratory drilling in the
--------------
White Mountain area in the 1960s. Earth Sciences was a consortium of companies
that was looking for commercial deposits of alunite. They found alunite and
associated deposits of kaolin by rotary percussion drilling. Data for these
holes is not available.
Buena Vista Mining drilled seven holes in the White Mountain lease area in
1992. The core was stored and is available for chemical and brightness analysis.
Utah Clay has a test pit that reveals high brightness kaolin exposed at the
surface. Samples have been taken from the pit to test the kaolin for use in
paints and other industries.
Neither proven nor probable reserves have been established.
Oro Blanco. Earth Sciences conducted extensive exploration for molybdenum,
----------
uranium, gold and flouite in the Oro Blanco region of the Oro Blanco Mountains
in the 1970s and 1980s. Earth Sciences drilled 241 core and rotary holes in the
area subject to our claims. They found deposits of both kaolin and alunite. Most
of this drilling was done on the west side of the deposit where a 165 million
short ton deposit of 14 percent alunite was defined. The drilling also defined
zones of strong kaolinite alteration surrounding the alunite deposits.
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Fire Clay Minerals, Inc. next drilled 104 core holes in the area subject to
our placer claims, the holes totaling 10,982 feet and defining a deposit of high
brightness kaolin and alunite.
An area of 130 by 300 feet was stripped of overburden to expose a kaolin
deposit. Samples have been taken from this area to test for brightness and
chemistry.
Neither proven nor probable reserves have been established.
Koosharem and Kimberly Claims. There have been no significant operations on
-----------------------------
these claims other than the annual assessment work on the perceived deposits.
Topaz Claims. Utah Clay conducted a limited drilling program on the Topaz
------------
claims property in 1995. Evidence of a certain form of kaolite, called
halloysite, was found. Drilling was not sufficient to prove any reserves.
Present Condition of the Properties
White Mountain. White Mountain has an open pit and the seven test holes on
--------------
the deposit drilled by Buena Vista.
Our plan for development includes re-analyzing the core holes that were
drilled. This analysis will cover the brightness, alteration minerals, percent
of alteration and color along with other tests. A new drilling program is
planned. First, holes will be drilled on 200-foot spacing to define the areas of
greatest shallow, high brightness kaolinite. The next phase of drilling will
concentrate on the highest potential areas found in the first holes. The spacing
will be 100 feet. If the beds of kaolin are consistent and continuous, this will
give indicated and possibly measured reserves. Closer spacing of drill holes
will be necessary if the beds are not continuous. The holes will be drilled to
150 feet. The drilling will commence outward from the test pit where a previous
hole encountered 136 feet of white kaolin. Brightness, color and specific
gravity test will be conducted on the cores.
Oro Blanco. We plan to drill confirmation holes next to six or seven of the
----------
original holes in order to confirm the cores of the original holes. Should
confirmation be obtained, this should allow the results of the earlier drilling
program to be assumed to be correct.
The cores will have to be re-tested for brightness and color. Density tests
will also be run.
A drilling program similar to that planned for White Mountain is
contemplated. There was an indication from the previous program that a promising
trend of kaolin continues to the east past where the previous drilling program
stopped.
25
<PAGE>
Koosharem, Kimberly and Topaz Claims. We have no present proposed program
------------------------------------
of exploration on these properties subject to our options to acquire. They are
without known reserves.
Plant and Equipment
There is no plant or equipment at any of the sites of the mining claims.
Power can be supplied to the White Mountain site from Utah Power & Light's
grid four miles to the east. Power can be supplied to the Oro Blanco site from
Utah Power & Light's grid ten miles to the east.
Rock Formations and Mineralizations
White Mountain. Kaolinite and alunite occur in the lower and upper tuff
---------------
members of an unnamed volcanic formation. These minerals have formed where acid
rich hydrothermal fluids have strongly altered the tuffs. Strong kaolinite and
alunite alteration are present for two miles along east-west faults. Local
centers of strong kaolinite or alunite alteration occur where north-northwest
fault zones intersect the main east-west structural features. Individual centers
of alteration are from 250 to 500 feet wide and elongated up to 2,000 feet along
its principal fault "feeder" system. Alteration zoning consists of alunite with
kaolinite in the core, grading outward to strongly kaolinized tuff then
kaolinized tuff with disseminated hematite.
Oro Blanco. The geology is similar to that at White Mountain, but the
----------
alteration is more complex.
Koosharem, Kimberly and Topaz Claims. Each of these areas shows the
----------------------------------------
hydrothermal alteration of volcanic tuffs. The geology has not been studied in
sufficient detail to describe it accurately.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1998 the company issued 2,100,774 shares of its common stock at
$0.18 a share to the following officers and directors of the company, persons
owning more than five percent of any class of security of the company, or to
members of their immediate family:
<TABLE>
<CAPTION>
Relationship No. of Shares
Person to the Company Issued(1) Consideration(2)
- ----------------------- ----------------------- ------------- ----------------
<S> <C> <C> <C>
Della Engh Mother of Dennis and 823,333 $148,200
Daniel Engh
Dennis S. Engh President and Director 581,900 104,742
</TABLE>
26
<PAGE>
<TABLE>
<S> <C> <C> <C>
Carmen J. (Tony) Lotito Director of Marketing 332,659 59,879
and Director
Thomas F. Harrison Vice President and 135,872 24,467
Director
Daniel H. Engh Vice President and 227,010 40,862
--------- --------
Director
2,100,774 $378,150
- -------------------------
</TABLE>
(1) The shares issued were valued at $0.18 a share, the bid price of the
common stock at the time the shares were issued.
(2) The consideration received by the company was the cancellation of debt
in the indicated amounts owed by the company to each of the named
persons. The debts arose from loans of money made to the company by the
named persons or from unpaid salaries owed to the named persons. The
debt owed to Della Engh arose entirely from loans of money she made to
the company. The debts owed to the other four persons arose primarily
from unpaid compensation for their services but also from unreimbursed
expenditures they each made on behalf of the company.
On December 27, 1999 the company issued 17,739,500 shares of its common
stock as the purchase price for an assignment of the Oro Blanco mining lease.
The shares were valued at $0.001 a share for a total purchase price of
$17,739.50. At the time of the purchase, the company's common stock had not
traded in the over-the-counter market for several weeks, and the stockholders'
capital in the company was impaired. The seller of the Oro Blanco lease was Utah
Kaolin Corporation, an affiliate of our company by reason of common directors of
the two companies and by reason of common control of the two companies through
majority ownership of the voting stock of each company by the directors of the
two companies.
The following persons received from Utah Kaolin Corporation, by way of
distribution, the following number of shares of common stock as a result of this
transaction:
No. of
Person Relationship to the Company Shares Issued
------ --------------------------- -------------
Dennis S. Engh President and Director 3,979,297
Daniel H. Engh Vice President and Director 3,979,297
Thomas F. Harrison Vice President and Director 3,869,666
Carmen J. (Tony) Lotito Director of Marketing and Director 1,984,833
Marilyn C. Kenan, Spouse of Thomas J. Kenan, 650,194
Trustee of the Marilyn securities law counsel to the
C. Kenan Trust company
<PAGE>
Dorcas Ardella Engh Mother of Dennis S. Engh and 850,000
Daniel H. Engh
Sherie S. Adams Legal Assistant to Thomas J. 10,000
Kenan, securities law counsel to
the company
Robert N. Nelson and Brother-in-law and sister of 1,300,000
Jeanette E. Nelson, TTEE Dennis S. Engh and Daniel H. Engh,
FBO Nelson Family and uncle and aunt to Darin Engh
Revocable Trust UAD 2-
28-91
Raymond and Olga Nelson Son and daughter-in-law of Robert 200,000
N. Nelson and Jeanette E. Nelson
Jack Nelson Son of Robert N. and Jeanette E. 100,000
Nelson
Kendrick O. Morrison None (non-affiliated shareholder) 816,213
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock is quoted on the OTC Bulletin Board under the stock
symbol "UTCLE". The high and low bid information for the stock during 1998 and
1999 is set forth below. The information was obtained from the OTC Bulletin
Board and reflects inter-dealer prices, without retail mark-up, mark-down or
commission and may not represent actual transactions:
<TABLE>
<CAPTION>
Calendar
Quarter High Low
------- ---- ---
1998:
<S> <C> <C> <C>
1st Qtr 2.125 1.75
2nd Qtr 2.0625 1.625
3rd Qtr 1.875 1.3125
4th Qtr 1.53125 0.125
1999:
1st Qtr 0.3438 0.1600
2nd Qtr 0.8438 0.1875
3rd Qtr 0.6250 0.1300
4th Qtr 0.5000 0.1875
</TABLE>
Holders. There are approximately 200 holders of record of our common stock.
- -------
There are three holders of record of our Series A Preferred Stock, for which
there is no trading market.
Dividends. No cash dividends have been declared during the last two years for
- ---------
either the common stock or the Series A Preferred Stock. There are no
restrictions that limit the ability of the company to pay dividends on the
common stock or that are likely to do so in the future other than the
requirement that dividends be paid first to the holders of the company's
preferred stock.
28
<PAGE>
PENNY STOCK REGULATIONS
Our common stock presently trades on the OTC Bulletin Board at a price
less than $5 a share and is subject to the rules governing "penny stocks."
A "penny stock" is any stock that:
o sells for less than $5 a share,
o is not listed on an exchange or authorized for quotation on The
Nasdaq Stock Market, and
o is not a stock of a "substantial issuer. "Utah Clay Technology is
not now a "substantial issuer" and cannot become one until it has
net tangible assets of at least $5 million, which it does not now
have.
There are statutes and regulations of the Securities and Exchange
Commission (the "Commission") that impose a strict regimen on brokers that
recommend penny stocks.
The Penny Stock Suitability Rule
Before a broker-dealer can recommend and sell a penny stock to a new
customer who is not an institutional accredited investor, the broker-dealer must
obtain from the customer information concerning the person's financial
situation, investment experience and investment objectives. Then, the
broker-dealer must "reasonably determine" (1) that transactions in penny stocks
are suitable for the person and (2) that the person, or his advisor, is capable
of evaluating the risks in penny stocks.
After making this determination, the broker-dealer must furnish the
customer with a written statement setting forth the basis for this suitability
determination. The customer must sign and date a copy of the written statement
and return it to the broker-dealer.
Finally the broker-dealer must also obtain from the customer a written
agreement to purchase the penny stock, identifying the stock and the number of
shares to be purchased.
The above exercise delays a proposed transaction. It causes many
broker-dealer firms to adopt a policy of not allowing their representatives to
recommend penny stocks to their customers.
The Penny Stock Suitability Rule, described above, and the Penny Stock
Disclosure Rule, described below, do not apply to the following:
o transactions not recommended by the broker-dealer,
29
<PAGE>
o sales to institutional accredited investors,
o sales to "established customers" of the broker-dealer persons who
either have had an account with the broker-dealer for at least a
year or who have effected three purchases of penny stocks with
the broker-dealer on three different days involving three
different issuers, and
o transactions in penny stocks by broker-dealers whose income from
penny stock activities does not exceed five percent of their
total income during certain defined periods.
The Penny Stock Disclosure Rule
Another Commission rule - the Penny Stock Disclosure Rule requires a
broker-dealer, who recommends the sale of a penny stock to a customer in a
transaction not exempt from the suitability rule described above, to furnish the
customer with a "risk disclosure document." This document includes a description
of the penny stock market and how it functions, its inadequacies and
shortcomings, and the risks associated with investments in the penny stock
market. The broker-dealer must also disclose the stock's bid and ask price
information and the dealer's and salesperson's compensation related to the
proposed transaction. Finally, the customer must be furnished with a monthly
statement including prescribed information relating to market and price
information concerning the penny stocks held in the customer's account.
Effects of the Rule
The above penny stock regulatory scheme is a response by the Congress
and the Commission to known abuses in the telemarketing of low-priced securities
by "boiler shop" operators. The scheme imposes market impediments on the sale
and trading of penny stocks. It has a limiting effect on a stockholder's ability
to resell a penny stock.
Our common stock likely will continue to trade below $5 a share on the
OTC Bulletin Board and be, for some time at least, shares of a "penny stock"
subject to the trading market impediments described above.
Potential De-Listing of Common Stock
Our common stock may be de-listed from the OTC Bulletin Board. NASD
Eligibility Rule 6530 issued on January 4, 1999, states that issuers that do not
make current filings pursuant to Sections 13 and 15(d) of the Securities
Exchange Act of 1934 are ineligible for listing on the OTC Bulletin Board.
Issuers who are not current with such filings are subject to de-listing
according
30
<PAGE>
to a phase-in schedule depending on each issuer's trading symbol as reported on
January 4, 1999. Our trading symbol on January 4, 1999 was UTCL. Under the
phase-in schedule, our common stock is subject to de-listing on May 3, 2000. On
April 7, 2000 our common stock trading symbol will be changed to UTCLE if we are
not current in filing reports by that date.
EXECUTIVE COMPENSATION
No executive officer of the company has received total compensation in
any of the last three years that exceeds $100,000. Dennis S. Engh, the president
of the company, received compensation for the last three years as follows:
Amount of Bonus and
Amount of Direct All Forms of
Person Compensation Non-Cash Compensation
------ ---------------- ---------------------
Dennis S. Engh, President:
1999 $72,000 0
1998 $72,000 0
1997 $72,000 0
Stock Options. We have adopted a 2000 Stock Option Plan, the major provisions of
- -------------
which Plan are as follows:
Options granted under the plan may be "employee incentive stock options"
as defined under Section 422 of the Internal Revenue Code or non-qualified stock
options, as determined by the option committee of the board of directors at the
time of grant of an option. The plan enables the option committee of the board
of directors to grant up to 500,000 stock options to employees and consultants
from time to time. The option committee has granted no options.
Directors. There are no arrangements pursuant to which directors of the company
- ---------
are compensated for their services as a director.
Employment Contracts. The company has no employment contracts with any person or
- --------------------
any compensatory plan or arrangement with any person that would result from the
resignation, retirement or any other termination of a person's employment with
the company or its subsidiaries or from a change in control of the company or a
change in a person's responsibilities following a change in control of the
company.
31
<PAGE>
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
The principal independent accountant of the company or any significant
subsidiary has not resigned, declined to stand for re-election, or been
dismissed by the company during the periods for which financial statements are
included herein.
LEGAL MATTERS
Thomas J. Kenan, Esq., of Oklahoma City, Oklahoma has passed and will
pass on certain legal matters for the company in connection with the offer, sale
and issuance of the shares offered herein.
ADDITIONAL INFORMATION
The company will furnish its shareholders with annual reports containing
audited financial information, reported upon by independent public accountants.
The company shall also furnish quarterly reports for the first three quarters of
each year containing unaudited financial information.
FINANCIAL STATEMENTS
The following financial statements are included as part of this
prospectus:
Page
----
Independent Auditors' Report ........................................... F-1
Balance Sheets December 31, 1999 and 1998 .............................. F-2
Statements of Operations
Year ended December 31, 1999 and 1998, and
cumulative from inception (March 1, 1994)
to December 31, 1999 ........................................... F-4
Statements of Changes in Stockholders' Deficit
From inception (March 1, 1994) to
December 31, 1999 .............................................. F-5
Statements of Cash Flows
Year ended December 31, 1999; year ended December 31, 1998; and
cumulative from inception (March 1, 1994) to
December 31, 1999 .............................................. F-7
Notes to Financial Statements .......................................... F-9
32
INDEPENDENT AUDITORS' REPORT
----------------------------
To the Stockholders and Board of Directors
Utah Clay Technology, Inc.
We have audited the accompanying balance sheets of Utah Clay Technology,
Inc. (An exploration stage company) as of December 31, 1999 and 1998 and the
related statements of operations, stockholders' deficit and cash flows for the
years ended December 31, 1999 and 1998, and for the period from inception (March
1, 1994) to December 31, 1999. These financial statements are the responsibility
of the company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and singnificant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Utah Clay
Technology, Inc. (An Exploration Stage company) as of December 31, 1999 and 1998
and the results of its operations and its cash flows for the years then ended,
and for the period from inception (March 1, 1994) to December 31, 1999, in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
the company will continue as a going concern. As discussed in Note 11 to the
financial statements, the company has suffered losses from operations and
remains in the Exploration stage. These conditions raise substantial doubt about
its ability to continue as a going concern. Management's plans in regard to
these matters are also described in Note 11. The financial statements do not
include any adjustments that might result from the outcome of this uncertainly.
/s/ Kabani & Company, Inc.
-----------------------------------
Kabani & Company, Inc.
Fountain Valley, California
March 17, 2000
<PAGE>
Utah Clay Technology, Inc.
(An Exploration Stage Company)
BALANCE SHEETS
December 31, 1999 & 1998
ASSETS
------
<TABLE>
<CAPTION>
1999 1998
---- ----
Current Assets
<S> <C> <C>
Cash $ 640 $ 208
Receivables 350 100
Inventory 21,568 21,568
---------- ----------
Total Current Assets 22,558 21,876
Properties & Equipment
Laboratory equipment 2,484 2,484
Machine design & configuration 128,000 -
Mining leases 45,073 27,333
Mining properties and deferred expenditures 1,091,022 1,026,739
(Less valuation allowance) (1,091,022) (1,026,739)
----------- ----------
Total Properties & Equipment 175,557 29,817
---------- ----------
$ 198,115 $ 51,693
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
Utah Clay Technology, Inc.
( An Exploration Stage Company )
BALANCE SHEETS
December 31, 1999 & 1998
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
1999 1998
---- ----
Current Liabilities $ 358,839 $ 194,541
Accounts payable
Advances payable- officers and directors 328,712 226,394
Notes payable 149,469 25,611
---------- -----------
Total Current Liabilities 837,020 446,546
Stockholders' Equity Deficit
Preferred stock, par value $0.001;
10,000,000 shares authorized;
84, 817 shares issued and outstanding 85 85
Common stock, par value $0.001;
30,000,000 shares authorized; 23,331,874
shares in1999 and 5,592,374 shares in 1998
issued and Outstanding 23,332 5,592
Additional paid-in capital 1,451,691 1,451,691
Deficit accumulated during the development stage (2,114,013) (1,852,221)
---------- ----------
Total Stockholders' Deficit (638,905) (394,853)
---------- ----------
$ 198,115 $ 51,693
========== ==========
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
Utah Clay Technology, Inc
(An Exploration Stage Company)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Cumulative
From inception
Year ended December 31, (March 1, 1994) to
-----------------------
1999 1998 December 31, 1999
---- ---- -----------------
<S> <C> <C> <C>
Revenues $ - $ - $ -
Expenses:
Mineral lease rentals 64,531 48,608 378,832
Inventory value adjustment - 37,034 37,034
General and administrative 132,878 242,091 606,433
Valuation allowance - Mining
properties and deferred
expenditures 64,283 213,950 1,091,022
---------- ----------- -----------
Loss before income taxes (261,692) (541,683) (2,113,321)
---------- ----------- -----------
Income taxes 100 100 692
---------- ----------- -----------
NET LOSS $ (261,792) $ (541,783) $(2,114,013)
========== =========== ===========
Basic and diluted Loss per
common share $ (0.04) $ (0.17)
========== ===========
Basic and diluted weighted
average number of common
shares outstanding 5,835,381 3,127,762
========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
Utah Clay Technology, Inc.
( An Exploration Stage Company )
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
From Inception (March 1, 1994) to December 31, 1999
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During
Preferred Stock Common Stock Paid-In Development
Shares Amount Shares Amount Capital Stage Total
--------- --------- ----------- ---------- ---------- ------------ ----------
Shares issued for
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cash March 1, 1994 - $ - 5,600,000 $ 56,000 $ $ $ 56,000
Shares issued for
services March 1,
1994 - - 14,400,000 144,000 - 144,000
Net loss for period
March 1, 1994 to
December 31, 1994 - - - - - (105,573) (105,573)
--------- -------- ----------- ---------- ---------- ----------- ---------
Balance December
31, 1994 - - 20,000,000 200,000 - (105,573) 94,427
Net loss for the
year ended December
31, 1995 - - - - - (672,267) (672,267)
--------- -------- ----------- ---------- ---------- ---------- ---------
Balance December
31, 1995 - - 20,000,000 200,000 - (777,840) (577,840)
1 for 10 reverse
split September 30,
1996 - - (18,000,000) (180,000) 180,000 - -
Change of par
value to $0.001 - - - ( 18,000) 18,000 - -
Preferred stock
issued to related
parties for
cancellation of
debt September 30,
1996 84,817 85 - - 424,000 - 424,085
Shares issued for
services in 1996 - - 265,000 265 48,200 - 48,465
Net loss for the
year ended December
31, 1996 - - - - - (153,669) (153,669)
--------- -------- ----------- ---------- ---------- ---------- --------
Balance December
31, 1996 84,817 85 2,265,000 2,265 670,200 (931,509) (258,959)
Shares issued for
cash in 1997 - - 100,000 100 199,900 - 200,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
Utah Clay Technology, Inc.
(An Exploration Stage Company)
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT (CONTINUED)
From Inception (March 1, 1994) to December 31, 1999
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During
Preferred Stock Common Stock Paid-In Development
Shares Amount Shares Amount Capital Stage Total
--------- -------- ---------- ---------- ---------- ----------- ----------
Shares issued for
debt cancellation
<S> <C> <C> <C> <C> <C> <C> <C>
in 1997 - $ - 165,000 $ 165 $ (165) $ - $ -
Net loss for the
year ended December
31, 1997 - - - - - (378,929) (378,929)
--------- -------- ---------- ---------- ---------- ----------- ---------
Balance December
31, 1997 84,817 85 2,530,000 2,530 869,935 (1,310,438) (437,888)
Shares issued for
outstanding
Warrants - - 389,600 389 103,634 - 104,023
Shares issued for
debt cancellation
In 1998 - - 2,100,774 2,101 376,049 - 378,150
Shares issued for
services in 1998 - - 572,000 572 102,073 - 102,645
Net loss for the
year ended December
31, 1998 - - - - (541,783) (541,783)
--------- -------- ---------- ---------- ---------- ---------- ----------
Balance December
31, 1998 84,817 85 5,592,374 5,592 1,451,691 (1,852,221) (394,853)
Shares issued for
mining lease - - 17,739,500 17,740 - - 17,740
Net loss for the
year ended December
31, 1999 - - - - - (261,792) (261,792)
--------- ------- ----------- ---------- ---------- ---------- ----------
Balance December
31, 1999 84,817 $ 85 23,331,874 $ 23,332 $1,451,691 $(2,114,013) $ (638,905)
======== ======= =========== ========== ========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
Utah Clay Technology, Inc.
(An Exploration Stage Company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Cumulative
from inception
Year Ended Year Ended (March 1, 1994)
December 31, December 31, to December 31,
1999 1998 1999
------------ ------------ ---------------
Cash flows from operating
activities:
<S> <C> <C> <C>
Net loss $ (261,792) $ (541,783) $ (2,114,013)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Issuance of common stock for
services - 102,645 295,110
Inventory valuation adjustment - 37,034 37,034
Valuation allowance-mining
properties and deferred
expenditures 64,283 213,950 1,091,022
(Increase) in receivables (250) (100) (350)
(Increase) in inventory - (48,627) (58,602)
Increase in Accounts payable 164,298 67,600 507,039
---------- ----------- ---------------
Net cash used in operating
activities (33,461) (169,281) (242,760)
Cash flows from investing activities:
Mining properties and deferred
expenditures (64,283) (213,950) (1,091,022)
Mining leases - - (27,333)
Machine design & configuration (128,000) - (130,484)
---------- ----------- -------------
Net cash used in investing
activities (192,283) (213,950) (1,248,839)
Cash flows from financing activities:
Net proceeds from advances
by officers/directors 102,318 246,856 982,747
Proceeds from notes payable 123,858 25,611 149,469
Issuance of shares - 104,023 360,023
---------- ----------- --------------
Net cash provided by financing
activities: 226,176 376,490 1,492,239
Net increase (decrease) in cash &
cash equivalent 432 (6,741) 640
Cash & cash equivalent - beginning
of period 208 6,949 -
---------- ------------ --------------
Cash at end of period $ 640 $ 208 $ 640
========== ============ ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
Utah Clay Technology, Inc.
(An Exploration Stage Company)
STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
Cumulative
from inception
Year Ended Year Ended (March 1, 1994)
December 31, December 31, to December 31,
1999 1998 1999
------------ ------------ ---------------
Supplemental disclosures:
Cash paid during the period for:
<S> <C> <C> <C>
Interest $ 4,802 $ 2,149 $ 6,951
========== ========== ===========
Income tax $ 300 $ 250 $ 850
========== ========== ===========
Non-cash investing and financing
activities:
Issuance of common stock for
services $ - $ 102,645 $ 295,110
========== ========== ===========
Issuance of preferred stock
for debt $ - $ - $ 424,085
========== =========== ===========
Issuance of common stock for
acquisition of
Mining rights $ 17,740 $ - $ 17,740
========== =========== ===========
Issuance of common stock against
cancellation of debt - Advances
and accrued expenses $ - $ 378,150 $ 802,235
========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE>
Utah Clay Technology, Inc.
(An Exploration Stage Company)
Notes to Financial Statements
December 31, 1999 and 1998
Note 1- Summary of significant accounting policies
Organization and nature of operations
Utah Clay Technology, Inc. (the "Company"), a Utah corporation, was
incorporated on March 1, 1994. The planned operations of the Company are to
engage in mining, processing and marketing of minerals. For the period from
inception (March 1, 1994) to December 31, 1999 the Company had no revenues. The
Company is classified as An Exploration stage company because its principal
activities involve obtaining the capital necessary to execute its strategic
business plan.
Cash and cash equivalents
The Company considers all liquid investments with a maturity of three
months or less from the date of purchase that are readily convertible into cash
to be cash equivalents.
Issuance of share for services
Valuation of shares for services is based on the fair market value of
services.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Inventory
The inventory consists of mining, grinding and hauling costs of
processed Kaolin, an industrial mineral. Inventory is valued utilizing the lower
of cost or market value determined on First-in First-out (FIFO) valuation
method. On December 31, 1998, an adjustment of $37,034 was made to reduce the
value of inventory to bring it at the market value of the inventory.
Equipment and mining properties
Equipment is recorded at cost. The Company has adopted the straight-
line method in computing depreciation for financial reporting purposes and
generally uses accelerated methods for income tax purposes. The annual provision
for depreciation will be
F-9
<PAGE>
Utah Clay Technology, Inc.
(An Exploration Stage Company)
Notes to Financial Statements
December 31, 1999 and 1998
computed principally in accordance with the following ranges of asset lives:
laboratory equipment- 3 to 5 years; processing equipment- 3 to 10 years.
Equipment was acquired and set up in late, 1997. No depreciation expense
has been recorded in the financial statements as the company is yet to use any
of its equipment and mining properties. (See Note 4).
Reclassifications
Certain items in the prior year financial statements have been
reclassified for comparative purposes to conform with the presentation in the
current years' presentation. These reclassifications have no effect on the
previously reported income (loss).
Income taxes
Deferred income tax assets and liabilities are computed annually for
differences between the financial statements and tax basis of assets and
liabilities that will result in taxable or deductible amounts in the future
based on enacted laws and rates applicable to the periods in which the
differences are expected to affect taxable income (loss). Valuation allowance
is established when necessary to reduce deferred tax assets to the amount
expected to be realized.
Basic and diluted net loss per share
Net loss per share is calculated in accordance with the Statement of
financial accounting standards No. 128 (SFAS No. 128), "Earnings per share".
SFAS No. 128 superseded Accounting Principles Board Opinion No.15 (APB 15).
Net loss per share for all periods presented has been restated to reflect the
adoption of SFAS No. 128. Basic net loss per share is based upon the weighted
average number of common shares outstanding. Diluted net loss per share is
based on the assumption that all dilutive convertible shares and stock options
were converted or exercised. Dilution is computed by applying the treasury stock
method. Under this method, options and warrants are assumed to be exercised at
the beginning of the period (or at the time of issuance, if later), and as if
funds obtained thereby were used to purchase common stock at the average market
price during the period.
Stock-based compensation
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-
Based Compensation". SFAS No. 123 prescribes accounting and reporting standards
for all stock-based compensation plans, including employee stock options,
restricted stock, employee stock purchase plans and stock appreciation rights.
SFAS No. 123 requires compensation expense to be recorded (i) using the new fair
value method or (ii) using the existing accounting rules prescribed by
Accounting Principles Board Opinion No. 25, "Accounting for stock issued to
employees" (APB 25) and related interpretations with proforma disclosure of what
net income
F-10
<PAGE>
Utah Clay Technology, Inc.
(An Exploration Stage Company)
Notes to Financial Statements
December 31, 1999 and 1998
and earnings per share would have been had the company adopted the new fair
value method. The company adopted this standard in 1998 and the implementation
of this standard did not have any impact on its financial statements.
Fair value of financial instruments
Statement of financial accounting standard No. 107, Disclosures about
fair value of financial instruments, requires that the company disclose
estimated fair values of financial instruments. The carrying amounts reported
in the statements of financial position for current assets and current
liabilities qualifying as financial instruments are a reasonable estimate of
fair value.
Comprehensive income
Statement of financial accounting standards No. 130, Reporting
comprehensive income (SFAS No. 130), establishes standards for reporting and
display of comprehensive income, its components and accumulated balances.
Comprehensive income is defined to include all changes in equity, except
those resulting resulting from investments by owners and distributions to
owners. Among other disclosures, SFAS No. 130 requires that all items that are
required to be recognized under current accounting standards as components of
comprehensive income be reported in a financial statements that is displayed
with the same prominence as other financial statements. The company adopted
this standard in 1998 and the implementation of this standard did not have a
material impact on its financial statements.
Reporting segments
Statement of financial accounting standards No. 131, Disclosures about
segments of am enterprise and related information (SFAS No. 131), which
superceded statement of financial accounting standards No. 14, Financial
reporting for segments of a business enterprise, establishes standards for the
way that public enterprises report information about operating segments in
annual financial statements and requires reporting of selected information about
operating segments in interim financial statements regarding products and
services, geographic areas and major customers. SFAS No. 131 defines operating
segments as components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performances. The company adopted this standard in 1998 and the implementation
of this standard did not have a material impact on its financial statements.
F-11
<PAGE>
Utah Clay Technology, Inc.
(An Exploration Stage Company)
Notes to Financial Statements
December 31, 1999 and 1998
Pension and other benefits
In February 1998, the Financing accounting standards board issued
statement of financial accounting standards No. 132, Employers' disclosures
about pension and other post-retirement benefits (SFAS No. 132), which
standardizes the disclosures requirements for pension and other post-retirement
benefits. The company adopted this standard in 1998 and the implementation of
this standard did not have any impact on its financial statements.
Accounting for the costs of computer software developed or obtained for internal
use
In March 1998, the Accounting standards executive committee of the
American institute of certified public accountants (ASEC of AICPA) issued
Statement of position (SOP) No. 98-1, "Accounting for the costs of computer
software developed or obtained for internal use", effective for fiscal years
beginning after December 15, 1998. SOP N0. 98-1 requires that certain costs of
computer software developed or obtained for internal use be continued
capitalized and amortized over the useful life of the related software . The
company adopted this standard in fiscal 1999 and the implementation of this
standard did not have a material impact on its financial statements.
Costs of start-up activities
In April 1998, the ASEC of AICPA issued SOP No. 98-5, "Reporting on
the costs of start-up activities", effective for fiscal years beginning after
December 15, 1998. SOP 98-5 requires the costs of start-up activities and
organization costs to be expensed as incurred. The company adopted this standard
in fiscal 1999 and the implementation of this standard did not have a material
impact on its financial statements.
Accounting developments
In June 1998, the No. 133, "Accounting for derivative instruments and
hedging activities", effective for fiscal years beginning after June 15, 1999,
which has deferred to June 30, 2000 by publishing of SFAS No. 137. SFAS
No. 133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts (collectively referred to as derivatives), and for hedging activities.
This statement requires that an entity recognize all derivative as either
assets or liabilities in the statement of financial condition and measure those
instruments at fair value. The accounting for changes in the fair value of a
derivative instrument depends on its intended use and the resulting designation.
The company does not expect that the adoption of this standard will have a
material impact on its financial statements.
F-12
<PAGE>
Utah Clay Technology, Inc.
(An Exploration Stage Company)
Notes to Financial Statements
December 31, 1999 and 1998
Note 2- Income taxes
Since the Company has not generated taxable income since inception, no
provision for income taxes has been provided (other than minimum franchise taxes
paid to the State of Utah). Differences between income tax benefits computed at
the federal statutory rate and reported income taxes for 1999 and 1998 are
primarily attributable to the valuation allowance for net operating losses
(NOL) and other permanent differences. The net deferred tax (benefit) due to
NOL carried forward, as of December 31, 1999 and 1998, consisted of the
following:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Deferred tax asset $ 418,389 $ 313,672
Deferred tax asset valuation allowance (418,389) (313,672)
Balance as of December 31 $ - $ -
========== ==========
</TABLE>
A summary of Net operating losses carried forward and their expiration
date is as follows:
<TABLE>
<CAPTION>
Year of Expiration Net Operating Losses
------------------ --------------------
<S> <C> <C>
2009 $ 105,573
2010 79,963
2011 112,380
2012 199,733
2013 286,532
2014 261,792
----- -----------
Total $ 1,045,973
===== ============
</TABLE>
Note 3- An exploration stage company
An exploration stage company is one for which principal operations of
mining have not commenced or principal operations have generated an
insignificant amount of revenue. Management of an exploration stage company
devotes most of its activities in conducting exploratory mining operations.
Operating losses have been incurred through December 31, 1999, and the Company
continues to use, rather than provide, working capital in this operation.
Although management believes that it is pursuing a course of action that will
provide successful future operations, the outcome of these matters is uncertain.
Note 4- Mining Properties and deferred expenditures and related valuation
allowance
Management and other shareholders formed the Company to obtain the
necessary financing to mine, explore, develop, operate and sell kaolin. The
Company owns two mining lease (including acquisition of a mining lease in
December 1999) and has options
F-13
<PAGE>
Utah Clay Technology, Inc.
(An Exploration Stage Company)
Notes to Financial Statements
December 31, 1999 and 1998
to acquire three other mining leases held by founders (these parties are also
directors and officers of the Company) of the Company.
The Company defers all acquisition, Exploration and development costs
that relate to specific mineral properties until such time as the mineral
properties are brought into production or are sold or abandoned. Costs
pertaining to properties developed to the point of production will be amortized
over the estimated productive life of the properties. Cost pertaining to
properties sold or abandoned will be written off.
The realization of the costs of mining properties and deferred
expenses is dependent upon sales of kaolin on a commercial basis from the
reserves of ore bodies. For the period from inception ( March 1, 1994 ) to
December 31, 1999 the Company had no revenues. To commence operations, the
Company's management believes significant additional equity and debt financing
will be required. Therefore, due to uncertainty as to recoverability, a
valuation allowance is deducted from the related asset.
Note 5- Accounts payable and accrued expenses
Accounts payable and accrued expenses as of December 31, 1999 and
1998, consist of the following:
1999 1998
---- ----
Lease rentals payable $ 82,571 $ 52,906
Litigation settlement - 40,000
Legal fees 66,249 36,508
Machine design & configuration 128,000 -
Health Insurance 12,343 -
Miscellaneous 69,676 62,127
---------- -----------
$ 358,839 $ 191,541
========== ===========
Note 6-Advances payable - Officers & Directors
Advances payable represents amount payable to officers or directors
of the company in lieu of their services or for advances made to the company. In
1998, the company issued common stock against a portion of advances outstanding.
The advances payable to officers and directors are unsecured, interest free and
due on demand.
F-14
<PAGE>
Utah Clay Technology, Inc.
(An Exploration Stage Company)
Notes to Financial Statements
December 31, 1999 and 1998
Following is a summary of Advances payable to officers and directors of the
company, as of December 31, 1999 and 1998:
Balance as on December 31, 1997 $ 209,488
Advances from officers and directors during 1998 287,454
Less: Issuance of 1,277,495 common stock @$0.18 per share (229,950)
Repayment of advances in 1998 (40,598)
-----------
Balance as on December 31, 1998 226,394
Advances from officers and directors during 1999 127,000
Less: Repayment of advances in 1999 (24,682)
-----------
Balance as on December 31, 1999 $ 328,712
===========
Note 7-Notes payable
Notes payable as on December 31, 1999 and 1998 comprised of following:
1999 1998
---- ----
Note payable-Bank, bearing an interest rate of
4 percent over the prime rate (7.75% on 12/31/99
and 8.50% on 12/31/98) and due on demand. $ 24,005 $ 25,611
Note payable to an affiliated company,
unsecured, interest free and due on demand. 30,464 -
Notes payable to individuals related to
officers of the company, bearing an
interest rate of 10% per annum, unsecured
and due on demand 50,000 -
Notes payable to others, bearing an
interest rate of 10% per annum, unsecured
and due on demand 20,000 -
Notes payable to others, interest free,
unsecured and due on 25,000 -
--------- --------
Total $ 149,469 $ 25,611
========= ========
Note 8- Preferred Stock
Effective September 30, 1996, the Company authorized the following
transactions:
(a) Authorization of 10,000,000 shares of preferred Stock at par value
of $ 0.001.
(b) The Company issued to the following officers, directors and
shareholders in exchange for the cancellation of the debt represented by
$424,085 in advances, 84,817 shares of Series A Preferred Stock at $5.00 a
share, which stock is entitled to annual dividends
F-15
<PAGE>
Utah Clay Technology, Inc.
(An Exploration Stage Company)
Notes to Financial Statements
December 31, 1999 and 1998
of $0.50 a share payable from the earnings of the Company and cumulative if
missed, is non-voting and is preferred over the company's common Stock in the
event of the liquidation and dissolution of the Company. The Series A Preferred
Stock is neither convertible into common Stock nor redeemable at the option of
the holder but is redeemable at the option of the company.
Amount of Number of
Debt Price/ Preferred
Name Converted Share Shares
- ---- --------- ----- ---------
Thomas F. Harrison $ 255,185 $ 5.00 51,037
Dennis S. Engh 168,900 $ 5.00 33,780
--------- ------ ------
Total $ 424,085 84,817
========= ======
Note 9- Litigation
Utah Clay was a defendant in a lawsuit brought for the recovery of
$50,000, interest and attorney fees by Six Way, Inc. and Daniel W. Jacksons
Trustee of the MJB Trust. The Company acknowledged the loan made to it by the
plaintiffs, which was the basis for the civil action. The claim was settled for
$60,000, including interest and litigation costs of $10,000, to be payable by
1999. By December 31, 1999, the whole amount was paid off. The outstanding
liability of $40,000 as of December 31, 1998 is included in Accounts payable and
accrued expenses.
Note 10- Acquisition of mining lease
The company acquired a mining lease of Kaolin mineral from an
affiliated company for $17,740 on December 27, 1999. The Company issued
17,739,500 shares of common stock @$0.001 per share in lieu of consideration of
mining lease.
Note 11-Going Concern uncertainty
The company's financial statements have been presented on the basis
that it is a going concern, which contemplates the realization of assets and
satisfaction of liabilities in the normal course of business. The company
incurred a net loss of $2,114,013 for the period from inception (March 1, 1994)
to December 31, 1999. The company's current liabilities exceeded its current
assets by $814,462 and $424,670 as of December 31, 1999 and 1998, respectively.
The company's total liabilities exceeded its total assets by $638,905 and
$394,853 as of December 31, 1999 and 1998, respectively. These factors, as well
as the uncertain conditions that the company faces in its day-to-day operations,
create an uncertainty as to the company's ability to continue as a going
concern. The financial statements do not include any adjustments that might be
necessary should the company be unable to continue as a going concern.
F-16
<PAGE>
Utah Clay Technology, Inc.
(An Exploration Stage Company)
Notes to Financial Statements
December 31, 1999 and 1998
12- Subsequent events & Commitments
Lease commitments
Subsequent to year ended December 31, 1999, the company entered in
to five separate lease addendum agreements for mining leases on two properties
and option for mining lease on three properties, at $10,000 per year, per
property, for next five years through March, 2005. The company also is required
to pay to the Bureau of land management, US Department of interior, an amount
of $21,000 per year pursuant to their mining lease and option agreement.
Issuance of shares
Subsequent to year ended December 31, 1999 the company entered in to
various agreements with several parties, whereby, the company issued 1,540,000
shares for $573,000 in consideration for cash, services and cancellation of
debt, during the quarter ended March 31, 2000.
Stock Option
Subsequent to year ended December 31, 1999 the company has adopted a
stock option plan, under which options granted may be "employee incentive stock
options" as defined under Section 422 of the Internal revenue code or
non-qualified stock options, as determined by the option committee of the board
of directors at the time of grant of an option. The plan enables the option
committee of the board of directors to grant up to 500,000 stock options to
employees and consultants from time to time. The option committee has granted no
options. The date of grant of an Option shall, for all purposes, be the date on
which the Option Committee makes the determination granting such Option, or such
other date as is determined by the Option Committee.
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
The general corporation law of Utah and the bylaws of the Registrant
provide certain indemnification rights for directors, officers and agents of the
Registrant. These indemnification provisions are set forth in the Prospectus
under "Indemnification."
Item 25. Other Expenses of Issuance and Distribution
The estimated expenses of this offering, other than brokers'
commissions, are as follows:
Estimated
Item Amount
--------------------- ---------
Registration fees $ 250
Transfer agent's fees 1,500
Printing 2,000
Legal 20,000
Accounting 35,000
EDGAR provider fees 3,000
--------
$ 61,750
The Registrant will pay all the above expenses. The selling security
holder will pay none of them.
Item 26. Recent Sales of Unregistered Securities
The following information is provided for all securities sold by the
Registrant within the past three years without registering the securities under
the Securities Act of 1933. All securities were shares of common stock. There
were no underwriters involved in the sales.
<TABLE>
<CAPTION>
Dollar Value of
No. of Cash Other Type of
Date Shares Sold Purchasers Consideration Consideration
- ---- ----------- ---------- ------------- -------------
<S> <C> <C> <C> <C>
1-12-97 to 265,000(1) 40 persons $200,000 $165,000
7-16-97
1998: 389,600(1) 9 persons(2) $104,040 -
823,333(1) Della Engh - $148,200(3)
581,900(1) Dennis S. Engh - 104,742(3)
332,659(1) Carmen J. (Tony) Lotito - 59,879(3)
135,872(1) Thomas F. Harrison - 24,467(3)
227,010(1) Daniel H. Engh - 40,862(3)
</TABLE>
33
<PAGE>
200,000(1) Nobel House Financial - 36,000(4)
Services
300,000(1) Del Mar Financial - 54,000(4)
Services
37,000(1) Investors Advisors - 6,600(4)
25,000(1) S.B. Stocks, U.S.A., Inc. - 250(4)
10,000(1) Strathmore Equities, Inc. - 100(4)
12-99 17,739,500(5) Utah Kaolin Corporation - 17,740
3-00 80,000(6) McKay, Burton & Thurman - 48,305
10,000(7) James Groscost - 2,600
- ------------------------
(1) These shares were sold pursuant to the exemption from registration
provided by Regulation D, Rule 504 in a public offering. At the time of
the sales, the Registrant was not a reporting company or a blank check
company. A total of $779,140 was received in cash, cancellation of debt,
or services rendered to the Registrant in exchange for all shares sold
pursuant to their exemption from registration.
(2) These persons exercised warrants that had been issued in 1997 as part of
the Regulation D, Rule 504 offering described in footnote (1) above.
(3) These amounts represent the cancellation of debt owed to the Registrant.
The debt to Della Engh represents cash loans made to the Registrant by
her. The other cancelled debts represent amounts owed to officers of the
Registrant for unpaid compensation for performance of their duties to
the Registrant and for reimbursement of outlays of cash they made on
behalf of the Registrant. The issuances of stock were made in reliance
on the exemption from registration provided by Regulation D, Rule 504.
See footnote (1) above.
(4) These amounts represent the value of services rendered to the Registrant
by the named entities. The nature of the services was that of financial
public relations - increasing the visibility of the Registrant in the
financial markets. See footnote (1) above.
(5) These shares were issued to purchase the Oro Blanco mining lease. See
"Certain Relationships and Related Transactions" in the Prospectus. The
shares were issued pursuant to the exemption from registration provided
by Regulation D, Rule 506. No public solicitation or public advertising
was employed. The purchaser of the shares was an affiliate of the
Registrant.
34
<PAGE>
(6) These shares were issued in exchange for legal services provided to Utah
Clay over a several year period and were issued pursuant to the
exemption from registration provided by Regulation D, Rule 506. No
public solicitation or public advertising was employed.
(7) These shares were issued in exchange for the cancellation of
indebtedness of Utah Clay that arose with regard to ore hauling services
provided by Mr. Groscost. The shares were issued pursuant to the
exemption from registration provided by Regulation D, Rule 506. No
public solicitation or public advertising was employed.
Exhibits
The following exhibits are filed as part of this Registration Statement:
Exhibit
Number Description of Exhibit
- ------- ----------------------
3(i) - Articles of Incorporation of Utah Clay Technology, Inc.
and amendments thereto.
3(ii) - Bylaws of Utah Clay Technology, Inc.
5 - Opinion of Thomas J. Kenan on the legality of the
securities being registered.
9 - 2000 Stock Option Plan
10.1 - White Mountain mining lease, consisting of Amendment
Agreement of November 9, 1992; Mining Lease dated March 1,
1994; Addendum to Mining Lease dated March 15, 2000; and
Addendum to Mining Lease dated March 27, 2000.
10.2 - Oro Blanco mining lease, consisting of Mining Lease dated
December 31, 1999.
10.3 - Kimberly claims: Mining Lease Agreement (Fullmer-Engh),
dated June 19, 1993; Addendum to Fullmer-Engh Mining
Lease, dated March 15, 2000; Option (Engh-Kaolin of the
West)to Enter Into Mining Lease, dated September 30, 1996;
Option (Kaolin of the West-Utah Clay) to Enter Into Mining
Lease, dated September 30, 1996, to which is attached an
unexecuted Mining Lease; Addendum to Engh-Kaolin of the
West Option to Enter Into Mining Lease, dated March 27,
2000; and Addendum to Kaolin of the West-Utah Clay Option
to Enter Into Mining Lease dated March 27, 2000.
35
<PAGE>
10.4 - Koosharem claims: Mining Lease Agreement (Fullmer-Engh),
dated June 19, 1993; Addendum to Fullmer-Engh Mining
Lease, dated March 15, 2000; Option (Engh-Kaolin of the
West)to Enter Into Mining Lease, dated September 30, 1996;
Option (Kaolin of the West-Utah Clay) to Enter Into Mining
Lease, dated September 30, 1996, to which is attached an
unexecuted Mining Lease; Addendum to Engh-Kaolin of the
West Option to Enter Into Mining Lease, dated March 27,
2000; and Addendum to Kaolin of the West-Utah Clay Option
to Enter Into Mining Lease dated March 27, 2000.
10.5 - Topaz claims: Mining Lease Agreement (Fullmer-Engh), dated
June 19, 1993; Addendum to Fullmer-Engh Mining Lease,
dated March 15, 2000; Option (Engh-Kaolin of the West) to
Enter Into Mining Lease, dated September 30, 1996; Option
(Kaolin of the West-Utah Clay) to Enter Into Mining Lease,
dated September 30, 1996, to which is attached an
unexecuted Mining Lease; Addendum to Engh-Kaolin of the
West Option to Enter Into Mining Lease, dated March 27,
2000; and Addendum to Kaolin of the West-Utah Clay Option
to Enter Into Mining Lease dated March 27, 2000.
23.1 - Consent of Thomas J. Kenan, to the reference to him as an
attorney who has passed upon certain information contained
in the Registration Statement.
23.2 - Consent of Kabani & Company, Certified Public Accountants,
independent auditors of the Registrant.
27 - Financial Data Schedule.
Item 28. Undertakings
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the company pursuant to the foregoing provisions, or otherwise, the
company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the company of expenses incurred or paid by a
director, officer or controlling person of the company in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling
36
<PAGE>
person in connection with the securities being registered, the company will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
37
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Salt Lake City, Utah.
Date: March 31, 2000 UTAH CLAY TECHNOLOGY, INC.
By/s/Dennis S. Engh
----------------------------------
Dennis S. Engh, President, and
individually as a Director
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates indicated.
Date: March 31, 2000 /s/ Darin D. Engh
---------------------------------
Darin D. Engh, Treasurer, Secretary
and Director
Date: March 31, 2000 /s/ Thomas F. Harrison
---------------------------------
Thomas F. Harrison, Vice President
and Director
Date: March 31, 2000 /s/ Daniel H. Engh
---------------------------------
Daniel H. Engh, Vice President and
Director
Date: March 31, 2000 /s/ Carmen J. (Tony) Lotito
---------------------------------
Carmen J. (Tony) Lotito, Director
of Marketing and Director
38
<PAGE>
PROSPECTUS DELIVERY OBLIGATION. All dealers or brokers that effect transactions
- ------------------------------
in these securities for the selling security holders are required to deliver a
Prospectus.
39
Utah Clay Technology, Inc.
Exhibits to Amendment No. 1 to
Form SB-2 Registration Statement
Exhibit
Number Description of Exhibit
3(i) - Articles of Incorporation of Utah Clay Technology,
Inc. and amendments thereto.
3(ii) - Bylaws of Utah Clay Technology, Inc.
5 - Opinion of Thomas J. Kenan on the legality of the
securities being registered.
9 - 2000 Stock Option Plan
10 - White Mountain mining lease, consisting of Amendment
Agreement of November 9, 1992; Mining Lease dated March 1,
1994; Addendum to Mining Lease dated March 15, 2000; and
Addendum to Mining Lease
dated March 27, 2000.
10.1 - Oro Blanco mining lease, consisting of Mining Lease dated
December 31, 1999.
10.2 - Kimberly claims: Mining Lease Agreement (Fullmer-
Engh), dated June 19, 1993; Addendum to Fullmer-
Engh Mining Lease, dated March 15, 2000; Option
(Engh-Kaolin of the West)to Enter Into Mining Lease, dated
September 30, 1996; Option (Kaolin of the West-Utah Clay)
to Enter Into Mining Lease, dated September 30, 1996, to
which is attached an unexecuted Mining Lease; Addendum to
Engh-Kaolin of the West Option to Enter Into Mining Lease,
dated March 27, 2000; and Addendum to Kaolin of the
WestUtah Clay Option to Enter Into Mining Lease dated
March 27, 2000.
10.3 - Koosharem claims: Mining Lease Agreement (Fullmer-
Engh), dated June 19, 1993; Addendum to Fullmer-
Engh Mining Lease, dated March 15, 2000; Option
(Engh-Kaolin of the West)to Enter Into Mining Lease, dated
September 30, 1996; Option (Kaolin of the West-Utah Clay)
to Enter Into Mining Lease, dated September 30, 1996, to
which is attached an unexecuted Mining Lease; Addendum to
Engh-Kaolin of the West Option to Enter Into Mining Lease,
dated March 27, 2000; and Addendum to Kaolin of the West-
<PAGE>
Utah Clay Option to Enter Into Mining Lease dated March
27, 2000.
10.4 - Topaz claims: Mining Lease Agreement (Fullmer-Engh),
dated June 19, 1993; Addendum to FullmerEngh Mining Lease,
dated March 15, 2000; Option (Engh-Kaolin of the West)to
Enter Into Mining Lease, dated September 30, 1996; Option
(Kaolin of the West-Utah Clay) to Enter Into Mining Lease,
dated September 30, 1996, to which is attached an
unexecuted Mining Lease; Addendum to Engh-Kaolin of the
West Option to Enter Into Mining Lease, dated March 27,
2000; and Addendum to Kaolin of the WestUtah Clay Option
to Enter Into Mining Lease dated March 27, 2000.
23 - Consent of Thomas J. Kenan, to the reference to him
as an attorney who has passed upon certain information
contained in the Registration Statement.
23.1 - Consent of Kabani & Company, Certified Public Accountants,
independent auditors of the Registrant.
27 - Financial Data Schedule.
<PAGE>
#156551
Received
March 01, 1994
State of Utah
Department of Commerce
ARTICLES OF INCORPORATION
OF
UTAH CLAY TECHNOLOGY, INC.
The undersigned natural person, being over the age of eighteen (18)
years, and acting as an incorporator under the provisions of the Utah Revised
Business Corporation Act (hereinafter referred to as the "Act ") adopts the
following Articles of Incorporation:
ARTICLE I
The name of this corporation is Utah Clay Technology, Inc. (the
"Corporation").
ARTICLE II
The Corporation is organized to engage in any lawful act or activity
for which corporations may be organized under the Act.
ARTICLE III
The Corporation is authorized to issue only one class of shares, to be
designated Common Stock. The total number of shares of Common Stock that the
Corporation is authorized to issue is Thirty Million (30,000,000). The Common
Stock of the Corporation shall have a par value of One Cent ($.01) per share and
shall be entitled to receive the net assets of the Corporation upon dissolution.
ARTICLE IV
The shareholders of the Corporation shall have pre-emptive rights with
respect to issuance by the Corporation of shares of its Common Stock.
<PAGE>
ARTICLE V
The street address of the initial registered office of the Corporation
is 426 South 500 East, Salt Lake City, Utah, 84102. The name of the initial
registered agent of the Corporation at that address is E. Paul Wood.
ARTICLE VI
The Corporation authorizes indemnification of its directors and
officers, and advancement of expenses, to the extent set forth respectively in
Sections 902 and 904 of the Utah Revised Business Corporation Act.
ARTICLE VII
The name and address of the incorporator of the Corporation is as
follows:
E. Paul Wood, Esq.
LITTLEFIELD & PETERSON ~
426 South 500 East
Salt Lake City, UT 84102
IN WITNESS WHEREOF, the undersigned, being the incorporator of the
Corporation, executes these Articles of Incorporation and certifies to the truth
of the facts herein stated, this 1st day of March, 1994.
/s/E. Paul Wood
---------------------------------------
E. Paul Wood
Incorporator
The appointment of the undersigned as the initial registered agent of
the Corporation is hereby accepted.
/s/E. Paul Wood
---------------------------------------
E. Paul Wood
Registered Agent
<PAGE>
Received
October 21, 1996
Utah Div. of
Corp. & Comm. Code
AMENDED
ARTICLES OF INCORPORATION
OF
UTAH CLAY TECHNOLOGY, INC.
The undersigned natural persons, being over the age of eighteen (18)
years, and acting as Board of Directors under the provisions of the Utah Revised
Business Corporation Act (hereinafter referred to as the "Act") adopts the
following Amended Articles of Incorporation:
ARTICLE I
The name of this corporation is Utah Clay Technology, Inc. (the
"Corporation").
ARTICLE II
The Corporation is organized to engage in any lawful act or activity
for which corporations may be organized under the Act.
ARTICLE III
The Corporation is authorized to issue two classes of shares, to be
designated as:
1) Common Stock and;
2) Preferred Stock.
COMMON STOCK:
AUTHORIZED NUMBER OF SHARES: The total number of shares of Common
Stock that the Corporation is authorized to issue is Thirty Million
(30,000,000).
PAR VALUE: The Common Stock of the Corporation shall have a par value
of ONE HUNDREDTH CENT ($.001) per share and shall be entitled to receive the net
assets of the
-1-
<PAGE>
Corporation after distribution to Preferred Shares in the event of the
liquidation and dissolution of the Company.
PREFERRED STOCK:
AUTHORIZED NUMBER OF SHARES: The total number of shares of Preferred
Stock that the Corporation is authorized is TEN MILLION SHARES (10,000,000).
PAR VALUE: The Preferred Stock of the Corporation shall have a par
value of ONE HUNDREDTH CENT ($0.001) per share and shall be entitled to receive
the assets of the Corporation over the Company's Common Stock in the event of
the liquidation and dissolution of the Company.
ARTICLE IV
The shareholders of the Corporation shall have pre-emptive rights with
respect to issuance by the Corporation of shares of its Common Stock.
ARTICLE V
The street address of the registered office of the Corporation is 3985
South 2000 East, Salt Lake City, Utah 84124. The name of the registered agent of
the Corporation at that address is Dennis S. Engh.
ARTICLE VI
The Corporation authorizes indemnification of its directors and
officers, and advancement of expenses, to the extent set forth respectively in
Sections 902 and 904 of the Utah Revised Business Corporation Act.
ARTICLE VII
The name and address's of the Board of Directors of the Corporation is
as follows:
-2-
<PAGE>
Daniel H. Engh Dennis S. Engh
2340 East Germania Circle 4532 Briarcreek Drive
Sandy, Utah 84093 Salt Lake City, Utah 84117
Darin Engh Tony Lotito
437 East Elise Street 4346 Mullholland Street
Sandy, Utah 84070 Salt Lake City, Utah 84124
Thomas F. Harrison
2930 Millcreek Road
Salt Lake City, Utah 84109
IN WITNESS WHEREOF, the undersigned, being the Board of Directors of
the Corporation, executes these Amended Articles of Incorporation and certifies
to the truth of the facts herein stated, this ___ day of October, 1996.
/s/Daniel H. Engh /s/Dennis S. Engh
- --------------------------- -----------------------------
Daniel H. Engh Dennis S. Engh
/s/Darin Engh /s/Tony Lotito
- --------------------------- -----------------------------
Darin Engh Tony Lotito
/s/Thomas F. Harrison
- ---------------------------
Thomas F. Harrison
The appointment of the undersigned as the registered agent of the
Corporation is hereby accepted.
/s/Dennis S. Engh
---------------------------------
Dennis S. Engh
Registered Agent
-3-
AMENDED
ARTICLES OF INCORPORATION
OF
UTAH CLAY TECHNOLOGY, INC.
The undersigned natural persons, being over the age of eighteen (18)
years, and acting as the Board of Directors under the provisions of the Utah
Revised Business Corporation Act (hereinafter referred to as the "Act") adopts
the following amended Articles of Incorporation:
ARTICLE I
The name of this corporation is Utah Clay Technology, Inc. (the
"Corporation").
ARTICLE II
The Corporation is organized to engage in any lawful act or activity for
which corporations may be organized under the Act.
ARTICLE III
The Corporation is authorized to issue two classes of shares, to be
designated as:
1) Common Stock and;
2) Preferred Stock
COMMON STOCK:
AUTHORIZED NUMBER OF SHARES: The total number of shares of Common
Stock that the Corporation is authorized to issue is Thirty Million
(30,000,000).
PAR VALUE: The Common Stock of the corporation shall have a par value
of ONE HUNDREDTH CENT ($.001) per share and shall be entitled to receive the net
assets of the Corporation after distribution to Preferred Shares in the event of
<PAGE>
Received
March 20, 2000
Utah Div. of
Corp. & Comm. Code
the liquidation and dissolution of the Company.
PREFERRED STOCK:
AUTHORIZED NUMBER OF SHARE: The total number of shares of Preferred
Stock that the Corporation is authorized is TEN MILLION SHARES (10,000,000).
PAR VALUE: The Preferred Stock of the Corporation shall have a par
value of ONE HUNDREDTH CENT ($0.001) per share and shall be entitled to receive
the asset of the corporation over the Company's common Stock in the event of
liquidation and dissolution of the Company.
ARTICLE IV
The shareholders of the Corporation shall have no pre-emptive rights with
respect to issuance by the corporation of shares of its Common Stock.
ARTICLE V
The street address of the registered office of the Corporation is 3985
South 2000 East, Salt Lake City, Utah 84124. The name of the registered agent
of the Corporation at that address is Dennis S. Engh.
ARTICLE VI
The Corporation authorizes indemnification of its directors and officers,
and advancement of expenses, to the extent set forth respectively in Section
9092 and 904 of the Utah Revised Business Corporation Act.
ARTICLE VII
The name and address of the Board of Directors of the Corporation is as
follows:
<PAGE>
Daniel H. Engh Dennis S. Engh
2340 East Germania Circle 4532 Briarcreek Drive
Sandy, Utah 84093 Salt Lake City, Utah 84117
Darin Engh Tony Lotito
437 East Elise Street 4610 South Naniloa Drive
Sandy, Utah 84070 Salt Lake City, Utah 84124
Thomas F. Harrison
2930 Millcreek Road
Salt Lake City, Utah 84109
IN WITNESS WHEREOF, the undersigned, being the Board of Directors of the
Corporation, executes these Amended Articles of Incorporation and certifies to
the truth of the facts herein stated, this ___ day of March, 2000.
/s/Daniel H. Engh /s/Dennis S. Engh
- --------------------------------- ----------------------------------
Daniel H. Engh Dennis S. Engh
/s/Darin Engh /s/Tony Lotito
- -------------------------------- ----------------------------------
Darin Engh Tony Lotito
/s/Thomas F. Harrison
- --------------------------------
Thomas F. Harrison
The appointment of the undersigned as the registered agent of the
Corporation is hereby accepted.
/s/Dennis S. Engh
----------------------------------
Dennis S. Engh
Registered Agent
BYLAWS
OF
UTAH CLAY TECHNOLOGY, INC.
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of the corporation
shall be established and maintained at 3985 South 2000 East, in Salt Lake City,
Salt Lake County, Utah.
SECTION 2. OTHER OFFICES. The corporation may have other offices, either
within or without the State of Utah, at such place or places as the Board of
Directors may from time to time appoint or the business of the corporation may
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
------------------------
SECTION 1. ANNUAL MEETINGS. Annual meetings of stockholders for the
election of directors and for such other business as may be stated in the
notice of the meeting, shall be held at such place, either within or without the
State of Utah, and at such time and date as the Board of Directors, by
resolution, shall determine and as set forth in the notice of the meeting. In
the event the Board of Directors fails to so determine the time, date and place
of meeting, the annual meeting of stockholders shall be held at the registered
office of the corporation in Utah on the 3rd Saturday in October of each year at
ten o'clock a.m.
Exhibit 3(ii)
Page 1 of 16 Pages
<PAGE>
If the date of the annual meeting shall fall upon a legal holiday,
the meeting shall be held on the next succeeding business day. At each annual
meeting, the stockholders entitled to vote shall elect a Board of Directors and
they may transact such other corporate business as shall be stated in the notice
of the meeting.
SECTION 2. OTHER MEETINGS. Meetings of stockholders for any purpose
other than the election of directors may be held at such time and place, within
or without the State of Utah, as shall be stated in the notice of the meeting.
SECTION 3. VOTING. Each stockholder entitled to vote in accordance with
the terms of the Articles of Incorporation and in accordance with the provisions
of these Bylaws shall be entitled to one vote, in person or by proxy, for each
share of stock entitled to vote held by such stockholder, but no proxy shall be
voted after three years from its date unless such proxy provides for a longer
period. Upon the demand of any stockholder, the vote for directors and the vote
upon any question before the meeting, shall be by ballot. All elections for
directors shall be decided by plurality vote of the shares present in person or
represented by proxy at the meeting and entitled to vote on the election of
directors; and all other questions shall be decided by the affirmative vote of
the majority of shares present in person or represented by proxy at the meeting
and entitled to vote on the subject matter, except as otherwise provided by the
Articles of Incorporation or the laws of the State of Utah.
Exhibit 3(ii)
Page 2 of 16 Pages
<PAGE>
A complete list of the stockholders entitled to vote at the ensuing
election, arranged in alphabetical order, with the address of each, and the
number of shares held by each, shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours for a period of at least ten (10) days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at the
time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
SECTION 4. QUORUM. Except as otherwise required by law, by the Articles
of Incorporation or by these Bylaws, the presence, in person or by proxy, of
stockholders holding a majority of the stock of the corporation entitled to
vote shall constitute a quorum at all meetings of the stockholders. In case a
quorum shall not be present at any meeting, a majority in interest of the
stockholders entitled to vote thereat, present in person or by proxy, shall
have power to adjourn the meeting from time to time, without notice other than
announcement at the meeting until the requisite amount of stock entitled to vote
shall be present. At any such adjourned meeting at which the requisite amount of
stock entitled to vote shall be represented, any business may be transacted
which might have been transacted at the meeting as originally noticed; but only
those stockholders entitled to vote at the meeting as originally noticed shall
be entitled to vote at any adjournment or adjournments thereof.
Exhibit 3(ii)
Page 3 of 16 Pages
<PAGE>
SECTION 5. SPECIAL MEETINGS. Special meetings of the stockholders for
any purpose or purposes may be called by the President or Secretary, or by
resolution of the directors.
SECTION 6. NOTICE OF MEETINGS. Written notice, stating the place, date
and time of the meeting, and the general nature of the business to be
considered, shall be given to each stockholder entitled to vote thereat at his
address as it appears on the records of the corporation, not less than ten (10)
nor more than sixty (60) days before the date of the meeting. No business other
than that stated in the notice shall be transacted at any meeting without the
unanimous consent of all the stockholders entitled to vote thereat.
SECTION 7. ACTION WITHOUT MEETING. Unless otherwise provided by the
Articles of Incorporation, any action required to be taken at any annual or
special meeting of stockholders, or any action which may be taken at any annual
or special meeting, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
Exhibit 3(ii)
Page 4 of 16 Pages
<PAGE>
ARTICLE III
DIRECTORS
---------
SECTION 1. NUMBER AND TERM. The number of directors shall be one or
more. The directors shall be elected at the annual meeting of the stockholders
and each director shall be elected to serve until his or her successor shall be
elected and shall qualify. Directors need not be stockholders.
SECTION 2. RESIGNATIONS. Any director, member of a committee or other
office may resign at any time. Such resignation shall be made in writing, and
shall take effect at the time specified therein, and if no time be specified, at
the time of its receipt by the President or Secretary. The acceptance of
a resignation shall not be necessary to make it effective.
SECTION 3. VACANCIES. If the office of any director, member of a
committee or other officer becomes vacant, the remaining directors in office,
though less than a quorum by a majority vote, may appoint any qualified person
to fill such vacancy, who shall hold office for the unexpired term and until his
successor shall be duly chosen.
SECTION 4. REMOVAL. Any director or directors may be removed either
for or without cause at any time by the affirmative vote of the holders of a
majority of all the shares of stock outstanding and entitled to vote, at a
special meeting of the stockholders called for the purpose and the vacancies
thus created may be filled, at the meeting held for the purpose of removal, by
the affirmative vote of a majority in interest of the stockholders entitled to
vote.
Exhibit 3(ii)
Page 5 of 16 Pages
<PAGE>
SECTION 5. INCREASE OF NUMBER. The number of directors may be increased
by amendment of these Bylaws by the affirmative vote of a majority vote of a
majority in interest of the stockholders, at the annual meeting or at a special
meeting called for that purpose, and by like vote the additional directors
may be chosen at such meeting to hold office until the next annual election
and until their successors are elected and qualify.
SECTION 6. POWERS. The Board of Directors shall exercise all of the
powers of the corporation except such as are by law, or by the Articles of
Incorporation of the corporation or by these Bylaws conferred upon or reserved
to the stockholders.
SECTION 7. COMMITTEES. The Board of Directors may, by resolution or
resolutions passed by a majority of the whole board, designate one or more
committees, each committee to consist of one or more of the directors of the
corporation. Any such committee, to the extent provided in the resolution of the
Board of Directors, or in these Bylaws, shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the corporation, and may authorize the seal of the corporation to
be affixed to all papers which may require it; but no such committee shall have
the power or authority in reference to amending the Articles of Incorporation,
adopting an agreement of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets, recommending to the stockholders a
Exhibit 3(ii)
Page 6 of 16 Pages
<PAGE>
dissolution of the corporation or a revocation of a dissolution, or amending the
Bylaws of the corporation; and, unless the resolution, these Bylaws or the
Articles of Incorporation expressly so provide, no such committee shall have the
power or authority to declare a dividend or to authorize the issuance of stock.
SECTION 8. ANNUAL MEETINGS. The annual meeting of the Board may be held
at such time and place, either within or without the State of Utah, as shall be
fixed by a vote of the shareholders at the annual meeting and no notice of such
meeting shall be necessary to the newly elected directors in order to legally
constitute such meeting.
SECTION 9. REGULAR MEETINGS. Regular meetings of the directors may be
held without notice at such places and times as shall be determined from time to
time by resolution of the directors.
SECTION 10. SPECIAL MEETINGS. Special meetings of the board may be
called by the President or by the Secretary on the written request of any two
(2) directors on at least two (2) days' notice to each director and shall be
held at such place or places as may be determined by the directors, or as shall
be stated in the call of the meeting.
Exhibit 3(ii)
Page 7 of 16 Pages
<PAGE>
SECTION 11. QUORUM. A majority of the directors shall constitute a
quorum for the transaction of business. If at any meeting of the board there
shall be less than a quorum present, a majority of those present may adjourn the
meeting from time to time until a quorum is obtained, and no further notice
thereof need be given other than by announcement at the meeting which shall be
so adjourned.
SECTION 12. COMPENSATION. Directors shall not receive any stated salary
for their services as directors or as members of committees, but by resolution
of the board a fixed fee and expenses of attendance may be allowed for
attendance at each meeting. Nothing herein contained shall be construed to
preclude any director from serving the corporation in any other capacity as an
officer, agent or otherwise, and receiving compensation therefor.
SECTION 13. ACTION WITHOUT MEETING. Any action required or permitted to
be taken at any meeting of the Board of Directors, or of any committee
thereof, may be taken without a meeting, if prior to such action a written
consent thereto is signed by all members of the board, or of such committee as
the case may be, and such written consent is filed with the minutes of
proceedings of the board or committee.
ARTICLE IV
OFFICERS
--------
SECTION 1. OFFICERS. The officers of the corporation shall be a
President, a Treasurer, and a Secretary, all of whom shall be elected by the
Board of Directors and who shall hold office until their successors are elected
and qualified. In addition, the Board of Directors may elect a Chairman, one (1)
or more Vice Presidents and such Assistant Secretaries and Assistant Treasurers
Exhibit 3(ii)
Page 8 of 16 Pages
<PAGE>
as they may deem proper. None of the officers of the corporation need be
directors. The officers shall be elected at the first meeting of the Board of
Directors after each annual meeting. More than two (2) offices may be held by
the same person.
SECTION 2. OTHER OFFICERS AND AGENTS. The Board of Directors may appoint
such other officers and agents as it may deem advisable, who shall hold their
offices for such terms and shall exercise such powers and perform such duties
as shall be determined from time to time by the Board of Directors.
SECTION 3. CHAIRMAN. The Chairman of the Board of Directors, if one be
elected, shall preside at all meetings of the Board of Directors and he shall
have and perform such other duties as from time to time may be assigned to him
by the Board of Directors.
SECTION 4. PRESIDENT. The President shall be the chief executive officer
of the corporation and shall have the general powers and duties of supervision
and management usually vested in the office of President of a corporation.
He shall preside at all meetings of the stockholders if present thereat, and
in the absence or non-election of the Chairman of the Board of Directors, at
all meetings of the Board of Directors, and shall have general supervision,
direction and control of the business of the corporation. Except as the Board of
Directors shall authorize the execution thereof in some other manner, he
shall execute bonds, mortgages and other contracts in behalf of the corporation,
and shall cause the seal to be affixed to any instrument requiring it and when
so affixed the seal shall be attested by the signature of the Secretary or an
Assistant Secretary.
Exhibit 3(ii)
Page 9 of 16 Pages
<PAGE>
SECTION 5. VICE PRESIDENT. Each Vice President shall have such powers
and shall perform such duties as shall be assigned to him by the directors.
SECTION 6. TREASURER. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation. He shall
deposit all monies and other valuables in the name and to the credit of the
corporation in such depositories as may be designated by the Board of Directors.
SECTION 7. SECRETARY. The Secretary shall give, or cause to be given,
notice of all meetings of stockholders and directors, and all other notices
required by law or by these Bylaws, and in case of his absence or refusal
or neglect so to do, any such notice may be given by any person thereunto
directed by the President, or by the directors, or stockholders, upon whose
requisition the meeting is called as provided in these Bylaws. He shall record
all the proceedings of the meetings of the corporation and of the directors
in a book to be kept for that purpose, and shall perform such other duties as
may be assigned to him by the directors or the President. He shall have custody
of the seal of the corporation and shall affix the same to all instruments
requiring it, when authorized by the directors or the President, and attest the
same.
Exhibit 3(ii)
Page 10 of 16 Pages
<PAGE>
SECTION 8. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. Assistant
Treasurers and Assistant Secretaries, if any, shall be elected and shall have
such powers and shall perform such duties as shall be assigned to them,
respectively, by the directors.
SECTION 9. SALARIES. The salaries of all officers of the corporation
shall be fixed by the Board of Directors.
SECTION 10.REMOVAL. Any officer elected or appointed by the Board of
Directors may be removed from office, with or without cause, at any time by
the affirmative vote of a majority of the directors present at any meeting of
the Board at which a quorum is present.
ARTICLE V
MISCELLANEOUS
-------------
SECTION 1. CERTIFICATES OF STOCK. Certificates of stock, signed by the
President or Vice President, and the Treasurer or an Assistant Treasurer, or
Secretary or an Assistant Secretary, shall be issued to each stockholder
certifying the number of shares owned by him in the corporation. Any of or all
the signatures may be facsimiles.
SECTION 2. LOST CERTIFICATES. A new certificate of stock may be issued
in the place of any certificate theretofore issued by the corporation, alleged
to have been lost or destroyed, and the directors may, in their discretion,
require the owner of the lost or destroyed certificate, or his legal
representatives, to give the corporation a bond, in such sum as they may direct,
not exceeding double the value of the stock, to indemnify the corporation
against any claim that may be made against it on account of the alleged loss of
any such certificate, or the issuance of any such new certificate.
Exhibit 3(ii)
Page 11 of 16 Pages
<PAGE>
SECTION 3. TRANSFER OF SHARES. The shares of stock of the corporation
shall be transferable only upon its books by the holders thereof in person or by
their duly authorized attorneys or legal representatives, and upon such transfer
the old certificates shall be surrendered to the corporation by the delivery
thereof to the person in charge of the stock and transfer books and ledgers, or
to such other person as the directors may designate, by whom they shall be
cancelled, and new certificates shall thereupon be issued. A record shall be
made of each transfer and whenever a transfer shall be made for collateral
security, and not absolutely, it shall be so expressed in the entry of the
transfer.
SECTION 4. STOCKHOLDERS RECORD DATE. In order that the corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporation
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than sixty (60) nor less than
ten (10) days before the date of such meeting, nor more than sixty (60) days
prior to any other action. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting; provided, however, that the Board of Directors may fix a new
record date for the adjourned meeting.
Exhibit 3(ii)
Page 12 of 16 Pages
<PAGE>
SECTION 5. REGISTERED STOCKHOLDERS. The corporation shall be entitled to
treat the holder of record of any share or shares as the holder in fact thereof,
and, accordingly, shall not be bound to recognize any equitable or other claim
to or interest in such share on the part of any other person, whether or not
it shall have express or other notice thereof, except as may be otherwise
expressly provided by the laws of Utah.
SECTION 6. DIVIDENDS. Subject to the provisions of the Articles of
Incorporation, the Board of Directors may, out of funds legally available
therefor at any regular or special meeting, declare dividends upon the capital
stock of the corporation as and when they deem expedient. Before declaring any
dividend there may be set apart out of any funds of the corporation available
for dividends, such sum or sums as the directors from or as a reserve fund to
meet contingencies or for equalizing dividends or for such other purposes as the
directors shall deem conducive to the interests of the corporation.
SECTION 7. SEAL. The corporate seal shall be circular in form and shall
contain the name of the corporation and the words "CORPORATE SEAL." Said seal
may be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
Exhibit 3(ii)
Page 13 of 16 Pages
<PAGE>
SECTION 8. FISCAL YEAR. The fiscal year of the corporation shall be
determined by resolution of the Board of Directors.
SECTION 9. CHECKS. All checks, drafts or other orders for the payment of
money, notes or other evidences of indebtedness issued in the name of the
corporation shall be signed by such officer or officers, agent or agents of the
corporation, and in such manner as shall be determined from time to time by
resolution of the Board of Directors.
SECTION 10. NOTICE. Whenever any notice is required by these Bylaws to
be given, personal notice is not meant unless expressly so stated, and any
notice so required shall be deemed to be sufficient if given by depositing the
same in the United States mail, postage prepaid, addressed to the person
entitled thereto at his address as it appears on the records of the corporation,
and such notice shall be deemed to have been given on the day of such mailing.
Stockholders not entitled to vote shall not be entitled to receive notice of any
meetings except as otherwise provided by Statute.
SECTION 11. WAIVER OF NOTICE. Whenever any notice whatever is required
to be given under the provisions of any law, or under the provisions of the
Articles of Incorporation of the corporation or these Bylaws, a waiver
thereof in writing, signed by the person or persons entitled to said notice,
whether before or after the time stated therein, shall be deemed equivalent
thereto.
Exhibit 3(ii)
Page 14 of 16 Pages
<PAGE>
ARTICLE VI
INDEMNIFICATION OF OFFICERS, DIRECTORS,
---------------------------------------
EMPLOYEES AND AGENTS
--------------------
To the extent and in the manner permitted by the laws of the State of
Utah, and specifically as is permitted under the Utah Revised Business
Corporation Act, the corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, other than an action by or in the right of the corporation, by
reason of the fact that such person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses, including attorneys'
fees, judgments, fines and amounts paid in settlement.
ARTICLE VII
AMENDMENTS
----------
These Bylaws may be altered or repealed and Bylaws may be made at
any annual meeting of the stockholders or at any special meeting thereof if
notice of the proposed alteration or repeal or Bylaw or Bylaws to be made be
contained in the notice of such special meeting, by the affirmative vote of a
majority of the stock issued and outstanding and entitled to vote thereat, or by
the affirmative vote of a majority of the Board of Directors, at any regular
meeting of the Board of Directors, or at any special meeting of the Board of
Directors, if notice of the proposed alteration or repeal, or Bylaw or Bylaws to
be made, be contained in the notice of such special meeting.
Exhibit 3(ii)
Page 15 of 16 Pages
<PAGE>
APPROVAL OF DIRECTORS
---------------------
The foregoing Bylaws, after being read, section by section, were
approved by the directors of this corporation at a meeting held on March 2,
1994.
Exhibit 3(ii)
Page 16 of 16 Pages
FULLER, TUBB, POMEROY & STOKES
A PROFESSIONAL CORPORATION
ATTORNEYS AT LAW
201 ROBERT S. KERR AVENUE, SUITE 1000
OKLAHOMA CITY, OK 73102
G. M. FULLER (1920-1999) TELEPHONE 405-235-2575
JERRY TUBB FACSIMILE 405-232-8384
DAVID POMEROY
TERRY STOKES
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OF COUNSEL:
MICHAEL A. BICKFORD
THOMAS J. KENAN
ROLAND TAGUE
March 31, 2000
Dennis Engh, President
Utah Clay Technology, Inc.
3985 South 2000 East
Salt Lake City, UT 84124
Re: Utah Clay Technology, Inc.
Dear Mr. Engh:
I have reviewed the Form SB-2 Registration Statement of Utah Clay
Technology, Inc. and am of the opinion that the securities being registered on
the Form SB-2 have been legally issued, are fully paid, and are non-assessable.
Sincerely,
/s/ Thomas J. Kenan
-----------------------------------
Thomas J. Kenan
Exhibit 5
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UTAH CLAY TECHNOLOGY, INC.
2000 STOCK OPTION PLAN
1. Purposes of the Plan. The purposes of this 2000 Stock Option Plan are
to attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under this Plan may be incentive stock options (as
defined under Section 422 of the Code) or nonqualified stock options, as
determined by the Option Committee at the time of grant of an option and subject
to the applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated thereunder.
2. Definitions. As used herein, the following definitions shall apply:
2.1 "Option Committee" means the Board or any of its committees, as
applicable, that is administering the Plan pursuant to Section 4 of the Plan.
2.2 "Board" means the Board of Directors of the Company.
2.3 "Code" means the Internal Revenue Code of 1986, as amended.
2.4 "Company" means UTAH CLAY TECHNOLOGY, INC., a Utah corporation.
2.5 "Consultant" means any consultant or advisor to the Company or
any Parent or Subsidiary and any director of the Company whether compensated for
such services or not, but not including any Employee.
2.6 "Continuous Status as an Employee" means the absence of any
interruption or termination of the employment relationship by the Company or any
Subsidiary. Continuous Status as an Employee shall not be considered interrupted
in the case of: (i) any leave of absence approved by the Board, including sick
leave, military leave, or any other personal leave; provided, however, that for
purposes of Incentive Stock Options, such leave is for a period of not more than
90 days, unless reemployment upon the expiration of such leave is guaranteed by
contract or statute, or unless provided otherwise pursuant to Company policy
adopted from time to time; or
Exhibit 9
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(ii) in the case of transfers between locations of the Company or between the
Company, its Subsidiaries or its successors.
2.7 "Employee" means any person, including officers and directors,
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.
2.8 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
2.9 "Fair Market Value" means, as of any date, the value of Stock
determined as follows:
2.9.1 If the Stock is listed on any established stock exchange
or a national market system including without limitation the National Market
System of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, its Fair Market Value shall be the closing sales
price for such stock (or the closing bid, if no sales were reported, as
quoted on such system or exchange or the exchange with the greatest volume of
trading in Stock for the last market trading day prior to the time of
determination) as reported in the Wall Street Journal or such other source as
the Option Committee deems reliable;
2.9.2 If the Stock is quoted on the NASDAQ System (but not on
the National Market System thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high and low asked prices for the Stock; or
2.9.3 In the absence of an established market for the Stock,
the Fair Market Value thereof shall be determined in good faith by the Option
Committee.
2.10 "Incentive Stock Option" means an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code.
2.11 "Nonqualified Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
2.12 "Option" means a stock option granted pursuant to the Plan.
2.13 "Optioned Stock" means the Stock subject to an Option.
2.14 "Optionee" means an Employee or Consultant who receives an
Option.
Exhibit 9
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2.15 "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
2.16 "Plan" means this 2000 Stock Option Plan.
2.17 "Share" means a share of the Stock, as adjusted in accordance
with Section 13 of the Plan.
2.18 "Stock" means the Common Stock, par value $.001 per share, of
the Company.
2.19 "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 13 of
the Plan, the maximum number of shares of Stock which may be optioned and sold
under the Plan is 500,000 shares. The shares may be authorized, but unissued, or
reacquired Stock. If an Option should expire or become unexercisable for any
reason without having been exercised in full, the unpurchased Shares which were
subject thereto shall, unless the Plan shall have been terminated, become
available for future grant under the Plan.
4. Administration of the Plan.
4.1 Administration By Board or Committee. The Plan shall be
administered by (a) the Board or (b) a committee designated by the Board to
administer the Plan, which committee shall be constituted in such a manner as to
permit the Plan to comply with Rule 16b-3 promulgated under the Exchange Act or
any successor thereto ("Rule 16b-3") with respect to a plan intended to qualify
thereunder as a discretionary plan. Once appointed, such committee shall
continue to serve in its designated capacity until otherwise directed by the
Board. From time to time the Board may increase the size of the committee and
appoint additional members thereof, remove members (with or without cause) and
appoint new members in substitution therefor, fill vacancies, however caused,
and remove all members of the committee and thereafter directly administer the
Plan, all to the extent permitted by Rule 16b-3 with respect to a plan intended
to qualify thereunder as a discretionary plan.
4.2 Limitation on Administration by Board. Notwithstanding the
foregoing, the Plan shall not be administered by the Board if (a) the Company
and its officers and directors are then subject to the requirements of Section
16 of the Exchange Act and (b) the Board's administration of the Plan would
prevent the Plan from complying with Rule 16b-3.
4.3 Multiple Administrative Bodies. If permitted by
Exhibit 9
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Rule 16b-3, the Plan may be administered by different bodies with respect to
directors, non-director officers and Employees who are neither directors nor
officers.
4.4 Powers of the Option Committee. Subject to the provisions of the
Plan and in, the case of a committee, the specific duties delegated by the
Board to such committee, the Option Committee shall have the authority, in its
discretion:
4.4.1 to determine whether and to what extent Options shall be
granted hereunder;
4.4.2 to select the officers, Consultants and Employees to whom
Options may from time to time be granted hereunder;
4.4.3 to determine the number of shares of Stock to be covered
by each such award granted hereunder;
4.4.4 to determine the Fair Market Value of the Stock, in
accordance with Section 2.9 of the Plan;
4.4.5 to approve forms of agreement for use under the Plan;
4.4.6 to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder (including, but not
limited to, the per share exercise price for the Shares to be issued pursuant
to the exercise of an Option and any restriction or limitation, or any
vesting, acceleration or waiver of forfeiture restrictions regarding any Option
or other award and/or the shares of Stock relating thereto, based in each case
on such factors as the Option Committee shall determine, in its sole
discretion);
4.4.7 to determine whether and under what circumstances an
Option may be bought-out for cash under subsection 10.4;
4.4.8 to determine whether, to what extent and under what
circumstances Stock and other amounts payable with respect to an award under
this Plan shall be deferred either automatically or at the election of the
participant (including providing for and determining the amount, if any, of any
deemed earnings on any deferred amount during any deferral period); and
4.4.9 to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Stock covered by such
Option shall have declined since the date the Option was granted.
Exhibit 9
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4.5 Effect of Option Committee's Decision. All decisions,
determinations and interpretations of the Option Committee shall be final and
binding on all Optionees and any other holders of any Options. Neither the
Board, the Committee, nor any member thereof shall be liable for any act,
omission, interpretation, construction or determination made in connection with
the Plan in good faith, and the members of the Board and of the Committee shall
be entitled to indemnification and reimbursement by the Company in respect of
any claim, loss, damage or expense (including counsel fees) arising therefrom to
the full extent permitted by law.
5. Eligibility.
5.1 Nonqualified Stock Options may be granted to Employees and
Consultants. Incentive Stock Options may be granted only to Employees. An
Employee or Consultant who has been granted an Option may, if he is otherwise
eligible, be granted an additional Option or Options.
5.2 Each Option shall be designated in the written option
agreement as either an Incentive Stock Option or a Nonqualified Stock Option.
However, notwithstanding such designations to the extent that the aggregate Fair
Market Value of the Shares with respect to which Options designated as Incentive
Stock Options are exercisable for the first time by any Optionee during any
calendar year (under all plans of the Company or any Parent or Subsidiary)
exceeds $100,000, such excess Options shall be treated as Nonqualified Stock
Options. For this purpose, Incentive Stock Options shall be taken into account
in the order in which they were granted, and the Fair Market Value of the Shares
shall be determined as of the time the Option with respect to such Shares is
granted.
5.3 The Plan shall not confer upon any Optionee any right
with respect to continuation of employment or consulting relationship with the
Company, nor shall it interfere in any way with his right or the Company's right
to terminate his employment or consulting relationship at any time, with or
without cause, unless otherwise agreed in writing by the Company and such
Optionee.
6. Term of Plan. The Plan shall become effective upon its adoption
by the Board of Directors subject only to approval by the holders of a majority
of the outstanding Shares within 12 months after such date. Should the Plan not
be approved by a vote of shareholders as specified above, the Plan shall
terminate 12 months after the effective date, all options issued prior to that
termination date shall continue in effect but without the benefits that would
accrue under the Code or the Act from such shareholder approval. Otherwise, it
shall continue in effect until ten years
Exhibit 9
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from the effective date, unless extended by the Board or sooner terminated under
Section 15 of the Plan. No grants of Options will be made pursuant to the Plan
after termination of the Plan.
7. Term of Option. The term of each Option shall be the term stated in
the Option Agreement; provided, however, that in the case of an Incentive Stock
Option, the terms shall be no more than 10 years from the date of grant thereof
or such shorter term as may be provided in the Option Agreement. However, in the
case of an Option granted to an Optionee who, at the time the Option is granted,
owns Stock representing more than 10% of the voting power of all classes of
stock of the Company or any Parent or Subsidiary, the term of the Option shall
be five years from the date of grant thereof or such shorter term as may be
provided in the Option Agreement.
8. Option Exercise Price and Consideration.
8.1 The per share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be such price as is determined by the
Option Committee; provided, however, that as to an Incentive Option:
8.1.1 granted to an Employee who, at the time of the grant of
such Incentive Stock Option, owns stock representing more than 10% of the voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
per Share exercise price shall be no less than 110% of the Fair Market Value per
Share on the date of grant.
8.1.2 granted to any Employee, the per Share exercise price
shall be no less than 100% of the Fair Market Value per Share on the date of
grant.
8.2 The consideration to be paid for the Shares to be issued upon
exercise of an Option may be paid by certified or cashier's check. In the
discretion of the Option Committee as set forth in the Option Agreement or,
except for Incentive Options, determined at the time of exercise, payment may
also be made by any or all of the following:
8.2.1 check,
8.2.2 promissory note,
8.2.3 other shares of the Company's capital stock which (a) in
the case of shares of the Company's capital stock acquired upon exercise of
an Option either have been owned by the Optionee for more than six months on
the date of surrender or were not acquired, directly or indirectly, from the
Company, and (b) have a Fair Market Value on the date of surrender equal to the
Exhibit 9
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aggregate exercise price of the Shares to which said Option shall be exercised,
8.2.4 authorization for the Company to retain from the total
number of Shares as to which the Option is exercised that number of Shares
having a Fair Market Value on the date of exercise equal to the exercise price
for the total number of Shares as to which the Option is exercised,
8.2.5 delivery of a properly executed exercise notice together
with irrevocable instructions to a broker to promptly deliver to the Company the
amount of sale or loan proceeds required to pay the exercise price, or
8.2.6 such other consideration and method of payment for
the issuance of Shares to the extent permitted under applicable laws.
9. Limitation on Exercise. The following limitations on exercise of
Options shall apply to all Incentive Options and, except to the extent waived by
the Option Committee and stated in the Option Agreement, to all other Options.
9.1 Termination of Employment. In the event of termination of an
Optionee's relationship as a Consultant (unless such termination is for purposes
of becoming an Employee of the Company) or on termination of an Optionee's
Continuous Status as an Employee with the Company (as the case may be), such
Optionee may, but only within 90 days (or, as to Options other than Incentive
Options, such longer period of time as is determined by the Option Committee)
after the date of such termination, but in no event later than the expiration
date of the term of such Option as set forth in the Option Agreement, exercise
his Option to the extent that Optionee was entitled to exercise it at the date
of such termination. To the extent that Optionee was not entitled to exercise
the Option at the date of such termination, or if Optionee does not exercise
such Option to the extent so entitled within the time specified herein, the
Option shall terminate.
9.2 Disability of Optionee. Notwithstanding the provisions of
Section 9.1 above, in the event of termination of an Optionee's relationship as
a Consultant or Continuous Status as an Employee as a result of his total and
permanent disability (as defined in Section 22(e)(3) of the Code), Optionee may,
but only within 12 months from the date of such termination and in no event
later than the expiration date of the term of such Option as set forth in the
Option Agreement, exercise the Option to the extent otherwise entitled to
exercise it at the date of such termination. To the extent that Optionee was not
entitled to exercise the Option at the date of termination, or if Optionee does
not exercise such Option to the extent so entitled within the time specified
herein,
Exhibit 9
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the Option shall terminate.
9.3 Death of Optionee. In the event of the death of an Optionee, the
Option may be exercised, at any time within 12 months following the date of
death (but in no event later than the expiration date of the term of such Option
as set forth in the Option Agreement), by the Optionee's estate or by a person
who acquired the right to exercise the Option by bequest or inheritance, but
only to the extent the Optionee was entitled to exercise the Option at the date
of death. To the extent that the Optionee was not entitled to exercise the
Option at the date of termination, or if the Optionee's estate (or such other
person who acquired the right to exercise the Option) does not exercise such
Option to the extent so entitled within the time specified herein, the Option
shall terminate.
10. Exercise of Option.
10.1 Procedure for Exercise; Rights as a Stockholder. An Option
shall be deemed to be exercised, and the Optionee deemed to be a stockholder of
the Shares being purchased upon exercise, when written notice of such exercise
has been given to the Company in accordance with the terms of the Option by the
person entitled to exercise the Option and full payment for the Shares with
respect to which the Option is exercised has been received by the Company. Full
payment may, as authorized by the Board, consist of any consideration and method
of payment allowable under Section 8.2 of the Plan. An Option may not be
exercised for a fraction of a Share.
10.2 Effect on Number of Shares. Exercise of an Option in any
manner shall result in a decrease in the number of shares which thereafter may
be available, both for purposes of the Plan and for sale under the Option, by
the number of Shares as to which the Option is exercised.
10.3 Rule 16b-3. Options granted to persons subject to Section
16(b) of the Exchange Act must comply with the Rule 16b-3 and shall contain such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
10.4 Buyout Provisions. The Option Committee may at any time
offer to buy out for a payment in cash or Shares, an Option previously granted,
based on such terms and conditions as the Option Committee shall establish and
communicate to the Optionee at the time that such offer is made.
11. Non-Transferability of Options. The Options may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner other
than by will or by the laws of descent or
Exhibit 9
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distribution and may be exercised, during the lifetime of the Optionee, only by
the Optionee.
12. Stock Withholding to Satisfy Withholding Tax Obligations.
12.1 At the discretion of the Option Committee, Optionees may
satisfy withholding tax obligations as provided in this paragraph. When an
Optionee incurs tax liability in connection with an Option, which tax liability
is subject to tax withholding under applicable tax laws, and the Optionee is
obligated to pay the Company an amount required to be withheld under applicable
tax laws, the Optionee may satisfy the withholding tax obligation by electing to
have the Company withhold from the Shares to be issued upon exercise of the
Option, that number of Shares having a Fair Market Value equal to the amount
required to be withheld. The Fair Market Value of the Shares to be withheld
shall be determined on the date that the amount of tax to be withheld is to be
determined (the "Tax Date").
12.2 All elections by an Optionee to have Shares withheld for
this purpose shall be made in writing in a form acceptable to the Option
Committee and shall be subject to the following restrictions:
12.2.1 the election must be made on or prior to the applicable
Tax Date;
12.2.2 once made, the election shall be irrevocable as to the
particular Shares of the Option as to which the election is made;
12.2.3 all elections shall be subject to the consent or
disapproval of the Option Committee; and
12.2.4 if the Optionee is subject to Rule 16b-3, the election
must comply with the applicable provisions of Rule 16b-3 and shall be subject to
such additional conditions or restrictions as may be required thereunder to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
12.3 In the event the election to have Shares withheld is made by an
Optionee, the Tax Date is deferred under Section 83 of the Code and no election
is filed under Section 83(b) of the Code, the Optionee shall receive the full
number of Shares with respect to which the Option is exercised but such Optionee
shall be unconditionally obligated to tender back to the Company the proper
number of Shares on the Tax Date.
13. Changes in the Company's Capital Structure. The existence of
outstanding Options shall not affect in any way the
Exhibit 9
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right or power of the Company or its stockholders to make or authorize any or
all adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business, or any merger or consolidation of
the Company, or any issue of bond, debentures, preferred or prior preference
stock ahead of or affecting the Stock or the rights thereof, or the dissolution
or liquidation of the Company, or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding, whether of a
similar character or otherwise; subject to the following:
13.1 If the Company shall effect a subdivision or consolidation
of shares or other capital readjustment, the payment of a stock dividend, or
other increase or reduction of the number of shares of the Stock outstanding,
without receiving compensation therefor in money, services or property, then (a)
the number, class, and per share price of shares of Stock subject to outstanding
Options hereunder shall be appropriately adjusted in such a manner as to entitle
an Optionee to receive upon exercise of an Option, for the same aggregate cash
consideration, the same total number and class of shares as he would have
received had he exercised his Option; (b) the number and class of shares of
Stock then reserved for issuance under the Plan shall be adjusted by
substituting for the total number and class of shares of Stock then reserved
that number and class of shares of stock that would have been received by the
owner of an equal number of outstanding shares of each class of Stock as the
result of the event requiring the adjustment.
13.2 Unless otherwise expressly provided in an Option Agreement,
upon a Corporate Change (as defined below), notwithstanding any other term of
this Plan, any and all outstanding Options not fully vested and exercisable
shall vest in full and be immediately exercisable, and any other restrictions on
such Options including, without limitation, requirements concerning the
achievement of specific goals shall terminate. The foregoing shall apply to
Incentive Options, unless stated to the contrary in the Option Agreement, even
though the effect may be to convert part of the Option to a Nonqualified Option.
13.3 As used in this Plan, a "Corporate Change" shall be deemed
to have occurred upon, and shall mean (a) the acquisition by any individual,
entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act) (a "Person"), of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 80% or more of either (i) the then
outstanding shares of Stock of the Company (the "Outstanding Company Common
Stock") or (ii) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); provided, however, that
the following
Exhibit 9
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transactions shall not constitute a Corporate Change: (u) any acquisition by
virtue of the conversion of preferred stock of the Company outstanding on the
effective date hereof; (v) customary transactions with and between underwriters
and selling group members with respect to a bona fide public offering of
securities, (w) any acquisition directly from the Company (excluding an
acquisition by virtue of the exercise of a conversion privilege), (x) any
acquisition by the Company, (y) any acquisition by any employee benefit plan(s)
(or related trust(s)) sponsored or maintained by the Company or any corporation
controlled by the Company or (z) any acquisition by any entity pursuant to a
reorganization, merger or consolidation, if, immediately following such
reorganization, merger or consolidation the conditions described in clauses (i),
(ii) and (iii) of clause (b) of this paragraph are satisfied; or (b) the
approval by the stockholders of the Company of a reorganization, merger or
consolidation, in each case, unless immediately following such reorganization,
merger or consolidation (i) more than 60% of, respectively, the then outstanding
shares of common stock (or other equivalent securities) of the entity resulting
from such reorganization, merger or consolidation and the combined voting power
of the then outstanding voting securities of such entity entitled to vote
generally in the election of directors (or other similar governing body) is then
beneficially owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Company Common Stock and Outstanding Company Voting Securities immediately prior
to such reorganization, merger or consolidation in substantially the same
proportions as their ownership, immediately prior to such reorganization, merger
or consolidation of the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (ii) no Person (excluding the Company,
any employee benefit plan(s) (or related trust(s)) of the Company and/or its
subsidiaries or such entity resulting from such reorganization, merger or
consolidation and any Person beneficially owning, immediately prior to such
reorganization, merger or consolidation, directly or indirectly, 80% or more of
the Outstanding Company Common Stock or Outstanding Company Voting Securities,
as the case may be) beneficially owns, directly or indirectly, 80% or more of,
respectively, the then outstanding shares of common stock (or other equivalent
securities) of the entity resulting from such reorganization, merger or
consolidation or the combined voting power of the then outstanding voting
securities of such entity entitled to vote generally in the election of
directors (or other similar governing body) and (iii) at least a majority of the
members of the board of directors (or other similar governing body) of the
entity resulting from such reorganization, merger or consolidation were members
of the Incumbent Board (as defined below) at the time of the execution of the
initial agreement providing for such reorganization, merger on consolidation.
The "Incumbent Board" shall mean individuals who as of the effective date hereof
constitute the Company's Board of
Exhibit 9
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Directors; provided, however, that any individual becoming a director subsequent
to such date whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of either (i) an actual or threatened election contest (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act), or an
actual or threatened solicitation of proxies or consents by or on behalf of a
Person other than the Company's Board of Directors or (ii) a plan or agreement
to replace a majority of the members of the Board of Directors then comprising
the Incumbent Board.
13.4 The Company intends that this Section shall comply with the
requirements of Rule 16b-3 and any future rules promulgated in substitution
therefor under the Exchange Act during the term of the Plan. Should any
provision of this Section not be necessary to comply with the requirements of
Rule 16b-3 or should any additional provisions be necessary for this Section to
comply with the requirements of Rule 16b-3, the Board of Directors may amend the
Plan to add to or modify the provisions of the Plan accordingly.
13.5 Except as hereinbefore expressly provided, the issue by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, for cash or property, or for labor or services either
upon direct sale or upon the exercise of rights or warrants to subscribe
therefor, or upon conversion of shares or obligations of the Company convertible
into such shares or other securities, shall not affect, and no adjustment by
reason thereof shall be made with respect to, the number, class, or price of
shares of Stock then subject to outstanding Options.
14. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date on which the Option Committee makes the determination
granting such Option, or such other date as is determined by the Option
Committee. Notice of the determination shall be given to each Employee or
Consultant to whom an Option is so granted within a reasonable time after the
date of such grant.
15. Amendment and Termination of the Plan.
15.1 Amendment and Termination. The Board may at any time amend,
alter, suspend or discontinue the Plan, but no amendment, alteration, suspension
or discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with Rule 16b-3 under the
Exhibit 9
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Exchange Act or with Section 422 of the Code (or any other applicable law or
regulation, including the applicable requirements of the NASD or an established
stock exchange), the Company shall obtain stockholder approval of any Plan
amendment in such a manner and to such a degree as required.
15.2 Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.
16. Conditions Upon Issuance of Shares.
16.1 Shares shall not be issued pursuant to the exercise of an
Option unless the exercise of such Option and the issuance and delivery of such
Shares pursuant thereto shall comply with all relevant provisions of law,
including without limitation, the Securities Act of 1933, as amended, the
Exchange Act, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the Shares may then be listed, and
shall be further subject to the approval of counsel for the Company with respect
to such compliance.
16.2 As a condition to the exercise of an Option, the Company may
require the person exercising such Option to represent and warrant at the time
of any such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
17. Reservation of Shares. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
18. Information to Optionees. The Company shall provide to each Optionee,
during the period for which such Optionee has one or more Options
outstanding, copies of all annual reports and other information which are
generally provided to all stockholders of the Company. The Company shall not be
required to provide such information to persons whose duties in connection with
the Company assure their access to equivalent information.
19. Governing Law; Construction. All rights and obligations under the
Plan shall be governed by, and the Plan shall be construed in accordance with,
the laws of the State of Delaware without regard to the principals of conflicts
of laws. Titles and
Exhibit 9
Page 13 of 14 Pages
<PAGE>
headings to Sections herein are for purposes of reference only, and shall in no
way limit, define or otherwise affect the meaning or interpretation of any
provisions of the Plan.
ADOPTED by the Directors on , 2000.
---------------
APPROVED by the Shareholders on ,2000.
-----------------
Exhibit 9
Page 14 of 14 Pages
<PAGE>
MINING LEASE
BETWEEN
DANIEL H. ENGH, CONNIE L. ENGH, DENNIS S. ENGH,
JUDY A. ENGH, DARIN ENGH, HOLLY ENGH (a.k.a. HOLLY KINGDON)
AND
UTAH CLAY TECHNOLOGY 1NC.
(A UTAH CORPORATION)
MARCH 1, 1994
<PAGE>
TABLE OF CONTENT
----------------
ARTICLE Page No.
- ------- --------
I - DEFINITIONS............................................................1
1.1 "Agreement"..............................................1
1.2 "Area of Interest".......................................2
l.3 "Assets".................................................2
1.4 "Leased Minerals"........................................2
1.5 "Development"............................................2
1.6 "Dollars" or "$".........................................2
1.7 "Exploration" ' .........................................2
1.8 "Effmtxve Date...........................................2
1.9 "Exploration Period".....................................2
1.10 "Exploration Rights .....................................2
1.11 "Mining" ................................................2
1.12 "Operations".............................................3
1.13 "Prime Rate".............................................3
1.14 "Products"...............................................3
1.15 "Program"................................................3
1.16 "Propertion".............................................3
1.17 "Transfer"...............................................3
1.18 "Work Expenditures"......................................3
II - REPRESENTATIONS AND WARRANTIES; COVENANTS;
TITLE TO ASSETS
2.1 Capaeity of Participants.................................3
2.2 Representations and Warranties...........................4
2.3 Disclosures..............................................6
2.4 Covenants................................................6
2.5 Record Title Jmd Lessor's Interest ......................6
2.6 Federal Potassium Leases.................................6
III - NAME, PURPOSES AND TERM...............................................7
3.1 General..................................................7
3.2 Name ....................................................7
3.3 Purposes.................................................7
3.4 Limitation...............................................7
3.5 Term.....................................................7
3.6 Terms and Conditions.....................................8
3.7 Termination..............................................8
3.8 Funds Paid...............................................8
3.9 Copy of all Data.........................................8
i
<PAGE>
ARTICLE Page No.
- ------- --------
IV - CONSIDERATION.........................................................8
4.1 Consideration............................................8
4.1(A) Annual Labor ............................................8
4.1(B) Reserved Royalty.........................................8
V - APPOINTMENT OF AGENT BY LESSOR.......................................10
5.1 Appointment of Agent....................................10
VI - PERIODIC REPORTS ....................................................10
6.1 Semi-annual Wirtten Reports.............................10
6.2 Audit all Operations....................................10
VII - RIGHTS AND OBLIGATIONS OF LESSEE ....................................10
7.1 Entering Leased Premises ...............................10
7.2 Inspection of Operations, records ......................11
7.3 Transfers, Encumbrances or Conveyances .................11
7.4 Expenses and Liens......................................11
7.5 Indemnification.........................................11
7.6 Mixed or Co-mingle minerals.............................12
VIII - PATENT OF CLAIMS.....................................................12
8.1 Obtaill Patent to Mining Claims.........................12
8.2 Rights extend to Amendments.............................12
IX - DEFAULT AND FORCE MAJEURE ...........................................12
9.1 Default Performaing Obligations.........................12
9.2 Prevented or Delayed from Obligations...................12
X - LEASE PREMISES.......................................................13
10.1 Defend Title............................................13
10.2 Copies Map..............................................13
XI - TAXES AND DUTIES.....................................................13
11.1 Lessee Agrees to Pay Taxes..............................13
11.2 Notices to Lessee.......................................13
11.3 Comply with all State and Federal Laws..................13
11.4 Reclamation Work....................................... 13
XII - ASSIGNMENT AND TRANSFER
12.1 Assign or Transfer......................................14
XIII - MISCELLANEOUS........................................................14
13.1 Governed by Utah Laws...................................14
13.2 Title for Convenience...................................14
13.3 Contain Entire Agreement................................14
13.4 Force of Law............................................14
13.5 Proper Address's........................................14
13.6 Affect Validity of thc Lease............................14
13.7 Benefit of the Successors...............................15
ii
<PAGE>
ARTICLE Page No.
- ------- --------
13.8 Memorandum of Lease.....................................15
13.9 Diligently Explore......................................15
XIV - EXPLORATION REQUIREMENTS .............................................15
14.1 Operator of Exploration, Mining.........................15
EXHIBITS
- --------
EXHIBIT A - PROPERTIES .............................................1
PART I. - Proporties and Title Exceptions..........................1
PART 2. - Area of Interest.........................................4
iii
<PAGE>
MINING LEASE
THIS MINING LEASE, herein referred to as "Lease", made and entered into
this 1st day of March, 1994, by and between DANIEL H. ENGH, CONNIE L. ENGH, at
2340 East Germania Circle, Sandy, Utah 84093-1174, DENNIs S. ENGH, JUDY A. ENGH,
at 4532 Briarcreek Drive, Salt Lake City, Utah 84124, DARIN ENGH, at 437 Elise
Street, Sandy, Utah 84070, HOLLY ENGH (a.k.a. HOLLY KINGDON) at 9064 Cheyenne
Way, Park City, Utah 84060 hereinafter referred to as "Owner or Lessor", and
UTAH CLAY TECHNOLOGY INC., a Utah corporation, having an address at 3985 South
2000 East, Salt Lake City, Utah 84124 (hereinafter designated as "Lessee"):
WITNESSETH:
WHEREAS, Lessor is owner of certain properties and property fights
situated in Beaver County, State of Utah, and more particularly described in the
attached Exhibit "A", incorporated by reference, and hereinafter referred to as
the "Leased Premises"; and
WHEREAS, Lessee desires to lease certain fights in and to the Leased
Premises which Lessor is willing to grant to Lessee;
NOW THEREFORE, in Consideration of $10.00 paid by Lessee to Owner
receipt of which is hereby acknowledged and the payments, covenants and
agreements hereinafter set forth the parties agree as follows:
GRANT, Lessor hereby grants and leases to Lessee for and in consideration
of, and subject to all of the terms provisions and conditions hereinaftg set
forth, the exclusive right and privilege to mine, extract, remove and dispose of
the all locatable Minerals in, upon or under the Leased Premises, together with
the right to use and occupy so much of the surface of the Leased Premises as may
be required for all purposes reasonably incident to the mining, extracting,
removal and disposal of the locatable Minerals according to the provisions of
this Lease.
ARTICLE I
---------
DEFINITIONS
-----------
1.1 "Agreement" means this Mining Lease, including all amendments and
modifications thereof, and all schedules and exhibits, which are incorporated
herein by this reference.
-1-
<PAGE>
1.2 "Area of Interest" means the area described in Part 2 of Exhibit A.
1.3 "Assets" means the Properties, Products and all other real and
personal property, tangible and intangible, held for the benefit of the Lessor
hereunder.
1.4 "Leased Minerals" or "Locatable Minerals" as used herein shall mean
all locatable minerals acquired by virtue of the placer or lode mining claims
owned by owner.
1.5 "Development" means all preparation for the removal and recovery of
Products, including the construction or installation of a mill or any other
improvements to be used for the mining, handling milling, processing or other
beneficiation of Products.
1.6 "Dollars" or "$" means dollars in the currency of the United
States.
1.7 "Exploration" means all activities directed toward ascertaining the
existence, location, quantity, quality or commercial value of deposits of
Products.
1.8 "Effective Date" means the date first written above.
1.9 "Exploration Period" means the period of time during which Lessee
is conducting Exploration Operations pursuant to Article VII. The Exploration
Period shall begin on the Effective Date and, unless this Agreement sooner
terminates, shall end on the date a processing mill is placed into production
with Leased Minerals.
1.10 "Exploration Rights" mean collectively the following:
(a) the sole and exclusive right of Lessee and its agents,
employees, contractors, subcontractors and workers, to enter upon and occupy the
Properties for Exploration purposes during the Exploration Period and to conduct
thereon such prospecting, trenching, drilling, sampling, examination, testing
development, engineering and feasib'dity studies for kaolin and other or
associated clays or metals and all other ores and minerals whatever kind or
character as desired by Lessee; and
(b) the right to do such other things as Lessee, in its sole
discretion, deems advisable or necessary to maintain and to fully evaluate the
mineral potential of the Properties to determine the feasibility of Development
of the Properties, including the right to remove bom the Properties such limited
volumes of minerals and materials as are necessary for test and assaying;
provided, however, that Lessee shall not have the right during the Exploration
Period to mine and remove such minerals and materials for sale.
1.11 "Mining" means the mining, extracting, producing, handling, milling
or other processing of Products.
-2-
<PAGE>
1.12 "Operations" means the activities carried out under this Agreement.
1.13 "Prime Rate" means the interest rate published as the Prime Rate in
the "Money Rates" column of The Wall Street Journal, as said rate may change
-----------------------
from day to day, or if said column sets forth a range of rates on a single day,
the arithmetic mean thereof.
1.14 "Products" means all ores, minerals and mineral resources produced
from the Properties under this Agreement.
1.15 "Program" means a description in reasonable detail of Operations to
be conducted and objectives to be accomplished by the Lessee for a specified
period.
1.16 "Properties" means those interests in real property described in
Part 1 of Exhibit A and all other interests in real property within the Area of
Interest which are acquired and held subject to this Agreement.
1.17 "Transfer" means sell, grant, assign, ea~nnher, pledge or otherwise
commit or dispose of.
1.18 "Work Expenditures" means the 'minimum work obligations described
in Sections 3.5 and 4.1 below and shall include, for purposes of this Agreement,
the value of all time, money or equipment contn]~uted to or used on or in
connection with the Properties or the Area of Interest by Lessee in good faith,
including but not limited to all consultants' time, all costs of testing and
assaying and all other expenses reasonably necessary to evaluate the Properties
or the Area of Interest. Work Expenditures shall include (a) geological
evaluation, geophysical study, geochemical analysis, rock and soil sampling,
geological mapping and similar activities affecting the Properties or the Area
of Interest; (b) drilling, trenching, road construction and pad construction
(plus associated stand-by time) and other physical work on the Properties or the
Area of Interest; (c) environmental, permitting and reclamation ~ (d) title
examination and title curative, remonumentation of unpatented mining claims,
survey (or re-survey), claim filing fees, taxes, and all other reasonable
project maintenance or associated costs on or for the benefit of the Properties
or the Area of Interest, including without limitation the maintenance activities
described in Sections 3.2 and 4.1 acquisition of property within the Area of
interest.
ARTICLE II
----------
REPRESENTATIONS AND WARRANTIES; COVENANTS; TITLE TO ASSETS
----------------------------------------------------------
2.1 Capacity of Participants. Lessee and Lessor, each for itself
--------------------------
represent and warrant as follows:
-3-
<PAGE>
(a) That it is a corporation and individuals respectively duly
incorporated and in good standing in its state of incorporation and that
it is qualified to do business and is in good standing in those states
where necessary in order to carry out the purposes of this Agreement;
(b) That it has the capacity to enter into and perform this
Agreement and all transactions contemplated herein and that all
corporate and other actions required to authorize it to enter into
and perform this Agreement have been properly taken;
(c) That it will not breach any other agreement or arrangement by
entering into or performing this Agreement; and
(d) That this Agreement has been duly executed and delivered by it
and is valid and binding upon it in accordance with its terms.
2.2 Representations and Warranties. Lessor make the following
--------------------------------
representations and warranties effective on the Effective Date:
The Leased Premises. The "Leased Premises" shall mean all of the
---------------------
Property described in Exhibit "A" attached hereto and made a part hereof,
together with all of the ores, minerals and materials thereon and thereunder,
and all right, title and all water, water rights, easements and rights of way
now and hereafter owned or held by Lessor in, upon or under the said property,
or in any way pertaining thereto.
(a) With respect to those Properties Lessor claimed through the
Bureau Of Land Management and those Properties Lessor has enter into a
mineral leases with the State of Utah, if any, Lessor are in exclusive
possession mining rights of such Properties free and clear of all
defects, royalties, liens and encumbrances except those specifically
identified in Part I of Exhibit A.
(b) With respect to those Properties in which Lessor hold an
interest under leases or other contracts: (i) Lessor are in exclusive
possession of such Properties; (ii) neither Lessor has received any
notice of default of any of the terms or provisions of such contracts;
(iii) Lessor have the authority under such contracts to perform
fully their obligations under this ~ (iv) such contracts are valid and
are in good standing; and (v) the properties covered thereby are free
and clear of all defects, royalties, liens and encumbrances except for
those specifically identified in Part I of Exhibit A or in such
contracts.
(c) With respect to unpatented mining claims that are included
within the Properties, except as provided in Part 1 of Exhibit A and
subject to the paramount title of the United States, the claims are
free and clear of defects, royalties, liens and encumbrances except for
those specifically identified in Part 1 of Exhibit A and to the best of
Lessor's knowledge and belief, (i) the unpatented mining claims were
properly laid out and monumented; (ii) all required location and
validation work was properly performed; and (iii)
-4-
<PAGE>
all assessment work required to hold the unpatented mining claims has
been performed in a manner consistent with that required of the
Lessee pursuant to Section 4. l(A) of this Agreement through the
assessment year ending September I, 1994. With respect to such
unpatented mining claims located by or on behalf of Lessor or one of
their Affiliates, except as provided in Part 1 of Exhibit A and
subject to the paramount title of the United States, all location
notices and certificates and all affidavits of assessmem work and other
filings required to maintain the claims in good standing have been
properly and timely recorded and filed with appropriate governmental
agencies, with respect to such unpatented mining claims that were not
located by or on behalf of Lessor or one of their Affiliates, Lessor
make the representation and warranty contained in the foregoing sentence
to the best of their knowledge and belief. Additionally, Lessor have no
knowledge of any claims conflicting with the claims described in Part 1
of Exhibit A. Nothing in this Section 2.2(c), however, shall be deemed
to be a representation or a warranty that any of the unpatented mining
claims described in Part 1 of Exhibit A contains a discovery of
minerals.
Lessor represents to Lessee: (1) that subject to the matters
specifically set forth in Exhibit "A," and subject to the matters set
forth below with respect to unpatented mining claims, Lessor has the
exclusive possession of the Leased Premises and (2) that the Lessor has
the full right, power and capacity to enter into this Lease upon the
terms set forth herein. Since the Leased Premises, as described in
Exhibit "A" includes unpatented mining claims, Owner represents and
warrants to Lessee: (1) that Lessor's title is subject to paramount
title of the United States of America and to the rights, if any, of
surface patentees; (2) that the acts of location performed by Lessor on
the unpatented mining claims described in Exhibit "A" have been
completed in compliance with the laws of the State of Utah and of the
United States of America; and (3) that the Notice Of Intent To Hold has
been completed and filed with the Beaver County Recorder and the BLM in
Salt Lake City, Utah.
(d) Lessor have delivered to Lessee all information concerning
title to the Properties in Lessor's possession or control, including but
not limited to, true and correct copies of all leases or other contracts
relating to the Properties of which Lessor has knowledge.
(e) Except as disclosed in Exhibit A, there are no pending or
threatened actions, suits, claims or proceedings with respect to the
Properties.
(f) Except as disclosed in Exhibit A, Lessor is aware of any
adverse environmental condition on or affecting the Properties.
(g) Except as disclosed in Exhibit A, Lessor has any material
contractual commitments obligations which relate to or affect the
Properties.
Notwithstanding any other provision of this Section 2.2, Lessor makes the
representations and warranties contained in this Section to the best of its
knowledge and belief, except that with respect
-5-
<PAGE>
to claims arising by, through or under Lessor or any its Affiliates, such
representations and warranties (except those contained in Section 2.2(c)
identified as being made on knowledge and belief) shall be absolute. The
representations and warranties set forth above shall survive the execution
and delivery of any documents of Transfer provided under this Agreement.
2.3 Disclosures. Each of the Participants represents and warrants that
-----------
it is unaware of any material facts or circumstances which have not been
disclosed in this Agreement, which should be disclosed to the other Participant
in order to prevent the representations in this Article II from being materially
misleading.
2.4 Covenants. Lessee covenant and agree as follows:
---------
(a) At any time, they will give prompt notice Lessor (during the
Exploration Period) of any notice of default, lawsuit, proceeding, action or
damage of which either Lessee becomes aware and which might affect the
Properties either Participant's title to the Properties.
(b) Notwithstanding any other provision of this Agreement, during
the Exploration Period neither of them will Transfer any interest in any
property located in the Area of Interest, except as between themselves and then
only upon 14-day prior notice to Lessee, nor will either of them conduct,
without Lessor's prior written consent, any property acquisition, exploration,
claim staking or mining operations within the Area of Interest.
(c) At any time, they will use their best efforts to assist
Lessor (during the Exploration Period) in obtaining necessary permits or
approvals, access to the Properties and water rights to the extent required by
or for operations hereunder, and to assist Lessee in informing Lessor of legal,
title and mining problems which may affect the Properties.
(d) They will make available to Lessor, its employees and agents,
any and all data, maps, other documents or information which either of them may
have or may acquire pertaining to the Properties.
2.5 Record Title and Lessor's Interest
----------------------------------
(a) Title to the mining claims shall be held by Lessor.
(b) Lessee will at all times maintain Utah Clay Technology, Inc.,
in good standing and qualified to own Property under the laws of the State of
Utah.
2.6 Lessee understands and acknowledges hereby that there are current
Federal Potassium Leases on some of the same area as the Leased Premises. That
the Lessor can only convey the rights that it possesses in relation to placer
and lode mining claims being staked over the Federal Potassium Leases, as
allowed by the Multiple Minerals Development Act, 30 U.S.C. s 521 (1970), and
other State and Federal law.
-6-
<PAGE>
Since law hasn't clearly defined exact cutoffs between the two mineral
domains (Federal leases and later mining claim locations) and their rights, it
behooves both the Lessor and Lessee, or their successors, to make agreements
with the Potassium lessee as necessary to prevent entanglements, both as to
mineral and other rights.
ARTICLE III
-----------
NAME, PURPOSES AND TERM
-----------------------
3.1 General. Lessor and Lessee hereby enter into this Agreement for the
-------
purposes hereinafter stated and agree that all of their rights and all of the
Operations on or in connection with the Properties or the Area of Interest shall
be subject to and governed by this Agreement.
3.2 Name. The name of this mine shall be The Blawn Wash Clay. Lessee
----
during the Exploration Period and, thereai~er, shall accomplish any registration
required by applicable assumed or fictitious name statutes and similar statutes.
3.3 Purposes. This Agreement is entered into for the following purposes
--------
and for no others, and shall serve as the exclusive means by which the
Participants, or either of them, accomplish such purposes:
(a) to conduct Exploration within the Area Interest,
(b) to acquire additional Properties within the Area of Interest,
(c) to evaluate the possible Development of the Properties,
(d) to engage in Development and Mining Operations on the
Properties,
(e) to engage in marketing Products, and
(f) to perform any other activity necessary appropriate, or
incidental to any of the foregoing.
3.4 Limitation. Unless the Participants otherwise agree in writing,
----------
the development and operations shall be limited to the purposes described in
Section 3.3, and nothing in this Agreement shall be construed to enlarge such
purposes.
3.5 Term. The primary term of this Lease shall be for a period of three
----
(3) years from the date hereof and for so long thereai~er as Leased Minerals are
produced in commercial
-7-
<PAGE>
quantities at more than 500 tons/month from the lands described in Exhibit A by
the Lessee, their partners, successors or assigns, for at least ten months of
each year after the initial three (3) year term has expired, subject to
extension or termination as hereinafter provided.
3.6 This Lease and the terms and conditions of this Lease agreement
issued by the Lessor are made with the Lessee herein on condition that Lessee
and any lawful successor in interest to Lessee shall perform all covenants and
terms and conditions herein set forth to be performed by Lessee or its lawful
assigns including payment of royalties as herein provided. Lessor may issue
written notice of termination and cancellation of this Lease, and forfeiture,
subject to paragraph 9.1: declaring that the Leased Premises and each and every
part thereof have thereby reverted to the Lessor, including any and all fixtures
and improvements required to be left with the property upon expiration,
termination, or cancellation of this Lease.
3.7 Lessee may terminate this Lease at any time by giving Lessors at
least ninety (90) days prior written notice, together with a check in fidl
settlement of any royalties that are due and unpaid; upon giving such notice of
termination, Lessee shall be released of all its obligations except those
obligations which have theretofore accrued. Within Thirty (30) days after date
of termination, Lessee shall execute and record a release and quitclaim deed
releasing all of Lessee's right, title and interest in and to the Leased
Premises.
3.8 Upon the effective date of termination by Lessee, Lessor shall be
entitled to retain all funds paid to it by Lessee pursuant to this Lease.
3.9 Within sixty (60) days after termination from this Lease, Lessee or
its successor or assign will provide Lessor with a copy of all data prepared,
collected, and interpreted by or for it (including maps, drill data, assays,
analyses, geological surveys, topographic surveys, market studies, flow sheets,
processing studies, and all other data) pertaining to the Leased Premises and
the Leased Minerals. Lessee will provide readable copies of all new factual
geologic data and reports by February 15th of each year.
ARTICLE IV
----------
CONSIDERATION
-------------
4.1 The Lessee in consideration of the granting of the rights and
privileges granted herein hereby covenants and agrees as follows:
A). Annual Labor:
------------
(1) To perform upon or for the benefit of the Leased Premises the
annual assessment work as set forth under the laws of the United States and the
State of Utah, and to prepare timely proof of the performance of such labor and
to record and file the same as required by law,
-8-
<PAGE>
and to furnish Lessor with a copy thereof Should this Lease be terminated as
herein provided and the effective date of such termination shall be ninety (90)
days, or less, prior to the end of the then current assessment year, Lessee
shall nevertheless be required to perform upon or for the benefit of the Leased
Premises the annual labor for such assessment year and shall prepare timely
proof thereof, record the same, and furnish Lessor with a copy of such proof as
hereinafter provided. In the performance of annual labor upon or for the benefit
of the Leased Premises, Lessee shall be entitled to perform such work upon any
of the claims or upon any of the groups of claims comprising the Leased Premises
or upon other claims lying outside the Leased Premises so long as such work
shall qualify for the purpose of the development of the Leased Premises as a
contiguous group pursuant to the requirements of law relating to group work on
mining claims except as herein provided.
(2) Assessment work will be completed by July 15 of each year starting
with the 1994 Assessment Year, or Lessor may do the work and charge reasonable
costs time and expenses to Lessee. Lessee will furnish to Lessor a copy of the
proof-of-labor with the County and the BLM time-stamp on it, no later than
September 15th of each year.
B). RESERVED ROYALTY:
(1) To pay lessor a three percent (3%) royalty on all ores, minerals or
products (herein called "Production") mined and removed from the Leased
Premises. Said royalty shall be calculated based upon the gross value of the
Production. In the event Production is removed from the Leased Premises and
stockpiled, royalty shall be payable six(6) months after removal and the gross
value shall be deemed the highest value received for comparable material sold
from the Leased Premises or from the nearest mine or property to the Leased
Premises.
(2) Production royalty shall be paid within thirty (30) days after
receipt of payment for each shipment or when otherwise due, and each payment
shall be accompanied by a statement showing the date(s) of shipment(s), quantity
and value of each shipmer~, to whom sold and the gross value received, and any
cost deductions. Production royalty payments not made when due shall bear
interest at the rate of I 1/2% per calendar month or fraction thereof until paid
in full.
(3) Method of Production royalty payments shall be in U.S. dollars
payable by cash or valid check drawn on available funds, and shall be deemed
made when deposited at Lessor's single depository at:
FIRST UTAH BANK
3826 South 2300 East
Salt Lake City, Utah 84109
phone (801) 272-9454
-9-
<PAGE>
Lessor may change its single depository at any time by giving written notice to
Lessee.
ARTICLE V
---------
APPOINTMENT OF AGENT BY LESSOR
------------------------------
5.1 Lessor hereby appoints Daniel H. Engh as their agent and attorney-
in-fact for the purpose of representing the claim owners as a group, and
authorize him to take all necessary or desirable actions on behalf of Lessor.
This appointment shall be without limitation and remain in force until said
agent resigns or is replaced by a newly appointed agent for the entire group of
owners.
ARTICLE VI
----------
PERIODIC REPORTS
----------------
6.1 Lessee agrees to make semi-annual written reports to lessor (on or
before January 1 and July 1 each year) detailing the exploration, development
and mining work done upon the leased premises, the dates, quantity and value of
ores, minerals or products shipped from the Leased Premises, the identity of the
buyer(s) thereof or the place where such ores, minerals or products are
stockpiled, the plans for the Leased Premises during the next six (6) month
period, and other activities conducted or planned for the Leased Premises, also,
Lessee will provide Lessor with a copy of all data prepared, collected, and
interpreted by or for it (including maps, drill data, assays, analyses,
geological surveys, topographic surveys, market studies, flow sheets, processing
studies, and all other data) pertaining to the Leased Premises and the Leased
Minerals. Lessee will provide readable copies of aH new factual geologic data
and reports by January I and July 1 of each year.
6.2 Lessee shall audit all operations upon the Leased Premises at least
annually, and furnish to Lessor a copy of such audit within thirty (30) days
after completion.
ARTICLE VII
-----------
RIGHTS AND OBLIGATIONS OF LESSEE
--------------------------------
7.1 The Lessee will forthwith have and is hereby granted by Lessor the
right and privilege from the date hereof and so long thereafter as this Lease
remains in force and effect of
- 10 -
<PAGE>
entering into and upon the Leased Premises and the right to drill and excavate
thereon and therein holes, pits, tunnels, shafts, and other such excavations and
to conduct therein and elsewhere such surveys, exploration, investigations,
sampling, milling, screening and other work similar as well as dissimilar as
Lessee in its sole judgment and discretion may wish to know relating to any and
all facts relative to the geology of the Leased Premises, including but not
limited to the geology of the Leased Minerals and the mining, milling,
beneficiating, and marketing thereof, together with the right to drain water and
materials and to pile overburden at places most convenient to Lessee, and the
right to dig or bore wells and use any water in or upon said lands and the right
to construct and place Upon said lands any and ali buildings, dams, drains,
machinery, roads, railroads, pipe and power lines and other improvements that
may be convenient for said purposes, all of which improvements will become the
full and complete property of the Lessor upon termination or assignment of Lease
back to Lessor, and Lessee will be under no further obligation or liability with
respect thereto except for reclamation and except as provided in paragraph 7.5
below. Lessee will have the paramount possession and control of the Leased
Premises with regard to the Leased Mineral rights obtained herein during and
throughout the life of this Lease and shall be entitled to conduct therein and
thereon all mining, milling and beneficiation uses and purposes reasonably
incident thereto as it shall deem satisfactory and advantageous so far as Lessee
tries not to interfere with the rights of the Federal potassium leases. All work
shall be conducted by Lessee as Lessee in its sole judgment and discretion deems
best and in a good and minerlike fashion. Stockpiles and tailings covered by
Lease, remain the property of the Lessor upon surrender of Lease. Mining timbers
in place shall remain affixed as part of the Leased Premises unless released in
writing to Lessee.
7.2 Lessor or his agents duly authorized in writing will have at ail
reasonable times and at his own risk access to all parts of Leased Premises and
associated premises for the purposes of reasonable inspection of operations,
record keeping, and accounts to the end that Lessor might verify that the
specified royalty payments are being made properly and that operations are being
conducted in a minerlike fashion. Lessee will keep records in a businesslike
manner.
7.3 Any and all future leases, transfers, encumbrances or conveyances
of interests in the Leased Premises not covered by this Lease shall be
subordinate to and subject to the fights of Lessee, his successors, assigns of
sublessees, so long as this Lease is in force and effect.
7.4 Lessee shall pay all expenses incurred by it and shall permit
no liens to attach to Leased Premises on account of any debt for materials or
services furnished for the benefit of the Leased Premises while this Lease is in
effect.
7.5 Lessee will indemnify and forever hold harmless and defend Lessor
from any demand, claim, suit, judgment or liability resulting fi.om the
exploratory or development activities of Lessee conducted pursuant to this
agreement. Upon request of Lessor, Lessee will furnish evidence of sufficient
workmen's compensation, liability and other insurance to cover anticipated
risks, or evidence that it is adequately self-insured for such contingencies.
-11-
<PAGE>
7.6 Lessee agrees that Leased Minerals from the Leased Premises shall
not be mixed or co-mingled with minerals, ore, substances or materials from
other properties or lands except as agreed by Lessor.
ARTICLE VIII
------------
PATENT OF CLAIMS
----------------
8.1 Upon request of Lessee at any time during the term of this Lease,
the Lessor agrees to undertake to obtain patent to any of the mining claims
designated by Lessee. Lessee, at its own expense, shall prepare all documents,
compile all data and comply in all respects with all applicable laws in this
endeavor, and Lessor shall execute all documents required for this purpose and
shall cooperate fully with Lessee in the patent application and proceedings.
8.2 The rights of Lessor and Lessee under this Lease will extend to any
and ali amended, relocated, or patented claims referred to in Exhibit A. Lessor
and Lessee agree that all amendments, relocations, or staking new claims in the
claimed area, of the claims referred to in Exhibit A, will be made in the name
of Lessor. Some claims need amending and it is known hereby to the Lessee. Any
valid mining claims staked by Lessor, or his agents, within the Leased Premises
shall fail under and be a part of this Lease.
ARTICLE IX
----------
DEFAULT AND FORCE MAJEURE
-------------------------
9.1 If Lessee will be in default in performing any obligations (except
the timely payment of royalties), Lessee shall lose no rights unless, within
sixty (60) days following written notice from Lessor, given at the address
herein specified, specifying such failure or breach, Lessee shall fail to make
such payment or undertake to cure such default by commencement and follow
through of appropriate performance, within a reasonable amount of time. Upon
such failure, Lessor may terminate this Lease.
9.2 If Lessee shall be prevented or delayed from performing its
obligations (degree)r performing any work which it desires to perform or is
performing by reason of act of nature, strike or threat of strike, fire, flood,
war, mob violence, court order, unavoidable casualties, or any other
enumeration, beyond the control of Lessee which cannot be overcome by the means
normally employed in performance and at comparable and reasonable expense, then
the duration of this Lease shall be extended for a period equal to the period of
Force Majeure and any failure to perform obligations shall not be deemed a
breach of this Lease. Lessee agrees to use reasonable
-12-
<PAGE>
diligence to remove such causes of disability as may occur from time to time.
This paragraph shall not excuse payment or delay payment of royalties.
ARTICLE X
---------
LEASE PREMISES
--------------
10.1 The parties hereto agree that during the term of this Lease, in the
event title to any of the Leased Premises is contested by any person or persons,
corporation or corporations, or governmental agencies, Lessee will, at its own
election and expense, defend the title to any of the Leased Premises before any
court of competent jurisdiction or any administrative body. Lessee will defend
any actions for damages relating to exploration, development, or mining
activities by Lessee on Leased Premises.
10.2 Lessor, upon execution of this Lease, shall furnish Lessee with
copies of all property maps possessed by Lessor on the Leased Premises and
adjacent lands.
ARTICLE XI
----------
TAXES AND DUTIES
----------------
11.1 Lessee agrees to pay (i) all taxes hereat~er levied and assessed
upon all machinery and improvements placed by Lessee upon the LeaSed Premises,
(ii) taxes herea~er levied upon the Leased Premises, including taxes assessed by
reason of net annual proceeds, and (iii) occupation or severance taxes imposed
upon the mining or production of Leased Minerals from the Leased Premises or any
other taxes, assessments or charges resulting from Lessee activities on Leased
Premises.
11.2 Lessor agrees to promptly transmit to Lessee any notices pertaining
to taxes, assessments and charges which Lessor may receive.
11.3 Lessee, in all operations under this Lease, will comply with all
applicable State and Federal laws, including the social laws relative to
employment, safety, workmen's compensation insurance, social security,
unemployment tax and tax withholding. Lessee shall hold Lessor harmless from
chims of damage to persons or property arising from Lessee's operations under
this Lease. Lessee will comply with hazardous waste, air and water quality
requirements.
11.4 Lessee will do all reclamation work required by the Bureau of Land
Management, the State of Utah or Beaver County in a timely manner.
-13-
<PAGE>
ARTICLE XII
-----------
ASSIGNMENT AND TRANSFER
-----------------------
12.1 Lessee will not convey, assign or transfer its interest in this
lease or any part of this Lease without the prior notification and consent in
writing of the Lessor. The assignee party will, as a condition of consent to the
transfer, agree to be bound by and subject to the terms of this Lease. Any
assignee party will provided a photocopy of the executed copy of assignment and
is delivered to the other party. Overriding royalty assignments will not become
effective, even if otherwise valid without the consent in writing of the Lessor.
Lessee, its successor and assigns, may not assign or convey royalty, overriding
royalty, production payment or like interest in the Leased Premises without
Lessor's prior written consent.
ARTICLE XIII
------------
MISCELLANEOUS
-------------
13.1 This agreement shall be governed by the laws of the State of Utah.
13.2 Title headings are for convenience only and shall not be deemed a
part of this Lease.
13.3 This Lease and Its Exhibit contain the entire agreement between the
parties and supersedes entirely any prior understandings whether oral or
written.
13.4 If any provisions of this Lease is or becomes void or unenforceable
by Force of Law, the other provisions shall remain valid and enforceable.
13.5 Lessor's and Lessee's proper address shall be the following, which
either may change by giving written notice to the other.
Daniel H. Engh
2340 East Germania Circle
Sandy, Utah 84093
Utah Clay Technology, Inc. 3985 South 2000 East
Salt Lake City, Utah 8124
13.6 The failure to enforce at any time any provisions of this Lease,
shall in no way be construed to be a waiver of such provisions, or to affect
validity of the Lease.
-14-
<PAGE>
13.7 This Lease shall be binding upon and inure to the benefit of the
successors and permitted assigns of the parties.
13.8 A Memorandum of this Lease may be filed by either party.
13.9 Lessee will diligently explore and conduct operations on or near
Leased Premises throughout the term of this Lease in a manner reasonably
calculated to advance the production of minerals from Leased Premises.
ARTICLE XIV
-----------
EXPLORATION REQUIREMENTS
------------------------
14.1 Lessor agrees to Utah Clay Technology, Inc. as the party that will
be the operator's of the exploration, and mining of the lode and placer claims
referred to in Exhibit A. Lessee agrees that it can not transfer or assign ail
or part of being the operator of the exploration, and mining to any other party.
IN WITNESS WHEREOF, this Lease has been executed and delivered by
Lessor to Lessee as of the day and year first above written.
/s/Daniel H. Engh
- -------------------------------
Daniel H. Engh
Lessor
/s/Connie L. Engh
- -------------------------------
Connie L. Engh
Lessor
/s/Dennis S. Engh
- -------------------------------
Dennis S. Engh
Lessor
-15-
<PAGE>
/s/Judy A. Engh
- -------------------------------
Judy A. Engh
Lessor
/s/Darin Engh
- -------------------------------
Darin Engh
Lessor
/s/Holly Engh Kingdon
- -------------------------------
Holly Engh (a.k.a. Holly Kingdon
Lessor
UTAH CLAY TECHNOLOGY, INC.
BY:/s/Dennis S. Engh
----------------------------
President
Lessee
State of Utah
S.S.
County of Salt Lake
On this 22nd day of October, 1996, personally appeared before me.
Daniel H. Engh, Connie L. Engh, Dennis S. Engh, Judy A. Engh, Darin Engh, Holly
- --------------------------------------------------------------------------------
Engh (a.k.a. Holly Kingdon). Dennis S. Engh, having authority to sign as
- ----------------------------
President of Utah Clay Technology, Inc. and by authority of the board of
Directors, who acknowledged to me that they executed the foregoing document.
- ------------------------------ RESIDING AT:
-----------------------
-----------------------------------
-----------------------------------
-----------------------------------
-16-
<PAGE>
EXHIBIT A
---------
To Mining Lease Agreement dated as of March 1st,
1994, by and among Daniel H. Engh, Connie L. Engh,
Dennis S. Engh, Judy A. Engh, Darin Engh, Holly Engh
(a.k.a. Holly Kingdon) and Utah Clay Technology, Inc.
PART 1
- ------
With respect to the Properties, Daniel H. Engh and Dennis S. Engh are in
control and ownership of Engh Family placer claims described below:
The Following Property consists of Placer Claims plus, all other claims
located in Townships 29 South Range 13 & 14 West Salt Lake Medrian, Beaver
County, Utah which Owner has claim to in this area.
NAME TYPE OF
OF CLAIM CLAIM FILING DATE BOOK & PAGE UMC NUMBER
-------- ------- ----------- ----------- ----------
BLUE #201 (PLACER) 07/22/88 238 374 313316
BLUE #202 (PLACER) 07/22/88 238 375 313317
BLUE F203 (PLACER) 07/22/88 238 376 313318
BLUE F204 (PLACER) 07/22/88 238 377 313319
BLUE #205 (PLACER) 07/22/88 238 378 313320
BLUE #206 (PLACER) 07/22/88 238 379 313321
BLUE F207 (PLACER) 07/22/88 238 380 313322
BLUE F208 (PLACER) 07/22/88 238 381 313323
BLUE #209 (PLACER) 07/22/88 238 382 313324
BLUE #210 (PLACER) 07/22/88 238 383 313325
BLUE//211 (PLACER) 07/22/88 238 384 313326
BLUE #212 (PLACER) 07/22/88 238 385 313327
BLUE//213 (PLACER) 07/22/88 238 386 313328
BLUE F214 (PLACER) 07/22/88 238 387 313329
BLUE #215 (PLACER) 07/22/88 238 388 313330
1
<PAGE>
BLUE #216 (PLACER) 07/22/88 238 389 313331
BLUE #217 (PLACER) 07/22/88 238 390 313332
BLUE #218 (PLACER) 07/22/88 238 391 313333
BLUE//219 (PLACER) 07/22/88 238 392 313334
BLUE #220 (PLACER) 07/22/88 238 393 313335
The above claims are Located and Recorded in Beaver County, Utah.
This mininG lease contains a Reserved Royalty of 3% on all ores, minerals or
Products (called "Production") mined and removed from the leased Premises. Said
Royalty shall be calculated based upon the gross value of the production.
Additionally, the below Julie White lode or placer claims have a minimum royalty
of $5,000.00 and or a production royalty of $2.50/ton which is adjusted by the
Consumer Prices Index for all Urban Consumers for U.S. City average as published
by the U.S. Department of Labor Bureau of Labor Statistics.
With respect to the Properties, Daniel H. Engh and Dennis S. Engh have a mining
lease Dated November 9th 1992 by and between Don W. Fullmer (Lessor) and Daniel
H. Engh, Dennis S. Engh (Lessee). All terms and conditions of the November 9,
1992 mining lease will be a part of this minin~ lease. Said claims of this
mining lease are described below:
The Property consists of Lode Claims and Placer claims Plus, all other
claims located in Townships 29 South Range 13 West and Township 29 South 14 West
Salt Lake Medrian, Beaver County, Utah which Owner has claim to in this area.
CLAIM NAME DESCRIPTION UMC NUMBER
- -------------- ----------------------------------- ----------
Julie White #1 NW 1/4 SEC. 9, TWNS. 29 SO. R-13. (PLACER) 303016
Julie White #2 SW 1/4 SEC. 9, TWNS. 29 SO. R-13. (PLACER) 303017
Julie White #3 NE 1/4 SEC. 8, TWIGS. 29 SO. R-13. (PLACER) 303018
Julie White #4 SE 1/4 SEC. 8, TWIGS. 29 SO. R-13. (PLACER) 303019
Julie White #5 NW 1/4 SEC. 8, TWNS. 29 SO. R-13. (PLACER) 303020
Julie White #6 NE 1/4 SEC. 7, TWNS. 29 SO. R-13. (PLACER) 303021
Julie White #7 NW 1/4 SEC. 7, TWNS. 29 SO. R-13. (PLACER) 303022
Julie White #8 NE 1/4 SEC. 12,TWNS. 29 SO. R-14. (PLACER) 303023
Julie White #9 SE 1/4 SEC. 1, TWNS. 29 SO. R-14. (PLACER) 303024
2
<PAGE>
(LODES CLAIMS)
------------------
Julie White #11 NE 1/4 SEC. 7 & NW ~ SEC. 8,TWNS. 29 SO. R-13 W 302980
Julie White #12 NE 1/4 SEC. 7 & NW ~ SEC. 8,TWNS. 29 SO. R-13 W 302981
Jutie White #13 NW 1/4 SEC. 8, TWNS. 29 SO R-13 W. 302982
Julie White #14 NW 1/4 & NE 1/4 SEC. 8, TWNS 29 SO. R-13 W. 302983
Julie White #15 NW 1/4 SEC. 8. TWNS. 29 SO R-13 W. 302984
Julie White #16 NW 1/4 & NE 1/4 SEC. 8, TWNS 29 SO. R-13 W. 302985
Julie White #17 NE 1/4 SEC. 8, TWNS. 29 SO R-13 W. 302986
Julie White #18 NE 1/4 SEC. 8, TWNS. 29 SO R-13 W. 302987
Julie White #19 NE 1/4 SEC. 8, TWNS. 29 SO R-13 W. 302988
Julie White #20 NE & NW 1/4 SEC. 8, TWNS. 29 SO. R-13 W. 302989
Julie White #21 NE 1/4 SEC. 8, TWNS. 29 SO. R-13 W. 302990
Julie White #22 NE & SE 1/4 SEC. 8, TWNS. 29 SO. R-13 W. 302991
Situated in Township 29 South, Range 13 West, Township 29 South, Range
14, Salt Lake Meridian, Beaver County, Utah.
<PAGE>
Dated March 1st, 1994
PART 2
- ------
Area of Interest
ALl lands within the following described Areas of Interest including:
T29S, R13W Sections 2-6, 7-11, 14-18
T29S, R14W Sections 1-2, 11-14
T28S, R12W Section 31
T28S, R13W Sections 35, 36
T29S, R12W Sections 5-7, 18
T29S, R13W Sections 1-13
T29S, R14W Sections 1, 12, 13
and any lands in Township 29 South 13 West, Township 29 South 14 West to
define the boundary of Area of interest.
4
<PAGE>
AMENDMENT AGREEMENT
THIS AMENDMENT AGREEMENT made and entered into this 9th, day of
November, 1992, to the EXPLORATION FOR MINING AND MINERAL DEVELOPMENT LEASE,
-------------------------------------------------------
WITH OPTION TO PURCHASE PLACER AND LODE MINING CLAIMS, dated July 14, 1989, and
- -----------------------------------------------------
the AMENDMENT AGREEMENT, dated January 20, 1992, by and between DON W. FULLMER,
-------------------
whose address is 800 NORTH MAIN, FILMORE, UTAH 84631, herein referred to as
"Lessor" or "Owner" and DANIEL H. ENGH, DENNIS S. ENGH whose address is 2340
EAST GERMANIA CIRCLE, SANDY, UTAH 84093-1174, hereinafter referred to as
"Lessee"
WITNESSETH:
WHEREAS, Lessee wishes to change the above mentioned agreements, and
Owner wishes to change the same agreements, here by agree to amend the above
mentioned agreements,
WHEREAS, the owner is the sole owner, or the agent for the
association which is the sole owner of the unpatented mining claims listed in
Exhibit "A" of this agreement, hereinafter referred to as the "Leased Property",
and
WHEREAS, Lessee desires to lease the Leased Property, Owner and
Lessee hereby agree to the following (hereinafter referred to as the
"Agreement"):
WHEREAS, Lessor is owner of certain properties and property rights
situated in Beaver County, State of Utah, and more particularly described in the
attached Exhibit "A", incorporated by reference, and hereinafter referred to as
the "Leased Premises"; and
<PAGE>
AMENDMENT AGREEMENT
- -------------------
November 09 , 1992
Page 2 of 20
WHEREAS, Lessee desires to lease certain rights in and to the Leased
Premises which Lessor is willing to grant to Lessee;
NOW THEREFORE, in consideration of $100.00 paid by Lessee to Lessors
receipt of which is hereby acknowledged and the payments, covenants and
agreements hereinafter set forth the parties agree as follows:
1. The Leased Premises.
-------------------
The "Leased Premises" shall mean all of the property described in
Exhibit "A" attached hereto and made a part hereof, together with all of the
ores, minerals and materials thereon and thereunder, and all right, title and
all water, water rights, easements and rights of way now and hereafter owned or
held by Owner in, upon or under the said property, or in any way pertaining
thereto.
2. Warranties and Representations
------------------------------
Owner represents to Lessee: (1) that subject to the matters
specifically set forth in Exhibit "A," and subject to the matters set forth
below with respect to unpatented mining claims, Owner has the exclusive
possession of the mining claims and (2) that the Owner has the full right, power
and capacity to enter into this Lease upon the terms set forth herein. Since the
Leased Premises, as described in Exhibit "A" includes unpatented mining claims,
Owner represents and warrants to Lessee: (1) that Owner's title is subject to
paramount title of the United States of America and to the rights, if any, of
surface patentees; (2) that the acts of location performed by Owner on the
unpatented mining claims described in Exhibit "A" have been completed in
compliance with the
<PAGE>
AMENDMENT AGREEMENT
- -------------------
November 09 , 1992
Page 3 of 20
laws of the State of Utah and of the United States of America; and (3) that the
Notice Of Intent To Hold has been completed and filed with the Beaver County
Recorder and the BLM in Salt Lake City, Utah. (4) Lessee represents to owner:
(A) that Lessee has made a preliminary search of the Bureau of Land Management
records with regard to the leased premises and (B) That Lessee is aware of some
conflicting claims within the boundaries of the leased premises and (C) That
Lessee intends to do additional title research and to take such actions as are
necessary to perfect title in the Lessors favor, insofar as possible and (D)
That Lessee will refrain from or abandon all attempts to obtain title to the
Leased Premises except as provided by this by this lease, without first
obtaining owners written consent.
I. GRANT
1.1 Lessor hereby grants and leases to Lessee for and in
consideration of, and subject to all of the terms provisions and conditions
hereinafter set forth, the exclusive right and privilege to mine, extract,
remove and dispose of the all locatable Minerals in, upon or under the Leased
Premises, together with the right to use and occupy so much of the surface of
the Leased Premises as may be required for all purposes reasonably incident to
the mining, extracting, removal and disposal of the locatable Minerals according
to the provisions of this Lease.
II. LEASED MINERALS
2.1 "Leased Minerals" or "Locatable Minerals" as used herein shall
mean all locatable minerals acquired by virtue of
<PAGE>
AMENDMENT AGREEMENT
- -------------------
November 09 , 1992
Page 4 of 20
the placer or lode mining claims owned by owner.
2.2 Lessee understands and acknowledges hereby that there are current
Federal Potassium Leases on some of the same area as the Leased Premises. That
the Lessor can only convey the rights that it possesses in relation to
placer and 1ode mining claims being staked over the Federal Potassium Leases, as
allowed by the Multiple Minerals Development Act, 30 U.S.C. s 521 (1970),
and other State and Federal law.
III. TERM
3.1 The primary term of this Lease shall be for a period of five (5)
years from the date hereof and for so long thereafter as Leased Minerals are
produced in commercial quantities at more than 500 tons/month from the lands
described in Exhibit A by the Lessee, their partners, successors or assigns, for
at least ten months of each year' after the first year term has expired, subject
to extension or termination as hereinafter provided.
3.2 This Lease and the terms and conditions of this Lease agreement
issued by the Lessor are made with the Lessee herein on condition that Lessee
and any lawful successor in interest to Lessee shall perform all covenants
and terms and conditions herein set forth to be performed by Lessee or its
lawful assigns including payment of royalties as herein provided. Lessor may
issue written notice of termination and cancellation of this Lease, and
forfeiture, subject to paragraph 9.1: declaring that the Leased Premises and
each and every part thereof have thereby reverted to the Lessor, including any
and all fixtures and improvements required to be left with the property upon
expiration,
<PAGE>
AMENDMENT AGREEMENT
- -------------------
November 09 , 1992
Page 5 of 20
termination, or cancellation of this Lease.
3.3 Lessee may terminate this Lease at any time by giving Lessors
at least ninety (90) days prior written notice, together with a check in full
settlement of any royalties that are due and unpaid; upon giving such notice of
termination, Lessee shall be released of all its obligations except those
obligations which have theretofore accrued. Within Thirty (30) days after date
of termination, Lessee shall execute and record a release and quitclaim deed
releasing all of Lessee's right, title and interest in and to the Leased
Premises.
3.4 Upon the effective date of termination by Lessee, Lessor shall be
entitled to retain all funds paid to it by Lessee pursuant to this Lease.
3.5 Within sixty (60) days after termination from this Lease, Lessee
or its successor or assign will provide Lessor with a copy of all data prepared,
collected, and interpreted by or for it (including maps, drill data, assays,
analyses, geological surveys, topographic surveys, and other data pertaining to
the Leased Premises and the Leased Minerals. Lessee will provide readable copies
of all new factual geologic data and reports by February 15th of each year.
IV. CONSIDERATION
4.1 The Lessee in consideration of the granting of the rights and
privileges granted herein hereby covenants and agrees as follows:
<PAGE>
AMENDMENT AGREEMENT
- -------------------
November 09 , 1992
Page 6 of 20
(1) $5,000.00 due June 15, 1993 and $5,000.00 annual minimum royalty
beginning on the first anniversary of this lease and thereafter minimum
$5,000.00 each anniversary until Lessee terminates its rights. The minimum
royalty of $5,000 00, will be adjusted by the Consumer Prices Index for All
Urban Consumers for U.S. City Average as published by the U.S. Department of
Labor, Bureau of Labor Statistics who is created pursuants toSec. 5(a) of Public
Law 304, 79th Congress. The average at the end of December 1992 will be the
base year and any changes in the Consumer Prices Index for All Urban Consumers
U.S. City Average for the following year ended December will determine the
percent change in the $5,000.00 for the following year. Each year becomes the
new base year to measure change from.
(2) Production Royalty: A production royalty on Leased Minerals
which shall be Two Dollars and 50 Cents per ton ($2.50/ton) of ore removed from
or mined and processed upon the Leased Property.
(3) The production royalty of $2.50/ton stated in IV (2), will be
adjusted by the Consumer Prices Index for All Urban Consumers for U.S. City
Average as published by the U.S. Department of Labor, Bureau of Labor Statistics
who is created pursuant to Sec. 5(a) of Public Law 304, 79th Congress. The
average at the end of December 1992 will be the base year and any change in the
Consumer Prices Index for All Urban Consumers for U.S. City Average for the
following year ended December will determine the percent change in the $2.50/ton
for the following year. Each year becomes the new base year to measure change
from.
A). Annual Labor:
------------
(l) To perform upon the Leased Premises the annual
<PAGE>
AMENDMENT AGREEMENT
- -------------------
November 09 , 1992
Page 7 of 20
assessment work as set forth under the laws of the United States and the State
of Utah, and to prepare timely proof of the performance of such labor and to
record and file the same as required by law, and to furnish Lessor with a copy
thereof. Should this Lease be terminated as herein provided and the effective
date of such termination shall be ninety (90) days, or less, prior to the end
of the then current assessment year, Lessee shall nevertheless be required to
perform upon of the Leased Premises the annual labor for such assessment year
and shall prepare timely proof thereof, record the same, and furnish Lessor
with a copy of such proof as hereinafter provided. In the performance of annual
labor upon or for the benefit of the Leased Premises, Lessee shall be
entitled to perform such work upon any of the claims or upon any of the groups
of claims comprising the Leased Premises so long as such work shall qualify for
the purpose of the development of the Leased Premises as a contiguous group
pursuant to the requirements of law relating to group work on mining claims
except as herein provided.
(2) Assessment work will be completed by July 15 of each
year starting with the 1993 Assessment Year, or Lessor may do the work and
charge reasonable costs time and expenses to Lessee. Lessee will furnish to
Lessor a copy of the proof-of-labor with the County, no later than September
15th of each year.
B). PRODUCTION ROYALTY PAYMENTS:
---------------------------
(1) Production royalty shall be paid within thirty (30) days
after receipt of payment for each shipment or when otherwise due, and each
payment shall be accompanied by a statement
<PAGE>
AMENDMENT AGREEMENT
- -------------------
November 09 , 1992
Page 8 of 20
showing the date(s) of shipment(s), quantity and value of each shipment, to whom
sold and the gross value received, and any cost deductions.
(2) Method of Production royalty payments shall be in U.S.
dollars payable by cash or valid check drawn on available funds, and shall be
deemed made when deposited at LeSsor's single depository at:
Paradise Management Co.
P.O. Box 368
Filmore, Utah 84631
Phone (801) 743-5848
Lessor may change its single depository at any time by giving written notice to
Lessee.
V. PERIODIC REPORTS
5.1 Lessee agrees to make semi-annual written reports to lessor (on
or before January 1 and July 1 each year) detailing th exploration, development
and mining work done upon the leased premises, quantity of ores, minerals or
products shipped from the Leased Premises, the identity of the buyer(s) thereof
or the place where such ores, minerals or products are stockpiled, the plans for
the Leased Premises during the next six (6) month period, and other activities
conducted or planned for the Leased Premises.
5.2 Lessee shall audit all operations upon the Leased Premises at
least annually, and furnish to Lessor a copy of such audit within thirty (30)
days after completion.
<PAGE>
AMENDMENT AGREEMENT
- -------------------
November 09 , 1992
Page 9 of 20
VI. RIGHTS AND OBLIGATIONS OF LESSEE
6.1 The Lessee will forthwith have and is hereby granted by Lessor
the right and privilege from the date hereof and so long thereafter as this
Lease remains in force and effect of entering into and upon the Leased Premises
and the right to drill and excavate thereon and therein holes, pits, tunnels,
shafts, and other such excavations and to conduct therein and elsewhere such
surveys, exploration, investigations, sampling, milling, screenifig and other
work similar as well as dissimilar as Lessee in its sole judgment and discretion
may wish to know relating to any and all facts relative to the geology of the
Leased Premises, including but not limited to the geology of the Leased Minerals
and the mining, milling, beneficiating, and marketing thereof, together with the
right to drain water and materials and to pile overburden at places most
convenient to Lessee, and the right to dig or bore wells and use any water in or
upon said lands and the right to construct and~ place upon said lands any
and all buildings, dams, drains, machinery, roads, railroads, pipe and power
lines and other improvements that may be convenient for said purposes, all of
which improvements will become the full and complete property of the Lessor
upon termination or assignment of Lease back to Lessor, and Lessee will be under
no further obligation or liability with respect thereto except for reclamation
and except as provided in paragraph 6.7 below. Lessee will have the paramount
possession and control of the Leased Premises with regard to the Leased Mineral
rights obtained herein during and throughout the life of this Lease and shall be
entitled to conduct therein and thereon all mining, milling and beneficiation
uses and purposes reasonably incident thereto as it shall deem satisfactory
and advantageous so far as Lessee tries not to interfere with the rights of the
Federal potassium leases. All work shall be conducted by Lessee as Lessee in its
sole judgment and discretion deems best and in a good and
<PAGE>
AMENDMENT AGREEMENT
- -------------------
November 09 , 1992
Page 10 of 20
minerlike fashion. Stockpiles and tailings covered by Lease, remain the property
of the Lessor upon surrender of Lease. Mining timbers in place shall remain
affixed as part of the Leased Premises unless released in writing to Lessee.
6.2 Lessor or his agents duly authorized in writing will have at all
reasonable times and at his own risk access to all parts of Leased Premises and
associated premises for the purposes of reasonable inspection of operations,
record keeping, and accounts to the end that Lessor might verify that the
specified royalty payments are being made properly and that operations are being
conducted in a minerlike fashion. Lessee will keep records in a businesslike
manner.
6.3 Any and all future leases, transfers, encumbrances or conveyances
of interests in the Leased Premises not covered by this Lease shall be
subordinate to and subject to the rights of Lessee, his successors, assigns
of sublessees, so long as this Lease is in force and effect.
6.4 Lessee shall pay all expenses incurred by it and shall permit no
liens to attach to Leased Premises on account of any debt for materials or
services furnished for the benefit of the Leased Premises while this Lease is in
effect.
6.5 Lessee will indemnify and forever hold harmless and defend Lessor
from any demand, claim, suit, judgment or liability resulting from the
exploratory or development activities of Lessee conducted pursuant to this
agreement. Upon request of Lessor, Lessee will furnish evidence of sufficient
workmen's compensation, liability and other insurance to cover anticipated
risks, or evidence that it is adequately self-insured for such contingencies.
<PAGE>
AMENDMENT AGREEMENT
- -------------------
November 09, 1992
Page 11 of 20
6.6 Lessee agrees that Leased Minerals from the Leased Premises
shall not be mixed or co-mingled with minerals, ore, substances or materials
from other properties or lands except as agreed by Lessor.
6.7 In the event of the termination of this Lease by lapse of time or
otherwise, Lessee shall grade and slope and otherwise reclaim that portion of
the land being leased pursuant hereto, which was the site of actual mining
operations, in accordance with the requirements of the State and Federal
regulations then in effect and Owner may elect to assume the burden of
reclaiming the land, by notifying Lessee in writing of his intent to assume said
burden, in which event, Lessee will obtain not more than three (3) bids for
Performance of the reclamation work required by this paragraph, and will pay
over to owner a sum equal to ninety-five percent (95%) of the lowest of said
bids. Thereafter, Lessee shall be relieved from all duties, expenses or
responsibility with respect to such reclamation and Owner, simultaneously with
or prior to the receipt of said payment, shall obtain from the
appropriate-Government agencies and deliver to Lessee all documents necessary to
release Lessee from all further responsibility for the performance of such
reclamation work.
VII. PATENT OF CLAIMS
7.1 Upon request of Lessee at any time during the term of this
Lease, the Lessor agrees to undertake to obtain patent to any of the mining
claims designated by Lessee. Lessee, at its own expense, shall prepare all
documents, compile all data and comply in all respects with all applicable laws
in this endeavor, and
<PAGE>
AMENDMENT AGREEMENT
- -------------------
November 09, 1992
Page 12 of 20
Lessor shall execute all documents required for this purpose and shall cooperate
fully with Lessee in the patent application and proceedings.
7.2 The rights of Lessor and Lessee under this Lease will extend to
any and all amended, relocated, or patented claims referred to in Exhibit A.
Lessor and Lessee agree that all amendments, relocations, or staking new cl&ims
in the claimed area, of the claims referred to in Exhibit A, will be made in the
name of Lessor. Some claims need amending and it is known hereby to the Lessee.
Any valid mining claims staked by Lessor, or his agents, within the Leased
Premises shall fall under and be a part of this Lease.
VIII. DEFAULT AND FORCE MAJEURE
8.1 If Lessee will be in default in performing any obligations
(except the timely payment of royalties), Lessee shall lose no rights unless,
within sixty (60) days following written notice from Lessor, given at the
address herein specified, specifying such failure or breach, Lessee shall fail
to make such payment or undertake to cure such default by commencement and
follow through of appropriate performance, within a reasonable amount of time.
Upon such failure, Lessormay terminate this Lease.
8.2 If Lessee shall be prevented or delayed from performing its
obligations or performing any work which it desires to perform or is performing
by reason of act of nature, strike or threat of strike, fire, flood, war, mob
violence, court order, unavoidable casualties, or any other enumeration, beyond
the
<PAGE>
AMENDMENT AGREEMENT
- -------------------
November 09, 1992
Page 13 of 20
control of Lessee which cannot be overcome by the means normally employed in
performance and at comparable and reasonable expense, then the duration of this
Lease shall be extended for a period equal tothe period of Force Majeure and any
failure to perform obligations shall not be deemed a breach of this Lease.
Lessee agrees to use reasonable diligence to remove such causes of disability as
may occur from time to time. This paragraph shall not excuse payment or delay
payment of royalties.
IX. Lease Premises.
9.1 The parties hereto agree that during the term of this Lease, in
the event title to any of the Leased Premises is contested by any person or
persons, corporation or corporations, or governmental agencies, Lessee will, at
its own election and expense, defend the title to any of the Leased Premises
before any court of competent jurisdiction or any administrative body. Lessee
will defend any actions for damages relating to exploration, development, or
mining activities by Lessee on Leased Premises.
9.2 Lessor, upon executionof this Lease, shall furnish Lessee with
copies of all property maps possessed by Lessor on the Leased Premises and
adjacent lands.
X. TAXES AND DUTIES
10.1 Lessee agrees to pay (i) all taxes hereafter levied and assessed
upon all machinery and improvements placed by Lessee upon the Leased Premises,
(ii) taxes hereafter levied upon the Leased Premises, including taxes assessed
by reason of net annual proceeds, and (iii) occupation or severance taxes
imposed upon the mining or production of Leased Minerals from the Leased
<PAGE>
AMENDMENT AGREEMENT
- -------------------
November 09, 1992
Page 14 of 20
Premises or any other taxes, assessments or charges resulting from Lessee
activities on Leased Premises.
10.2 Lessor agrees to promptly transmit to Lessee any notices
pertaining to taxes, assessments and charges which Lessor may receive.
10.3 Lessee, in all operations under this Lease, will comply with all
applicable State and Federal laws, including the social laws relative to
employment, safety, workmen's compensation insurance, social security,
unemployment tax and tax withholding. Lessee shall hold Lessor harmless from
claims of damage to persons or property arising from Lessee's operations under
this Lease. Lessee will comply with hazardous waste, air and water quality
requirements.
10.4 Lessee will do all reclamation work required by the Bureau
of Land Management, the State of Utah or Beaver County in a timely manner.
XI. ASSIGNMENT AND TRANSFER
11.1 Lessee can convey, assign or transfer its interest in this lease
or any part of this Lease without the prior notification and consent in writing
of the Lessor. The assignee party will, as a condition of consent to the
transfer, agree to be bound by and subject to the terms of this Lease. Any
assignee party will provided a photocopy of the executed copy of assignment and
is delivered to the other party. Overriding royalty assignments will not become
effective, even if otherwise valid without the consent in writing of the Lessor.
Lessee, its successor and assigns, may not assign or convey royalty, overriding
royalty, production payment or like interest in the Leased Premises
<PAGE>
AMENDMENT AGREEMENT
- -------------------
November 09 , 1992
Page 15 of 20
without Lessor's prior written consent.
XII. MISCELLANEOUS
12.1 This agreement shall be governed by the laws of the State of
Utah.
12.2 Title headings are for convenience only and shall not be deemed
a part of this Lease.
12.3 This Lease and Its Exhibit contain the entire agreement between
the parties and supersedes entirely any prior understandings whether oral or
written.
12.4 If any provisions of this Lease is or becomes void or
unenforceable by Force of Law, the other provisions shall remain valid and
enforceable.
12.5 Lessor's and Lessee's proper address shall be the following,
which either may change by giving written notice to the other.
Don W. Fullmer
P.O. Box 268
800 North Main
Filmore, Utah 84631
Daniel H. Engh, Dennis S. Engh
2340 East Germania Circle
Sandy, Utah 84093-1174
12.6 The failure to enforce at any time any provisions of this Lease,
shall in no way be construed to be a waiver of such provisions, or to affect
validity of the Lease.
12.7 This Lease shall be binding upon and inure to the
<PAGE>
AMENDMENT AGREEMENT
- -------------------
November 09, 1992
Page 16 of 20
benefit of the successors and permitted assigns of the parties.
12.8 A Memorandum of this Lease may be filed by either party.
12.9 Lessee will diligently explore and conduct operations on or
near Leased Premises throughout the term of this Lease in a manner reasonably
calculated to advance the production of minerals from Leased Premises.
IN WITNESS WHEREOF, this Lease has been executed and delivered by
Lessor to Lessee as of the day and year first above written.
/s/Don W. Fullmer
- -------------------------------
Don W. Fullmer
LESSOR
/s/Daniel H. Engh /s/Dennis S. Engh
- -------------------------------- ----------------------------------
Daniel H. Engh Dennis S. Engh
LESSEE LESSEE
<PAGE>
AMENDMENT AGREEMENT
- -------------------
November 09, 1992
Page 17 of 20
ACKNOWLEDGEMENT
STATE OF UTAH
SS.
COUNTY OF Millard
On this 9th day of November, 1992, before me personally appeared DON W.
FULLMER to me known to be the person described in and who executed the foregoing
instrument and acknowledged that he executed the same as a free act and deed.
Given under my hand and seal this 9th day of November, 1992.
My Commission Expires October 11, 1994.
----------------------------------
ACKNOWLEDGEMENT
STATE OF UTAH
SS.
COUNTY OF Salt Lake
On this 9th day of November, 1992, before me personally appeared DANIEL H.
ENGH to me known to be the person described in and who executed the foregoing
instrument and acknowledged that he executed the same as a free act and deed.
Given under my hand and seal this 9th day of November, 1992.
My Commission Expires April 15, 1995.
----------------------------------
<PAGE>
AMENDMENT AGREEMENT
- -------------------
November 09, 1992
Page 18 of 20
ACKNOWLEDGMENT
STATE OF UTAH
SS.
COUNTY OF Salt Lake
On this 9th day of November, 1992, before me personally appeared DENNIS S.
ENGH to me known to be the person described in and who executed the foregoing
instrument and acknowledged that he executed the same as a free act and deed.
Given under my hand and seal this 9th day of November, 1992.
My Commission Expires April 15, 1995.
----------------------------------
<PAGE>
AMENDMENT AGREEMENT
- -------------------
November 09, 1992
Page 19 of 20
EXHIBIT A
To the Mining Lease Agreement
Between Don W. Fullmer, and Daniel H. Enqh, Dennis S. Enqh.
-------------- ------------------------------
Dated the 9th day of November, 1992.
The Property consists of Lode Claims and Placer claims Plus,
all other claims located in Townships 29 South Range 13 West and
Township 29 South 14 West Salt Lake Medrian, Beaver County, Utah which
Owner has claim to in this area.
CLAIM NAME DESCRIPTION UMC NUMBER
- --------------- ------------------------------------------ ----------
Julie White #1 NW 1/4 SEC. 9, TWNS. 29 SO. R-13. (PLACER) 303016
Julie White #2 SW 1/4 SEC. 9, TWNS. 29 SO. R-13. (PLACER) 303017
Julie White #3 NE 1/4 SEC. 8, TWNS. 29 SO. K-13. (PLACER) 303018
Julie White #4 SE 1/4 SEC. 8, TWNS. 29 SO. R-13. (PLACER) 303019
Julie White #5 NW 1/4 SEC. 8, TWNS. 29 SO. R-13. (PLACER) 303020
Julie White #6 NE 1/4 SEC. 7, TWNS. 29 SO. R-13. (PLACER) 303021
Julie White #7 NW 1/4 SEC. 7, TWNS. 29 SO. R-13. (PLACER) 303022
Julie White #8 NE 1/4 SEC. 12,TWNS. 29 SO. R-14. (PLACER) 303023
Julie White #9 SE 1/4 SEC. 1, TWNS. 29 SO. R-14. (PLACER) 303024
(LODES CLAIMS)
--------------------
Julie White #ll NE 1/4 SEC. 7 & NW 1/4 SEC. 8,TWNS. 29 SO. R-13 W 302980
Julie White #12 NE 1/4 SEC. 7 & NW 1/4 SEC. 8,TWNS. 29 SO. R-13 W 302981
Julie White #l3 NW 1/4 SEC. 8, TWNS. 29 SO. R-13 W. 302982
Julie White #14 NW 1/4 % 1/4 NE 1/4 SEC. 8, TWNS. 29 SO. R-13 W. 302983
Julie White #15 NW 1/4 SEC. 8. TWNS. 29 SO. R-13 W. 302984
Julie White #16 NW 1/4 & NE 1/4 SEC. 8, TWNS. 29 SO. R-13 W. 302985
Julie White #17 NE 1/4 SEC. 8, TWNS. 29 SO. R-13 W. 302986
Julie White #18 NE 1/4 SEC. 8, TWNS. 29 SO. R-13 W. 302987
Julie White #19 NE 1/4 SEC. 8, TWNS. 29 SO. R-13 W. 302988
Julie White #20 NE & NW 1/4 SEC. 8, TWNS. 29 SO. R-13 W. 302989
Julie White #21 NE 1/4 SEC. 8, TWNS. 29 SO. R-13 W. 302990
Julie White #22 NE & SE 1/4 SEC. 8, TWNS. 29 SO. R-13 W. 302991
Situated in Township 29 South, Range 13 West, Township 29 South,
Range 14, Salt Lake Meridian, Beaver County, Utah.
<PAGE>
AMENDMENT AGREEMENT
- -------------------
November 09, 1992
Page 20 of 20
CLAIM NAME UMC NUMBER
- --------------------- ----------
Julie White #23 326947
Julie White #24 326948
Julie White #25 326949
Julie White #26 326950
Julie White #27 326951
Julie White #28 326952
Julie White #29 326953
Julie White #30 326954
Julie White #31 326955
Julie White #32 326956
Julie White #33 326957
Julie White #34 326958
Julie White #35 326959
Julie White #36 326960
Julie White #37 326961
Julie White #38 326962
Situated in Township 29 South, Range 13 West, Salt Lake Meridian,
Beaver County, Utah.
<PAGE>
ADDENDUM TO MINING LEASE
This Addendum to Mining Lease is made tlxis lSth day of March, 2000 by and
between Don W. Fullmer and Areola B. Fullmer, his wife. 905 North Main Street,
Fillmore, Utah 94631. hereinafter referred to as "Lessor;" and Daniel H. Engh
and Dennis S. Engh whose address is 2340 East Oennania Circle. Sandy, Utah
84093-1174, hereinafter referred to as "Lessee." In consideration: of bringing
minimum royalty payments up to date through paynents in the amount of
$24.976.21, the receipt and adequacy of which is hereby acknowledged, Lessor
hereby acknowledges that file items of default contained in the Notice dated
December 31, 1999. incorporated by this reference, are hereby satisfied in full
or waived as to past acts only.
In consideration of the foregoing funds paid to Lessor. Lessor also
ratifies the following Mining Lease No. 1 - dated November 9, 1992 with Daniel
H. Engh and Dennis S. Engh as being in full force and effect, without any
modification of the lease or any waiver of the lease term as to future
performance except at Paragraph 3.1 of the Mining Lease, the primary term and
the requirement to obtain commercial production are extended for five (5) years
hereof.
The leases and claims covered thereby are more particularly described on
the attached Exhibit A, incorporated by this reference.
This Addendum shall be effective on the date above.
/s/Don W. Fullmer /s/Daniel H. Engh
- --------------------------------- ----------------------------------
Don W. Fullmer, (Lessor) Daniel H. Engh, (Lessee)
/s/Arnola B. Fullmer /s/Dennis S. Engh
- --------------------------------- ----------------------------------
Arnola B. Fullmer (Lessor) Dennis S. Engh, (Lessee)
<PAGE>
To The ADDENDUM TO MINING LEASE
Page 2
STATE OF UTAH
SS
County of Millard
On this 15th day of March, 2000, personally appeared before me Don W.
Fullmer and Arnola B. Fullmer, his wife, who acknowledged to me
that they executed the foregoing Addendum to Mining Lease.
/s/Barbara-Ann Iverson
----------------------------------
NOTARY PUBLIC
Residing at: 390 S. 100E
---------------------
Fillmore, UT
My Commission Expires:
- ---------------------------------
STATE OF UTAH
SS
COUNTY OF Millard
On this 15th day of March, 2000, personally appeared before me Daniel H.
Engh and Dennis S. Engh, who acknowledge to me that they executed the foregoing
Addendum to Mining Lease.
/s/Barbara-Anne Iverson
----------------------------------
NOTARY PUBLIC
Residing At: 390 S. 100E
----------------------
Fillmore, UT
My Commission Expires:
- ---------------------------------
<PAGE>
To The ADDENDUM TO MINING LEASE
Page 3
Exhibit A
Mining Lease #1
- ---------------
With respect to the Properties, Daniel H. Engh and Dennis S. Engh have a
AMENDMENT AGREEMENT Dated November 9th 1992 by and between Don W. Fullmer
Lessor) and Daniel H. Engh, Dennis S. Engh (Lessee). All terms and conditions of
the November 9, 1992. AMENDMENT AGREEMENT will be a part of this Letter
Agreement. Said claims of this AMENDMENT AGREEMENT are described below:
The Property consists of Lode Claims and Placer claims Plus, all other
claims located in Townships 29 South Range 13 West and Township 29 South 14 West
Salt Lake Medrian. Beaver County, Utah which Owner has claim to in this area.
CLAIM NAME DESCRIPTION UMC NUMBER
- ---------- ------------ ----------
Julia White #1 NW 1/4 SEC. 9, TWNS. 29 SO. R-13. (PLACER) 303016
Julia White #2 SW 1/4 SEC. 9, TWNS. 29 SO. R-13. (PLACER) 303017
Julia White #3 NE 1/4 SEC. 8, TWNS. 29 SO. R-13. (PLACER) 303018
Julie White #4 SE 1/4 SEC. 8, TWNS. 29 SO. R-13. (PLACER) 303019
Julia White #5 NW 1/4 SEC. 6, TWNS. 29 SO. R-13. (PLACER) 303020
Julia White #6 NE 1/4 SEC. 7, TWNS. 29 SO. R-13. (PLACER) 303021
Julia White #7 NW 1/4 SEC. 7, TWNS. 29 SO. R-13. (PLACER) 303022
Julia White #8 NE 1/4 SEC. 12,TWNS. 29 SO. R-14. (PLACER) 303023
Julia White #9 SE 1/4 SEC. 1, TWNS. 29 SO. R-14. (PLACER) 303024
(LODES CLAIMS)
--------------------
Julia White #11 NE 1/4 SEC. 7 & NW 1/4 SEC. 8, TWNS. 29 SO. R-13 W 302980
Julia White #12 NE 1/4 SEC. 7 & NW 1/4 SEC. 8, TWNS. 29 SO. R-13 W 302981
Julia Whi~e #13 NW 1/4 SEC. 8, TWNS. 29 SO. R-13 W. 302982
Julia White #14 NW 1/4 & NE 1/4 SEC. 8, TWONS. 29 SO. R-13 W. 302983
Julia White #15 NW 1/4 SEC. 8, TWNS. 29 SO. R-13 W. 302984
Juli~ White #16 NW 1/4 & NE 1/4 SEC. 8, TWONS. 29 SO. R-13 W. 302985
Juli~ White #17 NE 1/4 SEC. 8, TOWNS. 29 SO. R-13 W. 302986
Julia White #18 NE 1/4 SEC.8, TOWNS. 29 SO. R-13 W. 302987
Julia White #l9 NE 1/4 SEC. 8, TWNS. 29 SO. R-13 W. 302988
Julia.White #20 NE & NW 1/4 SEC. 8, TWNS. 29 SO. R-13 W. 302989
Julia White #21 NE 1/4 SEC. 8, TWNS. 29 SO. R-13 W. 302990
Julia white #22 NE & SE 1/4 SEC. 8, TWNS. 29 SO. R-13 W. 302991
Situated in Township 29 South, Range 13 West, Township 29 South, Range 14,
Salt Lake Meridian, Beaver County, Utah.
Exhibit A
Mining Lease Blawn Wash
- -----------------------
To Mining Lease Agreement dated as of December 31st, 1999, by and among Daniel
H. Engh, Connie L. Engh, Dennis S. Engh, Judy A. Engh, Darin Engh, Holly Engh
(a.k.a. Holly Kingdon) and Utah Clay Technology, Inc.
PART 1
- ------
With respect to the Properties, Daniel H. Engh and Dennis S. Engh are in
control and ownership of Engh Family Lode and placer claims described below:
The Following Property consists of Placer Claims plus, all other claims
located in Townships 29 South Range 13 & 14 West Salt Lake Medrian, Beaver
County, Utah which Owner has claim to in this area.
The Property consists of Lode Claims and Placer claims Plus, all other
claims located in Townships 29 South Range 15 West and Township 30 South 15 West
Salt Lake Medrian, Beaver County, Utah which Owner has claim to in this area.
<TABLE>
<CAPTION>
Claim Name UMC Nos.
---------- --------
<S> <C> <C>
Meadow Nos. 15-20 305325-305330
Brooke Nos. 30-33 305331-305334
Blue Nos. 20-46 310617-310643
Blue Nos. 47-62 312037-312052
Blue Nos. 63-64 313298-313299
Blue Nos. 65-66 312053-312054
Blue Nos. 67-68 313300-313301
Blue Nos. 69-70 312055-312056
Blue Nos. 71-76 313302-313307
</TABLE>
Page 1
<PAGE>
<TABLE>
<CAPTION>
CLAIM NAME BOOK PAGE UMC NUMBER
---------- ---- ---- ----------
<S> <C> <C> <C>
BLUE #93 238 366 313308
BLUE #94 238 367 313309
BLUE #95 238 368 313310
BLUE #96 238 369 313311
BLUE #97 238 370 313312
BLUE #98 238 371 313313
BLUE #99 238 372 313314
BLUE #100 238 373 313315
</TABLE>
<TABLE>
<CAPTION>
CLAIM NAME BOOK PAGE UMC NUMBER
---------- ---- ---- ----------
<S> <C> <C> <C>
ENGH #1 252 654 335833
ENGH #2 252 765 335962
(AMENDED) 253 119
ENGH #3 252 766 335963
(AMENDED) 253 120
ENGH #4 252 767 335964
(AMENDED) 253 121
ENGH #5 252 768 335965
(AMENDED) 253 122
ENGH #6 252 769 335966
(AMENDED) 253 123
CLAIM NAME BOOK PAGE UMC NUMBER
---------- ---- ---- ----------
ENGH #7 252 770 335967
(AMENDED) 253 124
ENGH #8 252 771 335968
(AMENDED) 253 125
ENGH #9 252 772 335969
(AMENDED) 253 126
ENGH #10 252 773 335970
(AMENDED) 253 127
ENGH #11 252 774 335971
(AMENDED) 253 128
ENGH #12 252 775 335972
(AMENDED) 253 129
ENGH #13 252 776 335973
</TABLE>
Page 2
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
(AMENDED) 253 130
ENGH #14 252 777 335974
(AMENDED) 253 131
ENGH #15 252 778 335975
(AMENDED) 253 132
ENGH #16 252 779 335976
(AMENDED) 253 133
</TABLE>
<PAGE>
Situated in Township 29 South, Range 15 West, Salt Lake Meridian, Beaver
County, Utah.
<TABLE>
<CAPTION>
NAME TYPE OF
OF CLAIM CLAIM FILING DATE BOOK & PAGE UMC NUMBER
- --------- -------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
BLUE #201 (PLACER) 07/22/88 238 374 313316
BLUE #202 (PLACER) 07/22/88 238 375 313317
BLUE #203 (PLACER) 07/22/88 238 376 313318
BLUE #204 (PLACER) 07/22/88 238 377 313319
BLUE #205 (PLACER) 07/22/88 238 378 313320
BLUE #206 (PLACER) 07/22/88 238 379 313321
BLUE #207 (PLACER) 07/22/88 238 380 313322
BLUE #208 (PLACER) 07/22/88 238 381 313323
BLUE #209 (PLACER) 07/22/88 238 382 313324
BLUE #210 (PLACER) 07/22/88 238 383 313325
BLUE #211 (PLACER) 07/22/88 238 384 313326
BLUE #212 (PLACER) 07/22/88 238 385 313327
BLUE #213 (PLACER) 07/22/88 238 386 313328
BLUE #214 (PLACER) 07/22/88 238 387 313329
BLUE #215 (PLACER) 07/22/88 238 388 313330
BLUE #216 (PLACER) 07/22/88 238 389 313331
BLUE #217 (PLACER) 07/22/88 238 390 313332
BLUE #218 (PLACER) 07/22/88 238 391 313333
BLUE #219 (PLACER) 07/22/88 238 392 313334
BLUE #220 (PLACER) 07/22/88 238 393 313335
</TABLE>
The above claims are Located and Recorded in Beaver County, Utah.
This mining lease contains a Reserved Royalty of 3% on all ores, minerals or
Products (called "Production") mined and removed from the leased Premises. Said
Royalty shall be calculated based upon the gross value of the production.
Additionally, the above claims and the below mineral leases have a minimum
royalty of $5,000.00 and or a production royalty of $2.50/ton which is adjusted
by the Consumer Prices Index for all Urban Consumers for U.S. City average as
published by the U.S. Department of Labor Bureau of Labor Statistics.
Additionally, the property includes subleases to the following Sate of Uah
mineral leases. The State of Utah mineral leases have a 5 1/2% Royalty.
Page 3
<PAGE>
A Sub-Lease to the following State of Utah mineral Leases:
Clay lease ML-43616 (ALL)
Clay lease ML-43648 (All)
Industrial Sands lease ML-43649 (All)
Industrial Sands lease ML-43650 (ALL)
Metalliferous Minerals lease ML-43651 (All)
Metalliferous Minerals lease ML-43652 (All)
The State mineral leases will be subject to the same terms and conditions of
this lease and approval of sub-lease assignment from the State of Utah.
End of Exhibit A.
MINING LEASE AGREEMENT
----------------------
THIS MINING LEASE AGREEMENT made and entered into this 9th day of
June, 1993, by and between DON W. FULLMER, and ARNOLA B. FULLMER, HIS WIFE,
whose address is 1025 NORTH MAIN, FILLMORE, UTAH 84631, herein referred to as
"Lessor" or "Owner" and DANIEL H. ENGH, DENNIS S. ENGH whose address is 2340
EAST GERMANIA CIRCLE, SANDY, UTAH 84093-1174, hereinafter referred to as
"Lessee".
WITNESSETH:
WHEREAS, the owner is the sole owner, or the agent for the
association which is the sole owner of the unpatented mining claims listed in
Exhibit "A" of this agreement, hereinafter referred to as the "Leased Property",
and
WHEREAS, Lessee desires to lease the Leased Property, Owner and Lessee
hereby agree to the following (hereinafter referred to as the "Agreement"):
WHEREAS, Lessor is owner of certain properties and property rights
situated in Sevier County, State of Utah, and more particularly described in the
attached Exhibit "A", incorporated by reference, and hereinafter referred to as
the "Leased Premises"; and
WHEREAS, Lessee desires to lease certain rights in and to the Leased
Premises which Lessor is willing to grant to Lessee;
NOW THEREFORE, in consideration of $100.00 paid by Lessee to
Lessors receipt of which is hereby acknowledged and the payments, covenants and
agreements hereinafter set forth the parties agree as follows:
<PAGE>
1. The Leased Premises.
-------------------
The "Leased Premises" shall mean all of the property described
in Exhibit "A" attached hereto and made a part hereof, together with all of the
ores, minerals and materials thereon and thereunder, and all right, title and
all water, water rights, easements and rights of way now and hereafter owned or
held by Owner in, upon or under the said property, or in any way pertaining
thereto.
2. Warranties and Representations.
------------------------------
Owner represents to Lessee: (1) that subject to the matters
specifically set forth in Exhibit "A," and subject to the matters set forth
below with respect to unpatented mining claims, Owner has the exclusive
possession of the Mining Claims and (2) that the Owner has the full right, power
and capacity to enter into this Lease upon the terms set forth herein. Since the
Leased Premises, as described in Exhibit "A" includes unpatented mining claims,
Owner represents and warrants to Lessee: (1) that Owner's title is subject to
paramount title of the United States of America and to the rights, if any, of
surface patentees; (2) that the acts of location performed by Owner on the
unpatented mining claims described in Exhibit "A" have been completed in
compliance with the laws of the State of Utah and of the United States of
America; and (3) that the Notice Of Intent To Hold has been completed and filed
with the Juab County Recorder and the BLM in Salt Lake City, Utah.
(4) Lessee represents to owner: (A) that Lessee has made a preliminary search of
the Bureau of Land Management records with regard to the leased premises and (B)
That Lessee is aware of some conflicting claims within the boundaries of the
leased premises and
<PAGE>
(C) That Lessee intends to do additional title research and to take such actions
as are necessary to perfect title in the Lessors favor, insofar as possible and
(D) That Lessee will refrain from or abandon all attempts to obtain title to the
Leased Premises except as provided by this by this lease, without first
obtaining owners written consent.
I. GRANT
1.1 Lessor hereby grants and leases to Lessee for and in
consideration of, and subject to all of the terms provisions and conditions
hereinafter set forth, the exclusive right and privilege to mine, extract,
remove and dispose of the all locatable Minerals in, upon or under the Leased
Premises, together with the right to use and occupy so much of the surface of
the Leased Premises as may be required for all purposes reasonably incident to
the mining, extracting, removal and disposal of the locatable Minerals according
to the provisions of this Lease.
II. LEASED MINERALS
2.1 "Leased Minerals" or "Locatable Minerals" as used herein
shall mean all locatable minerals acquired by virtue of the placer or lode
mining claims owned by owner.
III. TERM
3.1 The primary term of this Lease shall be for a period of five
(5) years from the date hereof and for so long thereafter as Leased Minerals are
produced in commercial quantities at more than 200 tons/month from the lands
described in Exhibit A by the Lessee, their partners, successors or assigns, for
at least ten months of each year after the first five year term has expired,
subject to extension or termination as hereinafter provided.
3.2 This Lease and the terms and conditions of this Lease
agreement issued by the Lessor are made with the Lessee herein on condition that
Lessee and any lawful successor in interest to Lessee shall perform all
<PAGE>
covenants and terms and conditions herein set forth to be performed by Lessee or
its lawful assigns including payment of royalties as herein provided. Lessor may
issue written notice of termination and cancellation of this Lease, and
forfeiture, subject to paragraph 9.1: declaring that the Leased Premises and
each and every part thereof have thereby reverted to the Lessor, including any
and all fixtures and improvements required to be left with the property upon
expiration, termination, or cancellation of this Lease.
3.3 Lessee may terminate this Lease at any time by giving Lessors
at least ninety (90) days prior written notice, together with a check in full
settlement of any royalties that are due and unpaid; upon giving such notice of
termination, Lessee shall be released of all its obligations except those
obligations which have theretofore accrued. Within Thirty (30) days after date
of termination, Lessee shall execute and record a release and quitclaim deed
releasing all of Lessee's right, title and interest in and to the Leased
Premises.
3.4 Upon the effective date of termination by Lessee, Lessor
shall be entitled to retain all funds paid to it by Lessee pursuant to this
Lease.
3.5 Within sixty (60) days after termination from this Lease,
Lessee or its successor or assign will provide Lessor with a copy of all data
prepared, collected, and interpreted by or for it (including maps, drill data,
assays, analyses, geological surveys, topographic surveys, and other data
pertaining to the Leased Premises and the Leased Minerals. Lessee will provide
readable copies of all new factual geologic data and reports by February 15th of
each year.
IV. CONSIDERATION
4.1 The Lessee in consideration of the granting of the rights
and privileges granted herein hereby covenants and agrees as follows:
<PAGE>
(1) Due $5,000.00 annual minimum royalty beginning on the first
anniversary of this lease and thereafter minimum $5,000.00 each anniversary
until Lessee terminates its rights. The minimum royalty of $5,000.00, will be
adjusted by the Consumer Prices Index for All Urban Consumers for U.S. City
Average as published by the U.S. Department Of Labor, Bureau Of Labor Statistics
who is created pursuant to Sec. 5(a) of Public Law 304, 79th Congress. The
average at the end of December 1992 will be the base year and any change in the
Consumer Prices Index for All Urban Consumers for U.S. City Average for the
following year ended December will determine the percent change in the $5,000.00
for the following year. Each year becomes the new base year to measure change
from.
(2) Production Royalty: A production royalty on Leased Minerals
which shall be Two Dollars and 50 Cents per ton ($2.50/ton) of ore removed from
or mined and processed upon the Leased Property. The Production Royalty will be
applied towards the annual minimum royalty of $5,000.00 on an annual basis.
(3) The production royalty of $2.50/ton stated in IV (2), will
be adjusted by the Consumer Prices Index for All Urban Consumers for U.S. City
Average as published by the U.S. Department Of Labor, Bureau Of Labor Statistics
who is created pursuant to Sec. 5(a) of Public Law 304, 79th Congress. The
average at the end of December 1992 will be the base year and any change in the
Consumer Prices Index for All Urban Consumers for U.S. City Average for the
following year ended December will determine the percent change~ in the
$2.50/ton for the following year. Each year becomes the new base year to measure
change from.
A). Annual Labor:
------------
(1) To perform upon the Leased Premises the annual
assessment work as set forth under the laws of the United States and the State
of Utah, and to prepare timely proof of the performance of such labor and to
record and file the same as required by law, and to furnish Lessor with a copy
thereof.
Should this Lease be terminated as herein provided and the effective date of
such termination shall be ninety (90) days, or less, prior to the end of the
then current assessment year, Lessee shall nevertheless be required to perform
upon the Leased Premises the annual labor for such assessment year and shall
prepare timely proof thereof, record the same, and furnish Lessor with a copy of
such proof as hereinafter provided. In the performance of annual labor upon or
for the benefit of the Leased Premises, Lessee shall be entitled to perform such
work upon any of the claims or upon any of the groups of claims comprising the
Leased Premises so long as such work shall qualify for the purpose of the
development of the Leased Premises as a contiguous group pursuant to the
<PAGE>
requirements of law relating to group work on mining claims except as herein
provided.
(2) Assessment work will be completed by July 15 of each
year starting with the 1993 Assessment Year, or Lessor may do the work and
charge reasonable costs time and expenses to Lessee. Lessee will furnish to
Lessor a copy of the proof-of-labor with the County, no later than September
15th of each year.
(3) Rental Fees Required For Unpatented Mining Claims by
the Bureau of Land Management. The fiscal year 1993 Appropriations Acts for the
Department of the Interior, signed October 5, 1992, requires holders of
unpatented mining claims to pay the Federal Government a new rental fee of $100
per claim per year. The rental fee requirement, which will expire September 30,
1994, suspends a Mining Law requirement for performance of a minimum of $100 of
assessment work per claim per year. The Two rental years are September 1, 1992,
through August 31, 1993, and September 1, 1993, through August 31, 1994. Claims
are defined as lode claims, placer claims, mill sites, and tunnel sites.
For the next 2 years, claimants must pay the BLM $100 per claim
rental on or before August 31, 1993, for the year ending September 1, 1993, and
<PAGE>
an advance rental of $100 per claim on or before August 31, 1993, for the year
beginning September 1, 1993.
Lessee agrees to pay this rental fee on or before July 31, 1993
to the Bureau of Land Management. Lessor will agree to be present at the Bureau
of Land Management's office in Salt Lake City, Utah when payment is made or
accept copy of payment receipt stamped by the BLM within five days of payment.
Lessee agrees to pay on or before July 31 of any future rental fees required by
the Bureau of Land Management after the expiration of September 30, 1994.
B). PRODUCTION ROYALTY PAYMENTS:
(1) Production royalty shall be paid within thirty (30)
days after receipt of payment for each shipment or when otherwise due, and each
payment shall be accompanied by a statement showing the date(s) of shipment(s),
quantity and value of each shipment, to whom sold and the gross value received,
and any cost deductions.
(2) Method of Production royalty payments shall be in
U.S. dollars payable by cash or valid check drawn on available funds, and shall
be deemed made when deposited at Lessor's single depository at:
Paradise Management Co.
P.O. Box 268
Fillmore, Utah 84631
Phone (801) 743--5848
Lessor may change its single depository at any time by giving written notice to
Lessee.
<PAGE>
V. PERIODIC REPORTS
5.1 Lessee agrees to make semi--annual written reports to lessor (on or
before January 1 and July 1 each year) detailing the exploration, development
and mining work done upon the leased premises, quantity of ores, minerals or
products shipped from the Leased Premises, the identity of the buyer(s) thereof
or the place where such ores, minerals or products are stockpiled, the plans for
the Leased Premises during the next six (6) month period, and other activities
conducted or planned for the Leased Premises.
5.2 Lessee shall audit all operations upon the Leased Premises at least
annually, and furnish to Lessor a copy of such audit within thirty (30) days
after completion.
VI. RIGHTS AND OBLIGATIONS OF LESSEE
6.1 The Lessee will forthwith have and is hereby granted by Lessor
the right and privilege from the date hereof and so long thereafter as this
Lease remains in force and effect of entering into and upon the Leased Premises
and the right to drill and excavate thereon and therein holes, pits, tunnels,
shafts, and other such excavations and to conduct therein and elsewhere such
surveys, exploration, investigations, sampling, milling, screening and other
work similar as well as dissimilar as Lessee in its sole judgment and discretion
may wish to know relating to any and all facts relative to the geology of the
Leased Premises, including but not limited to the geology of the Leased Minerals
and the mining, milling, beneficiating, and marketing thereof, together with the
right to drain water and materials and to pile overburden at places most
convenient to Lessee, and the right to dig or bore wells and use any water in or
upon said lands and the right to construct and place upon said lands any and all
buildings, dams, drains, machinery, roads, railroads, pipe and power lines and
other improvements that may be convenient for said purposes, all of which
improvements will become the full and complete property of the Lessor upon
termination or assignment of Lease back to Lessor, and Lessee will be under no
further obligation or liability with respect thereto except for reclamation and
<PAGE>
except as provided in paragraph 6.7 below. Lessee will have the paramount
possession and control of the Leased Premises with regard to the Leased Mineral
rights obtained herein during and throughout the life of this Lease and shall be
entitled to conduct therein and thereon all mining, milling and beneficiation
uses and purposes reasonably incident thereto as it shall deem satisfactory and
advantageous so far as Lessee tries not to interfere with the rights of the
Federal potassium leases. All work shall be conducted by Lessee as Lessee in its
sole judgment and discretion deems best and in a good and minerlike fashion.
Stockpiles and tailings covered by Lease, remain the property of the Lessor upon
surrender of Lease. Mining timbers in place shall remain affixed as part of the
Leased Premises unless released in writing to Lessee.
6.2 Lessor or his agents duly authorized in writing will have at all
reasonable times and at his own risk access to all parts of Leased Premises
and associated premises for the purposes of reasonable inspection of operations,
record keeping, and accounts to the end that Lessor might verify that the
specified royalty payments are being made properly and that operations are being
conducted in a miner-like fashion. Lessee will keep records in a businesslike
manner.
6.3 Any and all future leases, transfers, encumbrances or conveyances
of interests in the Leased Premises not covered by this Lease shall be
subordinate to and subject to the rights of Lessee, his successors, assigns of
sublessees, so long as this Lease is in force and effect.
6.4 Lessee shall pay all expenses incurred by it and shall permit
no liens to attach to Leased Premises on account of any debt for materials
or services furnished for the benefit of the Leased Premises while this Lease is
in effect.
6.5 Lessee will indemnify and forever hold harmless and defend Lessor
from any demand, claim, suit, judgment or liability resulting from, the
<PAGE>
exploratory or development activities of Lessee conducted pursuant to this
agreement. Upon request of Lessor, Lessee will furnish evidence of sufficient
workmen's compensation, liability and other insurance to cover anticipated
risks, or evidence that it is adequately self--insured for such contingencies.
6.6 Lessee agrees that Leased Minerals from the Leased Premises shall
not be mixed or co--mingled with minerals, ore, substances or materials from
other properties or lands except as agreed by Lessor.
6.7 In the event of the termination of this Lease by lapse of time or
otherwise, Lessee shall grade and slope and otherwise reclaim that portion
of the land being leased pursuant hereto, which was the site of actual mining
operations, in accordance with the requirements of the State and Federal
regulations then in effect and Owner may elect to assume the burden of
reclaiming the land, by notifying Lessee in writing of his intent to assume said
burden, in which event, Lessee will obtain not more than three (3) bids for
performance of the reclamation work required by this paragraph, and will pay
over to owner a sum equal to ninety--five percent (95%) of the lowest of said
bids. Thereafter, Lessee shall be relieved from all duties, expenses or
responsibility with respect to such reclamation and Owner, simultaneously with
or prior to the receipt of said payment, shall obtain from the appropriate
Government agencies and deliver to Lessee all documents necessary to release
Lessee from all further responsibility for the performance of such reclamation
work.
VII. PATENT OF CLAIMS
7.1 Upon request of Lessee at any time during the term of this Lease,
the Lessor agrees to undertake to obtain patent to any of the mining claims
designated by Lessee. Lessee, at its own expense, shall prepare all documents,
compile all data and comply in all respects with all applicable laws in this
<PAGE>
endeavor, and Lessor shall execute all documents required for this purpose and
shall cooperate fully with Lessee in the patent application and proceedings.
7.2 The rights of Lessor and Lessee under this Lease will extend to any
and all amended, relocated, or patented claims referred to in Exhibit A. Lessor
and Lessee agree that all amendments, relocations, or staking new claims in the
claimed area, of the claims referred to in Exhibit A, will be made in the name
of Lessor. Some claims need amending and it is known hereby to the Lessee. Any
valid mining claims staked by Lessor, or his agents, within the Leased
Premises shall fall under and be a part of this Lease.
VIII. DEFAULT AND FORCE MAJEURE
8.1 If Lessee will be in default in performing any obligations
(except the timely payment of royalties), Lessee shall lose no rights unless,
within sixty (60) days following written notice from Lessor, given at the
address herein specified, specifying such failure or breach, Lessee shall fail
to make such payment or undertake to cure such default by commencement and
follow through of appropriate performance, within a reasonable amount of time.
Upon such failure, Lessor may terminate this Lease.
8.2 If Lessee shall be prevented or delayed from performing its
obligations or performing any work which it desires to perform or is performing
by reason of act of nature, strike or threat of strike, fire, flood, war, mob
violence, court order, unavoidable casualties, or any other enumeration, beyond
the control of Lessee which cannot be overcome by the means normally employed in
performance and at comparable and reasonable expense, then the duration of this
Lease shall be extended for a period equal to the period of Force Majeure and
any failure to perform obligations shall not be deemed a breach of this Lease.
Lessee agrees to use reasonable diligence to remove such causes of disability as
<PAGE>
may occur from time to time. This paragraph shall not excuse payment or delay
payment of royalties.
IX. Lease Premises.
9.1 The parties hereto agree that during the term of this Lease, in the
event title to any of the Leased Premises is contested by any person or persons,
corporation or corporations, or governmental agencies, Lessee will, at its own
election and expense, defend the title to any of the Leased Premises before any
court of competent jurisdiction or any administrative body. Lessee will defend
any actions for damages relating to exploration, development, or mining
activities by Lessee on Leased Premises.
9.2 Lessor, upon execution of this Lease, shall furnish Lessee with
copies of all property maps possessed by Lessor on the Leased Premises and
adjacent lands.
X. TAXES AND DUTIES
10.1 Lessee agrees to pay (i) all taxes hereafter levied and assessed
upon all machinery and improvements placed by Lessee upon the Leased Premises,
(ii) taxes hereafter levied upon the Leased Premises, including taxes assessed
by reason of net annual proceeds, and (iii) occupation or severance taxes
imposed upon the mining or production of Leased Minerals from the Leased
Premises or any other taxes, assessments or charges resulting from Lessee
activities on Leased Premises.
10.2 Lessor-agrees to promptly transmit to Lessee any notices pertaining
to taxes, assessments and charges which Lessor may receive.
10.3 Lessee, in all operations under this Lease, will comply with all
applicable State and Federal laws, including the social laws relative to
<PAGE>
employment, safety, workmen's compensation insurance, social security,
unemployment tax and tax withholding. Lessee shall hold Lessor harmless from
claims of damage to persons or property arising from Lessee's operations under
this Lease. Lessee will comply with hazardous waste, air and water quality
requirements.
10.4 Lessee will do all reclamation work required by the Bureau of Land
Management, the State of Utah or Juab County in a timely manner.
11.1 Lessee can convey, assign or transfer its interest in this lease
or any part of this Lease without the prior notification and consent in
writing of the Lessor. The assignee party will, as a condition of consent to the
transfer, agree to be bound by and subject to the terms of this Lease. Any
assignee party will provided a photocopy of the executed copy of assignment and
is delivered to the other party. Overriding royalty assignments will not become
effective,' even if otherwise valid without the consent in writing of the
Lessor. Lessee, its successor and assigns, may not assign or convey royalty,
overriding royalty, production payment or like interest in the Leased Premises
without Lessor's prior written consent.
XII. MISCELLANEOUS
12.1 This agreement shall be governed by the laws of the State of Utah.
12.2 Title headings are for convenience only and shall not be deemed
a part of this Lease.
12.3 This Lease and Its Exhibit contain the entire agreement between
the parties and supersedes entirely any prior understandings whether oral or
written.
<PAGE>
12.4 If any provisions of this Lease is or becomes void or unenforceable
by Force of Law, the other provisions shall remain valid and enforceable.
12.5 Lessor's and Lessee's proper address shall be the following, which
either may change by giving written notice to the other.
Don W. Fullmer, Arnola B. Fullmer
P.O. Box 268
1025 North Main
Fillmore, Utah 84631
Daniel H. Engh. Dennis S. Engh
2340 East Germania Circle
Sandy. Utah 84093--1174
12.6 The failure to enforce at any time any provisions of this Lease,
shall in no way be construed to be a waiver of such' provisions, or to affect
validity of the Lease.
12.7 This Lease shall be binding upon and inure to the benefit of the
successors and permitted assigns of the parties.
12.8 A Memorandum of this Lease may be filed by either party.
12.9 Lessee will diligently explore and conduct operations on or near
Leased Premises throughout the term of this Lease in a manner reasonably
calculated to advance the production of minerals from Leased Premises.
<PAGE>
IN WITNESS WHEREOF, this Lease has been executed and delivered
by Lessor to Lessee as of the day and year first above written.
/S/ Don W. Fullmer /S/ Arnola B. Fullmer
- --------------------------------- -----------------------------------
Don W. Fullmer Arnola B. Fullmer
LESSOR LESSOR
/S/ Daniel H. Engh /S/ Dennis S. Engh
- --------------------------------- -----------------------------------
Daniel H. Engh Dennis S. Engh
LESSEE LESSEE
<PAGE>
ACKNOWLEDGMENT
STATE OF UTAH
COUNTY of Millard
-------
On this 19th day of June, 1993, before me personally appeared DON W.
FULLMER to me known to be the person described in and who executed the foregoing
instrument and acknowledged that he executed the same as a free act and deed.
Given under my hand and seal this 19th I day of June, 1993. My
Commission Expires July 3, 1994.
/S/ Lee Ann H. Burton
---------------------
ACKNOWLEDGMENT
STATE OF UTAH
COUNTY OF Millard
-------
On this 19th_day of June, 1993, before me personally appeared ARNOLA B.
FULLMER to me known to be the person described in and who executed the foregoing
instrument and acknowledged that he executed the same as a free act and deed.
Given under my hand and seal this 19th day of June, 1993. My Commission
Expires July 3, 1994.
/S/ Lee Ann H. Burton
---------------------
<PAGE>
ACKNOWLEDGMENT
STATE OF UTAH
COUNTY of Millard
-------
On this 19th day of June, 1993, before me personally appeared DANIEL
H. ENGH to me known to be the person described in and who executed the
foregoing instrument and
acknowledged that he executed the same as a free act and deed.
Given under my hand and seal this 19th day of June, 1993. My Commission
Expires July 3, 1994.
/S/ Lee Ann H. Burton
---------------------
ACKNOWLEDGMENT
STATE OF UTAH
COUNTY of Millard
-------
On this 19th day of June, 1993, before me personally appeared DENNIS S.
ENGH to me known to be the person described in and who executed the foregoing
instrument and acknowledged that he executed the same as a free act and deed.
Given under my hand and seal this 19th day of June, 1993. My Commission
Expires July 3, 1994.
/S/ Lee Ann H. Burton
---------------------
<PAGE>
EXHIBIT A
To the Mining Lease Agreement
Between Don W. Fullmer, Arnola B. Fullmer, and Daniel H. Engh, Dennis S.
--------------------------------- -------------------------
Engh
- ----
Dated the 19th day of June, 1993.
PROPERTY
The Property consists of unpatented lode and association placer mining claims
located on land managed by the National Forest Service in the State of Utah
(Salt Lake Base & Meridian) Sevier County:
Mill Creek area association placer claims:
<TABLE>
<CAPTION>
Claim UMC # T, R, S. County
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
White Mark #1 303012 26S, 4.5W, 30 Sevier
White Mark #2 303013 26S, 4.5W, 30 Sevier
Nola #1 303014 26S, 4.5W, 30 Sevier
Nola #2 303015 26S, 4.5W, 30 Sevier
Mill Creek Area lode claims:
Debra Dawn #1 302970 26S, 4.5W, 30 Sevier
Debra Dawn #2 302971 26S, 4.5W, 30 Sevier
Debra Dawn #3 302972 26S, 4.5W, 30 Sevier
Debra Dawn #4 302973 26S, 4.5W, 30 Sevier
Debra Dawn #5 302974 26S, 4.5W, 30 Sevier
Silver Star #1 302975 26S, 4.5W, 30 Sevier
Silver Star #2 302976 26S, 4.5W, 30 Sevier
Silver Star #3 302977 26S, 4.5W, 30 Sevier
</TABLE>
ADDENDUM TO MINING LEASE
This Addendum to Mining Lease is made this 15th day of March, 2000 by and
between Don W. Fullmer and Arnola B. Fullmer, his wife. 905 North Main Street,
Fillmore. Utah 94631, hereinafter referred to as "Lessor," and Daniel H. Engh
and Dennis S. Engh whose address is 2340 East Germania Circle, Sandy, Utah
84093-1174, hereinafter referred to as "Lessee."
In consideration, of bringing minimum royalty payments up to date through
payments in the amount of $14,034.81, the receipt and adequacy of which is
hereby acknowledged, Lessor hereby acknowledges that the items of default
contained in the Notice dated December 31, 1999, incorporated by this reference,
are hereby satisfied in full or waived as to past acts only.
Lessor and Lessee ratify Mining Lease No. 3 - dated June 19, 1993, between
the parties as being in full force and effect, without any modification of the
lease except as provided herein, or any waiver of the lease terms as to future
performance, except at Paragraph 3.1 of Mining Lease, the primary term and the
requirement to obtain commercial production are emended tbr five (5) years from
the date hereof.
In consideration of the extension of time for achieving commercial
production, the Lessee grants to the Lessor the right, at the Lessors sole
option and expense, to enter upon any portion of the leased premises, not at
that time being actively mined, under the terms of the lease, by the Lessee, to
mine and produce clay and other minerals for sale by the Lessor for use in brick
or cement. Such production shall not exceed 100,000 tons per year from the
leased premises. The first operator conducting commerical mining operations on
the leased premises shall direct the location and manner of any joint mining
operations. No royalty or other payment shall be assessed by the Lessee on
production by the Lessor. However, direct payments necessary to keep the claims
current and viable shall be assumed by the Lessor based on the percentage of
<PAGE>
total production performed by the Lessor in any given year. Minimum royalties
payable to the Lessor by the Lessee shall be waived by the Lessor during any
year in which the Lessor shall produce clay from the Leased premises as
provided above.
The leases and claims covered filetoby are more particularly described on
the attached Exhibit A, incorporated by this reference.
This Addendum shall be effective on the date above.
/s/Don W. Fullmer, /s/Daniel H. Engh
- --------------------------------- -----------------------------------
Don W. Fullmer, (Lessor) Daniel H. Engh, (Lessee)
/s/Arnola B. Fullmer /s/Dennis S. Engh
- --------------------------------- -----------------------------------
Arnola B. Fullmer (Lessor) Dennis S. Engh, (Lessee)
<PAGE>
To The ADDENDUM TO MINING LEASE
Page 3
STATE OF UTAH
SS.
County of Millard
--------------
On this 15 day of March, 2000, personally appeared before me Don W.
Fullmer and Arnola B. Fullmer, his wife, who acknowledged to me that they
executed the foregoing Addendum to Mining Lease.
-----------------------------------
NOTARY PUBLIC
RESIDING AT: 390 S. 100E
-----------------------
My Commission Expires: Fillmore, UT
STATE OF UTAH
SS.
County of Millard
--------------
On this 15 day of March, 2000, personally appeared before Daniel H. Engh
and Dennis S. Engh, who acknowledged to me that they executed the foregoing
Addendum to Mining Lease.
-----------------------------------
NOTARY PUBLIC
RESIDING AT: 390 S. 100E
-----------------------
My Commission Expires: Fillmore, UT
<PAGE>
To The ADDENDUM TO MINING LEASE
Page 4
Exhibit A
Mining Lease #3
- ---------------
With respect to the Properties, Daniel H. Engh and Dennis S. Engh have a MINING
LEASE AGREEMENT Dated June 19th 1993 by and between Don W. Fullmer, Arnola B.
Fullmer (Lessor) and Daniel H. Engh, Dennis S. Engh (Lessee). All terms and
conditions of the June 19, 1993 MINING LEASE AGREEMENT will be a part of this
Letter Agreement. Said claims of this MINING LEASE AGREEMENT are described
below:
The Property consists of unpatented lode and association placer mining claims
located on land managed by the National Forest Service in the State of Utah
(Salt Lake Base & Meridian) Sevier County:
Mill Creek area association placer claims:
- --------------------------------------------------------------------------------
Claim UMC # T. R. S. County
----- ----- -- -- -- ------
White Mark #1 303912 26S, 4.5w, 30 Sevier
White Mark #2 302013 26S, 4.5W, 30 Sevier
Nola #1 303014 26S, 4.5W, 30 Sevier
Nola #2 302015 26S, 4.5W, 30 Sevier
Mill Creek Area lode claims:
Debra Dawn #1 302970 26S, 4.5W, 30 Sevier
Debra Dawn #2 302971 26S, 4.5W, 3O Sevier
Debra Dawn #3 302972 26S, 4.5W, 30 Sevier
Debra Dawn #4 302973 26S, 4.5W, 30 Sevier
Debra Dawn #5 302974 26S, 4.5W, 30 Sevier
Silver Star #1 302975 26S, 4.5W, 30 Sevier
Silver Star #2 302976 26S, 4.5W, 30 Sevier
Silver Star #3 302977 26S, 4.5W, 30 Sevier
End of Exhibit A.
<PAGE>
OPTION TO ENTER INTO MINING LEASE
OPTION AGREEMENT by and between Daniel H. Engh, Dennis S. Engh (Lessor)
and Kaolin Of The West, LLC. (Lessee), a Utah Limited Liability Company.
1. A) Lessee hereby pays to Lessor's the sum of $100.00 in consideration
for this option, which option payment shall be credited to the Mining
Lease Agreement if the option is exercised, and
B) Lessee will pay annually to Lessor to retain this option and right to
enter into a mining lease for the mining claims listed in Exhibit A
(Mining Lease Agreement) within the option period for $5,000.00 (five
thousand dollars), due June 10th of each year and payment of all Federal
and State rents, taxes and other payments associated with the mining
claims. All payments of all Federal and State rents, taxes and other
payments associated with the mining claims are due to Lessor by June
10th of each year.
2. This option shall remain in effect until November 1, 2000, and thereupon
expire unless this option is sooner exercised.
3. To exercise this option, Lessee must notify Owner of same by certified
mail within the option period. All notices shall be sent to owner at the
following address:
Daniel H. Engh
2340 E. Germania Circle
Sandy, Utah 84093-1174
4. PROPERTY
The Property consists of unpatented lode and association placer mining claims
located on land managed by the National Forest Service in the State of Utah
(Salt Lake Base & Meridian):
Box Creek Area association placer claims:
<PAGE>
The Property consists of Lode Claims and Placer claims. And are located
in Townships 26 South Range 1 West, and Township 27 South, Range 2 West, Salt
Lake Meridian, Sevier, and Piute Counties, Utah.
5. Should the Lessee exercise the option, the Lessor and Lessee agree to
promptly sign the attached Mining Lease, and consummate the Mining Lease on its
terms, which are incorporated herein by reference.
6. This Option agreement shall be binding upon and inure to the benefit of
the parties, their successors, assigns and personal representatives.
Signed this 30th day of September, 1996.
Kaolin Of The West, LLC.
/S/Daniel H. Engh BY: /S/Dennis S. Engh
- --------------------------------- -----------------------------------
Lessor, Daniel H. Engh Its:
Lessee
/S/ Dennis S. Engh
- ---------------------------------
Lessor, Dennis S. Engh
<PAGE>
OPTION TO ENTER INTO MINING LEASE
OPTION AGREEMENT by and between Kaolin Of The West, LLC. a Utah Limited
Liability Company at 4532 Briarcreek Street, Salt Lake City, Utah 84117
hereinafter referred to as the (Lessor) and Utah Clay Technology, Inc., at 3985
South 2000 East, Salt Lake City, Utah 84124,hereinafter referred to as (Lessee),
a Utah corporation.
1. A) Lessee hereby pays to Lessor's the sum of $100.00 in consideration
for this option, which option payment shall be credited to the Mining Lease
Agreement if the option is exercised, and
B) Lessee will pay annually to Lessor to retain this option and right to
enter into a mining lease for the mining claims listed in Exhibit A (Mining
Lease Agreement) within the option period for $5,000.00 (five thousand
dollars), due June 10th of each year and payment of all Federal and State
rents, taxes and other payments associated with the mining claims. All
payments of all Federal and State rents, taxes and other payments
associated with the mining claims are due to Lessor by June 10th of each
year, and
C) The Lessee agrees to pay upon exercising this option, in cash and/or
common stock, to the Lessor an amount equal to the "Fair Market Value of
the Leased Premises" as agreed between the parties on or before November 1,
2000.
The Fair Market Value of the Lease Premises will be defined in a
Report that will summarize the economic evaluation and dollar computation
of the kaolin reserves of the Leased Premises as determined by an
independent engineer on or before June 1, 2000. All costs associated
with the preparation of the "Fair Market Value Report of the Leased
Premises" will be paid by the Lessee.
2. This option shall remain in effect until November 1, 2000, and thereupon
expire unless this option is sooner exercised.
3. To exercise this option, Lessee must notify Owner of same by certified mail
within the option period. All notices shall be sent
<PAGE>
To the "Option To Enter Into Mining Lease"
Page 2 of 2
to owner at the following address:
Kaolin Of The West, LLC.
Daniel H. Engh
2340 E. Germania Circle
Sandy, Utah 84093-1174
4. PROPERTY
The Property consists of unpatented lode and association placer mining claims
located on land managed by the National Forest Service in the State of Utah
(Salt Lake Base & Meridian):
Mill Creek area association placer claims:
The Property consists of Lode Claims and Placer claims. And are located in
Townships 26 South Range 4.5 West Salt Lake Meridian, Sevier County, Utah.
5. Should the Lessee exercise the option, the Lessor and Lessee agree to
promptly sign the attached Mining Lease, and consummate the Mining Lease on its
terms, which are incorporated herein by reference.
6. This Option agreement shall be binding upon and inure to the benefit of the
parties, their successors, assigns and personal representatives.
Signed this 30th day of September, 1996.
Kaolin Of The West, LLC. Utah Clay Technology, Inc.
- --------------------------------- ------------------------------------
Its: Its:
Lessor Lessee
<PAGE>
MINING LEASE
BETWEEN
DANIEL H. ENGH, DENNIS S. ENGH,
AND
UTAH CLAY TECHNOLOGY INC.
(A UTAH CORPORATION)
DATE:
<PAGE>
TABLE OF CONTENTS
ARTICLE Page No.
- ------- --------
I - DEFINITIONS.............................................................1
1.1 "Agreement" ...............................................1
1.2 "Area of Interest".........................................2
1.3 "Assets" ..................................................2
1.4 "Leased Minerals" .........................................2
1.5 "Development" .............................................2
1.6 "Dollars" or "$" ..........................................2
1.7 "Exploration" .............................................2
1.8 "Effective Date" ..........................................2
1.9 "Exploration Period" ......................................2
1.10 "Exploration Rights" ......................................2
1.11 "Mining" .................................................2
1.12 "Operations" ..............................................3
1.13 "Prime Rate" ..............................................3
1.14 "Products" ................................................3
1.15 "Program" .................................................3
1.16 "Properties" ..............................................3
1.17 "Transfer" ................................................3
1.18 "Work Expenditures" .......................................3
II - REPRESENTATIONS AND WARRANTIES; COVENANTS;
TITLE TO ASSETS
2.1 Capacity of Participants ..................................3
2.2 Representations and Warranties ............................4
2.3 Disclosures ...............................................6
2.4 Covenants .................................................6
2.5 Record Title and Lessor's Interest ........................6
III - NAME, PURPOSES AND TERM ..............................................7
3.1 General ...................................................7
3.2 Name ......................................................7
3.3 Purposes ..................................................7
3.4 Limitation ................................................7
3.5 Term ......................................................7
3.6 Terms and Conditions ......................................7
3.7 Termination ...............................................8
3.8 Funds Paid ................................................8
3.9 Copy of all Data ..........................................8
i
<PAGE>
ARTICLE Page No.
- ------- --------
IV - CONSIDERATION..........................................................8
4.1 Consideration .............................................8
4.1(A) Annual Labor...............................................8
4.1(B) Reserved Royalty...........................................9
V - APPOINTMENT OF AGENT BY LESSOR
5.1 Appointment of Agent......................................10
VI - PERIODIC REPORTS .....................................................10
6.1 Semi-annual Written Reports.............................. l0
6.2 Audit all Operations......................................10
VII - RIGHTS AND OBLIGATIONS OF LESSEE
7.1 Entering Leased Premises..................................10
7.2 Inspection of Operations, records.........................11
7.3 Transfers, Encumbrances or Conveyances....................11
7.4 Expenses and Liens........................................11
7.5 Indemnification...........................................11
7.6 Mixed or Co-mingled minerals..............................11
VIII - PATENT OF CLAIMS ...................................................12
8.1 Obtain Patent to Mining Claims............................12
8.2 Rights extend to Amendments...............................12
IX - DEFAULT AND FORCE MAJEURE.............................................12
9.1 Default Performaing Obligations...........................12
9.2 Prevented or Delayed from Obligations.....................12
X - LEASE PREMISES ........................................................13
10.1 Defend Title..............................................13
10.2 Copies Maps...............................................13
XI - TAXES AND DUTIES .....................................................13
11.1 Lessee Agrees to Pay Taxes................................13
11.2 Notices to Lessee.........................................13
11.3 Comply with all State and Federal Laws....................13
11.4 Reclamation Work..........................................13
XII - ASSIGNMENT AND TRANSFER .............................................14
12.1 Assign or Transfer........................................14
XIII - MISCELLANEOUS......................................................14
13.1 Governed by Laws..........................................14
13.2 Title for Convenience ....................................14
13.3 Contain Entire Agreement .................................14
13.4 Force of Law..............................................14
13.5 Proper Address's..........................................14
13.6 Affect Validity of the Lease .............................14
ii
<PAGE>
ARTICLE Page No.
- ------- --------
13.7 Benefit of the Successors.................................14
13.8 Memorandum of Lease.......................................14
13.9 Diligently Explore........................................15
XIV -EXPLORATION REQUIREMENTS
14.1 Operator of Exploration, Mining ..........................15
EXHIBITS
- --------
EXHIBIT A - PROPERTIES..............................................1
PART 1. - Properties and Title Exceptions .........................1
PART 2. - Area of Interest.........................................3
iii
<PAGE>
MINING LEASE
THIS MINING LEASE, herein referred to as "Lease", made and entered into
this --th day of October, 1996, by and between DANIEL H. ENGH, at 2340 East
Germania Circle, Sandy, Utah 84093-1174, DENNIS S. ENGH, at 4532 Briarcreek
Drive, Salt Lake City, Utah 84124, hereinafter referred to as "Owner or Lessor",
and UTAH CLAY TECHNOLOGY INC., a Utah corporation, having an address at 3985
South 2000 East, Salt Lake City, Utah 84124 (hereinafter designated as
"Lessee"):
WITNESSETH:
WHEREAS, Lessor is owner of certain properties and property rights situated
in Sevier County, State of Utah, and more particularly described in the attached
Exhibit "A", incorporated by reference, and hereinafter referred to as the
"Leased Premises"; and
WHEREAS, Lessee desires to lease certain rights in and to the Leased
Premises which Lessor is willing to grant to Lessee;
NOW THEREFORE, in consideration of $10.00 paid by Lessee to Owner receipt
of which is hereby acknowledged and the payments, covenants and agreements
hereinafter set forth the parties agree as follows:
GRANT, essor hereby grants and leases to Lessee for and in consideration
of, and subject to all of the terms provisions and conditions hereinafter set
forth, the exclusive right and privilege to mine, extract, remove and dispose of
the all locatable Minerals in, upon or under the Leased Premises, together with
the right to use and occupy so much of the surface of the Leased Premises as may
be required for all purposes reasonably incident to the mining, extracting,
removal and disposal of the locatable Minerals according to the provisions of
this Lease.
ARTICLE I
---------
DEFINITIONS
-----------
1.1 "Agreement" means this Mining Lease, including all amendments and
modifications thereof, and all schedules and exhibits, which are incorporated
herein by this reference.
1.2 "Area of Interest" means the area described in Part 2 of Exhibit
A.
-1-
<PAGE>
1.3 "Assets" means the Properties, Products and all other real and
personal property, tangible and intangible, held for the benefit of the Lessor
hereunder.
1.4 "Leased Minerals" or "Locatable Minerals" as used herein shall
mean all locatable minerals acquired by virtue of the placer or lode mining
claims owned by owner.
1.5 "Development" means all preparation for the removal and recovery
of Products, including the construction or installation of a mill or any
other improvements to be used for the mining, handling, milling, processing
or other beneficiation of Products.
1.6 "Dollars" or "$" means dollars in the currency of the United
States.
1.7 "Exploration" means all activities directed toward ascertaining
the existence, location, quantity, quality or commercial value of deposits of
Products.
1.8 "Effective Date" means the date first written above.
1.9 "Exploration Period" means the period of time during which Lessee
is conducting Exploration Operations pursuant to Article VII. The Exploration
Period shall begin on the Effective Date and, unless this Agreement sooner
terminates, shall end on the date a processing mill is placed into production
with Leased Minerals.
1.10 "Exploration Rights" mean collectively the following:
(a) the sole and exclusive right of Lessee and its agents,
employees, contractors, subcontractors and workers, to enter upon and occupy the
Properties for Exploration purposes during the Exploration Period and to conduct
thereon such prospecting, trenching, drilling, sampling, examination, testing
development, engineering and feasibility studies for kaolin and other or
associated clays or metals and all other ores and minerals whatever kind or
character as desired by Lessee; and
(b) the right to do such other things as Lessee, in its sole
discretion, deems advisable or necessary to maintain and to fully evaluate the
mineral potential of the Properties to determine the feasibility of Development
of the Properties, including the right to remove from the Properties such
limited volumes of minerals and .materials as are necessary for test and
assaying; provided; however, that Lessee shall not have the right during the
Exploration Period to mine and remove such minerals and materials for sale.
1.11 "Mining" means the mining, extracting, producing, handling,
milling or other processing of Products.
1.12 "Operations" means the activities carried out under this
Agreement.
-2-
<PAGE>
1.13 "Prime Rate" means the interest rate published as the Prime Rate
in the "Money Rates" column of The Wall Street Journal, as said rate may change
from day to day, or if said column sets forth a range of rates on a single day,
the arithmetic mean thereof.
1.14 "Products" means all ores, minerals and mineral resources
produced from the Properties under this Agreement.
1.15 "Program" means a description in reasonable detail of Operations
to be conducted and objectives to be accomplished by the Lessee for a specified
period.
1.16 "Properties" means those interests in real property described in
Part 1 of Exhibit A and all other interests in real property within the Area of
Interest which are acquired and held subject to this Agreement.
1.17 "Transfer" means sell, grant, assign, encumber, pledge or
otherwise commit or dispose of.
1.18 "Work Expenditures" means the minimum work obligations described
in Sections 3.5 and 4.1 below and shall include, for purposes of this Agreement,
the value of all time, money or equipment contributed to or used on or in
connection with the Properties or the Area of Interest by Lessee in good faith,
including but not limited to all consultants' time, all costs of testing and
assaying and all other expenses reasonably necessary to evaluate the Properties
or the Area of Interest. Work Expenditures shall include (a) geological
evaluation, geophysical study, geochemical analysis, rock and soil sampling,
geological mapping and similar activities affecting the Properties or the Area
of Interest; (b) drilling, trenching, road construction and pad construction
(plus associated stand-by time) and other physical work on the Properties or the
Area of Interest; (c) environmental, permitting and reclamation expenditures;
(d) title examination and title curative, remonumentation of unpatented mining
claims, survey (or re-survey), claim filing fees, taxes, and all other
reasonable project maintenance or associated costs on or for the benefit of the
Properties or the Area of Interest, including without limitation the maintenance
activities described in SeCtions 3.2 and 4.1 acquisition of property within the
Area of interest.
ARTICLE II
----------
REPRESENTATIONS AND WARRANTIES: COVENANTS: TITLE TO ASSETS
----------------------------------------------------------
2.1 Capacity of Participants. Lessee and Lessor, each for itself,
------------------------
represent and warrant as follows:
(a) That it is a corporation and individuals respectively duly
incorporated and in good standing in its state of incorporation and that
it is qualified to do business and is
-3-
<PAGE>
in good standing in those states where necessary in order to carry out
the purposes of this Agreement;
(b) That it has the capacity to enter into and perform this
Agreement and all transactions contemplated herein and that all
corporate and other actions required to authorize it to enter into and
perform this Agreement have been properly taken;
(c) That it will not breach any other agreement or arrangement by
entering into or performing this Agreement; and
(d) That this Agreement has been duly executed and delivered by
it and is valid and binding upon it in accordance with its terms.
2.2 Representations and Warranties. Lessor make the following
---------------------------------
representations and warranties effective on the Effective Date:
The Leased Premises. The "Leased Premises" shall mean all of the
---------------------
property described in Exhibit "A" attached hereto and made a part hereof,
together with all of the ores, minerals and materials thereon and thereunder,
and all right, title and all water, water rights, easements and rights of way
now and hereafter owned or held by Lessor in, upon or under the said property,
or in any way pertaining thereto.
(a) With respect to those Properties Lessor claimed through the
Bureau Of Land Management and those Properties Lessor has enter into a
mining lease with Don W. Fullmer, Arnola B. Fullmer, if any, Lessor
are in exclusive possession of the mining rights of such Properties
free and clear of all defects, royalties, liens and encumbrances
except those specifically identified in Part 1 of Exhibit A.
(b) With respect to those Properties in which Lessor hold an
interest under leases or other contracts: (i) Lessor are in exclusive
possession of such Properties; (ii) neither Lessor has received any
notice of default of any of the terms or provisions of such contracts;
(iii) Lessor have the authority under such contracts to perform fully
their obligations under this Agreement; (iv) such contracts are valid
and are in good standing; and (v) the properties covered thereby are
free and clear of all defects, royalties, liens and encumbrances
except for those specifically identified in Part 1 of Exhibit A or in
such contracts.
(c) With respect to unpatented mining claims that are included
within the Properties, except as provided in Part 1 of Exhibit A and
subject to the paramount title of the United States, the claims are
free and clear of defects, royalties, liens and encumbrances except
for those specifically identified in Part 1 of Exhibit A and to the
best of Lessor's knowledge and belief; (i) the unpatented mining
claims were properly laid out and monumented; (ii) all required
location and validation work was properly performed;
-4-
<PAGE>
and (iii) all assessment work required to hold the unpatented mining
claims has been performed in a manner consistent with that required of
the Lessee pursuant to Section 4. I(A) of this Agreement through the
assessment year ending September 1, 1995. With respect to such
unpatented mining claims located by or on behalf of Lessor or one of
their Affiliates, except as provided in Part 1 of Exhibit A and
subject to the paramount title of the United States, all location
notices and certificates and all affidavits of assessment work and
other filings required to maintain the claims in good standing have
been properly and timely recorded and filed with appropriate
governmental agencies, with respect to such unpatented mining claims
that were not located by or on behalf of Lessor or one of their
Affiliates, Lessor make the representation and warranty contained in
the foregoing sentence to the best of their knowledge and belief.
Additionally, Lessor have no knowledge of any claims conflicting with
the claims described in Part 1 of Exhibit A. Nothing in this Section
2.2(c), however, shall be deemed to be a representation or a warranty
that any of the unpatented mining claims described in Part 1 of
Exhibit A contains a discovery of minerals.
Lessor represents to Lessee: (1) that subject to the matters
specifically set forth in Exhibit "A," and subject to the matters set
forth below with respect to unpatented mining claims, Lessor has the
exclusive possession of the Leased Premises and (2) that the Lessor
has the full right, power and capacity to enter into this Lease upon
the terms set forth herein. Since the Leased Premises, as described in
Exhibit "A" includes unpatented mining claims, Owner represents and
warrants to Lessee: (1) that Lessor's title is subject to paramount
title of the United States of America and to the rights, if any, of
surface patentees; (2) that the acts of location performed by Lessor
on the unpatented mining claims described in Exhibit "A" have been
completed in compliance with the laws of the State of Utah and of the
United States of America; and (3) that the Notice Of Intent To Hold
has been completed and filed with the Beaver County Recorder and the
BLM in Salt Lake City, Utah.
(d) Lessor have delivered to Lessee all information concerning
title to the Properties in Lessor's possession or control, including,
but not limited to, true and correct copies of all leases or other
contracts relating to the Properties of which Lessor has knowledge.
(e) Except as disclosed in Exhibit A, there are no pending or
threatened actions, suits, claims or proceedings with respect to the
Properties.
(f) Except as disclosed in Exhibit A. Lessor is aware of any
adverse environmental condition on or affecting the Properties.
(g) Except as disclosed in Exhibit A, Lessor has any material
contractual commitments obligations which relate to or affect the
Properties.
Notwithstanding any other provision of this Section 2.2, Lessor makes the
representations and
-5-
<PAGE>
warranties contained in this Section to the best of its knowledge and belief,
except that with respect to claims arising by, through or under Lessor or any
its Affiliates, such representations and warranties (except those contained in
Section 2.2(c) identified as being made on knowledge and belief) shall be
absolute. The representations and warranties set forth above shall survive the
execution and delivery of any documents of Transfer provided under this
Agreement.
2.3 Disclosures, Each of the Participants represents and warrants
-----------
that it is unaware of any material facts or circumstances which have not been
disclosed in this Agreement, which should be disclosed to the other Participant
in order to prevent the representations in this Article II from being materially
misleading.
2.4 Covenants, Lessee covenant and agree as follows:
---------
(a) At any time, they will give prompt notice Lessor (during the
Exploration Period) of any notice of default, lawsuit, proceeding, action or
damage of which either Lessee becomes aware and which might affect the
Properties either Participant's title to the Properties.
(b) Notwithstanding any other provision of this Agreement,
during the Exploration Period neither of them will Transfer any interest in any
property located in the Area of Interest, except as between themselves and then
only upon 14-day prior notice to Lessee, nor will either of them conduct,
without Lessor's prior written consent, any property acquisition, exploration,
claim staking or mining operations within the Area of Interest.
(c) Atany time, they will use their best efforts to assist
Lessor (during the Exploration Period) in obtaining necessary permits or
approvals, access to the Properties and water rights to the extent required by
or for operations hereunder, and to assist Lessee in informing Lessor of legal,
title and mining problems which may affect the Properties.
(d) They will make available to Lessor, its employees and agents,
any and all data, maps, other documents or information which either of them may
have or may acquire pertaining to the Properties.
2.5 Record Title and Lessor's Interest.
(a) Title to the mining claims shall be held by Lessor.
(b) Lessee will at all times maintain Utah Clay Technology, Inc.,
in good standing and qualified to own property under the laws of the State of
Utah.
-6-
<PAGE>
ARTICLE III
-----------
NAME. PURPOSES AND TERM
-----------------------
3.1 General. Lessor and Lessee hereby enter into this Agreement for
-------
the purposes hereinafter stated and agree that all of their rights and all of
the Operations on or in connection with the Properties or the Area of Interest
shall be subject to and governed by this Agreement.
3.2 Name. The name of this mine shall be The Mill Creek Clay. Lessee
----
during the Exploration Period and, thereafter, shall accomplish any registration
required by applicable assumed or fictitious name statutes and similar statutes.
3.3 Purposes. This Agreement is entered into for the following
--------
purposes and for no others, and shall serve as the exclusive means by which the
Participants, or either of them, accomplish such purposes:
(a) to conduct Exploration within the Area Interest,
(b) to acquire additional Properties within the Area of Interest,
(c) to evaluate the possible Development of the Properties,
(d) to engage in Development and Mining Operations on the
Properties,
(e) to engage in marketing Products, and
(f) to perform any other activity necessary appropriate, or
incidental to any of the foregoing.
3.4 Limitation. Unless the Participants otherwise agree in writing,
----------
the development and operations shall be limited to the purposes described in
Section 3.3, and nothing in this Agreement shall be construed to enlarge such
purposes.
3.5 Term. The primary term of this Lease shall be for a period of
----
three (3) years from the date hereof and for so long thereafter as Leased
Minerals are produced in commercial quantities at more than 500 tons/month
from the lands described in Exhibit A by the Lessee, their partners, successors
or assigns, for at least ten months of each year after the initial three (3)
year term has expired, subject to extension or termination as hereinafter
provided.
3.6 This Lease and the terms and conditions of this Lease agreement
issued by the Lessor are made with the Lessee herein on condition that Lessee
and any lawful successor in interest to Lessee shall perform all covenants and
terms and conditions herein set forth to be performed by
-7-
<PAGE>
Lessee or its lawful assigns including payment of royalties as herein provided.
Lessor may issue written notice of termination and cancellation of this Lease,
and forfeiture, subject to paragraph 9.1 declaring that the Leased Premises and
each and every part thereof have thereby reverted to the Lessor, including any
and all fixtures and improvements required to be left with the property upon
expiration, termination, or cancellation of this Lease.
3.7 Lessee may terminate this Lease at any time by giving Lessors at
least ninety (90) days prior written notice, together with a check in full
settlement of any royalties that are due and unpaid; upon giving such notice of
termination, Lessee shall be released of all its obligations except those
obligations which have theretofore accrued. Within Thirty (30) days after date
of termination, Lessee shall execute and record a release and quitclaim deed
releasing all of Lessee's right, title and interest in and to the Leased
Premises.
3.8 Upon the effective date of termination by Lessee, Lessor shall be
entitled to retain all funds paid to it by Lessee pursuant to this Lease.
3.9 Within sixty (60) days after termination from this Lease, Lessee
or its successor or assign will provide Lessor with a copy of all data prepared,
collected, and interpreted by or for it (including maps, drill data, assays,
analyses, geological surveys, topographic surveys, market studies flow sheets,
processing studies, and all other data) pertaining to the Leased Premises and
the Leased Minerals. Lessee will provide readable copies of all new factual
geologic data and reports by February 15th of each year.
ARTICLE IV
----------
CONSIDERATION
-------------
4.1 The Lessee in consideration of the granting of the rights and
privileges granted herein hereby covenants and agrees as follows:
A). Annual Labor:
------------
(1) To perform upon or for the benefit of the Leased Premises the
annual assessment work as set forth under the laws of the United States and the
State of Utah, and to prepare timely proof of the performance of such labor and
to record and file the same as required by law, and to furnish Lessor with a
copy thereof. Should this Lease be terminated as herein provided and the
effective date of such termination shall be ninety (90) days, or less, prior to
the end of the then current assessment year, Lessee shall nevertheless be
required to Perform upon or for the benefit of the Leased Premises the annual
labor for such assessment year and shall prepare timely proof thereof, record
the same, and furnish Lessor with a copy of such proof as hereinafter provided.
In the performance of annual labor upon or for the benefit of the Leased
Premises, Lessee shall be entitled to perform such work upon any of the claims
or upon any of
-8-
<PAGE>
the groups of claims comprising the Leased Premises or upon other claims lying
outside the Leased Premises so long as such work shall qualify for the purpose
of the development of the Leased Premises as a contiguous group pursuant to the
requirements of law relating to group work on mining claims except as herein
provided.
(2) Assessment work will be completed by July 15 of each year starting
with the 1994 Assessment Year, or Lessor may do the work and charge reasonable
costs time and expenses to Lessee. Lessee will furnish to Lessor a copy of the
proof-of-labor with the County and the BLM time-stamp on it, no later than
September 15th of each year.
B). RESERVED ROYALTY:
(1) To pay lessor a three percent (3%) royalty on all ores, minerals
or products (herein called "Production") mined and removed from the Leased
Premises. Said royalty shall be calculated based upon the gross value of the
Production. In the event Production is removed from the Leased Premises and
stockpiled, royalty shall be payable six(6) months after removal and the gross
value shall be deemed the highest value received for comparable material sold
from the Leased Premises or from the nearest mine or property to the Leased
Premises.
(2) Production royalty shall be paid within thirty (30) days after
receipt of payment for each shipment or when otherwise due, and each payment
shall be accompanied by a statement showing the date(s) of shipment(s), quantity
and value of each shipment, to whom sold and the gross value received, and any
cost deductions. Production royalty payments not made when due shall bear
interest at the rate of 1 1/2% per calendar month or fraction thereof until paid
in full.
(3) Method of Production royalty payments shall be in U.S. dollars
payable by cash or valid check drawn on available funds, and shall be deemed
made when deposited at Lessor's single depository at:
FIRST UTAH BANK
3826 South 2300 East
Salt Lake City, Utah 84109
phone (801) 272-9454
Lessor may change its single depository at any time by giving written notice to
Lessee.
-9-
<PAGE>
ARTICLE V
---------
APPOINTMENT OF AGENT BY LESSOR
------------------------------
5.1 Lessor hereby appoints Daniel H. Engh as their agent and
attorney-in-fact for the purpose of representing the claim owners as a group,
and authorize him to take all necessary or desirable actions on behalf of
Lessor. This appointment shall be without limitation and remain in force until
said agent resigns or is replaced by a newly appointed agent for the entire
group of owners.
ARTICLE VI
----------
PERIODIC REPORTS
----------------
6.1 Lessee agrees to make semi-annual written reports to lessor (on
or before January 1 and July 1 each year) detailing the exploration, development
and mining work done upon the leased premises, the dates, quantity and value of
ores, minerals or products shipped from the Leased Premises, the identity of the
buyer(s) thereof or the place where such ores, minerals or products are
stockpiled, the plans for the Leased Premises during the next six (6) month
period, and other activities conducted or planned for the Leased Premises. also,
Lessee will provide Lessor with a copy of all data prepared, collected, and
interpreted by or for it (including maps, drill data, assays, analyses,
geological surveys, topographic surveys, market studies, flow sheets, processing
studies, and all other data) pertaining to the Leased Premises and the Leased
Minerals. Lessee will provide readable copies of all new factual geologic data
and reports by January 1 and July 1 of each year.
6.2 Lessee shall audit all operations upon the Leased Premises at
least annually, and furnish to Lessor a copy of such audit within thirty (30)
days aider completion.
ARTICLE VII
-----------
RIGHTS AND OBLIGATIONS OF LESSEE
--------------------------------
7.1 The Lessee will forthwith have and is hereby granted by Lessor
the right and privilege from the date hereof and so long thereafter as this
Lease remains in force and effect of entering into and upon the Leased
Premises and the right to drill and excavate thereon and therein holes, pits,
tunnels, shafts, and other such excavations and to conduct therein and
elsewhere such surveys, exploration, investigations, sampling, milling,
screening and other work
-10-
<PAGE>
similar as well as dissimilar as Lessee in its sole judgment and discretion may
wish to know relating to any and all facts relative to the geology of the Leased
Premises, including but not limited to the geology of the Leased Minerals and
the mining, milling, beneficiating, and marketing thereof, together with the
right to drain water and materials and to pile overburden at places most
convenient to Lessee, and the fight to dig or bore wells and use any water in or
upon said lands and the right to construct and place upon said lands any and all
buildings, dams, drains, machinery, roads, railroads, pipe and power lines and
other improvements that may be convenient for said purposes, ail of which
improvements will become the full and complete property of the Lessor upon
termination or assignment of Lease back to Lessor, and Lessee will be under no
further obligation or liability with respect thereto except for reclamation and
except as provided in paragraph 7.5 below. Lessee will have the paramount
possession and control of the Leased Premises with regard to the Leased Mineral
fights obtained herein during and throughout the life of this Lease and shall be
entitled to conduct therein and thereon all mining, milling and beneficiation
uses and purposes reasonably incident thereto as it shall deem satisfactory and
advantageous so far as Lessee tries not to interfere with the rights of the
Federal potassium leases. All work shall be conducted by Lessee as Lessee in its
sole judgment and discretion deems best and in a good and minerlike fashion.
Stockpiles and tailings covered by Lease, remain the property of the Lessor upon
surrender of Lease. Mining timbers in place shall remain affixed as part of the
Leased Premises unless released in writing to Lessee.
7.2 Lessor or his agents duly authorized in writing will have at all
reasonable times and at his own risk access to ail parts of Leased Premises and
associated premises for the purposes of reasonable inspection of operations,
record keeping, and accounts to the end that Lessor might verify that the
specified royalty payments are being made properly and that operations are being
conducted in a minerlike fashion. Lessee will keep records in a businesslike
manner.
7.3 Any and all future leases, transfers, encumbrances or conveyances
of interests in the Leased Premises not covered by this Lease shall be
subordinate to and subject to the fights of Lessee, his successors, assigns of
sublessees, so long as this Lease is in force and effect.
7.4 Lessee shall pay all expenses incurred by it and shall permit no
liens to attach to Leased Premises on account of any debt for materials or
services furnished for the benefit of the Leased Premises while this Lease is in
effect.
7.5 Lessee will indemnify and forever hold harmless and defend Lessor
from any demand, claim, suit, judgment or liability resulting from the
exploratory or development activities of Lessee conducted pursuant to this
agreement. Upon request of Lessor, Lessee will furnish evidence of sufficient
workmen's compensation, liability and other insurance to cover anticipated
risks, or evidence that it is adequately self-insured for such contingencies.
7.6 Lessee agrees that Leased Minerals from the Leased Premises shall
not be mixed or co-mingled with minerals, ore, substances or materials from
other properties or lands except as agreed by Lessor.
-11-
<PAGE>
ARTICLE VIII
------------
PATENT OF CLAIMS
----------------
8.1 Upon request of Lessee at any time during the term of this Lease,
the Lessor agrees to undertake to obtain patent to any of the mining claims
designated by Lessee. Lessee, at its own expense, shall prepare all documents,
compile all data and comply in all respects with all applicable laws in this
endeavor, and Lessor shall execute all documents required for this purpose and
shall cooperate fully with Lessee in the patent application and proceedings.
8.2 The rights of Lessor and Lessee under this Lease will extend to
any and all amended, relocated, or patented claims referred to in Exhibit A.
Lessor and Lessee agree that all amendments, relocations, or staking new claims
in the claimed area, of the claims referred to in Exhibit A, will be made in the
name of Lessor. Some claims need amending and it is known hereby to the Lessee.
Any valid mining claims staked by Lessor, or his agents, within the Leased
Premises shall fall under and be a part of this Lease.
ARTICLE IX
----------
DEFAULT AND FORCE MAJEURE
-------------------------
9.1 If Lessee will be in default in performing any obligations
(except the timely payment of royalties), Lessee shall lose no fights unless,
within sixty (60) days following written notice from Lessor, given at the
address herein specified, specifying such failure or breach, Lessee shall fall
to make such payment or undertake to cure such default by commencement and
follow through of appropriate performance, within a reasonable amount of time.
Upon such failure, Lessor may terminate this Lease.
9.2 If Lessee shall be prevented or delayed from performing its
obligations or performing any work which it desires to perform or is performing
by reason of act of nature, strike or threat of strike, fire, flood, war, mob
violence, court order, unavoidable casualties, or any other enumeration, beyond
the control of Lessee which cannot be overcome by the means normally employed in
performance and at comparable and reasonable expense, then the duration of this
Lease shall be extended for a period equal to the period of Force Majeure and
any failure to perform obligations shall not be deemed a breach of this Lease.
Lessee agrees to use reasonable diligence to remove such causes of disability as
may occur from time to time. This paragraph shall not excuse payment or delay
payment of royalties.
-12-
<PAGE>
ARTICLE X
---------
LEASE PREMISES
--------------
10.1 The parties hereto agree that during the term of this Lease, in
the event title to any of the Leased Premises is contested by any person or
persons, corporation or corporations, or governmental agencies, Lessee will,
at its own election and expense, defend the title to any of the Leased Premises
before any court of competent jurisdiction or any administrative body. Lessee
will defend any actions for damages relating to exploration, development, or
mining activities by Lessee on Leased Premises.
10.2 Lessor, upon execution of this Lease, shall furnish Lessee with
copies of all property maps possessed by Lessor on the Leased Premises and
adjacent lands.
ARTICLE XI
----------
TAXES AND DUTIES
----------------
11.1 Lessee agrees to pay (i) all taxes hereafter levied and
assessed upon all machinery and improvements placed by Lessee upon the Leased
Premises, (ii) taxes hereafter levied upon the Leased Premises, including taxes
assessed by reason of net annual proceeds, and (iii) occupation or severance
taxes imposed upon the mining or production of Leased Minerals from the Leased
Premises or any other taxes, assessments or charges resulting from Lessee
activities on Leased Premises.
11.2 Lessor agrees to promptly transmit to Lessee any notices
pertaining to taxes, assessments and charges which Lessor may receive.
11.3 Lessee, in all operations under this Lease, will comply with all
applicable State and Federal laws, including the social laws relative to
employment, safety, Workmen's Compensation insurance, social security,
unemployment tax and tax withholding. Lessee shall hold Lessor harmless from
claims of damage to persons or property arising from Lessee's operations
under this Lease. Lessee will comply with hazardous waste, air and water quality
requirements.
11.4 Lessee will do all reclamation work required by the Bureau of
Land Management, the State of Utah or Beaver County in a timely manner.
-13-
<PAGE>
ARTICLE XII
-----------
ASSIGNMENT AND TRANSFER
-----------------------
12.1 Lessee will not convey, assign or transfer its interest in
this lease or any part of this Lease without the prior notification and consent
in writing of the Lessor. The assignee party will, as a condition of consent to
the transfer, agree to be bound by and subject to the terms of this Lease.
Any assignee party will provided a photocopy of the executed copy of assignment
and is delivered to the other party. Overriding royalty assignments will not
become effective, even if otherwise valid without the consent in writing of the
Lessor. Lessee, its successor and assigns, may not assign or convey royalty,
overriding royalty, production payment or like interest in the Leased Premises
without Lessor's prior written consent.
ARTICLE III
-----------
MISCELLANEOUS
-------------
13.1 This agreement shall be governed by the laws of the State of
Utah.
13.2 Title headings are for convenience only and shall not be deemed
a part of this Lease.
13.3 This Lease and Its Exhibit contain the entire agreement between
the parties and supersedes entirely any prior understandings whether oral or
written.
13.4 If any provisions of this Lease is or becomes void or
unenforceable by Force of Law, the other provisions shall remain valid and
enforceable.
13.5 Lessor's and Lessee's proper address shall be the following,
which either may change by giving written notice to the other.
Daniel H. Engh
2340 East Germanla Circle
Sandy, Utah 84093
Utah Clay Technology, Inc.
3985 South 2000 East
Salt Lake City, Utah 8124
13.6 The failure to enforce at any time any provisions of this Lease,
shall in no way be
-14-
<PAGE>
construed to be a waiver of such provisions, or to affect validity of the Lease.
13.7 This Lease shall be binding upon and inure to the benefit of the
successors and permitted assigns of the parties.
13.8 A Memorandum of this Lease may be filed by either party.
13.9 Lessee will diligently explore and conduct operations on or near
Leased Premises throughout the term of this Lease in a manner reasonably
calculated to advance the production of minerals from Leased Premises.
ARTICLE XIV
-----------
EXPLORATION REOUIREMENTS
------------------------
14.1 Lessor agrees to Utah Clay Technology, Inc. as the party that
will be the operator's of the exploration, and mining of the lode and placer
claims referred to in Exhibit A. Lessee agrees that it can not transfer or
assign all or part of being the operator of the exploration, and mining to any
other party.
IN WITNESS WHEREOF, this Lease has been executed and delivered by
Lessor to Lessee as of the day and year first above written.
/s/Daniel H. Engh
- ---------------------------------
Daniel H. Engh
LESSOR
/s/Dennis S. Engh
- ---------------------------------
Dennis S. Engh
LESSOR
-15-
<PAGE>
UTAH CLAY TECHNOLOGY, INC.
BY:------------------------------
President
LESSEE
State of Utah
S.S.
County of Salt Lake
On this day of October, 1996, personally appeared before me,
Daniel H. Engh, Dennis S. Engh, Dennis S. Engh, having authority to sign as
- -------------------------------
President of Utah Clay Technology, Inc. and by authority of the board of
Directors, who acknowledged to me that they executed the foregoing document.
- ---------------------------------
NOTARY PUBLIC RESIDING AT:
-----------------------
-----------------------------------
-----------------------------------
-----------------------------------
-16-
<PAGE>
EXHIBIT A
---------
To Mining Lease Agreement dated as of October
, 1996, by and among Daniel H. Engh, Dennis S.
Engh, and Utah Clay Technology, Inc.
PART 1
- ------
With respect to the Properties, Daniel H. Engh and Dennis S. Engh are in
control of lode and placer claims described below:
The Property consists of unpatented lode and association placer mining claims
located on land managed by the National Forest Service in the State of Utah
(Salt Lake Base & Meridian) Sevier County:
Mill Creek area association placer claims:
Claim UMC # T. R. S. County
----- ----- -- -- -- ------
White Mark #1 303012 26S, 4.5W, 30 Sevier
White Mark #2 303013 26S, 4.5W, 30 Sevier
Nola #1 303014 26S, 4.5W, 30 Sevier
Nola #2 303015 26S, 4.5W, 30 Sevier
Mill Creek Area lode claims:
Debra Dawn #1 302970 26S, 4.5W, 30 Sevler
Debra Dawn #2 302971 26S, 4.5W, 30 Sevier
Debra Dawn #3 302972 26S, 4.5W, 30 Sevler
Debra Dawn #4 302973 26S, 4.5W, 30 Sevier
Debra Dawn #5 302974 26S, 4.5W, 30 Sevier
Silver Star #1 302975 26S, 4.5W, 30 Sevier
Silver Star #2 302976 26S, 4.5W, 30 Sevler
Silver Star #3 302977 26S, 4.5W, 30 Sevier
1
<PAGE>
This mining lease contains a Reserved Royalty of 3% on all ores, minerals or
Products (called "Production") mined and removed from the leased Premises. Said
Royalty shall be calculated based upon the gross value of the production.
Additionally, the claims above, lode or placer claims have a minimum royalty of
$5,000.00 and or a production royalty of $2.50/ton which is adjusted by the
Consumer Prices Index for all Urban Consumers for U.S. City average as published
by the U.S. Department of Labor Bureau of Labor Statistics.
With respect to the Properties, Daniel H. Engh and Dennis S. Engh have a mining
lease Dated June 19th 1993 by and between Don W. Fullmer, Arnola B. Fullmer
(Lessor) and Daniel H. Engh, Dennis S. Engh (Lessee). All terms and conditions
of the June 19, 1993 mining lease will be a part of this mining lease. Said
claims of this mining lease are described above:
<PAGE>
Dated October ,. 1996
PART 2
- ------
Area of Interest
All lands within the following described Areas of Interest including:
and any lands in Township 26 South 4.5 West, Township 27 South 4.5 West to
define the boundary of Area of interest.
<PAGE>
ADDENDUM TO MINING LEASE
This Addendum to Mining Lease is made this 15th day of March, 2000 by and
between Don W. Fullmer and Areola B. Fullmer, his wife. 905 North Main Street,
Fillmore, Utah 94631, hereinafter referred to as "Lessor." and Daniel H. Engh
and Dennis S. Engh whose address is 2340 East Germania Circle, Sandy, Utah
84093-1174, hereinafter referred to as "Lessee."
In consideration, of bringing minimum royalty payments up to date through
paymemts in the amount of $14,034.81, the receipt and adequacy of which is
hereby acknowledged. Lessor hereby acknowledges that the items of default
contained in the Notice dated December 31, 1999, incorporated by this reference,
are hereby satisfied in full or waived as to past acts only.
Lessor and Lessee ratify Mining Lease No, 3-dated June 19. 1993, between
the parties as being full force and effect, without any modification of the
lease except as provided herein, or any waiver of the lease terms as to future
performance, except at Paragraph 3.1 of Mining Lease, the primary term and the
requirement to obtain comercial production are extended for five (5) years from
the date hereof.
In consideration of the extension of time for achieving commercial
production, the Lessee grants to the Lessor the right, at the Lessors sole
option and expense, to enter upon any portion of the leased premises, not at
that time being actively mined, under the terms of the lease, by the Lessee to
mine and produce clay and other minerals for sale by the Lessor for use in brick
or cement. Such production shall not exceed 100,000 tons per year from the
leased premises. The first operator conducting commercial mining opera, ions on
the leased premises shall direct the location and manner of any joint mining
operations. No royalty or other payment shall be assessed by tho Lessee on
production by the Lessor. However, direct payments necessary to keep the claims
current and viable shall be assumed by the Lessor based on the percentage of
<PAGE>
total production performed by the Lessor in any given year. Minimum royalties
payable to the Lessor by the Lessee shall be waived by the Lessor during any
year in which the Lessor shall produce clay from file Leased premises as
provided above.
The leases and claims covered thereby aze more particularly described on
the attached Exhibit A, incorporated by this reference.
This Addendum shall be effective on the date above.
/s/Don W. Fullmer /s/Daniel H. Engh
- --------------------------------- ----------------------------------
Don W. Fullmer, (Lessor) Daniel H. Engh, (Lessee)
/s/Arnola B. Fullmer /s/Dennis S. Engh
- --------------------------------- ----------------------------------
Arnola B. Fullmer, (Lessor) Dennis S. Engh, (Lessee)
<PAGE>
To The ADDENDUM TO MINING LEASE
Page 3
STATE OF UTAH
SS
County of Millard
On this 15 day March, 2000, personally appeared before me Don W. Fullmer
and Arnola B. Fullmer, his wife, who acknowledged to me that they executed the
foregoing Addendum to Mining Lease.
----------------------------------
NOTARY PUBLIC
Residing at: 390 S. 100E
My Commission Expires: ----------------------
Fillmore, UT
- ---------------------
STATE OF UTAH
SS
County ofMillard
On this 15 day of March, 2000, personally appeared before me Daniel H. Engh
and Dennis S. Engh, who acknowledged to me that they executed the foregoing
Addendum to Mining Lease.
----------------------------------
NOTARY PUBLIC
Residing at: 390 S. 100E
My Commission Expires: ----------------------
Fillmore, UT
- ---------------------
<PAGE>
To The ADDENDUM TO MINING LEASE
Page 4
Exhibit A
Mining Lease #3
- ---------------
With respect to the Properties. Daniel H. Engh and Dennis S. Engh have a MINING
LEASE AGREEMENT Dated June 19th 1993 by and between Don W. Fullmer, Areola B.
Fullmer (Lessor) and Daniel H. Engh, Dennis S. Engh (Lessee). All terms and
conditions of the June 19, 1993 MINING LEASE AGREEMENT will be a part of this
Letter Agreement. Said claims of this MINING LEASE AGREEMENT are described
below:
The Property consists of unpatented lode and association placer mining claims
located on land managed by the National Forest Service in the State of Utah
(Salt Lake Base & Meridian) Sevier County:
Mill Creek area association placer claims:
Claim UMC # T. R. S. County
----- ----- -- -- -- ------
White Mark #1 303012 265, 4.5W, 30 Seviar
White Mark #2 303013 26S, 4.5W, 30 Seviar
Nola #1 303014 265, 4.5W, 30 Seviar
Nola #2 30S015 265, 4,5W, 30 Seviar
Mill Creek Area lode claims:
Debra Dawn #1 302970 265, 4.5W, 30 Seviar
Debra Dawn #2 302971 265, 4.5W, 3O Seviar
Debra Dawn #2 302972 265, 4.5W, 30 Seviar
Debra Dawn #4 302973 265, 4.5W, 30 Seviar
Debra Dawn #5 302974 265, 4.5W, 30 Seviar
Silver Star #1 302975 265, 4.5W, 30 Seviar
Silver Star #2 302976 265, 4.5W, 30 Seviar
Silver Star #3 302977 265, 4.5W, 30 Seviar
End of Exhibit A.
<PAGE>
ADDENDUM TO OPTION TO ENTER INTO MINING LEASE
(MILL CREEK AREA)
This Addendum to the OPTION TO ENTER INTO MINING LEASE, herein referred
to as "Option", made and entered into the 27th day of March, 2000, by and
between Daniel H. Engh, Dennis S. Engh (Optionor) and Kaolin Of The West, LLC.
(Optionee), a Utah Limited Liability Company:
In consideration, of providing copies of testing, analysis and
geological mapping of the Mill Creek Area claims describe in Exhibit A and the
acknowledgment of the payments due the Optionor from the starting date of
September 30th, 1996, the receipt of information and acknowledgment of payments
due is adequacy of which is hereby acknowledged.
In consideration of the foregoing acknowledgment to Optionor, Optionor
also ratifies the following OPTION TO ENTER INTO MINING LEASE for the Mill Creek
Area claims described in Exhibit A - dated September 30th, 1996 with KAOLIN OF
THE WEST, LLC., as being in full force and effect, without any modification of
the option or any waiver of the option terms as to future performance, except at
Paragraph 2 of the OPTION TO ENTER INTO MINING LEASE, the exercising the option
is extended for four (4) years from the date hereof.
The leases and claims covered thereby are more particularly described on
the attached Exhibit A, incorporated by this reference.
IN WITNESS WHEREOF, this ADDENDUM TO OPTION TO ENTER INTO MINING LEASE
has been executed and delivered by Optionor to Optionee as of the day and year
first above written.
Signed this 27th day of March, 2000.
<PAGE>
To The ADDENDUM TO OPTION TO ENTER INTO MINING LEASE (MILL CREEK AREA)
Page 2 of 4
Kaolin Of The West, LLC.
/s/ Daniel H. Engh BY: /s/ Dennis S. Engh
- --------------------------------- -----------------------------------
Daniel H. Engh, Optionor Its: Manager
Optionee
/s/ Dennis S. Engh
- ---------------------------------
Dennis S. Engh, Optionor
<PAGE>
To The ADDENDUM TO OPTION TO ENTER INTO MINING LEASE (MILL CREEK AREA)
Page 3 of 4
Exhibit A
ADDENDUM TO OPTION TO ENTER INTO MINING LEASE (MILL CREEK AREA)
- ---------------------------------------------------------------
To the OPTION TO ENTER INTO MINING LEASE Agreement dated as of September 30th,
1996, by and among Daniel H. Engh, Dennis S. Engh and Kaolin Of The West, LLC.,
a Utah Limited Liability Company:
PART 1
- ------
With respect to the Properties, Daniel H. Engh and Dennis S. Engh are in
control of lode and placer claims described below:
The Property consists of unpatented lode and association placer mining claims
located on land managed by the National Forest Service in the State of Utah
(Salt Lake Base & Meridian) Sevier County:
Mill Creek area association placer claims:
<TABLE>
<CAPTION>
Claim UMC # T, R, S. County
----- ----- -- -- -- ------
<S> <C> <C> <C> <C> <C>
White Mark #1 303012 26S, 4.5W, 30 Sevier
White Mark #2 303013 26S, 4.5W, 30 Sevier
Nola #1 303014 26S, 4.5W, 30 Sevier
Nola #2 303015 26S, 4.5W, 30 Sevier
</TABLE>
Mill Creek Area lode claims:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Debra Dawn #1 302970 26S, 4.5W, 30 Sevier
Debra Dawn #2 302971 26S, 4.5W, 30 Sevier
Debra Dawn #3 302972 26S, 4.5W, 30 Sevier
Debra Dawn #4 302973 26S, 4.5W, 30 Sevier
Debra Dawn #5 302974 26S, 4.5W, 30 Sevier
Silver Star #1 302975 26S, 4.5W, 30 Sevier
Silver Star #2 302976 26S, 4.5W, 30 Sevier
Silver Star #3 302977 26S, 4.5W, 30 Sevier
</TABLE>
<PAGE>
To The ADDENDUM TO OPTION TO ENTER INTO MINING LEASE(MILL CREEK AREA)
Page 4 of 4
This mining lease contains a Reserved Royalty of 3% on all ores, minerals or
Products (called "Production") mined and removed from the leased Premises. Said
Royalty shall be calculated based upon the gross value of the production.
Additionally, the claims above, lode or placer claims have a minimum royalty of
$5,000.00 and or a production royalty of $2.50/ton which is adjusted by the
Consumer Prices Index for all Urban Consumers for U.S. City average as published
by the U.S.
Department of Labor Bureau of Labor Statistics.
With respect to the Properties, Daniel H. Engh and Dennis S. Engh have a mining
lease Dated June 19th 1993 by and between Don W. Fullmer, Arnola B. Fullmer
(Lessor) and Daniel H. Engh, Dennis S. Engh (Lessee). All terms and conditions
of the June 19, 1993 mining lease will be a part of this mining lease. Said
claims of this mining lease are described above:
End of Exhibit A.
<PAGE>
ADDENDUM TO OPTION TO ENTER INTO MINING LEASE
(MILL CREEK AREA)
This Addendum to the OPTION TO ENTER INTO MINING LEASE, herein referred
to as "Option", made and entered into the 27th day of March, 2000, by and
between Kaolin Of The West, LLC., a Utah Limited Liability Company at 4532
Briarcreek Street, Salt Lake City, Utah 84117 hereinafter referred to as the
(Optionor) and Utah Clay Technology, Inc., at 3985 South 2000 East, Salt Lake
City, Utah 84124, hereinafter referred to as (Optionee), a Utah corporation:
In consideration, of providing copies of testing, analysis and
geological mapping of the Mill Creek Area claims describe in Exhibit A and the
acknowledgment of the payments due the Optionor from the starting date of
September 30th, 1996, the receipt of information and acknowledgment of payments
due is adequacy of which is hereby acknowledged.
In consideration of the foregoing acknowledgment to Optionor, Optionor
also ratifies the following OPTION TO ENTER INTO MINING LEASE for the Mill Creek
Area claims described in Exhibit A - dated September 30th, 1996 with UTAH CLAY
TECHNOLOGY INC., as being in full force and effect, without any modification of
the option or any waiver of the option terms as to future performance, except at
Paragraphs 1(C) and 2 of the OPTION TO ENTER INTO MINING LEASE, the exercising
the option is extended for four (4) years from the date hereof.
The leases and claims covered thereby are more particularly described on
the attached Exhibit A, incorporated by this reference.
<PAGE>
To The ADDENDUM TO OPTION TO ENTER INTO MINING LEASE(MILL CREEK AREA)
Page 2 of 4
IN WITNESS WHEREOF, this ADDENDUM TO OPTION TO ENTER INTO MINING LEASE
has been executed and delivered by Optionor to Optionee as of the day and year
first above written.
Signed this 27TH day of March, 2000.
Kaolin Of The West, LLC. Utah Clay Technology, Inc.
BY: /s/ Dennis S. Engh BY: /s/ Dennis S. Engh
- --------------------------------- -----------------------------------
Its: Manager Its: President
Optionor Optionee
<PAGE>
To The ADDENDUM TO OPTION TO ENTER INTO MINING LEASE(MILL CREEK AREA)
Page 3 of 4
Exhibit A
ADDENDUM TO OPTION TO ENTER INTO MINING LEASE (MILL AREA)
To the OPTION TO ENTER INTO MINING LEASE Agreement dated as of September 30th,
1996, by and among Kaolin Of The West, LLC., a Utah Limited Liability Company,
and Utah Clay Technology, Inc., a Utah Corporation.
PART 1
- ------
With respect to the Properties, Daniel H. Engh and Dennis S. Engh are in
control of lode and placer claims described below:
The Property consists of unpatented lode and association placer mining claims
located on land managed by the National Forest Service in the State of Utah
(Salt Lake Base & Meridian) Sevier County:
Mill Creek area association placer claims:
<TABLE>
<CAPTION>
Claim UMC # T, R, S. County
----- ----- -- -- -- ------
<S> <C> <C> <C> <C> <C>
White Mark #1 303012 26S, 4.5W, 30 Sevier
White Mark #2 303013 26S, 4.5W, 30 Sevier
Nola #1 303014 26S, 4.5W, 30 Sevier
Nola #2 303015 26S, 4.5W, 30 Sevier
</TABLE>
Mill Creek Area lode claims:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Debra Dawn #1 302970 26S, 4.5W, 30 Sevier
Debra Dawn #2 302971 26S, 4.5W, 30 Sevier
Debra Dawn #3 302972 26S, 4.5W, 30 Sevier
Debra Dawn #4 302973 26S, 4.5W, 30 Sevier
Debra Dawn #5 302974 26S, 4.5W, 30 Sevier
Silver Star #1 302975 26S, 4.5W, 30 Sevier
Silver Star #2 302976 26S, 4.5W, 30 Sevier
Silver Star #3 302977 26S, 4.5W, 30 Sevier
</TABLE>
<PAGE>
This mining lease contains a Reserved Royalty of 3% on all ores, minerals or
Products (called "Production") mined and removed from the leased Premises. Said
Royalty shall be calculated based upon the gross value of the production.
Additionally, the claims above, lode or placer claims have a minimum royalty of
$5,000.00 and or a production royalty of $2.50/ton which is adjusted by the
Consumer Prices Index for all Urban Consumers for U.S. City average as published
by the U.S. Department of Labor Bureau of Labor Statistics.
With respect to the Properties, Daniel H. Engh and Dennis S. Engh have a mining
lease Dated June 19th 1993 by and between Don W. Fullmer, Arnola B. Fullmer
(Lessor) and Daniel H. Engh, Dennis S. Engh (Lessee). All terms and conditions
of the June 19, 1993 mining lease will be a part of this mining lease. Said
claims of this mining lease are described above:
End of Exhibit A.
MINING LEASE AGREEMENT
THIS MINING LEASE AGREEMENT made and entered into this 19th of June, 1993, by
and between DON W. FULLMER, and ARNOLA B. FULLMER, HIS WIFE, whose address is
1025 NORTH MAIN, FILLMORE, UTAH 84631, herein referred to as "Lessor" or "Owner"
and DANIEL H. ENGH, DENNIS S. ENGH whose address is 2340 EAST GERMANIA CIRCLE,
SANDY, UTAH 84093-1174, hereinafter referred to as "Lessee".
WITNESSETH:
WHEREAS, the owner is the sole owner, or the agent for the
association which is the sole owner of the unpatented mining claims listed in
Exhibit "A" of this agreement, hereinafter referred to as the "Leased Property",
and
WHEREAS, Lessee desires to lease the Leased Property, Owner and Lessee
hereby agree to the following (hereinafter referred to as the "Agreement"):
WHEREAS, Lessor is owner of certain properties and property rights
situated in Piute, and Sevier Counties, State of Utah, and more
particularly described in the attached Exhibit "A", incorporated by
reference, and hereinafter referred to as the "Leased Premises"; and
WHEREAS, Lessee desires to lease certain rights in and to the Leased
Premises which Lessor is willing to grant to Lessee;
<PAGE>
NOW THEREFORE, in consideration of $100.00 paid by Lessee to
Lessors receipt of which is hereby acknowledged and the payments, covenants and
agreements hereinafter set forth the parties agree as follows:
1. The Leased Premises.
-------------------
The "Leased Premises" shall mean all of the property described in
Exhibit "A" attached hereto and made a part hereof, together with all of the
ores, minerals and materials thereon and thereunder, and all right, title and
all water, water rights, easements and rights of way now and hereafter owned or
held by Owner in, upon or under the said property, or in any way pertaining
thereto.
2. Warranties and Representations.
------------------------------
Owner represents to Lessee: (1) that subject to the matters
specifically set forth in Exhibit "A," and subject to the matters set forth
below with respect to unpatented mining claims, Owner has the exclusive
possession of the Mining Claims and (2) that the Owner has the full right, power
and capacity to enter into this Lease upon the terms set forth herein. Since the
Leased Premises, as described in Exhibit "A" includes unpatented mining claims,
Owner represents and warrants to Lessee: (1) that Owner's title is subject to
paramount title of the United States of America and to the rights, if any, of
surface patentees; (2) that the acts of location performed by Owner on the
unpatented mining claims described in Exhibit "A" have been completed in
compliance with the laws of the State of Utah and of the United States of
America; and (3) that the Notice Of Intent To Hold has been completed and filed
with the Juab County Recorder and the BLM in Salt Lake City, Utah.
<PAGE>
(4) Lessee represents to owner: (A) that Lessee has made a preliminary search of
the Bureau of Land Management records with regard to the leased premises and (B)
That Lessee is aware of some conflicting claims within the boundaries of the
leased premises and (C) That Lessee intends to do additional title research and
to take such actions as are necessary to perfect title in the Lessors favor,
insofar as possible and (D) That Lessee will refrain from or abandon all
attempts to obtain title to the Leased Premises except as provided by this by
this lease, without first obtaining owners written consent.
I. GRANT
1.1 Lessor hereby grants and leases to Lessee for and in
consideration of, and subject to all of the terms provisions and conditions
hereinafter set forth, the exclusive right and privilege to mine, extract,
remove and dispose of the all locatable Minerals in, upon or under the Leased
Premises, together with the right to use and occupy so much of the surface of
the Leased Premises as may be required for all purposes reasonably incident to
the mining, extracting, removal and disposal of the locatable Minerals according
to the provisions of this Lease.
II. LEASED MINERALS
2.1 "Leased Minerals" or "Locatable Minerals" as used herein
shall mean all locatable minerals acquired by virtue of the placer or lode
mining claims owned by owner.
III. TERM
3.1 The primary term of this Lease shall be for a period of five
(5) years from the date hereof and for so long thereafter as Leased Minerals are
produced in commercial quantities at more than 200 tons/month from the lands
described in Exhibit A by the Lessee, their partners, successors or assigns, for
at least ten months of each year after the first five year term has expired,
subject to extension or termination as hereinafter provided.
<PAGE>
3.2 This Lease and the terms and conditions of this Lease
agreement issued by the Lessor are made with the Lessee herein on condition that
Lessee and any lawful successor in interest to Lessee shall perform all
covenants and terms and conditions herein set forth to be performed by Lessee or
its lawful assigns including payment of royalties as herein provided. Lessor may
issue written notice of termination and cancellation of this Lease, and
forfeiture, subject to paragraph 9.1: declaring that the Leased Premises and
each and every part thereof have thereby reverted to the Lessor, including any
and all fixtures and improvements required to be left with the property upon
expiration, termination, or cancellation of this Lease.
3.3 Lessee may terminate this Lease at any time by giving Lessors
at least ninety (90) days prior written notice, together with a check in full
settlement of any royalties that are due and unpaid; upon giving such notice of
termination, Lessee shall be released of all its obligations except those
obligations which have theretofore accrued. Within Thirty (30) days after date
of termination, Lessee shall execute and record a release and quitclaim deed
releasing all of Lessee's right, title and interest in and to the Leased
Premises.
3.4 Upon the effective date of termination by Lessee, Lessor
shall be entitled to retain all funds paid to it by Lessee pursuant to this
Lease.
3.5 Within sixty (60) days after termination from this Lease,
Lessee or its successor or assign will provide Lessor with a copy of all data
prepared, collected, and interpreted by or for it (including maps, drill data,
assays, analyses, geological surveys, topographic surveys, and other data
pertaining to the Leased Premises and the Leased Minerals. Lessee will provide
<PAGE>
readable copies of all new factual geologic data and reports by February 15th of
each year.
IV. CONSIDERATION
4.1 The Lessee in consideration of the granting of the rights and
privileges granted herein hereby covenants and agrees as follows:
(1) Due $5,000.00 annual minimum royalty beginning on the first
anniversary of this lease and thereafter minimum $5,000.00 each anniversary
until Lessee terminates its rights. The minimum royalty of $5,000.00, will be
adjusted by the Consumer Prices Index for All Urban Consumers for U.S. City
Average as published by the U.S. Department Of Labor, Bureau Of Labor Statistics
who is created pursuant to Sec. 5(a) of Public Law 304, 79th Congress. The
average at the end of December 1992 will be the base year and any change in the
Consumer Prices Index for All Urban Consumers for U.S.. City Average for the
following year ended December will determine the percent change in the $5,000.00
for the following year. Each year becomes the new base year to measure change
from.
(2) Production Royalty: A production royalty on Leased Minerals
which shall be Two Dollars and 50 Cents per ton ($2.50/ton) of ore removed from
or mined and processed upon the Leased Property. The Production Royalty will be
applied towards the annual minimum royalty of $5,000.00 on an annual basis.
(3) The production royalty of $2.50/ton stated in IV (2), will be
adjusted by the Consumer Prices Index for All Urban Consumers for U.S. City
Average as published by the U.S. Department' Of Labor, Bureau Of Labor
Statistics who is created pursuant to Sec. 5(a) of Public Law 304, 79th
Congress. The average at the end of December 1992 will be the base year and any
change in the Consumer Prices Index for All Urban Consumers for U.S. City
Average for the following year ended December will determine the percent change
<PAGE>
in the $2.50/ton for the following year. Each year becomes the new base year to
measure change from.
A). Annual Labor:
(1) To perform upon the Leased Premises the annual
assessment work as set forth under the laws of the United States and the State
of Utah, and to prepare timely proof of the performance of such labor and to
record and file the same as required by law, and to furnish Lessor with a copy
thereof. Should this Lease be terminated as herein provided and the
effective date of such termination shall be ninety (90) days, or less, prior
to the end of the then current assessment year, Lessee shall nevertheless be
required to perform upon the Leased Premises the annual labor for such
assessment year and shall prepare timely proof thereof, record the same, and
furnish Lessor with a copy of such proof as hereinafter provided. In the
performance of annual labor upon or for the benefit of the Leased Premises,
Lessee shall be entitled to perform such work upon any of the claims or upon any
of the groups of claims comprising the Leased Premises so long as such work
shall qualify for the purpose of the development of the Leased Premises as a
contiguous group pursuant to the requirements of law relating to group work
on mining claims except as herein provided.
(2) Assessment work will be completed by July 15 of each
year starting with the 1993 Assessment Year, or Lessor may do the work and
charge reasonable costs time and expenses to Lessee. Lessee will furnish to
Lessor a copy of the proof-of-labor with the County, no later than September
15th of each year.
(3) Rental Fees Required For Unpatented Mining Claims by
the Bureau of Land Management. The fiscal year 1993 Appropriations Acts for
the Department of the Interior, signed October 5, 1992, requires holders
of unpatented mining claims to pay the Federal Government a new rental fee of
<PAGE>
$100 per claim per year. The rental fee requirement, which will expire September
30, 1994, suspends a Mining Law requirement for performance of a minimum of $100
of assessment work per claim per year. The Two rental years are September 1,
1992, through August 31, 1993, and September 1, 1993, through August 31, 1994.
Claims are defined as lode claims, placer claims, mill sites, and tunnel sites.
For the next 2 years, claimants must pay the BLM $100 per claim
rental on or before August 31, 1993, for the year ending September 1, 1993, and
an advance rental of $100 per claim on or before August 31, 1993, for the year
beginning September 1, 1993.
Lessee agrees to pay this rental fee on or before July 31, 1993
to the Bureau of Land Management. Lessor will agree to be present at the Bureau
of Land Management's office in Salt Lake City, Utah when payment is made or
accept copy of payment receipt stamped by the BLM within five days of payment.
Lessee agrees to pay on or before July 31 of any future rental fees required by
the Bureau of Land Management `after the expiration of September 30, 1994.
B). PRODUCTION ROYALTY PAYMENTS:
(1) Production royalty shall be paid within thirty (30)
days after receipt of payment for each shipment or when otherwise due, and
each payment shall be accompanied by a statement showing the date(s) of
shipment(s), quantity and value of each shipment, to whom sold and the gross
value received, and any cost deductions.
(2) Method of Production royalty payments shall be in
<PAGE>
U.S. dollars payable by cash or valid check drawn on available funds, and
shall be deemed made when deposited at Lessor's single depository at:
Paradise Management Co.
P.O. Box 268
Fillmore, Utah 84631
Phone (801) 743-5848
Lessor may change its single depository at any time by giving written notice to
Lessee.
V. PERIODIC REPORTS
5.1 Lessee agrees to make semi-annual written reports to lessor (on or
before January 1 and July 1 each year) detailing the exploration, development
and mining work done upon the leased premises, quantity of ores, minerals or
products shipped from the Leased Premises, the identity of the buyer(s) thereof
or the place where such ores, minerals or products are stockpiled, the plans for
the Leased Premises ~during the next six (6) month period, and other activities
conducted or planned for the Leased Premises.
5.2 Lessee shall audit all operations upon the Leased Premises at least
annually, and furnish to Lessor a copy of such audit within thirty (30) days
after completion.
VI. RIGHTS AND OBLIGATIONS OF LESSEE
6.1 The Lessee will forthwith have and is hereby granted by Lessor
the right and privilege from the date hereof and so long thereafter as this
<PAGE>
Lease remains in force and effect of entering into and upon the Leased Premises
and the right to drill and excavate thereon and therein holes, pits, tunnels,
shafts, and other such excavations and to conduct therein and elsewhere such
surveys, exploration, investigations, sampling, milling, screening and other
work similar as well as dissimilar as Lessee in its sole judgment and discretion
may wish to know relating to any and all facts relative to the geology of the
Leased Premises, including but not limited to the geology of the Leased Minerals
and the mining, milling, beneficiating, and marketing thereof, together with
the right to drain water and materials and to pile overburden at places most
convenient to Lessee, and the right to dig or bore wells and use any water in or
upon said lands and the right to construct and place upon said lands any and all
buildings, dams, drains, machinery, roads, railroads, pipe and power lines and
other improvements that may be convenient for said purposes, all of which
improvements will become the full and complete property of the Lessor upon
termination or assignment of Lease back to Lessor, and Lessee will be under no
further obligation or liability with respect thereto except for reclamation and
except as provided in paragraph 6.7 below. Lessee will have the paramount
possession and control of the Leased Premises with regard to the Leased Mineral
rights obtained herein during and throughout the life of this Lease and shall be
entitled to conduct therein and thereon all mining, milling and beneficiation
uses and purposes reasonably incident thereto as it shall deem satisfactory and
advantageous so far as Lessee tries not to interfere with the rights of the
Federal potassium leases. All work shall be conducted by Lessee as Lessee in its
sole judgment and discretion deems best and in a good and miner-like fashion.
Stockpiles and tailings covered by Lease, remain the property of the Lessor upon
surrender of Lease. Mining timbers in place shall remain affixed as part of the
Leased Premises unless released in writing to Lessee.
6.2 Lessor or his agents duly authorized in writing will have at all
reasonable times and at his own risk access to all parts of Leased Premises
and associated premises for the purposes of reasonable inspection of operations,
record keeping, and accounts to the end that Lessor might verify that the
specified royalty payments are being made properly and that operations are being
conducted in a miner-like fashion. Lessee will keep records in a businesslike
manner.
<PAGE>
6.3 Any and all future leases, transfers, encumbrances or conveyances
of interests in the Leased Premises not covered by this Lease shall be
subordinate to and subject to the rights of Lessee, his successors, assigns
of sublessees, so long as this Lease is in force and effect.
6.4 Lessee shall pay all expenses incurred by it and shall permit no
liens to attach to Leased Premises on account of any debt for materials or
services furnished for the benefit of the Leased Premises while this Lease is in
effect.
6.5 Lessee will indemnify and forever hold harmless and defend
Lessor from any demand, claim, suit, judgment or liability resulting from the
exploratory or development activities of Lessee conducted pursuant to this
agreement. Upon request of Lessor, Lessee will furnish evidence of sufficient
workmen's compensation, liability and other insurance to cover anticipated
risks, or evidence that it is adequately self--insured for such contingencies.
6.6 Lessee agrees that Leased Minerals from the Leased Premises shall
not be mixed or co-mingled with minerals, ore, substances or materials
from other properties or lands except as agreed by Lessor.
6.7 In the event of the termination of this Lease by lapse of time or
otherwise, Lessee shall grade and slope and otherwise reclaim that portion of
the land being leased pursuant hereto, which was the site of actual mining
operations, in accordance with the requirements of the State and Federal
regulations then in effect and Owner may elect to assume the burden of
reclaiming the land, by notifying Lessee in writing of his intent to assume said
burden, in which event, Lessee will obtain not more than three (3) bids for
<PAGE>
performance of the reclamation work required by this paragraph, and will pay
over to owner a sum equal to ninety--five percent (95%) of the lowest of said
bids. Thereafter, Lessee shall be relieved from all duties, expenses or
responsibility with respect to such reclamation and Owner, simultaneously with
or prior to the receipt of said payment, shall obtain from the appropriate
Government agencies and deliver to Lessee all documents necessary to release
Lessee from all further responsibility for the performance of such reclamation
work.
VII. PATENT OF CLAIMS
7.1 Upon request of Lessee at any time during the term of this Lease,
the Lessor agrees to undertake to obtain patent to any of the mining claims
designated by Lessee. Lessee, at its own expense, shall prepare all
documents, compile all data and comply in all respects with all applicable laws
in this endeavor, and Lessor shall execute all documents required for this
purpose and shall cooperate fully with Lessee in the patent application and
proceedings.
7.2 The rights of Lessor and Lessee under this Lease will extend
to any and all amended, relocated, or patented claims referred to in Exhibit A.
Lessor and Lessee agree that all amendments, relocations, or staking new claims
in the claimed area, of the claims referred to in Exhibit A, will be made in the
name of Lessor. Some claims need amending and it is known hereby to the Lessee.
Any valid mining claims staked by Lessor, or his agents, within the Leased
Premises shall fall under and be a part of this Lease.
VIII. DEFAULT AND FORCE MAJEURE
<PAGE>
8.1 If Lessee will be in default in performing any obligations
(except the timely payment of royalties), Lessee shall lose no rights unless,
within sixty (60) days following written notice from Lessor, given at the
address herein specified, specifying such failure or breach, Lessee shall fail
to make such payment or undertake to cure such default by commencement and
follow through of appropriate performance, within a reasonable amount of time.
Upon such failure, Lessor may terminate this Lease.
8.2 If Lessee shall be prevented or delayed from performing its
obligations or performing any work which it desires to perform or is performing
by reason of act of nature, strike or threat of strike, fire, flood, war, mob
violence, court order, unavoidable casualties, or any other enumeration, beyond
the control of Lessee which cannot be overcome by the means normally employed in
performance and at comparable and reasonable expense, then the duration of this
Lease shall be extended for a period equal to the period of Force Majeure and
any failure to perform obligations shall not be deemed a breach of this Lease.
Lessee agrees to use reasonable diligence to remove such causes of disability as
may occur from time to time. This paragraph shall not excuse payment or delay
payment of royalties.
IX. Lease Premises.
9.1 The parties hereto agree that during the term of this Lease,
in the event title to any of the Leased Premises is contested by any person or
persons, corporation or corporations, or governmental agencies, Lessee will, at
its own election and expense, defend the title to any of the Leased Premises
before any court of competent jurisdiction or any administrative body. Lessee
will defend any actions for damages relating to exploration, development, or
mining activities by Lessee on Leased Premises.
<PAGE>
9.2 Lessor, upon execution of this Lease, shall furnish Lessee
with copies of all property maps possessed by Lessor on the Leased Premises and
adjacent lands.
X. TAXES AND DUTIES
10.1 Lessee agrees to pay (I) all taxes hereafter levied and
assessed upon all machinery and improvements placed by Lessee upon the Leased
Premises, (ii) taxes hereafter levied upon the Leased Premises, including taxes
assessed by reason of net annual proceeds, and (iii) occupation or severance
taxes imposed upon the mining or production of Leased Minerals from the Leased
Premises or any other taxes, assessments or charges resulting from Lessee
activities on Leased Premises.
10.2 Lessor agrees to promptly transmit to Lessee any notices pertaining
to taxes, assessments and charges which Lessor may receive.
10.3 Lessee, in all operations under this Lease, will comply with all
applicable State and Federal laws, including the social laws relative to
employment, safety, workmen's compensation insurance, social security,
unemployment tax and tax withholding. Lessee shall hold Lessor harmless from
claims of damage to persons or property arising from Lessee's operations under
this Lease. Lessee will comply with hazardous waste, air and water quality
requirements.
10.4 Lessee will do all reclamation work required by the Bureau of Land
Management, the State of Utah or Juab County in a timely manner.
XI. ASSIGNMENT AND TRANSFER
<PAGE>
11.1 Lessee can convey, assign or transfer its interest in this lease
or any part of this Lease without the prior notification and consent in
writing of the Lessor. The assignee party will, as a condition of consent to the
transfer, agree to be bound by and subject to the terms of this Lease. Any
assignee party will provided a phot000py of the executed copy of assignment and
is delivered to the other party. Overriding royalty assignments will not become
effective, even if otherwise valid without the consent in writing of the Lessor.
Lessee, its successor and assigns, may not assign or convey royalty, overriding
royalty, production payment or like interest in the Leased Premises without
Lessor's prior written consent.
XII. MISCELLANEOUS
12.1 This agreement shall be governed by the laws of the State of Utah.
12.2 Title headings are for convenience only and shall not be deemed a
part of this Lease.
12.3 This Lease and Its Exhibit contain the entire agreement
between the parties and supersedes entirely any prior understandings whether
oral or written.
12.4 If any provisions of this Lease is or becomes void or
unenforceable by Force of Law, the other provisions shall remain valid and
enforceable.
12.5 Lessor's and Lessee's proper address shall be the following, which
either may change by giving written notice to the other.
<PAGE>
Don W. Fuilmer, Arnola B. Fullmer
P.O. Box 268
1025 North Main
Fillmore, Utah 84631
Daniel H. Engh, Dennis S. Engh
2340 East Germania Circle
Sandy. Utah 84093--1174
12.6 The failure to enforce at any time any provisions. of this Lease,
shall in no way be construed to be a waiver of such provisions, or to affect
validity of the Lease.
12.7 This Lease shall be binding upon and inure to the benefit of
the successors and permitted assigns of the parties.
12.8 A Memorandum of this Lease may be filed by either party.
12.9 Lessee will diligently explore and conduct operations on or near
Leased Premises throughout the term of this Lease in a manner reasonably
calculated to advance the production of minerals from Leased Premises.
IN WITNESS WHEREOF, this Lease has been executed and delivered by
Lessor to Lessee as of the day and year first above written.
/s/Don W. Fullmer /s/Arnola B. Fullmer
- --------------------------------- -----------------------------------
Don W. Fullmer Arnola B. Fullmer
LESSOR
/s/Daniel H. Engh /s/ Dennis S. Engh
- --------------------------------- -----------------------------------
Daniel H. Engh Dennis S. Engh
LESSEE LESSEE
<PAGE>
ACKNOWLEDGEMENT
STATE OF UTAH
COUNTY of Millard
-------
On this 19th day of June, 1993, before me personally appeared DON W.
FULLMER to me known to be the person described in and who executed the foregoing
instrument and acknowledged that he executed the same as a free act and deed.
Given under my hand and seal this 19th day of June, 1993. My Commission
Expires July 3, 1994.
/s/ Lee Ann H. Burton
---------------------
ACKNOWLEDGEMENT
STATE OF UTAH
COUNTY of Millard
-------
On this 19th day of June, 1993, before me personally appeared ARNOLA B.
FULLMER to me known to be the person described in and who executed the foregoing
instrument and acknowledged that he executed the same as a free act and deed.
Given under my hand and seal this 19th day of June, 1993. My Commission
Expires July 3, 1994.
/s/ Lee Ann H. Burton
---------------------
<PAGE>
ACKNOWLEDGMENT
STATE OF UTAH
COUNTY of Millard
-------
On this 19th day of June, 1993, before me personally appeared DANIEL H.
ENGH to me known to be the person described in and who executed the foregoing
instrument and acknowledged that he executed the same as a free act and deed.
Given under my hand and seal this 19th day of June, 1993. My Commission
Expires July 3, 1994.
/s/ Lee Ann H. Burton
---------------------
ACKNOWLEDGMENT
STATE OF UTAH
COUNTY of Millard
-------
On this 19th day of June, 1993, before me personally appeared DENNIS S.
ENGH to me known to be the person described in and who executed the foregoing
instrument and acknowledged that he executed the same as a free act and deed.
Given under my hand and seal this 19th day of June, 1993. My Commission
Expires July 3, 1994.
/s/ Lee Ann H. Burton
---------------------
<PAGE>
EXHIBIT A
To the Mining Lease Agreement
Between Don W. Fullmer, Arnola B. Fullmer, and Daniel H. Engh, Dennis S. Engh.
Dated the 19th day of June, 1993.
The Property consists of unpatented lode and association placer mining claims
located on land managed by the National Forest Service in the State of Utah
(Salt Lake Base & Meridian):
Box Creek Area association placer claims:
<TABLE>
<CAPTION>
Claim UMC # T, R, S County
--------------- ------ --- -- -- ------
<S> <C> <C> <C> <C> <C>
Carole Ann #1 303696 27S, 2W, 11 Piute
Carole Ann #2 303697 27S, 2W, 11 Piute
Carole Ann #3 303698 27S, 2W, 12 Piute
Carole Ann #4 303699 27S, 2W, 23 Piute
Carole Ann #5 303700 27S, 2W, 23 Piute
Carole Ann #6 303701 27S, 2W, 12 Piute
Carole Ann #7 303702 27S, 2W, 1 Piute
Carole Ann #8 303703 27S, 2W, 1 Piute
Carole Ann #9P 303704 27S, 1W, 5 Piute
Carole Ann #10P 303705 26S, 1W, 32 Piute
Carole Ann #10 303003 26S, 1W, 32 Sevier
Carole Ann #11P 303706 26S, 1W, 32 Piute
Carole Ann #11 303004 26S, 1W, 32 Sevier
Carole Ann #12 303005 26S, 1W, 32 Sevier
Carole Ann #13 303006 26S, 1W, 29 Sevier
Carole Ann #14 303007 26S, 1W, 29 Sevier
Carole Ann #15 303008 26S, 1W, 30 Sevier
Carole Ann #16 303009 26S, 1W, 30 Sevier
Carole Ann #17 303010 26S, 1W, 19 Sevier
Carole Ann #18 303011 26S, 1W, 19 Sevier
Carole Ann #19 303707 27S, 2W, 1 Piute
Carole Ann #20 303708 27S, 2W, 1 Piute
Carole Ann #21 303709 27S, 2W, 11 Piute
Carole Ann #22 303710 27S, 2W, 14 Piute
Carole Ann #23 303711 27S, 2W, 13 Piute
Carole Ann #24 303712 27S, 2W, 13 Piute
</TABLE>
<PAGE>
ADDENDUM TO MINING LEASE
This Addendum to Mining Lease is made this l5th day of March, 2000 by and
between Don W. Fullmer and Arnola B. Fullmer, his wife. 905 North Main Street,
Fillmore, Utah 94631, hereinafter referred to as "Lessor," and Daniel H. Engh
and Dennis S. Engh whose address is 2340 East Germania Circle, Sandy, Utah
84093-1174. hereinafter referred to as "Lessee."
In consideration, of bringing minimum royalty payments up to date through
payments in the amount of $14,034.81, the receipt and adequacy of which is
hereby acknowledged. Lessor hereby acknowledges that the items of default
contained in the Notice dated December 31. 1999. incorporated by this reference,
are hereby satisfied in full or waived as to past acts only.
Lessor and Lessee ratify Mining Lease No. 4 - dated June 19, 1993, between
the parties as being in full force and effect, without any modification of the
lease except as provided herein or any waiver of the lease terms as to future
performance, except at Paragraph 3.1 of Mining Lease, the primary term and the
requirement to obtain commercial production are extended the five (5) years from
the date hereof.
In consideration of the extension of time for achieving commercial
production, the Lessee grants to the Lessor the right, at the Lessors sole
option and expense, to enter upon any portion of the leased premises, not at
that time being actively mined, under the terms of the lease, by the Lessee, to
mine and produce clay and other minerals for sale by the Lessor for use in
brick or cement. Such production shall not exceed 100,000 tons per year from the
leased premises. The first operator conducting corinnetrial mining operations on
the leased premises shall direct the location and mariner of any joint mining
operations. No royalty or other payment shall be assessed by the Lessee on
production by the Lessor. HoweYet, direct payments necessary. to keep the claims
runrent and viable shall be assumed by the Lessor based on the percentage of
<PAGE>
total production performed by file Lessor in any given year. Minimum royalties
payable to the Lessor by the Lessee shall be waived by the Lessor during any
year in which the Lessor shall produce clay from the Leased premises as
provided above.
The leases and claims covered thereby are more particularly described on
the attached Exhibit A incorporated by this reference.
This Addendum shall be effective on the date above.
/s/Don W. Fullmer /s/Daniel H. Engh
- --------------------------------- -----------------------------------
Don W. Fullmer, (Lessor) Daniel H. Engh, (Lessee)
/s/Arnola B. Fullmer /s/Dennis S. Engh
- --------------------------------- -----------------------------------
Arnola B. Fullmer, (Lessor) Daniel H, Engh: (Lessee)
<PAGE>
To The ADDENDUM TO MINING LEASE
Page 3
STATE OF UTAH
SS.
County of Millard
--------------------
0n this 15 of March, 2000, personally appeared before me Don W. Fullmer
and Arnola B. Fullmer, his wife, who acknowledged to me that they executed the
foregoing Addendum to Mining Lease.
-----------------------------------
NOTARY PUBLIC
Residing at: 390 S. 100 E
-----------------------
My Commission Expires: Fillmore, UT
STATE OF UTAH
SS.
County of Millard
--------------------
On this 15 day of March, 2000, personally appeared before me Daniel H.
Engh and Dennis S. Engh, who acknowledged to me that they executed the foregoing
Addendum to Mining Lease.
-----------------------------------
NOTARY PUBLIC
Residing at: 390 S. 100E
-----------------------
My Commission Expires: Fillmore, UT
<PAGE>
To The ADDENDUM TO MINING LEASE
Page 4
Exhibit A
Mining Lease #4
- ---------------
With respect to the Properties, Daniel H. Engh and Dennis S. Engh have a MINING
LEASE AGREEMENT Dated June 19th 1993 by and between Don W. Fullmer, Arnola B.
Fullmer (Lessor) and Daniel H. Engh, Dennis S. Engh (Lessee). All terms and
conditions of the June 19, 1993 MINING LEASE AGREEMENT will be a part of this
Letter Agreement. Said claims of this MINING LEASE AGREEMENT are described
below:
The Property consists of unpatented lode and association placer mining claims
located on land managed by the National Forest Service in the State of Utah
(Salt Lake Base & Meridian):
Box Creek Area association placer claims:
- --------------------------------------------------------------------------------
Claim UMC T. R. S. County
----- --- -- -- -- ------
Carole Ann #1 303696 27S, 2W, 11 Piute
Carole Ann #2 303697 27S, 2W, 11 Piute
Carole Ann #3 303698 27S, 2W, 12 Piute
Carole Ann #4 303699 27S, 2W, 23 Piute
Carole Ann #5 303700 27S, 2W, 23 Piute
Carole Ann #6 303701 27S, 2W, 12 Piute
Carole Ann #7 303702 27S, 2W, 1 Piute
Carole Ann #8 303703 27S, 2W, 1 Piu%e
Carole Ann #9P 303704 27S, 1W, 5 Piute
Carole Ann #10P 303705 26S, 1W, 32 Piute
Carole Ann #10 303003 26S, 1W, 32 Sevier
Carole Ann #11P 303706 26S 1W, 32 Sevier
Carole Ann #l1 303004 26S 1W, 32 Sevier
Carole Ann #12 303005 26S, 1W, 32 Sevier
Carole Ann #13 303006 26S, 1W, 29 Sevier
Carole Ann #14 303007 26S, 1W, 29 Sevier
Carole Ann #15 303008 26S, 1W, 30 Sevier
Carole Ann #16 303009 26S, 1W, 30 Sevier
Carole Ann #17 303010 26S, 1W, 19 Sevier
Carole Ann #18 303011 26S, 1W, 19 Sevier
Carole Ann #19 303707 27S, 2W, 1 Piute
Carole Ann #20 303708 27S, 2W, 1 Piute
Carole Ann #21 303709 27S, 2W, 11 Piute
Carole Ann #22 303710 27S, 2W, 14 Piute
Carole Ann #23 303711 27S, 2W, 13 Piute
Carole Ann #24 303712 27S, 2W, 13 Piute
<PAGE>
OPTION TO ENTER INTO MINING LEASE
OPTION AGREEMENT by and between Daniel H. Engh, Dennis S. Engh (Lessor) and
Kaolin Of The West, LLC. (Lessee), a Utah Limited Liability Company.
1. A) Lessee hereby pays to Lessor's the sum of $100.00 in consideration for
this option, which option payment shall be credited to the Mining Lease
Agreement if the option is exercised, and
B) Lessee will pay annually to Lessor to retain this option and right to
enter into a mining lease for the mining claims listed in Exhibit A
(Mining Lease Agreement) within the option period for $5,000.00 (five
thousand dollars), due June 10th of each year and payment of all Federal
and State rents, taxes and other payments associated with the mining
claims. All payments of all Federal and State rents, taxes and other
payments associated with the mining claims are due to Lessor by June
10th of each year.
2. This option shall remain in effect until November 1, 2000, and thereupon
expire unless this option is sooner exercised.
3. To exercise this option, Lessee must notify Owner of same by certified mail
within the option period. All notices shall be sent to owner at the following
address:
Daniel H. Engh
2340 E. Germania Circle
Sandy, Utah 84093-1174
4. PROPERTY
The Property consists of unpatented lode and association placer mining claims
located on land managed by the National Forest Service in the State of Utah
(Salt Lake Base & Meridian)
Mill Creek area association placer claims:
<PAGE>
The Property consists of Lode Claims and Placer claims. And are located in
Townships 26 South Range 4.5 West Salt Lake Meridian, Sevier County, Utah.
5. Should the Lessee exercise the option, the Lessor and Lessee agree to
promptly sign the attached Mining Lease, and consummate the Mining Lease on its
terms, which are incorporated herein by reference.
6. This Option agreement shall be binding upon and inure to the benefit of the
parties, their successors, assigns and personal representatives.
Signed this 30th day of September, 1996.
Kaolin Of The West, LLC.
/S/ Daniel H. Engh BY: /S/ Dennis S. Engh
- --------------------------------- ------------------------------------
Lessor, Daniel H. Engh Its
Lessee
/S/ Dennis S. Engh
- ---------------------------------
Lessor, Dennis S. Engh
<PAGE>
OPTION TO ENTER INTO MINING LEASE
OPTION AGREEMENT by and between Kaolin Of The West, LLC. a Utah Limited
Liability Company at 4532 Briarcreek Street, Salt Lake City, Utah 84117
hereinafter referred to as the (Lessor) and Utah Clay Technology, Inc., at 3985
South 2000 East, Salt Lake City, Utah 84124, hereinafter referred to as
(Lessee), a Utah corporation.
1. A) Lessee hereby pays to Lessor's the sum of $100.00 in consideration for
this option, which option payment shall be credited to the Mining Lease
Agreement if the option is exercised, and
B) LesSee will pay annually to Lessor to retain this option and right to
enter into a mining lease for the mining claims listed in Exhibit A (Mining
Lease Agreement) within the option period for $5,000.00 (five thousand dollars),
due June 10th of each year) and payment of all Federal and State rents, taxes
and other payments associated with the mining claims. All payments of all
Federal and State rents, taxes and other payments associated with the mining
claims are due to Lessor by June 10th of each year, and
C) The Lessee agrees to pay upon exercising this option, in cash and/or
common stock, to the Lessor an amount equal to the "Fair Market Value of the
Leased Premises" as agreed between the parties on or before November 1, 2000.
The Fair Market Value of the Lease Premises will be defined in a Report
that will summarize the economic evaluation and dollar computation of the kaolin
reserves of the Leased Premises as determined by an independent engineer on or
before June 1, 2000. All costs associated with the preparation of the "Fair
Market Value Report of the Leased Premises" will be paid by the Lessee.
2. This option shall remain in effect until November 1, 2000, and thereupon
expire unless this option is sooner exercised.
3. To exercise this option, Lessee must notify Owner of same by certified mail
within the option period. Ail notices shall be sent
<PAGE>
To the "Option To Enter Into Mining Lease"
Page 2 of 2
to owner at the following address:
Kaolin Of The West, LLC.
Daniel H. Engh
2340 E. Germania Circle
Sandy, Utah 84093-1174
4. PROPERTY
The Property consists of unpatented lode and association placer mining claims
located on land managed by the National Forest Service in the State of Utah
(Salt Lake Base & Meridian):
Box Creek Area association placer claims:
The Property consists of Lode Claims and Placer claims. And are located in
Townships 26 South Range 1 West, and Township 27 South, Range 2 West, Salt Lake
Meridian, Sevier, and Piute Counties, Utah.
5. Should the Lessee exercise the option, the Lessor and Lessee agree to
promptly sign the attached Mining Lease, and consummate the Mining Lease on its
terms, which are incorporated herein by reference.
6. This Option agreement shall be binding upon and inure to the benefit of the
parties, their successors, assigns and personal representatives.
Signed this-- day of September, 1996.
Kaolin Of The West, LLC. Utah Clay Technology, Inc.
/s/Dennis S. engh By:/s/Dennis S. Engh
- --------------------------------- ----------------------------------
It: Its:
Lessor Lessee
<PAGE>
MINING LEASE
BETWEEN
DANIEL H. ENGH, DENNIS S. ENGH,
AND
UTAH CLAY TECHNOLOGY INC.
(A UTAH CORPORATION)
DATE:
<PAGE>
TABLE OF CONTENTS
ARTICLE Page No.
- ------- --------
I - DEFINITIONS
1.1 "Agreement"................................................1
1.2 "Area of Interest".........................................1
1.3 "Assets"...................................................2
1.4 "Leased Minerals"..........................................2
1.5 "Development"..............................................2
1.6 "Dollars" or "$"...........................................2
1.7 "Exploration"..............................................2
1.8 "Effective Date"...........................................2
1.9 "Exploration Period".......................................2
1.10 "Exploration Rights" ......................................2
1.11 "Mining"...................................................2
1.12 "Operations"...............................................3
1.13 "Prime Rate"...............................................3
1.14 "Products".................................................3
1.15 "Program"..................................................3
1.16 "Properties"...............................................3
1.17 "Transfer".................................................3
1.18 "Work Expenditures"........................................3
II - REPRESENTATIONS AND WARRANTIES; COVENANTS;
TITLE TO ASSETS
2.1 Capacity of Participants ..................................3
2.2 Representations and Warranties ............................4
2.3 Disclosures................................................6
2.4 Covenants..................................................6
2.5 Record Title and Lessor's Interest.........................6
III - NAME, PURPOSES AND TERM
3.1 General....................................................7
3.2 Name ......................................................7
3.3 Purposes ..................................................7
3.4 Limitation ............................ ...................7
3.5 Term ......................................................7
3.6 Terms and Conditions ......................................7
3.7 Termination................................................8
3.8 Funds Paid.................................................8
3.9 Copy of all Data ..........................................8
i
<PAGE>
ARTICLE Page No.
- ------- --------
IV - CONSIDERATION .........................................................8
4.1 Consideration .............................................8
4.1(A) Annual Labor ..............................................8
4.1(B) Reserved Royalty ......................................... 9
V - APPOINTMENT OF AGENT BY LESSOR
5.1 Appointment of Agent .....................................10
VI - PERIODIC REPORTS .....................................................l0
6.1 Semi-annual Written Reports...............................10
6.2 Audit all Operations .....................................l0
VII - RIGHTS AND OBLIGATIONS OF LESSEE.....................................10
7.1 Entering Leased Premises..................................10
7.2 Inspection of Operations, records.........................11
7.3 Transfers, Encumbrances or Conveyances....................11
7.4 Expenses and Liens....................................... 11
7.5 Indemnification.......................................... ll
7.6 Mixed or Co-mingled minerals .............................11
VIII - PATENT OF CLAIMS....................................................12
8.1 Obtain Patent to Mining Claims ...........................12
8.2 Rights extend to Amendments ..............................12
IX - DEFAULT AND FORCE MAJEURE.............................................12
9.1 Default Performaing Obligations ..........................12
9.2 Prevented or Delayed from Obligations ....................12
X - LEASE PREMISES ........................................................13
10.1 Defend Title .............................................13
10.2 Copies Maps ..............................................13
Xl - TAXES AND DUTIES......................................................13
11.1 Lessee Agrees to Pay Taxes ...............................13
11.2 Notices to Lessee.........................................13
11.3 Comply with ail State and Federal Laws ...................13
11.4 Reclamation Work .........................................13
XII - ASSIGNMENT AND TRANSFER..............................................14
12.1 Assign or Transfer........................................14
XIII - MISCELLANEOUS........................................................14
13.1 Governed by Utah Laws ....................................14
13.2 Title for Convenience ....................................14
13.3 Contain Entire Agreement .................................14
13.4 Force of Law..............................................14
13.5 Proper Address's .........................................14
13.6 Affect Validity of the Lease .............................14
ii
<PAGE>
ARTICLE Page No.
- ------- --------
13.7 Benefit of the Successors..................................14
13.8 Memorandum of Lease........................................15
13.9 Diligently Explore.........................................15
XIV - EXPLORATION REQUIREMENTS ............................................15
14.1 ..Operator of Exploration, Mining............................15
EXHIBITS
- --------
EXHIBIT A - PROPERTIES.............................................1
PART 1. - Properties and Title Exceptions.........................1
PART 2. - Area of Interest........................................3
iii
<PAGE>
MINING LEASE
THIS MINING LEASE, herein referred to as "Lease", made and entered into
this -st day of October, 1996, by and between DANIEL H. ENGH, at 2340 East
Germania Circle, Sa~y, Utah 84093-1174, DENNIS S. ENGH, at 4532 Briarcreek
Drive, Salt Lake City, Utah 84124, hereinafter referred to as "Owner or Lessor",
and UTAH CLAY TECHNOLOGY INC., a Utah corporation, having an address at 3985
South 2000 East, Salt Lake City, Utah 84124 (hereinafter designated as
"Lessee"):
WITNESSETH:
WHEREAS, Lessor is owner of certain properties and property rights
situated in Piute and Sevier Counties, State of Utah, and more particularly
described in the attached Exhibit "A", incorporated by reference, and
hereinafter referred to as the "Leased Premises"; and
WHEREAS, Lessee desires to lease certain rights in and to the Leased
Premises which Lessor is willing to grant to Lessee;
NOW THEREFORE, in consideration of $10.00 paid by Lessee to Owner receipt of
which is hereby acknowledged and the payments, covenants and agreements
hereinafter set forth the Parties agree as follows:
GRANT, Lessor hereby grants and leases to Lessee for and in consideration
of, and subject to all of the terms provisions and conditions hereinat~er'set
forth, the exclusive right and privilege to mine, extract, remove and dispose of
the all locatable Minerals in, upon or under the Leased Premises, together with
the right to use and occupy so much of the surface of the Leased Premises as may
be required for all purposes reasonably incident to the mining, extracting,
removal and disposal of the locatable Minerals according to the provisions of
this Lease.
ARTICLE I
---------
DEFINITIONS
-----------
1.1 "Agreement" means this Mining Lease, including all amendments and
modifications thereof, and all schedules and exhibits, which are incorporated
herein by this reference.
1.2 "Area of Interest" means the area described in Part 2 of Exhibit
A.
-1-
<PAGE>
1.3 "Assets" means the Properties, Products and all other real and
personal property, tangible and intangible, held for the benefit of the
Lessor hereunder.
1.4 "Leased Minerals" or "Locatable Minerals" as used herein shall
mean all locatable minerals acquired by virtue of the placer or lode mining
claims owned by owner.
1.5 "Development" means all preparation for the removal and recovery
of Products, including the construction or installation of a mill or any other
improvements to be used for the mining, handling, milling, processing or other
beneficiation of Products.
1.6 "Dollars" or "$" means dollars in the currency of the United
States.
1.7 "Exploration" means all activities directed toward ascertaining
the existence, location, quantity, quality or commercial value of deposits
of Products.
1.8 "Effective Date" means the date first written above.
1.9 "Exploration Period" means the period of time during which Lessee
is conducting Exploration Operations pursuant to Article VII. The Exploration
Period shall begin on the Effective Date and, unless this Agreement sooner
terminates, shall end on the date a processing mill is placed into production
with LeaSed Mineralsl
1.10 "Exploration Rights" mean collectively the following:
(a) the sole and exclusive right of Lessee and its agents,
employees, contractors, subcontractors and workers, to enter upon and occupy the
Properties for Exploration purposes during the Exploration Period and to conduct
thereon such prospecting, trenching, drilling, sampling, examination, testing
development, engineering and feasibility studies for kaolin and other or
associated clays or metals and all other ores and minerals whatever kind or
character as desired by Lessee; and
(b) the right to do such other things as Lessee, in its sole
discretion, deems advisable or necessary to maintain and to fully evaluate the
mineral potential of the Properties to determine the feasibility of Development
of the Properties, including the right to remove from the Properties such
limited volumes of minerals and materials as are necessary for test and
assaying; provided, however, that Lessee shall not have the right during the
Exploration Period to mine and remove such minerals and materials for sale.
1.11 "Mining" means the mining, extracting, Producing, handling,
milling or other processing of Products.
1.12 "Operations" means the activities carried out under this
Agreement.
-2-
<PAGE>
1.13 "Prime Rate" means the interest rate published as the Prime Rate
in the "Money Rates" column of The Wall Street Journal, as said rate may change
from day to day, or if said column sets forth a range of rates on a single day,
the arithmetic mean thereof.
1.14 "Products" means all ores, minerals and mineral resources
produced from the Properties under this Agreement.
1.15 "Program" means a description in reasonable detail of Operations
to be conducted and objectives to be accomplished by the Lessee for a specified
period.
1.16 "Properties" means those interests in real property described in
Part 1 of Exhibit A and all other interests in real property within the Area of
Interest which are acquired and held subject to this Agreement.
1.17 "Transfer" means sell, grant, assign, encumber, pledge or
otherwise commit or dispose of.
1.18 "Work Expenditures" means the minimum work obligations described
in Sections 3.5 and 4.1 below and shall include, for purposes of this Agreement,
the value of all time, money or equipment contributed to or used on or in
connection with the Properties or the Area of Interest by Lessee in good faith,
including but not limited to all consultants' time, all costs of testing and
assaying and all other expenses reasonably necessary to evaluate the Properties
or the Area of Interest. Work Expenditures shall include (a) geological
evaluation, geophysical study, geochemical analysis, rock and soil sampling,
geological mapping and similar activities affecting the Properties or
the Area of Interest; (b) drilling, trenching, road construction and pad
construction (plus associated stand-by time) and other physical work on the
Properties or the Area of Interest; (c) environmental, permitting and
reclamation expenditures; (d) title examination and title curative,
remonumentation of unpatented mining claims, survey (or re-survey), claim
filing fees, taxes, and all other reasonable project maintenance or associated
costs on or for the benefit of the Properties or the Area of Interest,
including without limitation the maintenance activities described in Sections
3.2 and 4.1 acquisition of property within the Area of interest.
ARTICLE II
----------
REPRESENTATIONS AND WARRANTIES: COVENANTS: TITLE TO ASSETS
----------------------------------------------------------
2.1 Canacity of Participants. Lessee and Lessor, each for itself,
------------------------
represent and warrant as follows:
(a) That it is a corporation and individuals respectively
duly incorporated and in good standing in its state of incorporation and that
it is qualified to do business and is
-3-
<PAGE>
in good standing in those states where necessary in order to carry out
the purposes of this Agreement;
(b) That it has the capacity to enter into and perform this
Agreement and all transactions contemplated herein and that all
corporate and other actions required to authorize it to enter into and
perform this Agreement have been properly taken;
(c) That it will not breach any other agreement or arrangement by
entering into or performing this Agreement; and
(d) That this Agreement has been duly executed and delivered by
it and is valid and binding upon it in accordance with its terms.
2.2 Representations and Warranties. Lessor make the following
representations and warranties effective on the Effective Date:
The Leased Premises The "Leased Premises" shall mean all of the
property described in Exhibit "A" attached hereto and made a part hereof,
together with all of the ores, minerals and materials thereon and thereunder,
and all right, title and all water, water rights, easements and rights of way
now and hereafter owned or held by Lessor in, upon or under the said property,
or in any way pertaining thereto.
(a) With respect to those Properties Lessor claimed through the
Bureau Of Land Management and those Properties Lessor has enter into a
mining lease with Don W. Fullmer, Arnola B. Fullmer, if any, Lessor
are in exclusive possession of the mining rights of such Properties
free and clear of all defects, royalties, liens and encumbrances
except those specifically identified in Part 1 of Exhibit A.
(b) With respect to those Properties in which Lessor hold an
interest under leases or other contracts: (i) Lessor are in exclusive
possession of such Properties; (ii) neither Lessor has received any
notice of default of any of the terms or provisions of such contracts;
(iii) Lessor have the authority under such contracts to perform fully
their obligations under this Agreement; (iv) such contracts are valid
and are in good standing; and (v) the properties covered thereby are
free and clear of all defects, royalties, liens and encumbrances
except for those specifically identified in Part 1 of Exhibit A or
in such contracts.
(c) With respect to unpatented mining claims that are included
within the Properties, except as provided in Part 1 of Exhibit A and
subject to the paramount title of the United States, the claims are
free and clear of defects, royalties, liens and encumbrances except
for those specifically identified in Part 1 of Exhibit A and to the
best of Lessor's knowledge and belief; (i) the unpatented mining
claims were properly laid out and monumented; (ii) all required
location and validation work was properly performed;
-4-
<PAGE>
and (iii) all assessment work required to hold the unpatented mining
claims has been performed in a manner consistent with that required
of the Lessee pursuant to Section 4. I(A) of this Agreement through
the assessment year ending September 1, 1995. With respect to such
unpatented mining claims located by or on behalf of Lessor or one of
their Affiliates, except as provided in Part 1 of Exhibit A and
subject to the paramount title of the United States, all location
notices and certificates and all affidavits of assessment work and
other filings required to maintain the claims in good standing have
been properly and timely recorded and filed with appropriate
governmental agencies, with respect to such unpatented mining claims
that were not located by or on behalf of Lessor or one of their
Affiliates, Lessor make the representation and warranty contained
in the foregoing sentence to the best of their knowledge and belief.
Additionally, Lessor have no knowledge of any claims conflicting with
the claims described in Part 1 of Exhibit A. Nothing in this Section
2.2(c), however, shall be deemed to be a representation or a warranty
that any of the unpatented mining claims described in Part 1 of
Exhibit A contains a discovery of minerals.
Lessor represents to Lessee: (1) that subject to the matters
specifically set forth in Exhibit "A," and subject to the matters set
forth below with respect to unpatented mining claims, Lessor has the
exclusive possession of the Leased Premises and (2) that the Lessor
has the full right, power and capacity to enter into this Lease upon
the terms set forth herein. Since the Leased Premises, as described in
Exhibit "A" includes unpatented mining claims, Owner represents and
warrants to Lessee: (1) that Lessors title is subject to paramount
title of the United States of America and to the rights, if any, of
surface patentees; (2) that the acts of location performed by
Lessor on the unpatented mining claims described in Exhibit "A" have
been completed in compliance with the laws of the State of Utah and of
the United States of America; and (3) that the Notice Of Intent To
Hold has been completed and filed with the Beaver County Recorder and
the BLM in Salt Lake City, Utah.
(d) Lessor have delivered to Lessee all information concerning
title to the Properties in Lessor's possession or control, including,
but not limited to, true and correct copies of all leases or other
contracts relating to the Properties of which Lessor has knowledge.
(e) Except as disclosed in Exhibit A, there are no pending or
threatened actions, suits, claims or proceedings with respect to the
Properties.
(f) Except as disclosed in Exhibit A. Lessor is aware of any
adverse environmental condition on or affecting the Properties.
(g) Except as disclosed in Exhibit A, Lessor has any material
contractual commitments obligations which relate to or affect the
Properties.
Notwithstanding any other provision of this Section 2.2, Lessor makes the
representations and
-5-
<PAGE>
warranties contained in this Section to the best of its knowledge and belief,
except that with respect to claims arising by, through or under Lessor or any
its Affiliates, such representations and warranties (except those contained in
Section 2.2(c) identified as being made on knowledge and belief) shall be
absolute. The representations and warranties set forth above shall survive the
execution and delivery of any documents of Transfer provided under this
Agreement.
2.3 Disclosures, Each of the Participants represents and warrants
-----------
that it is unaware of any material facts or circumstances which have not been
disclosed in this Agreement, which should be disclosed to the other Participant
in order to prevent the representations in this Article II from being materially
misleading.
2.4 Covenants, Lessee covenant and agree as follows:
---------
(a) At any time, they will give prompt notice Lessor (during the
Exploration Period) of any notice of default, lawsuit, proceeding, action or
damage of which either Lessee becomes aware and which might affect the
Properties either Participant's title to the Properties.
(b) Notwithstanding any other provision of this Agreement, during
the Exploration Period neither of them will Transfer any interest in any
property located in the Area of Interest, except as between themselves and then
only upon 14-day prior notice to Lessee, nor will either of them conduct,
without Lessor's prior written consent, any property acquisition, exploration,
claim staking or mining operations within the Area of Interest.
(c) At any time, they will use their best efforts to assist
Lessor (during the Exploration Period) in obtaining necessary permits or
approvals, access to the Properties and water rights to the extent required by
or for operations hereunder, and to assist Lessee in informing Lessor of legal,
title and mining problems which may affect the Properties.
(d) They will make available to Lessor, its employees and agents,
any and all data, maps, other documents or information which either of them may
have or may acquire pertaining to the Properties.
2.5 Record Title and Lessor's Interest.
----------------------------------
(a) Title to the mining claims shall be held by Lessor.
(b) Lessee will at all times maintain Utah Clay Technology, Inc.,
in good standing and qualified to own property under the laws of the State of
Utah.
-6-
<PAGE>
ARTICLE III
-----------
NAME. PURPOSES AND TERM
-----------------------
3.1 General. Lessor and Lessee hereby enter into this Agreement for
-------
the purposes hereinafter Stated and agree that all of their rights and all of
the Operations on or in connection with the Properties or the Area of Interest
shall be subject to and governed by this Agreement.
3.2 Name. The name of this mine shall be The Koosharem Clay. Lessee
----
during the Exploration Period and, thereafter, shall accomplish any registration
required by applicable assumed or fictitious name statutes and similar statutes.
3.3 Purposes. This Agreement is entered into for the following
--------
purposes and for no others, and shall serve as the exclusive means by which the
Participants, or either of them, accomplish such purposes:
(a) to conduct Exploration within the Area Interest,
(b) to acquire additional Properties within the Area of
Interest,
(c) to evaluate the possible Development of the Properties,
(d ) to engage in Development and Mining Operations on the
Properties,
(e) to engage in marketing Products, and
(f) to perform any other activity necessary appropriate, or
incidental to any of the foregoing.
3.4 Limitation. Unless the Participants otherwise agree in writing,
----------
the development and operations shall be limited to the purposes described in
Section 3.3, and nothing in this
Agreement shall be construed to enlarge such purposes.
3.5 Term. The primary term of this Lease shall be for a period of
----
three (3) years from the date hereof and for so long thereafter as Leased
Minerals are produced in commercial quantities at more than 500 tons/month from
the lands described in Exhibit A by the Lessee, their partners, successors or
assigns, for at least ten months of each year after the initial three (3) year
term has expired, subject to extension or termination as hereinafter provided.
3.6 This Lease and the terms and conditions of this Lease agreement
issued by the Lessor are made with the Lessee herein on condition that Lessee
and any lawful successor in interest to Lessee shall perform all covenants and
terms and conditions herein set forth to be performed by
-7-
<PAGE>
Lessee or its lawful assigns including payment of royalties as herein provided.
Lessor may issue written notice of termination and cancellation of this Lease,
and forfeiture, subject to paragraph 9.1: declaring that the Leased Premises and
each and every part thereof have thereby reverted to the Lessor, including any
and all fixtures and improvements required to be left with the property upon
expiration, termination, or cancellation of this Lease.
3.7 Lessee may terminate this Lease at any time by giving Lessors at
least ninety (90) days prior written notice, together with a check in full
settlement of any royalties that are due and unpaid; upon giving such notice of
termination, Lessee shall be released of ali its Obligations except those
obligations which have theretofore accrued. Within Thirty (30) days after date
of termination, Lessee shall execute and record a release and quitclaim deed
releasing all of Lessee's right, title and interest in and to the Leased
Premises.
3.8 Upon the effective date of termination by Lessee, Lessor shall be
entitled to retain all funds paid to it by Lessee pursuant to this Lease.
3.9 Within sixty (60) days after termination from this Lease, Lessee
or its successor or assign will provide Lessor with a copy of all data prepared,
collected, and interpreted by or for it (including maps, drill data, assays,
analyses, geological surveys, topographic surveys, market studies, flow sheets,
processing studies, and all other data) pertaining to the Leased Premises and
the Leased Minerals. Lessee will provide readable copies of all new factual
geologic data and reports by February 15th of each year.
ARTICLE IV
----------
CONSIDERATION
-------------
4.1 The Lessee in consideration of the granting of the rights and
privileges granted herein hereby covenants and agrees as follows:
A). Annual Labor:
------------
(1) To perform upon or for the benefit of the Leased Premises the
annual assessment work as set forth under the laws of the United States and the
State of Utah, and to prepare timely proof of the performance of such labor and
to record and file the same as required by law, and to furnish Lessor with a
copy thereof. Should this Lease be terminated as herein provided and the
effective date of such termination shall be ninety (90) days, or less, prior to
the end of the then current assessment year, Lessee shall nevertheless be
required to perform upon or for the benefit of the Leased Premises the annual
labor for such assessment year and shall prepare timely proof thereof, record
the same, and furnish Lessor with a copy of such proof as hereinafter provided.
In the performance of annual labor upon or for the benefit of the Leased
Premises, Lessee shall be entitled to perform such work upon any of the claims
or upon any of
-8-
<PAGE>
the groups of claims comprising the Leased Premises or upon other claims lying
outside the Leased Premises so long as such work shall qualify for the purpose
of the development of the Leased Premises as a contiguous group pursuant to the
requirements of law relating to group work on mining claims except as herein
provided.
(2) Assessment work will be completed by July 15 of each year starting
with the 1994 Assessment Year, or Lessor may do the work and charge reasonable
costs time and expenses to Lessee. Lessee will furnish to Lessor a copy of the
proof-of-labor with the County and the BLM time-stamp on it, no later than
September 15th of each year.
B). RESERVED ROYALTY:
(1) To pay lessor a three percent (3%) royalty on all ores, minerals
or products (herein called "Production") mined and removed from the Leased
Premises. Said royalty shall be calculated based upon the gross value of the
Production. In the event Production is removed from the Leased Premises
and stockpiled, royalty shall be payable six (6) months after removal and the
gross value shall be deemed the highest value received for comparable material
sold from the Leased Premises or from the nearest mine or property to the Leased
Premises.
(2) Production royalty shall be paid within thirty (30) days after
receipt of payment for each shipment or when otherwise due, and each payment
shall be accompanied by a statement showing the date(s) of shipment(s), quantity
and value of each shipment, to whom sold and the gross value received, and
any cost deductions. Production royalty payments not made when due shall bear
interest at the rate of 1 1/2% per calendar month or fraction thereof until
paid in full.
(3) Method of Production royalty payments shall be in U.S. dollars
payable by cash or valid check drawn on available funds, and shall be deemed
made when deposited at Lessor's single depository at:
FIRST UTAH BANK
3826 South 2300 East
Salt Lake City, Utah 84109
phone (801) 272-9454
Lessor may change its single depository at any time by giving written notice to
Lessee.
-9-
<PAGE>
ARTICLE V
---------
APPOINTMENT OF AGENT BY LESSOR
------------------------------
5.1 Lessor hereby appoints Daniel H. Engh as their agent and
attorney-in-fact for the purpose of representing the claim owners as a group,
and authorize him to take all necessary or desirable actions on behalf of
Lessor. This appointment shall be without limitation and remain in force until
said agent resigns or is replaced by a newly appointed agent for the entire
group of owners.
ARTICLE VI
----------
PERIODIC REPORTS
----------------
6.1 Lessee agrees to make semi-annual written reports to lessor (on or
before January 1 and July 1 each year) detailing the exploration, development
and mining work done upon the leased premises, the dates, quantity and value of
ores, minerals or products shipped from the Leased Premises, the identity of the
buyer(s) thereof or the place where such ores, minerals or products are
stockpiled, the plans for the Leased Premises during the next six (6) month
period, and other activities conducted or planned for the Leased Premises. also,
Lessee will provide Lessor with a copy of all data prepared, collected, and
interpreted by or for it (including maps, drill data, assays, analyses,
geological surveys, topographic surveys, market studies, flow sheets, processing
studies, and all other data) pertaining to the Leased Premises and the Leased
Minerals. Lessee will provide readable copies of all new factual geologic data
and reports by January 1 and July 1 of each year.
6.2 Lessee shall audit all operations upon the Leased Premises at least
annually, and furnish to Lessor a copy of such audit within thirty (30) days
aRer completion.
ARTICLE VII
-----------
RIGHTS AND OBLIGATIONS OF LESSEE
--------------------------------
7.1 The Lessee will forthwith have and is hereby granted by Lessor the
right and privilege from the date hereof and so long thereafter as this Lease
remains in force and effect of entering into and upon the Leased Premises and
the right to drill and excavate thereon and therein holes, pits, tunnels,
shafts, and other such excavations and to conduct therein and elsewhere such
surveys, exploration, investigations, sampling, milling, screening and other
work
-10-
<PAGE>
similar as well as dissimilar as Lessee in its sole judgment and discretion may
wish to know relating to any and all facts relative to the geology of the Leased
Premises, including but not limited to the geology of the Leased Minerals and
the mining, milling, beneficiating, and marketing thereof, together with the
right to drain water and materials and to pile overburden at places most
convenient to Lessee, and the right to dig or bore wells and use any water in or
upon said lands and the right to construct and place Upon said lands any and all
buildings, dams, drains, machinery, roads, railroads, pipe and power lines and
other improvements that may be convenient for said purposes, all of which
improvements will become the full and complete property of the Lessor upon
termination or assignment of Lease back to Lessor, and Lessee will be under no
further obligation or liability with respect thereto except for reclamation and
except as provided in paragraph 7.5 below. Lessee will have the paramourlt
possession and control of the Leased Premises with regard to the Leased Mineral
rights obtained herein during and throughout the life of this Lease and shall be
entitled to conduct therein and thereon all mining, milling and beneficiation
uses and purposes reasonably incident thereto as it shall deem satisfactory and
advantageous so far as Lessee tries not to interfere with the rights of the
Federal potassium leases. All work shall be conducted by Lessee as Lessee in its
sole judgment and discretion deems best and in a good and minerlike fashion.
Stockpiles and tailings covered by Lease, remain the property of the Lessor upon
surrender of Lease. Mining timbers in place shall remain affixed as part of the
Leased Premises unless released in writing to Lessee.
7.2 Lessor or his agents duly authorized in writing will have at all
reasonable times and at his own risk access to all parts of Leased Premises and
associated premises for the purposes of reasonable inspection of operations,
record keeping, and accounts to the end that Lessor might verify that the
specified royalty payments are being made properly and that operations are being
conducted in a minerlike fashion. Lessee will keep records in a businesslike
manner.
7.3 Any and all future leases, transfers, encumbrances or conveyances of
interests in the Leased Premises not covered by this Lease shall be subordinate
to and subject to the rights Lessee, his successors, assigns of sublessees, so
long as this Lease is in force and effect, of
7.4 Lessee shall pay all expenses incurred by it and shall permit no liens
to attach to Leased Premises on account of any debt for materials or services
furnished for the benefit of the Leased Premises while this Lease is in effect.
7.5 Lessee will indemnify and forever hold harmless and defend Lessor
from any demand, claim, suit, judgment or liability resulting from the
exploratory or development activities of Lessee conducted pursuant to this
agreement. Upon request of Lessor, Lessee will furnish evidence of sufficient
workmen's compensation, liability and other insurance to cover anticipated
risks, or evidence that it is adequately self-insured for such contingencies.
7.6 Lessee agrees that Leased Minerals from the Leased Premises shall
not be mixed or co-mingled with minerals, ore, substances or materials from
other properties or lands except as agreed by Lessor.
-11-
<PAGE>
ARTICLE VIII
------------
PATENT OF CLAIMS
----------------
8.1 Upon request of Lessee at any time during the term of this Lease,
the Lessor agrees to undertake to obtain patent to any of the mining claims
designated by Lessee. Lessee, at its own expense, shall prepare all documents,
compile all data and comply in all respects with all applicable laws in this
endeavor, and Lessor shall execute all documents required for this purpose and
shall cooperate fully with Lessee in the patent application and proceedings.
8.2 The rights of Lessor and Lessee under this Lease will extend to
any and all amended, relocated, or patented claims referred to in Exhibit A.
Lessor and Lessee agree that all amendments, relocations, or staking new claims
in the claimed area, of the claims referred to in Exhibit A, will be made in
the name of Lessor. Some claims need amending and it is known hereby to the
Lessee. Any valid mining claims staked by Lessor, or his agents, within the
Leased Premises shall fall under and be a part of this Lease.
ARTICLE IX
----------
DEFAULT AND FORCE MAJEURE
-------------------------
9.1 If Lessee will be in default in performing any obligations (except
the timely payment of royalties), Lessee shall lose no rights unless, within
sixty (60) days following written notice from Lessor, given at the address
herein specified, specifying such failure Or breach, Lessee shall fail to make
such payment or undertake to cure such default by commencement and follow
through of appropriate performance, within a reasonable amount of time. Upon
such failure, Lessor may terminate this Lease.
9.2 If Lessee shall be prevented or delayed from performing its
obligations or performing any work which it desires to perform or is performing
by reason of act of nature, strike or threat of strike, fire, flood, war, mob
violence, court order, unavoidable casualties, or any other enumeration, beyond
the control of Lessee which cannot be overcome by the means normally employed in
performance and at comparable and reasonable expense, then the duration of this
Lease shall be extended for a period equal to the period of Force Majeure and
any failure to perform obligations shall not be deemed a breach of this Lease.
Lessee agrees to use reasonable diligence to remove such causes of disability as
may occur from time to time. This paragraph shall not excuse payment or delay
payment of royalties.
-12-
<PAGE>
ARTICLE X
---------
LEASE PREMISES
--------------
10.1 The parties hereto agree that during the term of this Lease, in
the event title to any of the Leased Premises is contested by any person or
persons, corporation or corporations, or governmental agencies, Lessee will,
at its own election and expense, defend the title to any of the Leased Premises
before any court of competent jurisdiction or any administrative body. Lessee
will defend any actions for damages relating to exploration, development,
or mining activities by Lessee on Leased Premises.
10.2 Lessor, upon execution of this Lease, shall furnish Lessee with
copies of all property maps possessed by Lessor on the Leased Premises and
adjacent lands.
ARTICLE XI
----------
TAXES AND DUTIES
----------------
11.1 Lessee agrees to pay (i) all taxes hereafter levied and assessed
upon all machinery and improvements placed by Lessee upon the Leased Premises,
(ii) taxes hereafter levied upon the Leased Premises, including taxes assessed
by reason of net annual proceeds, and (iii) occupation or severance taxes
imposed upon the mining or production of Leased Minerals from the Leased
Premises or any other taxes, assessments or charges resulting from Lessee
activities on Leased Premises.
11.2 Lessor agrees to promptly transmit to Lessee any notices
pertaining to taxes, assessments and charges which Lessor may receive.
11.3 Lessee, in all operations under this Lease, will comply with all
applicable State and Federal laws, including the social laws relative to
employment, safety, workrnen's compensation insurance, social security,
unemployment tax and tax withholding. Lessee shall hold Lessor harmless from
claims of damage to persons or property arising from Lessee's operations under
this Lease. Lessee will comply with hazardous waste, air and water quality
requirements.
11.4 Lessee will do all reclamation work required by the Bureau of
Land Management, the State of Utah or Beaver County in a timely manner.
-13-
<PAGE>
ARTICLE XII
-----------
ASSIGNMENT AND TRANSFER
-----------------------
12.1 Lessee will not convey, assign or transfer its interest in this
lease or any part of this Lease without the prior notification and consent in
writing of the Lessor. The assignee party will, as a condition of consent to the
transfer, agree to be bound by and subject to the terms of this Lease. Any
assignee party will provided a photocopy of the executed copy of assignment and
is delivered to the other party. Overriding royalty assignments will not become
effective, even if otherwise valid without the consent in writing of the Lessor.
Lessee, its successor and assigns, may not assign or Convey royalty, overriding
royalty, production payment or like interest in the Leased Premises without
Lessor's prior written consent.
ARTICLE XIII
------------
MISCELLANEOUS
-------------
13.1 This agreement shall be governed by the laws of the State of
Utah.
13.2 Title headings are for convenience only and shall not be deemed
a part of this Lease.
13.3 This Lease and Its Exhibit contain the entire agreement between
the parties and supersedes entirely any prior understandings whether oral or
written.
13.4 If any provisions of this Lease is or becomes void or
unenforceable by Force of Law, the other provisions shall remain valid and
enforceable.
13.5 Lessor's and Lessee's proper address shall be the following,
which either may change by giving written notice to the other.
Daniel H. Engh
2340 East Germania Circle
Sandy, Utah 84093
Utah Clay Technology, Inc.
3985 South 2000 East
Salt Lake City, Utah 8124
13.6 The failure to enforce at any time any provisions of this Lease,
shall in no way be
-14-
<PAGE>
construed to be a waiver of such provisions, or to affect validity of the Lease.
13.7 This Lease shall be binding upon and inure to the benefit of the
successors and permitted assigns of the parties.
13.8 A Memorandum of this Lease may be filed by either party.
13.9 Lessee will diligently explore and conduct operations on or near
Leased Premises throughout the term of this Lease in a manner reasonably
calculated to advance the production of minerals from Leased Premises.
ARTICLE XIV
-----------
EXPLORATION REOUIREMENTS
------------------------
14.1 Lessor agrees to Utah Clay Technology, Inc. as the party that
will be the operator's of the exploration, and mining of the lode and placer
claims referred to in Exhibit A. Lessee agrees that it can not transfer or
assign all or part of being the operator of the exploration, and mining to any
other party.
IN WITNESS WHEREOF, this Lease has been executed and delivered by
Lessor to Lessee as of the day and year first above written.
/s/Daniel H. Engh
- ---------------------------------
Daniel H. Engh
LESSOR
/s/Dennis S. Engh
- ---------------------------------
Dennis S. Engh
LESSOR
-15-
<PAGE>
UTAH CLAY TECHNOLOGY, INC.
BY:
------------------------------
President
LESSEE
State of Utah
S.S.
County of Salt Lake
On this day of October, 1996, personally appeared before me,
Daniel H. Engh, Dennis S. Eneh. Dennis S. Engh, having authority to sign as
- ------------------------------
President of Utah Clay Technology, Inc. and by authority of the board of
Directors, who acknowledged to me that they executed the foregoing document.
- ---------------------------------
NOTARY PUBLIC RESIDING AT:
----------------------
----------------------------------
----------------------------------
----------------------------------
-16-
<PAGE>
EXHIBIT A
---------
To Mining Lease Agreement dated as of October
, 1996, by and among Daniel H. Engh, Dennis S.
Engh, and Utah Clay Technology, Inc.
PART 1
- ------
With respect to the Properties, Daniel H. Engh and Dennis S. Engh are in
control of lode and placer claims described below:
The Property consists of unpatented lode and association placer mining claims
located on land managed by the National Forest Service in the State of Utah
(Salt Lake Base & Meridian):
Box Creek Area association placer calims:
Claim UMC # T. R. S. County
----- ----- -- -- -- ------
Carole Ann #1 303696 27S, 2W, 11 Piute
Carole Ann #2 303697 27S, 2W, 11 Piute
Carole Ann #3 303698 27S, 2W, 12 Piute
Carole Ann #4 303699 27S, 2W, 23 Piute
Carole Ann #5 303700 27S, 2W, 23 Piute
Carole Ann #6 303701 27S, 2W, 12 Piute
Carole Ann #7 303702 27S, 2W, 1 Piute
Caro1e Ann #8 303703 27S, 2W, 1 Piute
1
<PAGE>
Claim UMC # T. R. S. County
----- ----- -- -- -- ------
Carole Ann #9P 303704 27S, 1W, 5 Piute
Carole Ann #10P 303705 26S, 1W, 32 Piute
Carole Ann #10 303003 26S, 1W, 32 Sevier
Carole Ann #11P 303706 26S, 1W, 32 Piute
Carole Ann #11 303004 26S, 1W, 32 Sevier
Carole Ann #12 303005 26S, 1W, 32 Sevier
Carole Ann #13 303006 26S, 1W, 29 Sevier
Carole Ann #14 303007 26S, 1W, 29 Sevier
Carole Ann #15 303008 26S, 1W, 30 Sevier
Carole Ann #16 303009 26S, 1W, 30 Sevier
Carole Ann #17 303010 26S, 1W, 19 Sevier
Carole Ann #18 303011 26S, 1W, 19 Sevier
Carole Ann #19 303707 27S, 2W, 1 Piute
Carole Ann #20 303708 27S, 2W, 1 Piute
Carole Ann #21 303709 27S, 2W, 11 Piute
Carole Ann #22 303710 27S, 2W, 14 Piute
Carole Ann #23 303711 27S, 2W, 13 Piute
Carole Ann #24 303712 27S, 2W, 13 Piute
This mining lease contains a Reserved Royalty of 3% on all ores, minerals or
Products (called "Production,.) mined and removed from the leased Premises. Said
Royalty shall be calculated based upon the gross value of the production.
Additionally, the claims above, lode or placer claims have a minimum royalty of
$5,000.00 and or a production royalty of $2.50/ton which is adjusted by the
Consumer Prices Index for all Urban Consumers for U.S. City average as published
by the U.S. Department of Labor Bureau of Labor Statistics.
With respect to the Properties, Daniel H. Engh and Dennis S. Engh have a mining
lease Dated June 19th 1993 by and between Don W. Fullmer, Arnola B. Fullmer
(Lessor) and Daniel H. Engh, Dennis S. Engh (Lessee). All terms and conditions
of the June 19, 1993 mining lease will be a part of this mining lease. Said
claims of this mining lease are described above:
2
<PAGE>
Dated October ~, 1996
PART 2
- ------
Area of Interest
All lands within the following described Areas of Interest including:
and any lands in Township 26 South 1 West, Township 27 South 1 West to
define the boundary of Area of interest.
3
<PAGE>
ADDENDUM TO MINING LEASE
This Addendmn to Mining Lease is made this 15th day of March, 2000 by and
between Don W. Fulhner and Pmaola B. Fullmer, his wife. 905 North Main Street,
Fillmore, Utah 94631, hereinafter referred to as "Lessor" and Daniel II. Engh
and Dennis S. Engh whose address is 2340 East Germania Circle, Sandy, Utah
84093-1174, hereinafter referred to as "Lessee."
In consideration, of bringing minimum royalty payments up to date through
payments in file amount of $14,034.81, the receipt and adequacy of which is
hereby acknowledged. Lessor hereby acknowledges that the items of default
contained in the Notice dated December 31. 1999. incorporated by this reference,
are hereby satisfied in full or waived as to past acts only.
Lessor and Lessee ratify Mining Lease No. 4 - dated June 19. 1993, between
the parties as being in full force and effect, without any modification of the
lease except as provided herein or any waiver of the iease terms as to future
performance, except at Paragraph 3.1 of Mining Lease the primary term and the
requirement to obtain commercial produotion are extended for five (5) years from
the date hereof.
In consideration of the extension of time for achieving commercial
production, the Lessee grants to the Lessor the right, at the Lessors sole
option and expense, to enter upon any portion of the leased premises, not at
that time being actively m. ined, under tile terms of the lease, by the Lessee,
to mine and produoe clay and other minerals for sale by the Lessor for use in
brick or cement. Such production shall not exceed 100,000 tons per year from
the leased premises. The first operator conducting commercial mining operations
on the leased premises shall direct the location and manner of any joint mining
operations. No royalty or other payment shall be assessed by the Lessee on
production by the Lessor. However, direct payments necessary to keep tile claims
current and viable shall be assumed by the Lessor based on the percentage of
<PAGE>
total production performed by the Lessor in any given year. Minimum royalties
payable to the Lessor by tile Lessee shall be waived by tile Lessor during any
year in which the Lessor shall produce clay from the Leased premises as provided
above.
The leases and claims covered thereby are more particularly described on
the attached Exhibit A. incorporated by this reference.
This Addendum shall be effective on the date above.
- --------------------------------- ----------------------------------
Don W. Fullmer, (Lessor) Daniel H. Engh, (Lessee)
- -------------------------------- ----------------------------------
Amola B. Fullmer, (Lessor) Dennis S. Engh, (Lessee)
<PAGE>
To Tile ADDENDUM TO MINING LEASE
Page 3
STATE OF UTAH
SS
County of Millard
on this 15 day of March, 2000, personally appeared before me Don W. Fullmer
and Areola B. Fullmer, his wife, who acknowledged to me that they executed the
foregoing Addendum to Mining Lease.
----------------------------------
NOTARY PUBLIC
Residing at 390 S. 100E
-----------------------
My Commission Expires: Fillmore, UT
- ---------------------
STATE OF UTAH
SS
County of Millard
on this 15 day of March, 2000, personally appeared before me Don W. Fullmer
and Areola B. Fullmer, his wife, who acknowledged to me that they executed the
foregoing Addendum to Mining Lease.
----------------------------------
NOTARY PUBLIC
Residing at 390 S. 100E
-----------------------
My Commission Expires: Fillmore, UT
- ---------------------
STATE OF UTAH
SS
County of Millard
On this 15 day of March, 2000, personally appeared before me Daniel H. Engh
and Dennis S. Engh, who acknowledged to me that they executed the foregoing
Addendum to Mining Lease.
----------------------------------
NOTARY PUBLIC
Residing at 390 S. 100E
-----------------------
My Commission Expires: Fillmore, UT
- ---------------------
<PAGE>
To The ADDENDUM TO MINING LEASE
Page 4
Exhibit A
Mining Lease #4
- ---------------
With respect to the Properties. Daniel H. Engh and Dermis S. Engh have a MINING
LEASE AGREEMENT Dated June 19th 1993 by and between Don W. Fullmer, Areola B.
Fullmer (Lessor) and Daniel H. Engh, Dennis S. Engh (Lessee). All terms and
conditions of the June 19, 1993 MINING LEASE AGREEMENT will be a part of this
Letter Agreement. Said claims of this MINING LEASE AGREEMENT are described
below:
The Property consists of unpatented lode and association placer mining claims on
land managed by the National Forest Service in the State of Utah (Salt Lake Base
& Meridian):
Box Creek Area association placer claims:
Claim UMB# T. R. S. County
----- ---- -- -- -- ------
Carole Ann #1 503696 27S, 2W, 11 Piute
Carole Ann #2 303697 27S, 2W, 11 Piute
Carole Ann #3 303698 27S, 2W, 12 Piute
Carole Ann #4 303699 27S, 2W, 23 Piute
Carole Ann #5 303700 27S, 2W, 23 Piute
Carole Ann #6 303701 27S, 2W, 12 Piute
Carole Ann #7 303702 27S, 2W, 1 Piute
Caroie Ann #8 303703 27S, 2W, 1 Piute
Carole Ann #9 303704 27S, 1W, 5 Piute
Carole Ann #10P 303705 26S, 1W, 32 Piute
Carole Ann #10 303003 26S, 1W, 32 Sevier
Carole Ann #llP 303706 26S, 1W, 32 Piute
Carole Ann #11 303004 26S, 1W, 32 Sevier
Carole Ann #12 303005 26S, 1W, 32 Sevie
Carole Ann #13 303006 26S, 1W, 29 Sevier
Carole Ann #14 303007 26S, 1W, 29 Sevier
Carole Ann #15 303008 26S, IW, 30 Sevier
Carole Ann #16 303009 26S, 1W, 30 Sevier
Carole Ann #17 303010 26S, 1W, 19 Sevier
Carole Ann #18 303011 26S, 1W, 19 Sevier
Carole Ann #19 303707 27S, 2W, 1 Piute
Carole Ann #20 303708 27S, 2W, 1 Piute
Carole Ann #21 303709 27S, 2W, ll Piute
Carole Ann #22 303710 27S, 2W, 14 Piute
Carole Ann #23 303711 27S, 2W, 13 Piute
Carole Ann #24 303712 27S, 2W, 13 Piute
<PAGE>
ADDENDUM TO OPTION TO ENTER INTO MINING LEASE
(BOX CREEK AREA)
This Addendum to the OPTION TO ENTER INTO MINING LEASE, herein referred to
as "Option", made and entered into the 27th day of March, 2000, by and between
Daniel H. Engh, Dennis S. Engh (Optionor) and Kaolin Of The West, LLC.
(Optionee), a Utah Limited Liability Company:
In consideration, of providing copies of testing, analysis and
geological mapping of the Box Creek Area claims describe in Exhibit A and the
acknowledgment of the payments due the Optionor from the starting date of
September 30th, 1996, the receipt of information and acknowledgment of payments
due is adequacy of which is hereby acknowledged.
In consideration of the foregoing acknowledgment to Optionor, Optionor
also ratifies the following OPTION TO ENTER INTO MINING LEASE for the Box Creek
Area claims described in Exhibit A - dated September 30th, 1996 with KAOLIN OF
THE WEST, LLC., as being in full force and effect, without any modification of
the option or any waiver of the option terms as to future performance, except at
Paragraph 2 of the OPTION TO ENTER INTO MINING LEASE, the exercising the option
is extended for four (4) years from the date hereof.
The leases and claims covered thereby are more particularly described on
the attached Exhibit A, incorporated by this reference.
<PAGE>
To The ADDENDUM TO OPTION TO ENTER INTO MINING LEASE(BOX CREEK AREA)
Page 4 of 5
IN WITNESS WHEREOF, this ADDENDUM TO OPTION TO ENTER INTO MINING LEASE
has been executed and delivered by Optionor to Optionee as of the day and year
first above written.
Signed this 27th day of March, 2000.
Kaolin Of The West, LLC.
/s/ Daniel H. Engh BY: /s/ Dennis S. Engh
- --------------------------------- -----------------------------------
Daniel H. Engh, Optionor Its: Manager
Optionee
/s/ Dennis S. Engh
- ---------------------------------
Dennis S. Engh, Optionor
<PAGE>
Exhibit A
ADDENDUM TO OPTION TO ENTER INTO MINING LEASE(BOX CREEK AREA)
To the OPTION TO ENTER INTO MINING LEASE Agreement dated as of September 30th,
1996, by and among Daniel H. Engh, Dennis S. Engh and Kaolin Of The West, LLC.,
a Utah Limited Liability Company:
PART 1
With respect to the Properties, Daniel H. Engh and Dennis S. Engh are in
control of lode and placer claims described below:
The Property consists of unpatented lode and association placer mining claims
located on land managed by the National Forest Service in the State of Utah
(Salt Lake Base & Meridian):
Box Creek Area association placer claims:
<TABLE>
<CAPTION>
Claim UMC # T, R, S County
------------ ------- --- --- -- ------
<S> <C> <C> <C> <C> <C>
Carole Ann #1303696 27S, 2W, 11 Piute
Carole Ann #2303697 27S, 2W, 11 Piute
Carole Ann #3303698 27S, 2W, 12 Piute
Carole Ann #4303699 27S, 2W, 23 Piute
Carole Ann #5303700 27S, 2W, 23 Piute
Carole Ann #6303701 27S, 2W, 12 Piute
Carole Ann #7303702 27S, 2W, 1 Piute
Carole Ann #8303703 27S, 2W, 1 Piute
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Claim UMC # T, R, S County
--------------- ------ --- --- -- ------
<S> <C> <C> <C> <C> <C>
Carole Ann #9P 303704 27S, 1W, 5 Piute
Carole Ann #10P 303705 26S, 1W, 32 Piute
Carole Ann #10 303003 26S, 1W, 32 Sevier
Carole Ann #11P 303706 26S, 1W, 32 Piute
Carole Ann #11 303004 26S, 1W, 32 Sevier
Carole Ann #12 303005 26S, 1W, 32 Sevier
Carole Ann #13 303006 26S, 1W, 29 Sevier
Carole Ann #14 303007 26S, 1W, 29 Sevier
Carole Ann #15 303008 26S, 1W, 30 Sevier
Carole Ann #16 303009 26S, 1W, 30 Sevier
Carole Ann #17 303010 26S, 1W, 19 Sevier
Carole Ann #18 303011 26S, 1W, 19 Sevier
Carole Ann #19 303707 27S, 2W, 1 Piute
Carole Ann #20 303708 27S, 2W, 1 Piute
Carole Ann #21 303709 27S, 2W, 11 Piute
Carole Ann #22 303710 27S, 2W, 14 Piute
Carole Ann #23 303711 27S, 2W, 13 Piute
Carole Ann #24 303712 27S, 2W, 13 Piute
</TABLE>
This mining lease contains a Reserved Royalty of 3% on all ores, minerals or
Products (called "Production") mined and removed from the leased Premises. Said
Royalty shall be calculated based upon the gross value of the production.
Additionally, the claims above, lode or placer claims have a minimum royalty of
$5,000.00 and or a production royalty of $2.50/ton which is adjusted by the
Consumer Prices Index for all Urban Consumers for U.S. City average as published
by the U.S. Department of Labor Bureau of Labor Statistics.
With respect to the Properties, Daniel H. Engh and Dennis S. Engh have a mining
lease Dated June 19th 1993 by and between Don W. Fullmer, Arnola B. Fullmer
(Lessor) and Daniel H. Engh, Dennis S. Engh (Lessee). All terms and conditions
of the June 19, 1993 mining lease will be a part of this mining lease. Said
claims of this mining lease are described above:
<PAGE>
To The ADDENDUM TO OPTION TO ENTER INTO MINING LEASE (BOX CREEK AREA)
Page 5 of 5
Dated September 30th, 1996
PART 2
- ------
Area of Interest
All lands within the following described Areas of Interest including:
and any lands in Township 26 South 1 West, Township 27 South 1 West to
define the boundary of Area of interest.
End of Exhibit A.
<PAGE>
ADDENDUM TO OPTION TO ENTER INTO MINING LEASE
(BOX CREEK AREA)
This Addendum to the OPTION TO ENTER INTO MINING LEASE, herein referred
to as "Option", made and entered into the 27th day of March, 2000, by and
between Kaolin Of The West, LLC., a Utah Limited Liability Company at 4532
Briarcreek Street, Salt Lake City, Utah 84117 hereinafter referred to as the
(Optionor) and Utah Clay Technology, Inc., at 3985 South 2000 East, Salt Lake
City, Utah 84124, hereinafter referred to as (Optionee), a Utah corporation:
In consideration, of providing copies of testing, analysis and
geological mapping of the Box Creek Area claims describe in Exhibit A and the
acknowledgment of the payments due the Optionor from the starting date of
September 30th, 1996, the receipt of information and acknowledgment of payments
due is adequacy of which is hereby acknowledged.
In consideration of the foregoing acknowledgment to Optionor, Optionor
also ratifies the following OPTION TO ENTER INTO MINING LEASE for the Box Creek
Area claims described in Exhibit A - dated September 30th, 1996 with UTAH CLAY
TECHNOLOGY INC., as being in full force and effect, without any modification of
the option or any waiver of the option terms as to future performance, except at
Paragraphs 1(C) and 2 of the OPTION TO ENTER INTO MINING LEASE, the exercising
the option is extended for four (4) years from the date hereof.
The leases and claims covered thereby are more particularly described on
the attached Exhibit A, incorporated by this reference.
<PAGE>
To The ADDENDUM TO OPTION TO ENTER INTO MINING LEASE (BOX CREEK AREA)
Page 2 of 5
IN WITNESS WHEREOF, this ADDENDUM TO OPTION TO ENTER INTO MINING LEASE
has been executed and delivered by Optionor to Optionee as of the day and year
first above written.
Signed this 27TH day of March, 2000.
Kaolin Of The West, LLC. Utah Clay Technology, Inc.
BY: /s/ Dennis S. Engh BY: /s/ Dennis S. Engh
- --------------------------------- -----------------------------------
Its: Manager Its: President
Optionor Optionee
<PAGE>
Exhibit A
ADDENDUM TO OPTION TO ENTER INTO MINING LEASE (BOX CREEK AREA)
To the OPTION TO ENTER INTO MINING LEASE Agreement dated as of September 30th,
1996, by and among Kaolin Of The West, LLC., a Utah Limited Liability Company,
and Utah Clay Technology, Inc., a Utah Corporation.
PART 1
With respect to the Properties, Daniel H. Engh and Dennis S. Engh are in
control of lode and placer claims described below:
The Property consists of unpatented lode and association placer mining claims
located on land managed by the National Forest Service in the State of Utah
(Salt Lake Base & Meridian):
Box Creek Area association placer claims:
<TABLE>
<CAPTION>
Claim UMC # T, R, S County
-------------- -------- --- -- -- ------
<S> <C> <C> <C> <C> <C>
Carole Ann #1303696 27S, 2W, 11 Piute
Carole Ann #2303697 27S, 2W, 11 Piute
Carole Ann #3303698 27S, 2W, 12 Piute
Carole Ann #4303699 27S, 2W, 23 Piute
Carole Ann #5303700 27S, 2W, 23 Piute
Carole Ann #6303701 27S, 2W, 12 Piute
Carole Ann #7303702 27S, 2W, 1 Piute
Carole Ann #8303703 27S, 2W, 1 Piute
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Claim UMC # T, R, S County
--------------- ------ --- -- -- ------
<S> <C> <C> <C> <C> <C>
Carole Ann #9P 303704 27S, 1W, 5 Piute
Carole Ann #10P 303705 26S, 1W, 32 Piute
Carole Ann #10 303003 26S, 1W, 32 Sevier
Carole Ann #11P 303706 26S, 1W, 32 Piute
Carole Ann #11 303004 26S, 1W, 32 Sevier
Carole Ann #12 303005 26S, 1W, 32 Sevier
Carole Ann #13 303006 26S, 1W, 29 Sevier
Carole Ann #14 303007 26S, 1W, 29 Sevier
Carole Ann #15 303008 26S, 1W, 30 Sevier
Carole Ann #16 303009 26S, 1W, 30 Sevier
Carole Ann #17 303010 26S, 1W, 19 Sevier
Carole Ann #18 303011 26S, 1W, 19 Sevier
Carole Ann #19 303707 27S, 2W, 1 Piute
Carole Ann #20 303708 27S, 2W, 1 Piute
Carole Ann #21 303709 27S, 2W, 11 Piute
Carole Ann #22 303710 27S, 2W, 14 Piute
Carole Ann #23 303711 27S, 2W, 13 Piute
Carole Ann #24 303712 27S, 2W, 13 Piute
</TABLE>
This mining lease contains a Reserved Royalty of 3% on all ores, minerals or
Products (called "Production") mined and removed from the leased Premises. Said
Royalty shall be calculated based upon the gross value of the production.
Additionally, the claims above, lode or placer claims have a minimum royalty of
$5,000.00 and or a production royalty of $2.50/ton which is adjusted by the
Consumer Prices Index for all Urban Consumers for U.S. City average as published
by the U.S. Department of Labor Bureau of Labor Statistics.
With respect to the Properties, Daniel H. Engh and Dennis S. Engh have a mining
lease Dated June 19th 1993 by and between Don W. Fullmer, Arnola B. Fullmer
(Lessor) and Daniel H. Engh, Dennis S. Engh (Lessee). All terms and conditions
of the June 19, 1993 mining lease will be a part of this mining lease. Said
claims of this mining lease are described above:
<PAGE>
Dated September 30th, 1996
PART 2
Area of Interest
All lands within the following described Areas of Interest including:
and any lands in Township 26 South 1 West, Township 27 South 1 West to
define the boundary of Area of interest.
End of Exhibit A.
MINING LEASE AGREEMENT
THIS MINING LEASE AGREEMENT made and entered into this 19th day of
June, 1993, by and between DON W. FULLMER, whose
address is 1025 NORTH MAIN, FILLMORE, UTAH 84631, herein referred to as "Lessor"
or "Owner" and DANIEL H. ENGH, DENNIS S. ENGH whose address is 2340 EAST
GERMANIA CIRCLE, SANDY, UTAH 84093-1174, hereinafter referred to as "Lessee".
WITNESSETH:
WHEREAS, the owner is the sole owner, or the agent for the
association which is the sole owner of the unpatented mining claims listed
in Exhibit "A" of this agreement, hereinafte referred to as the "Leased
Property", and
WHEREAS, Lessee desires to lease the Leased Property, Owner and
Lessee hereby agree to the following (hereinafte referred to as the
"Agreement"):
WHEREAS, Lessor is owner of certain properties and property~
rights situated in Juab County, State of Utah, and more particularly
described in the attached Exhibit "A", incorporated by reference, and
hereinafter referred to as the "Leased Premises"; and
WHEREAS, Lessee desires to lease certain rights in and to the
Leased Premises which Lessor is willing to grant to Lessee;
NOW THEREFORE, in consideration of $100.00 paid by Lessee to Lessors
receipt of which is hereby acknowledged and the payments, covenants and
agreements hereinafter set forth the parties agree as follows:
<PAGE>
1. The Leased Premises.
-------------------
The "Leased Premises" shall mean all of the property described in
Exhibit "A" attached hereto and made a part hereof, together with all of
the ores, minerals and materials thereon and thereunder, and all right,
title and all water, water rights, easements and rights of way now and
hereafter owned or held by Owner in, upon or under the said property, or in any
way pertaining thereto.
2. Warranties and Representations.
------------------------------
Owner represents to Lessee: (1) that subject to the matters
specifically set forth in Exhibit "A," and subject to the matters set forth
below with respect to unpatented mining claims, Owner has the exclusive
possession of the Mining Claims and (2) that the Owner has the full right, power
and capacity to enter into this Lease upon the terms setforth herein. Since the
Leased Premises, as described in Exhibit "A" includes unpatented mining claims,
Owner represents and warrants to Lessee: (1) that Owner's title is subject to
paramount title of the United States of America and to the rights, if any, of
surface patentees; (2) that the acts of location performed by Owner on the
unpatented mining claims described in Exhibit "A" have been completed in
compliance with the laws of the State of Utah and of the United States of
America; and (3) that the Notice Of Intent To Hold has been completed and filed
with the Juab County Recorder and the BLM in Salt Lake City, Utah.
(4) Lessee represents to owner: (A) that Lessee has made a preliminary search
of the Bureau of Land Management records with regard to the leased premises
and (B) That Lessee is aware of some conflicting claims within the boundaries
of the leased premises and (C) That Lessee intends to do additional title
research and to take such actions as are necessary to perfect title in the
Lessors favor, insofar as possible and (D) That Lessee will refrain from or
abandon all attempts to obtain title to the Leased Premises except as provided
by this by this lease, without first obtaining owners written consent.
<PAGE>
I. GRANT
1.1 Lessor hereby grants and leases to Lessee for and in
consideration of, and subject to all of the terms provisions and conditions
hereinafter set forth, the exclusive right and privilege to mine, extract,
remove and dispose of the all locatable Minerals in, upon or under the Leased
Premises, together with the right to use and occupy so much of the surface of
the Leased Premises as may be required for all purposes reasonably incident to
the mining, extracting, removal and disposal of the locatable Minerals according
to the provisions of this Lease.
II. LEASED MINERALS
2.1 "Leased Minerals" or "Locatable Minerals" as used herein
shall mean all locatable minerals acquired by virtue of the placer or lode
mining claims owned by owner.
III. TERM
3.1 The primary term of this Lease shall be for a period of five
(5) years from the date hereof and for so long thereafter as Leased Minerals
are produced in commercial quantities at more than 200 tons/month from the lands
described in Exhibit A by the Lessee, their partners, successors or assigns, for
at least ten months of each year after the first five year term has expired,
subject to extension or termination as hereinafter provided.
3.2 This Lease and the terms and conditions of this Lease
agreement issued by the Lessor are made with the Lessee herein on condition
that Lessee and any lawful successor in interest to Lessee shall perform all
covenants and terms and conditions herein set forth to be performed by Lessee
or its lawful assigns including payment of royalties as herein provided.
<PAGE>
Lessor may issue written notice of termination and cancellation of this Lease,
and forfeiture, subject to paragraph 9.1: declaring that the Leased Premises
and each and every part thereof have thereby reverted to the Lessor, including
any and all fixtures and improvements required to be left with the property upon
expiration, termination, or cancellation of this Lease.
3.3 Lessee may terminate this Lease at any time by giving Lessors
at least ninety (90) days prior written notice, together with a check in full
settlement of any royalties that are due and unpaid; upon giving such notice of
termination, Lessee shall be released of all its obligations except those
obligations which have theretofore accrued. Within Thirty (30) days after date
of termination, Lessee shall execute and record a release and quitclaim deed
releasing all of Lessee's right, title and interest in and to the Leased
Premises.
3.4 Upon the effective date of termination by Lessee, Lessor
shall be entitled to retain all funds paid to it by Lessee pursuant to this
Lease.
3.5 Within sixty (60) days after termination from this Lease,
Lessee or its successor or assign will provide Lessor with a copy of all
data prepared, collected, and interpreted by or for it (including maps, drill
data, assays, analyses, geological surveys, topographic surveys, and other data
pertaining to the Leased Premises and the Leased Minerals. Lessee will provide
readable copies of all new factual geologic data and reports by February 15th of
each year.
IV. CONSIDERATION
4.1 The Lessee in consideration of the granting of the rights and
privileges granted herein hereby covenants and agrees as follows:
<PAGE>
(1) Due $5,000.00 annual minimum royalty beginning on the
first anniversary of this lease and thereafter minimum $5,000.00 each
anniversary until Lessee terminates its rights. The minimum royalty of
$5,000.00, will be adjusted by the Consumer Prices Index for All Urban Consumers
for U.S. City Average as published by the U.S. Department Of Labor, Bureau Of
Labor Statistics who is created pursuant to Sec. 5(a) of Public Law 304, 79th
Congress. The average at the end of December 1992 will be the base year and any
change in the Consumer Prices Index for All Urban Consumers for U.S. City
Average for the following year ended December will determine the percent change
in the $5,000.00 for the following year. Each year becomes the new base year to
measure change from.
(2) Production Royalty: A production royalty on Leased
Minerals which shall be Two Dollars and 50 Cents per ton ($2.50/ton) of ore
removed from or mined and processed upon the Leased Property. The Production
Royalty will be applied towards the annual minimum royalty of $5,000.00 on an
annual basis.
(3) The production royalty of $2.50/ton stated in IV (2),
will be adjusted by the Consumer Prices Index for All Urban Consumers
for U.S. City Average as published by the U.S. Department Of Labor,
Bureau Of Labor Statistics who is created pursuant to Sec. 5(a) of
Public Law 304, 79th Congress. The average at the end of December 1992
will be the base year and any change in the Consumer Prices Index for
All Urban Consumers for U.S. City Average for the following year ended
December will determine the percent change in the $2.50/ton for the
following year. Each year becomes the new base year to measure change from.
A). Annual Labor:
------------
(1) To perform upon the Leased Premises the annual
<PAGE>
assessment work as set forth under the laws of the United States and the State
of Utah, and to prepare timely proof of the performance of such labor and to
record and file the same as required by law, and to furnish Lessor with a copy
thereof.
Should this Lease be terminated as herein provided and the effective date of
such termination shall be ninety (90) days, or less, prior to the end of the
then current assessment year, Lessee shall nevertheless be required to perform
upon the Leased Premises the annual labor for such assessment year and shall
prepare timely proof thereof, record the same, and furnish Lessor with a copy
of such proof as hereinafter provided. In the performance of annual labor upon
or for the benefit of the Leased Premises, Lessee shall be entitled to perform
such work upon any of the claims or upon any of the groups of claims comprising
the Leased Premises so long as such work shal qualify for the purpose of the
development of the Leased Premises as a contiguous group pursuant to the
requirements of law relating to group work on mining claims except as herein
provided.
(2) Assessment work will be completed by July 15
of each year starting with the 1993 Assessment Year, or Lessor may do the work
and charge reasonable costs time and expenses to Lessee. Lessee will furnish to
Lessor a copy of the proof-of--labor with the County, no later than September
15th of each year.
(3) Rental Fees Required For Unpatented Mining
Claims by the Bureau of Land Management. The fiscal year 1993 Appropriations
Acts for the Department of the Interior, signed October 5, 1992, requires
holders of unpatented mining claims to pay the Federal Government a new rental
fee of $100 per claim per year. The rental fee requirement, which will expire
September 30, 1994, suspends a Mining Law requirement for performance of a
minimum of $100 of assessment work per claim per year. The Two rental years are
September 1, 1992, through August 31, 1993, and September 1, 1993, through
August 31, 1994. Claims are defined as lode claims, placer claims, mill sites,
and tunnel sites.
<PAGE>
For the next 2 years.; claimants must pay the BLM $100 per claim
rental on or before August 31, 1993, for the year ending September 1, 1993,
and an advance rental of $100 per claim on or before August 31, 1993, for the
year beginning September 1, 1993.
Lessee agrees to pay this rental fee on or before July 31, 1993 to
the Bureau of Land Management. Lessor will agree to be present at the Bureau of
Land Management's office in Salt Lake City, Utah when payment is made or accept
copy of payment receipt stamped by the BLM within five days of payment. Lessee
agrees to pay on or before July 31 of any future rental fees required by the
Bureau of Land Management after the expiration of September 30, 1994.
B). PRODUCTION ROYALTY PAYMENTS:
---------------------------
(1) Production royalty shall be paid within thirty
(30) days after receipt of payment for each shipment or when otherwise due,
and each payment shall be accompanied by a statement showing the date(s) of
shipment(s), quantity and value of each shipment; to whom sold and the gross
value received, and any cost deductions.
(2) Method of Production royalty payments shall
be in U.S. dollars payable by cash or valid check drawn on available funds, and
shall be deemed made when deposited at Lessor's single depository at:
Paradise Management Co.
P.O. Box 268
Fillmore, Utah 84631
Phone (801) 743--5848
Lessor may change its single depository at any time by giving written notice
to Lessee.
<PAGE>
V. PERIODIC REPORTS
5.1 Lessee agrees to make semi-annual written reports to lessor
(on or before January 1 and July 1 each year) detailing the exploration,
development and mining work done upon the leased premises, quantity of ores,
minerals or products shipped from the Leased Premises, the identity of the
buyer(s) thereof or the place where such ores, minerals or products are
stockpiled, the plans for the Leased Premises during the next six (6) month
period, and other activities conducted or planned for the Leased Premises.
5.2 Lessee shall audit all operations upon the Leased Premises
at least annually, and furnish to Lessor a copy of such audit within thirty (30)
days after completion.
VI. RIGHTS AND OBLIGATIONS OF LESSEE
6.1 The Lessee will forthwith have and is hereby granted by
Lessor the right and privilege from the date hereof and so long thereafter
as this Lease remains in force and effect of entering into and upon the Leased
Premises and the right to drill and excavate thereon and therein holes, pits,
tunnels, shafts, and other such excavations and to conduct therein and
elsewhere such surveys, exploration, investigations, sampling, milling,
screening and other work similar as well as dissimilar as Lessee in its sole
judgment and discretion may wish to know relating to any and all facts
relative to the geology of the Leased Premises, including but not limited to
the geology of the Leased Minerals and the mining, milling, beneficiating, and
marketing thereof, together with the right to drain water and materials and to
pile overburden at places most convenient to Lessee, and the right to dig or
bore wells and use any water in or upon said lands and the right to construct
<PAGE>
and place upon said lands any and all buildings, dams, drains, machinery, roads,
railroads, pipe and power lines and other improvements that may be convenient
for said purposes, all of which improvements will become the full and complete
property of the Lessor upon termination or assignment of Lease back to Lessor,
and Lessee will be under no further obligation or liability with respect thereto
except for reclamation and except as provided in paragraph 6.7 below. Lessee
will have the paramount possession and control of the Leased Premises with
regard to the Leased Mineral rights obtained herein during and throughout
the life of this Lease and shall be entitled to conduct therein and thereon
all mining, milling and beneficiation uses and purposes reasonably incident
thereto as it shall deem satisfactory and advantageous so far as Lessee tries
not to interfere with the rights of the Federal potassium leases. All work shall
be conducted by Lessee as Lessee in its sole judgment and discretion deems best
and in a good and minerlike fashion. Stockpiles and tailings covered by Lease,
remain the property of the Lessor upon surrender of Lease. Mining timbers in
place shall remain affixed as part of the Leased Premises unless released in
writing to Lessee.
6.2 Lessor or his agents duly authorized in writing will have at
all reasonable times and at his own risk access to all parts of Leased Premises
and associated premises for the purposes of reasonable inspection of operations,
record keeping, and accounts to the end that Lessor might verify that the
specified royalty payments are being made properly and that operations are
being conducted in a minerlike fashion. Lessee will keep records in a
businesslike manner.
6.3 Any and all future leases, transfers, encumbrances or
conveyances of interests in the Leased Premises not covered by this Lease shall
be subordinate to and subject to the rights of Lessee, his successors, assigns
of sublessees, so long as this Lease is in force and effect.
6.4 Lessee shall pay all expenses incurred by it and shall
permit no liens to attach to Leased Premises on account of any debt for
materials or services furnished for the benefit of the Leased Premises while
this Lease is in effect.
<PAGE>
6.5 Lessee will indemnify and forever hold harmless and defend
Lessor from any demand, claim, suit, judgment or liability resulting from the
exploratory or development activities of Lessee conducted pursuant to this
agreement. Upon request of Lessor, Lessee will furnish evidence of sufficient
workmen's compensation, liability and other insurance to cover anticipated
risks, or evidence that it is adequately self--insured for such contingencies.
6.6 Lessee agrees that Leased Minerals from the Leased Premises
shall not be mixed or co-mingled with minerals, ore, substances or materials
from other properties or lands except as agreed by Lessor.
6.7 In the event of the termination of this Lease by lapse
of time or otherwise, Lessee shall grade and slope and otherwise reclaim
that portion of the land being leased pursuant hereto, which was the site of
actual mining operations, in accordance with the requirements of the State and
Federal regulations then in effect and Owner may elect to assume the burden of
reclaiming the land, by notifying Lessee in writing of his intent to assume said
burden, in which event, Lessee will obtain not more than three (3) bids for
performance of the reclamation work required by this paragraph, and will pay
over to owner a sum equal to ninety--five percent (95%) of the lowest of said
bids. Thereafter, Lessee shall be relieved from all duties, expenses or
responsibility with respect to such reclamation and Owner, simultaneously with
or prior to the receipt of said payment, shall obtain from the appropriate
Government agencies and deliver to Lessee all documents necessary to release
Lessee from all further responsibility for the performance of such reclamation
work.
<PAGE>
VII. PATENT OF CLAIMS
7.1 Upon request of Lessee at any time during the term of
this Lease, the Lessor agrees to undertake to obtain patent to any of the
mining claims designated by Lessee. Lessee, at its own expense, shall prepare
all documents, compile all data and comply in all respects with all applicable
laws in this endeavor, and Lessor shall execute all documents required for this
purpose and shall cooperate fully with Lessee in the patent application and
proceedings.
7.2 The rights of Lessor and Lessee under this Lease will extend
to any and all amended, relocated, or patented claims referred to in Exhibit A.
Lessor and Lessee agree that all amendments, relocations, or staking new claims
in the claimed area, of the claims referred to in Exhibit A, will be made in the
name of Lessor. Some claims need amending and it is known hereby to the Lessee.
Any valid mining claims staked by Lessor, or his agents, within the Leased
Premises shall fall under and be a part of this Lease.
VIII. DEFAULT AND FORCE MAJEURE
8.1 If Lessee will be in default in performing any obligations
(except the timely payment of royalties), Lessee shall lose no rights unless,
within sixty (60) days following written notice from Lessor, given at the
address herein specified, specifying such failure or breach, Lessee shall fail
to make such payment or undertake to cure such default by commencement and
follow through of appropriate performance, within a reasonable amount of time.
Upon such failure, Lessor may terminate this Lease.
8.2 If Lessee shall be prevented or delayed from performing its
<PAGE>
obligations or performing any work which it desires to perform or is performing
by reason of act of nature, strike or threat of strike, fire, flood, war, mob
violence, court order, unavoidable casualties, or any other enumeration, beyond
the control of Lessee which cannot be overcome by the means normally employed in
performance and at comparable and reasonable expense, then the duration of this
Lease shall be extended for a period equal to the period of Force Majeure and
any failure to perform obligations shall not be deemed a breach of this
Lease. Lessee agrees to use reasonable diligence to remove such causes
of disability as may occur from time to time. This paragraph shall not excuse
payment or delay payment of royalties.
IX. Lease Premises.
9.1 The parties hereto agree that during the term of this
Lease, in the event title to any of the Leased Premises is contested by
any person or persons, corporation or corporations, or governmental
agencies, Lessee will, at its own election and expense, defend the title
to any of the Leased Premises before any court of competent jurisdiction
or any administrative body. Lessee will defend any actions for damages relating
to exploration, development, or mining activities by Lessee on Leased Premises.
9.2 Lessor, upon execution of this Lease, shall furnish Lessee
with copies of all property maps possessed by Lessor on the Leased Premises
and adjacent lands.
X. TAXES AND DUTIES
10.1 Lessee agrees to pay (i) all taxes hereafter levied and
assessed upon all machinery and improvements placed by Lessee upon the Leased
Premises, (ii) taxes hereafter levied upon the Leased Premises, including
taxes assessed by reason of net annual proceeds, and (iii) occupation or
severance taxes imposed upon the mining or production of Leased Minerals
from the Leased Premises or any other taxes, assessments or charges resulting
from Lessee activities on Leased Premises.
<PAGE>
10.2 Lessor agrees to promptly transmit to Lessee any notices
pertaining to taxes, assessments and charges which Lessor may receive.
10.3 Lessee, in all operations under this Lease, will comply
with all applicable State and Federal laws, including the social aws relative to
employment, safety, workmen's compensation insurance, social security,
unemployment tax and tax withholding. Lessee shall hold Lessor harmless from
claims of damage to persons or property arising from Lessee's operations
under this Lease. Lessee will comply with hazardous waste, air and water quality
requirements.
10.4 Lessee will do all reclamation work required by the Bureau
of Land Management, the State of Utah or Juab County in a timely manner.
XI. ASSIGNMENT AND TRANSFER
11.1 Lessee can convey, assign or transfer its interest in this
lease or any part of this Lease without the prior notification and consent in
writing of the Lessor. The assignee party will, as a condition of consent to
the transfer, agree to be bound by and subject to the terms of this Lease. Any
assignee party will provided a photocopy of the executed copy of assignment and
is delivered to the other party. Overriding royalty assignments will not become
effective, even if otherwise valid without the consent in writing of the Lessor.
Lessee, its successor and assigns, may not assign or convey royalty, overriding
royalty, production payment or like interest in the Leased Premises without
Lessor's prior written consent.
XII. MISCELLANEOUS
12.1 This agreement shall be governed by the laws of the State
of Utah.
<PAGE>
12.2 Title headings are for convenience only and shall not be
deemed a part of this Lease.
12.3 This Lease and Its Exhibit contain the entire agreement
between the parties and supersedes entirely any prior understandings whether
oral or written.
12.4 If any provisions of this Lease is or becomes void or
unenforceable by Force of Law, the other provisions shall remain valid and
enforceable.
12.5 Lessor's and Lessee's proper address shall be the following,
which either may change by giving written notice to the other.
Don W. Fulliner
P.O. Box 268
1025 North Main
Fillmore, Utah 84631
Daniel H. Engh, Dennis S. Engh
2340 East Germania Circle
Sandy, Utah 84093-1174
12.6 The failure to enforce at any time any provisions
of this Lease, shall in no way be construed to be a waiver of such provisions,
or to affect validity of the Lease.
12.7 This Lease shall be binding upon and inure to the benefit
of the successors and permitted assigns of the parties.
12.8 A Memorandum of this Lease may be filed by either party.
<PAGE>
12.9 Lessee will diligently explore and conduct
operations on or near Leased Premises throughout the term of this Lease
in a manner reasonably calculated to advance the production of minerals
from Leased Premises.
IN WITNESS WHEREOF, this Lease has been executed and
delivered by Lessor to Lessee as of the day and year first above
written.
/S/ Don W. Fullmer
Don W. Fullmer
LESSOR
/S/ Daniel H. Engh /S/ Dennis S. Engh
- --------------------------------- -----------------------------------
Daniel H. Engh Dennis S. Engh
LESSEE LESSEE
<PAGE>
ACKNOWLEDGMENT
STATE OF UTAH
COUNTY of Millard
-------
On this 19th day of June, 1993, before me personally appeared DON W.
FULLMER to me known to be the person described in and who executed the
foregoing instrument and acknowledged that he executed the same as a free act
and deed.
Given under my hand and seal this 19th day of June, 1993. My Commission
Expires July 3, 1994.
------------
/S/ Lee Ann H. Burton
-----------------------------------
ACKNOWLEDGMENT
STATE OF UTAH
COUNTY of Millard
-------
On this 19th day of June, 1993, before me personally appeared DANIEL H.
ENGH to me known to be the person described in and who executed the foregoing
instrument and acknowledged that he executed the same as a free act and deed.
Given under my hand and seal this 19th day of June, 1993. My Commission
Expires July 3, 1994.
------------
/S/ Lee Ann H. Burton
-----------------------------------
<PAGE>
ACKNOWLEDGMENT
STATE OF UTAH
COUNTY of Millard
-------
On this 19th day of June, 1993, before me personally appeared DENNIS S.
ENGH to me known to be the person described in and who executed the foregoing
instrument and acknowledged that he executed the same as a free act and deed.
Given under my hand and seal this 19th day of June, 1993. My Commission
Expires July 3, 1994.
------------
/S/ Lee Ann H. Burton
-----------------------------------
<PAGE>
EXHIBIT A
To the Mining Lease Agreement
Between Don W. Fullmer, and Daniel H. Engh, Dennis S. Engh.
Dated the 19th day of June, 1993.
The Property consists of Lode Claims and Placer claims. And are located in
Townships 13 South Range 11 West and Township 14 South 11 West, and Township 13
South 12 West and Township 13 South Range 10 West Salt Lake Medrian, Juab
County, Utah.
Claim Name Description UMC NUMBER
Hailstone Sec. 33, Twns. 13 So. R-11 W subdv SE 120109
Hailstone Sec. 33, & 34, Twns. 13 So. R-11 W subdv SE & SW 120110
Hailstone #1 Sec. 33, & 34, Twns. 13 So. R-11 W subdv SE & SW 120111
Nola No. 1 Sec. 33, Twns. 13 So. R-11 W subdv SE 120119
Carole Ann Sec. 4, Twns. 14 So. R-11 W subdv NE 120116
Carol Ann No. 1 Sec. 34, Twns. 13 So. R-11 W subdv SW 120117
Nola Sec. 33, Twns. 13 So. R-11 W subdv NE 120118
Brian #1 Sec. 28, Twns. 14 So. R-11 W subdv NW 120120
Brian #2 Sec. 28, Twns. 14 So. R-11 W subdv NE 120121
Brian #3 Sec. 28, Twns. 14 So. R-11 W subdv SE 120122
Brian #4 Sec. 27, Twns. 14 So. R-11 W subdv NW 120123
Brian #5 Sec. 27, Twns. 14 So. R-11 W subdv SW 120124
Brian #6 Sec. 28, Twns. 14 So. R-11 W subdv SW 120125
Brian #10 Sec. 28, Twns. 14 So. R-11 W subdv NW 120126
Brian #11 Sec. 27, Twns. 14 So. R-11 W subdv NW 120127
Snowflake Sec. 4, Twns. 14 So. R-11 W subdv NE 120132
Snowflake #1 Sec. 4, Twns. 14 So. R-11 W subdv NE 120133
Snowflake #2 Sec. 4, Twns. 14 So. R-11 W subdv NE 120134
Snowflake #3 Sec. 4, Twns. 14 So. R-11 W subdv E2 120135
Linda Sec. 33, & 34, Twns. 13 So. R-11 W subdv SE & SW 120136
Linda #1 Sec. 33, & 34, Twns. 13 So. R-11 W subdv SE & SW 120137
Linda #2 Sec. 33, Twns. 13 So. R-11 W subdv E2 120138
Linda #3 Sec. 33, Twns. 13 So. R-11 W subdv E2 120139
Linda #4 Sec. 33, Twns. 13 So. R-11 W subdv E2 120140
Linda #5 Sec. 33, Twns. 13 So. R-11 W subdv E2 120141
Linda #6 Sec. 33, Twns. 13 So. R-11 W subdv E2 120142
Brian #10 Sec. 28, Twns. 14 So. R-11 W subdv all 302968
Brian #11 Sec. 27, Twns. 14 So. R-11 W subdv W2 302969
Linda #5 Sec. 33, Twns. 13 So. R-11 W subdv All 302978
Linda #6 Sec. 33, Twns. 13 So. R-11 W subdv NE 302979
Linda Sec. 34, Twns. 13 So. R-11 W subdv W2 302992
Linda #1 Sec. 34, Twns. 13 So. R-11 W subdv E2 302993
Linda #2 Sec. 34, Twns. 13 So. R-11 W subdv E2 302994
Linda #3 Sec. 33, Twns. 13 So. R-11 W subdv E2 302995
Linda #4 Sec. 33, Twns. 13 So. R-11 W subdv E2 302996
Snowflake Sec. 33, Twns. 13 So. R-11 W subdv SE 302997
Snowflake #1 Sec. 33, Twns. 13 So. R-11 W subdv SE 302998
Snowflake #2 Sec. 33, Twns. 13 So. R-11 W subdv SE 302999
Snowflake #3 Sec. 4, Twns. 14 So. R-11 W subdv E2 303000
Hailstone Sec. 33, Twns. 13 So. R-11 W subdv SE 303001
Hailstone #1 Sec. 33 & 34, Twns. 13 So. R-11 W subdv SE & SW 303002
Hailstone Sec. 33, Twns. 13 So. R-11 W subdv SE 303025
<PAGE>
Nola No 1 Sec. 28, Twns. 13 So. R-11 W subdv SE 303026
Nola Sec. 33, Twns. 13 So. R-11 W subdv NE 303027
Carole Ann Sec. 4, Twns. 14 So. R-11 W subdv NE 303028
Carole Ann #1 Sec. 4, Twns. 14 So. R-11 W subdv SW 303029
Brian #1 Sec. 28, Twns. 13 So. R-11 W subdv NW 303034
Brian #2 Sec. 28, Twns. 13 So. R-11 W subdv NE 303035
Brian #3 Sec. 28, Twns. 13 So. R-11 W subdv SE 303036
Brian #4 Sec. 27, Twns. 13 So. R-11 W subdv NW 303037
Brian #5 Sec. 27, Twns. 13 So. R-11 W subdv SW 303038
Brian #6 Sec. 28, Twns. 13 So. R-11 W subdv SW 303039
<PAGE>
ADDENDUM TO MINING LEASE
This Addendum to Mining Lease is made this l5th day of March, 2000 by and
between Don W, Fullmer and Arnola B. Fullmer, his wife, 905 North Main Street,
Fillmore, Utah 94631, hereinafter referred to as "Lessor," and Daniel H. Engh
and Dennis S. Engh whose address is 2340 East Gennania Circle, Sandy, Utah
84093-1174, hereinafter referred to as "Lessee."
In consideration, of bringing minimum royalty payments up to date through
payments in the amount of $19,775.62, the receipt and adequacy of which is
hereby acknowledged. Lessor hereby acknowledges that the items of default
contained in the Notice dated December 31, 1999, incorporated by this reference,
are hereby satisfied in full or waived as to past acts only.
In consideration of the foregoing funds paid to Lessor, Lessor also
ratifies the following Mining Lease No. 2 - dated June 19, 1993 with Daniel H.
Engh and Dennis S. Engh as being in full force and effect, without any
modification of the lease or any waiver of'the lease terms as to future
performance, except at Paragraph 3.1 of the Mining Lease, the primary term and
the requirement to obtain commercial production are extended for five (5) years
from the date hereof.
The leases and claims covered thereby are more particularly described on
the attached Exhibit A incorporated by this reference.
This Addendum shall be effective on file date above.
/s/Don W. Fullmer /s/Daniel H. Engh
- --------------------------------- -----------------------------------
Don W. Fullmer, (Lessor) Daniel H. Engh, (Lessee)
/s/Arnola B. Fullmer /s/Dennis S. Engh
- --------------------------------- -----------------------------------
Arnola B. Fullmer, (Lessor Dennis S. Engh, (Lessee)
<PAGE>
To The ADDENDUM TO MINING LEASE
Page 2
STATE OF UTAH
SS
Coillily of Millard
------------------
On this 15 day of March, 2000, personally appeared before me Don W.
Fullmer and Arnola B. Fullmer, his wife, who acknowledged to me that they
executed the Addendum to Mining Lease.
-----------------------------------
NOTARY PUBLIC
Residing at: 390 S. 100E
-----------------------
My Commission Expires: Fillmore, UT
STATE OF UTAH
SS
County of Millard
--------------------
On this 15 day of March, 2000, personally appeared before me Daniel H.
Engh and Dennis S. Engh, who acknowledged to me that they executed the foregoing
Addendum to Mining Lease.
-----------------------------------
NOTARY PUBLIC
Residing at: 390 S. 100E
-----------------------
My Commission Expires: Fillmore, UT
<PAGE>
To The ADDENDUM TO MINING LEASE
Page 3
Exhibit A
Mining Lease #2
- ---------------
With respect to the Properties, Daniel H. Engh and Dennis S. Engh have a MINING
LEASE AGREEMENT Dated June 19th 1993 by and between Don W. Fullmer (Lessor)
and Daniel H. Engh, Dennis S. Engh (Lessee). All terms and conditions of the
June 19, 1993 MINING LEASE AGREEMENT will be a part of this Letter Agreement.
Said claims of this MINING LEASE AGREEMENT are described below:
Tile Property, consists of Lode Claims and Placer claims. And are located in
Townships 13 South Range 11 West and Township 14 South 11 West. and Township 13
South 12 West and Tox~nship 13 South Range 10 West Salt Lake Medrian, Juab
County, Utah.
Claim Name Description UMC NUMBER
- --------------------------------------------------------------------------------
Hailstone Sec. 33, Twns. 13 So. R-11 W subdv SE 120109
Hailstone Sec. 33, & 34, Twns. 13 So. R-11 W subdv SE & SW 120110
Hailstone #1 Sec. 33, & 34, Twns. 13 So. R-11 W subdv SE & SW 120111
Nola No. 1 Sec. 33, Twns. 13 So. R-11 W subdv SE 120119
Carole Ann Sec. 4, Twns, 14 So. R-11 W subdv NE 120116
Carol Ann No. 1 Sec. 34, Twns. 13 So. R-11 W subdv SW 120117
Nola Sec. 33, Twns. 13 So. R-11 W subdv NE 120118
Brian #l Sec. 28, Twns. 14 So. R-11 W subdv NW 120120
Brian #2 Sec. 28, Twns. 14 So. R-11 W subdv NE 120121
Brian #3 Sec. 28, Twns. 14 So. R-11 W subdv SE 120122
Brian #4 Sec. 28, Twns. 14 So. R-11 W subdv NW 120123
Brian #5 Sec. 28, Twns. 14 So. R-11 W subdv SW 120124
Brian #6 Sec. 28, Twns. 14 So. R-11 W subdv SW 120125
Brian #10 Sec. 28, Twns. 14 So. R-11 W subdv NW 120126
Brian #1l Sec. 28, Twns. 14 So. R-11 W subdv NW 120127
Snowflake Sec. 4, Twns. 14 So. R-11 W subdv NE 120132
Snowflake #1 Sec. 4, Twns. 14 So. R-11 W subdv NE 120133
5nowflako #2 Sec. 4, Twns. 14 So. R-11 W subdv NE 120134
Snowflake #3 Sec. 4, Twns. 14 So. R-11 W subdv E2 120135
Linda Sec. 33, & 34, Twns. 13 So. R-11 W subdv SE & SW 120136
Linda #1 Sec. 33, & 34, Twns. 13 So. R-11 W subdv SE & SW 120137
Linda #2 Sec. 33, Twns. 13 So. R-11 W subdv E2 120138
Linda #3 Sec. 33, Twns. 13 So. R-11 W subdv E2 120139
Linda #4 Sec. 33, Twns. 13 So. R-11 W subdv E2 120140
Linda #5 Sec. 33, Twns. 13 So. R-11 W subdv E2 120141
<PAGE>
To The ADDENDUM TO MINING LEASE
Page 4
Linda #6 Sec. 33, Twns. 13 So. R-11 W subdv E2 120142
Brian #10 Sec. 28, Twns. 14 So. R-11 W subdv All 302968
Brian #11 Sec. 27, Twns. 14 So. R-11 W subdv W2 302969
Linda #5 Sec. 33, Twns. 13 So. R-11 W subdv All 302992
Linda #6 Sec. 33, Twns. 13 So. R-11 W subdv NE 302979
Linda Sec. 34, Twns. 13 So. R-11 W subdv W2 302992
Linda #1 Sec. 34, Twns. 13 So. R-11 W subdv E2 302993
Linda #2 Sec. 34, Twns. 13 So. R-11 W subdv E2 302994
Linda #2 Sec. 33, Twns. 13 So. R-11 W subdv E2 302995
Linda #4 Sec. 33, Twns. 13 So. R-11 W subdv E2 302996
Snowflake Sec. 33, Twns. 13 So. R-11 W subdv SE 302997
Snowflake #1 Sec. 33, Twns. 13 So. R-11 W subdv SE 302998
Snowflake #2 Sec. 33, Twns. 13 So. R-11 W subdv SE 302999
Snowflake #3 Sec. 4, Twns. 14 So. R-11 W subdv E2 303000
Hailstone Sec. 33, Twns. 13 So. R-11 W subdv SE 303001
Hailstone #1 Sec. 33 & 34, Twns. 13 So. R-11 W subdv SE & SW 303002
Hailstone Sec. 33, Twns. 13 So. R-11 W subdv SE 303025
Nola No 1 Sec. 28, Twns. 13 So. R-11 W subdv SE 303026
Nola Sec. 33, Twns. 13 So. R-11 W subdv NE 303027
Carole Ann Sec. 4, Twns. 14 So. R-11 W subdv NE 303028
Carole Ann #1 Sec. 4, Twns. 14 So. R-11 W subdv SW 303029
Brian #1 Sec. 28, Twns. 13 So. R-11 W subdv NW 303034
Brian #2 Sec. 28, Twns. 13 So. R-11 W subdv NE 303035
Brian #3 Sec. 28, Twns. 13 So. R-11 W subdv SE 303036
Brian #4 Sec. 27, Twns. 13 So. R-11 W subdv NW 303037
Brian #5 Sec. 27, Twns. 13 So. R-11 W subdv SW 303038
Brian #6 Sec. 28, Twns. 13 So. R-11 W subdv SW 303039
End of Exhibit A.
<PAGE>
OPTION TO ENTER INTO MINING LEASE
OPTION AGREEMENT by and between Daniel H. Engh, Dennis S. Engh (Lessor) and
Kaolin Of The West, LLC. (Lessee), a Utah Limited Liability Company.
1. A) Lessee hereby pays to Lessor's the sum of $100.00 in consideration for
this option, which option payment shall be credited to the Mining Lease
Agreement if the option is exercised, and
B) Lessee will pay annually to Lessor to retain this option and right to
enter into a mining lease for the mining claims listed in Exhibit A (Mining
Lease Agreement) within the option period for $5,000.00 (five thousand
dollars), due June 10th of each year and payment of all Federal and State
rents, taxes and other payments associated with the mining claims. All
payments of all Federal and State rents, taxes and other payments
associated with the mining claims are due to Lessor by June 10th of each
year.
2. This option shall remain in effect until November 1, 2000, and thereupon
expire unless this option is sooner exercised.
3. To exercise this option, Lessee must notify Owner of same by certified mail
within the option period. Ail notices shall be sent to owner at the following
address:
Daniel H. Engh
2340 E. Germania Circle
Sandy, Utah 84093-1174
4. PROPERTY
The Property consists of unpatented lode and association placer mining claims
located on land managed by the Bureau of Land Management in the State of Utah
(Salt Lake Base & Meridian):
Joy area unpatented lode association placer claims:
The Property consists of Lode Claims and Placer claims. And
<PAGE>
are located in Townships 13 South Range 11 West and Township 14 South 11 West,
and Township 13 South 12 West and Township 13 South Range 10 West Salt Lake
Meridian, Juab County, Utah.
5. Should the Lessee exercise the option, the Lessor and Lessee agree to
promptly sign the attached Mining Lease, and consummate the Mining Lease on its
terms, which are incorporated herein by reference.
6. This Option agreement shall be binding upon and inure to the benefit of the
parties, their successors, assigns and personal representatives.
Signed this 30th day of September, 1996.
Kaolin Of The West, LLC.
/s/Daniel H. Engh By:/s/Dennis S. Engh
- --------------------------------- --------------------------------
Lessor, Daniel H. Engh Its: Lessee
/s/Dennis S. Enqh
- ---------------------------------
Lessor, Dennis
<PAGE>
OPTION TO ENTER INTO MINING LEASE
OPTION AGREEMENT by and between Kaolin Of The West, LLC., a Utah
Limited Liability Company at 4532 Briarcreek Street, Salt Lake City, Utah
84117 hereinafter referred to as the (Lessor) and Utah Clay Technology,
Inc., at 3985 South 2000 East, Salt Lake City, Utah 84124, hereinafter
referred to as (Lessee) a Utah corporation.
1. A) Lessee hereby pays to Lessor's the sum of $100.00 in consideration
for this option, which option payment shall be credited to the Mining
Lease Agreement if the option is exercised, and
B) Lessee will pay annually to Lessor to retain this option and right
to enter into a mining lease for the mining claims listed in Exhibit A
(Mining Lease Agreement) within the option period for $5,000.00 (five
thousand dollars), due June 10th of each year and payment of all
Federal and State rents, taxes and other payments associated with the
mining claims. All Payments of all Federal and State rents, taxes and
other payments associated with the mining claims are due to Lessor
by June 10th of each year.
C) The Lessee agrees to pay upon exercising this option, in cash
and/or common stock, to the Lessor an amount equal to the "Fair Market
Value of the Leased Premises" as agreed between the parties on or
before November 1, 2000.
The Fair Market Value of the Lease Premises will be defined in a
Report that will summarize the economic evaluation and dollar
computation of the kaolin reserves of the Leased Premises as
determined by an independent engineer on or before June 1, 2000. All
costs associated with the preparation of the "Fair Market Value Report
of the Leased Premises" will be paid by the Lessee.
2. This option shall remain in effect until November 1, 2000, and
thereupon expire unless this option is sooner exercised.
3. To exercise this option, Lessee must notify Owner of same by certified
mail within the option period. All notices shall be sent
<PAGE>
To the "Option To Enter Into Mining Lease"
Page 2 of 2
to owner at the following address:
Kaolin Of The West, LLC.
Daniel H. Engh
2340 E. Germania Circle
Sandy, Utah 84093-1174
4. PROPERTY
The Property consists of unpatented lode and association placer mining claims
located on land managed by the Bureau of Land Management in the State of Utah
(Salt Lake Base & Meridian):
Joy area unpatented lode association placer claims:
The Property consists of Lode Claims and Placer claims. And are located in
Townships 13 South Range 11 West and Township 14 South 11 West, and Township
13 South 12 West and Township 13 South Range 10 West Salt Lake Meridian, Juab
County, Utah. 5. Should the Lessee exercise the option, the Lessor and Lessee
agree to promptly sign the attached Mining Lease, and consummate the Mining
Lease on its terms, which are incorporated herein by reference.
6. This Option agreement shall be binding upon and inure to the benefit of the
parties, their successors, assigns and personal representatives.
Signed this 30 day of September, 1996.
Kaolin Of The West, LLC. Utah Clay Technology, Inc.
/S/Dennis S. Engh BY: Dennis S. Engh
- --------------------------------- ----------------------------------
Its: Its:
Lessor Lessee
<PAGE>
MINING LEASE
BETWEEN
DANIEL H. ENGH, DENNIS S. ENGH,
AND
UTAH CLAY TECHNOLOGY INC.
(A UTAH CORPORATION)
DATE:
<PAGE>
TABLE OF CONTENTS
ARTICLE Page No.
- ------- --------
I - DEFINITIONS.............................................................1
1.1 "Agreement" ...............................................1
1.2 "Area of Interest".........................................2
1.3 "Assets". .................................................2
1.4 "Leased Minerals" .........................................2
1.5 "Development" .............................................2
1.6 "Dollars" or "$" ..........................................2
1.7 "Exploration" .............................................2
1.8 "Effective Date" ..........................................2
1.9 "Exploration Period" ......................................2
1.10 "Exploration Rights" ......................................2
1.11 "Mining"...................................................2
1.12 "Operations" ..............................................3
1.13 "Prime Rate" ..............................................3
1.14 "Products" ................................................3
1.15 "Program" .................................................3
1.16 "Properties" ..............................................3
1.17 "Transfer" ................................................3
1.18 "Work Expenditures" .......................................3
II - REPRESENTATIONS AND WARRANTIES; COVENANTS;
TITLE TO ASSETS
2.1 Capacity of Participants ..................................3
2.2 Representations and Warranties ............................4
2.3 Disclosures ...............................................6
2.4 Covenants .................................................6
2.5 Record Title and Lessor's Interest ........................6
III - NAME, PURPOSES AND TERM ..............................................7
3.1 General ...................................................7
3.2 Name ......................................................7
3.3 Purposes ..................................................7
3.4 Limitation ................................................7
3.5 Term ......................................................7
3.6 Terms and Conditions ......................................7
3.7 Termination ...............................................8
3.8 Funds Paid ................................................8
3.9 Copy of all Data ..........................................8
i
<PAGE>
ARTICLE Page No.
- ------- --------
IV - CONSIDERATION .........................................................8
4.1 Consideration .............................................8
4.1(A) Annual Labor ..............................................8
4.1(B) Reserved Royalty ..........................................9
V - APPOINTMENT OF AGENT BY LESSOR ........................................10
5.1 Appointment of Agent .....................................10
VI - PERIODIC REPORTS .....................................................10
6.l Semi-annual Written Reports ..............................10
6.2 Audit all Operations .....................................l0
VII - RIGHTS AND OBLIGATIONS OF LESSEE ....................................10
7.1 Entering Leased' Premises ................................10
7.2 Inspection of Operations, records ........................11
7.3 Transfers, Encumbrances or Conveyances ...................11
7.4 Expenses and Liens .......................................11
7.5 Indemnification ..........................................11
7.6 Mixed or Co-mingled minerals .............................l1
VIII - PATENT OF CLAIMS ...................................................12
8.1 Obtain Patent to Mining Claims ...........................12
8.2 Rights extend to Amendments ..............................12
IX - DEFAULT AND FORCE MAJEURE ............................................12
9.1 Default Performaing Obligations ..........................12
9.2 Prevented or Delayed from Obligations ....................12
X - LEASE PREMISES ........................................................13
10.1 Defend Title ................................................13
10.2 Copies Maps .................................................13
XI - TAXES AND DUTIES .....................................................13
11.1 Lessee Agrees to Pay Taxes ...............................13
11.2 Notices to Lessee ........................................13
11.3 Comply with all State and Federal Laws ...................13
11.4 Reclamation Work .........................................13
XII - ASSIGNMENT AND TRANSFER .............................................14
12.1 Assign or Transfer ..........................................14
XIII - MISCELLANEOUS ......................................................14
13.1 Governed by Utah Laws.....................................14
13.2 Title for Convenience.....................................14
13.3 Contain Entire Agreement..................................14
13.4 Force of Law..............................................14
13.5 Proper Address's..........................................14
13.6 Affect Validity of the Lease............................. 14
ii
<PAGE>
ARTICLE Page No.
- ------- --------
13.7 Benefit of the Successors.................................14
13.8 Memorandum of Lease.......................................14
13.9 Diligently Explore........................................15
XIV - EXPLORATION REQUIREMENTS
14.1 Operator of Exploration, Mining .............................15
EXHIBITS
- --------
EXHIBIT A - PROPERTIES.............................................1
PART 1. - Properties and Title Exceptions ........................1
PART 2. - Area of Interest........................................4
iii
<PAGE>
MINING LEASE
THIS MINING LEASE, herein referred to as "Lease", made and entered
into this __st day of October, 1996, by and between DANIEL H. ENGH, at 2340 East
Germania Circle, Sandy; Utah 84093-1174, DENNIS S. ENGH, at 4532 Briarcreek
Drive, Salt Lake City, Utah 84124, hereinafter referred to as "Owner or Lessor",
and UTAH CLAY TECHNOLOGY INC., a Utah corporation, having an address at 3985
South 2000 East, Salt Lake City, Utah 84124 (hereinafter designated as
"Lessee"):
WITNESSETH:
WHEREAS, Lessor is owner of certain properties and property rights
situated in Juab County, State of Utah, and more particularly described in the
attached Exhibit "A", incorporated by reference, and hereinafter referred to as
the "Leased Premises"; and
WHEREAS, Lessee desires to lease certain fights in and to the Leased
Premises which Lessor is willing to grant to Lessee;
NOW THEREFORE, in consideration of $10.00 paid by Lessee to Owner
receipt of which is hereby acknowledged and the payments, covenants and
agreements hereinafter set forth the parties agree as follows:
GRANT, Lessor hereby grants and leases to Lessee for and in consideration
of, and subject to all of the terms provisions and conditions hereinafter set
forth, the exclusive right and privilege to mine, extract, remove and dispose of
the all locatable Minerals in, upon or under the Leased Premises, together with
the right to use and occupy so much of the surface of the Leased Premises as may
be required for all purposes reasonably incident to the mining, extracting,
removal and disposal of the locatable Minerals according to the provisions of
this Lease.
ARTICLE I
---------
DEFINITIONS
-----------
1.1 "Agreement" means this Mining Lease, including all amendments and
modifications thereof, and all schedules and exhibits, which are incorporated
herein by this 'reference.
1.2 "Area of Interest" means the area described in Part 2 of Exhibit
A.
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<PAGE>
1.3 "Assets" means the Properties, Products and all other real and
personal property. tangible and intangible, held for the benefit of the Lessor
hereunder.
1.4 "Leased Minerals" or "Locatable Minerals" as used herein shall
mean all locatable minerals acquired by virtue of the placer or lode mining
claims owned by owner.
1.5 "Development" means all preparation for the removal and recovery
of Products, including the construction or installation of a mill or any other
improvements to be used for the mining, handling, milling, processing or other
beneficiation of Products.
1.6 "Dollars" or "$" means dollars in the currency of the United
States.
1.7 "Exploration" means all activities directed toward ascertaining
the existence, location, quantity, quality or commercial value of deposits
of Products.
1.8 "Effective Date" means the date first written above.
1.9 "Exploration Period" means the period of time during which Lessee
is conducting Exploration Operations pursuant to Article VII. The Exploration
Period shall begin on the Effective Date and, unless this Agreement sooner
terminates, shall end on the date a processing mill is placed into production
with Leased Minerals.
1.10 "Exploration Rights" mean collectively the following:
(a) the sole and exclusive right of Lessee and its agents,
employees, contractors, subcontractors and workers, to enter upon and occupy the
Properties for Exploration purposes during the Exploration Period and to conduct
thereon such prospecting, trenching, drilling, sampling, examination, testing
development, engineering and feasibility studies for kaolin and other or
associated clays or metals and all other ores and minerals whatever kind or
character as desired by Lessee; and
(b) the right to do such other things as Lessee, in its sole
discretion, deems advisable or necessary to maintain and to fully evaluate the
mineral potential of the Properties to determine the feasibility of Development
of the Properties, including the fight to remove from the Properties such
limited volumes of minerals and materials as are necessary for test and
assaying; provided, however, that Lessee shall not have the fight during the
Exploration Period to mine and remove such minerals and materials for sale.
1.11 "Mining" means the mining, extracting, producing, handling,
milling or other processing of Products.
1.12 "Operations" means the activities carried out under this
Agreement.
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<PAGE>
1.13 "Prime Rate" means the interest rate published as the Prime Rate
in the "Money Rates" column of The Wall Street Journal, as said rate may change
from day to day, or if said column sets forth a range of rates on a single day,
the arithmetic mean thereof.
1.14 "Products" means all ores, minerals and mineral resources
produced from the Properties under this Agreement.
1.15 "Program" means a description in reasonable detail of Operations
to be conducted and objectives to be accomplished by the Lessee for a specified
period.
1.16 "Properties" means those interests in real property described in
Part 1 of Exhibit A and all other interests in real property within the Area of
Interest which are acquired and held subject to this Agreement.
1.17 "Transfer" means sell, grant, assign, encumber, pledge or
otherwise commit or dispose of.
1.18 "Work Expenditures" means the minimum work obligations described
in Sections 3.5 and 4.1 below and shall include, for purposes of this
Agreement, the value of all time, money or equipment contributed to or used on
or in connection with the Properties or the Area of Interest by Lessee in good
faith, including but not limited to all consultants' time, all costs of testing
and assaying and all other expenses reasonably necessary to evaluate the
Properties or the Area of Interest. Work Expenditures shall include (a)
geological evaluation, geophysical study, geochemical analysis, rock and soil
sampling, geological mapping and similar activities affecting the Properties or
the Area of Interest; (b) drilling, trenching, road construction and pad
construction (plus associated stand-by time) and other physical work on the
Properties or the Area of Interest; (c) environmental, permitting and
reclamation expenditures; (d) title examination and title curative,
remonumentation of unpatented mining claims, survey (or re-survey), claim
filing fees, taxes, and all other reasonable project maintenance or associated
costs on or for the benefit of the Properties or the Area of Interest, including
without limitation the maintenance activities described in Sections 3.2 and 4.1
acquisition of property within the Area of interest.
ARTICLE II
----------
REPRESENTATIONS AND WARRANTIES: COVENANTS: TITLE TO ASSETS
----------------------------------------------------------
2.1 Capacity of Participants. Lessee and Lessor, each for itself,
------------------------
represent and warrant as follows:
(a) That it is a corporation and individuals respectively duly
incorporated and in good standing in its state of incorporation and
that it is qualified to do business and is
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<PAGE>
in good standing in those states where necessary in order to carry out
the purposes of this Agreement;
(b) That it has the capacity to enter into and perform this
Agreement and all transactions contemplated herein and that all
corporate and other actions required to authorize it to enter into and
perform this Agreement have been properly taken;
(c) That it will not breach any other agreement or arrangement by
entering into or performing this Agreement; and
(d) That this Agreement has been duly executed and delivered by
it and is valid and binding upon it in accordance with its terms.
2.2 Representations and Warranties: Lessor make the following
--------------------------------
representations and warranties effective on the Effective Date:
The Leased Premises. The "Leased Premises" shall mean all of the
-------------------
property described in Exhibit "A" attached hereto and made a part hereof,
together with all of the ores, minerals and materials thereon and thereunder,
and all right, title and all water, water rights, easements and rights of way
now and hereafter owned or held by Lessor in, upon or under the said property,
or in any way pertaining thereto.
(a) With respect to those Properties Lessor claimed through the
Bureau Of Land Management and those Properties Lessor has enter into a
mining lease with Don W. Fullmer, if any, Lessor are in exclusive
possession mining rights of such Properties free and clear of all
defects, royalties, liens and encumbrances except those specifically
identified in Part 1 of Exhibit A.
(b) With respect to those Properties in which Lessor hold an
interest under leases or other contracts: (i) Lessor are in exclusive
possession of such Properties; (ii) neither Lessor has received any
notice of default of any of the terms or provisions of such
contracts; (iii) Lessor have the authority under such contracts to
perform fully their obligations under this Agreement; (iv) such
contracts are valid and are in good standing; and (v) the properties
covered thereby are free and clear of all defects, royalties, liens
and encumbrances except for those specifically identified in Part
1 of Exhibit A or in such contracts.
(c) With respect to unpatented mining claims that are included
within the Properties, except as provided in Part 1 of Exhibit A and
subject to the paramount title of the United States, the claims are
free and clear of defects, royalties, liens and encumbrances except
for those specifically identified in Part 1 of Exhibit A and to
the best of Lessor's knowledge and belief; (i) the unpatenied mining
claims were properly laid out and monumented; (ii) all required
location and validation work was properly performed;
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<PAGE>
and (iii) all assessment work required to hold the unpatented
mining claims has been performed in a manner consistent with that
required of the Lessee pursuant to Section 4.1(A) of this Agreement
through the assessment year ending September 1, 1995. With respect to
such unpatented mining claims located by or on behalf of Lessor or
one of their Affiliates, except as provided in Part 1 of Exhibit A and
subject to the paramount title of the United States, all location
notices and certificates and all affidavits of assessment work and
other filings required to maintain the claims in good standing have
been properly and timely recorded and filed with appropriate
governmental agencies, with respect to such unpatented mining claims
that were not located by or on behalf of Lessor or one of their
Affiliates, Lessor make the representation and warranty contained in
the foregoing sentence to the best of their knowledge and belief.
Additionally, Lessor have no knowledge of any claims conflicting with
the claims described in Part 1 of Exhibit A. Nothing in this Section
2.2(c), however, shall be deemed to be a representation or a warranty
that any of the unpatented mining claims described in Part 1 of
Exhibit A contains a discovery of minerals.
Lessor represents to Lessee: (1) that subject to the matters
specifically set forth in Exhibit "A," and subject to the matters set
forth below with respect to unpatented mining claims, Lessor has the
exclusive possession of the Leased Premises and (2) that the Lessor
has the full fight, power and capacity to enter into this Lease upon
the terms set forth herein. Since the Leased Premises, as described
in Exhibit "A" includes unpatented mining claims, Owner represents and
warrants to Lessee: (1) that Lessor's title is subject to paramount
title of the United States of America and to the fights, if any, of
surface patentees; (2) that the acts of location performed by Lessor
on the unpatented mining claims described in Exhibit "A" have
been completed in compliance with the laws of the State of Utah and
of the United States of America; and (3) that the Notice Of Intent To
Hold has been completed and filed with the Beaver County Recorder and
the BLM in Salt Lake City, Utah.
(d) Lessor have delivered to Lessee all information concerning
title to the Properties in Lessor's possession or control, including,
but not limited to, true and correct copies of all leases or other
Contracts relating to the Properties of which Lessor has knowledge.
(e) Except as disclosed in Exhibit A, there are no pending or
threatened actions, suits, claims or proceedings with respect to the
Properties.
(f) Except as disclosed in Exhibit A. Lessor is aware of any
adverse environmental condition on or affecting the Properties.
(g) Except as disclosed in Exhibit A, Lessor has any material
contractual commitments obligations which relate to or affect the
Properties.
Notwithstanding any other provision of this Section 2.2, Lessor makes the
representations and
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<PAGE>
warranties contained in this Section to the best of its knowledge and belief,
except that with respect to claims arising by, through or under Lessor or any,
its Affiliates, such representations and warranties (except those contained in
Section 2.2(c) identified as being made on knowledge and belief) shall be
absolute. The representations and warranties set forth above shall survive the
execution and delivery of any documents of Transfer provided under this
Agreement.
2.3 Disclosures, Each of the Participants represents and warrants
-----------
that it is unaware of any material facts or circumstances which have not been
disclosed in this Agreement, which should be disclosed to the other Participant
in order to prevent the representations in this Article II from being materially
misleading.
2.4 Covenants, Lessee covenant and agree as follows:
---------
(a) At any time, they will give prompt notice Lessor (during the
Exploration Period) of any notice of default, lawsuit, proceeding, action or
damage of which either Lessee becomes aware and which might affect the
Properties either Participant's title to the Properties.
(b) Notwithstanding any other provision of this Agreement, during
the Exploration Period neither of them will Transfer any interest in any
property located in the Area of Interest, except as between themselves and then
only upon 14-day prior notice to Lessee, nor will either of them conduct,
without Lessor's prior written consent, any property acquisition, exploration,
claim staking or mining operations within the Area of Interest.
(c) At any time, they will use their best efforts to assist
Lessor (during the Exploration Period) in obtaining necessary permits or
approvals, access to the Properties and water rights to the extent required by
or for operations hereunder, and to assist Lessee in informing Lessor of legal,
title and mining problems which may affect the Properties.
(d) They will make available to Lessor, its employees and agents,
any and all data, maps, other documents or information which either of them may
have or may acquire pertaining to the Properties.
2.5 Record Title and Lessor's Interest.
----------------------------------
(a) Title to the mining claims shall be held by Lessor.
(b) Lessee will at all times maintain Utah Clay Technology, Inc.,
in good standing . and qualified to own property under the laws of the State of
Utah.
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<PAGE>
ARTICLE III
-----------
NAME. PURPOSES AND TERM
-----------------------
3.1 General. Lessor and Lessee hereby enter into this Agreement for
-------
the purposes hereinafter stated and agree that all of their rights and all of
the Operations on or in connection with the Properties or the Area of Interest
shall be subject to and governed by this Agreement.
3.2 Name. The name of this mine shall be The Joy Clay. Lessee during
----
the Exploration Period and, thereafter, shall accomplish any registration
required by applicable assumed or fictitious name statutes and similar statutes.
3.3 Purposes. This Agreement is entered into for the following
--------
purposes and for no others, and shall serve as the exclusive means by which the
Participants, or either of them, accomplish such purposes:
(a) to conduct Exploration within the Area Interest,
(b) to acquire additional Properties within the Area of Interest,
(c) to evaluate the possible Development of the Properties,
(d) to engage in Development and Mining Operations on the
Properties,
(e) to engage in marketing Products, and
(f) to perform any other activity necessary appropriate, or
incidental to any of the foregoing.
3.4 Limitation. Unless the Participants otherwise agree in writing,
----------
the development and operations shall be limited to the purposes described in
Section 3.3, and nothing in this Agreement shall be construed to enlarge such
purposes.
3.5 Term. The primary term of this Lease shall be for a period of
----
three (3) years from the date hereof and for so long thereafter as Leased
Minerals are produced in commercial quantities at more than 500 tons/month from
the lands described in Exhibit A by the Lessee, their partners, successors or
assigns, for at least ten months of each year after the initial three (3)
year term has expired, subject to extension or termination as hereinafter
provided.
3.6 This Lease and the terms and conditions of this Lease agreement
issued by the Lessor are made with the Lessee herein on condition that Lessee
and any lawful successor in interest to Lessee shall perform all covenants and
terms and conditions herein set forth to be performed by
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<PAGE>
Lessee or its lawful assigns including payment of royalties as herein provided.
Lessor may issue written notice of termination and cancellation of this Lease,
and forfeiture, subject to paragraph 9.1: declaring that the Leased Premises and
each and every part thereof have thereby reverted to the Lessor, including any
and all fixtures and improvements required to be left with the property upon
expiration, termination, or cancellation of this Lease.
3.7 Lessee may terminate this Lease at any time by giving Lessors at
least ninety (90) days prior written notice, together with a check in full
settlement of any royalties that are due and unpaid; upon giving such notice of
termination, Lessee shall be released of all its obligations except those
obligations which have theretofore accrued. Within Thirty (30) days after date
of termination, Lessee shall execute and record a release and quitclaim deed
releasing all of Lessee's right, title and interest in and to the Leased
Premises.
3.8 Upon the effective date of termination by Lessee, Lessor shall be
entitled to retain all funds paid to it by Lessee pursuant to this Lease.
3.9 Within sixty (60) days after termination from this Lease,
Lessee or its successor or assign will provide Lessor with a copy of all data
prepared, collected, and interpreted by or for it (including maps, drill data,
assays, analyses, geological surveys, topographic surveys, market studies, flow
sheets, processing studies, and all other data) pertaining to the Leased
Premises and the Leased Minerals. Lessee will provide readable copies of all new
factual geologic data and reports by February 15th of each year.
ARTICLE IV
----------
CONSIDERATION
-------------
4.1 The Lessee in consideration of the granting of the rights and
privileges granted herein hereby covenants and agrees as follows:
A). Annual Labor:
------------
(1) To perform upon or for the benefit of the Leased Premises the
annual assessment work as set forth under the laws of the United States and the
State of Utah, and to prepare timely proof of the performance of such labor and
to record and file the same as required by law, and to furnish Lessor with a
copy thereof. Should this Lease be terminated as herein provided and the
effective date of such termination shall be ninety (90) days, or less, prior to
the end of the then current assessment year, Lessee shall nevertheless be
required to perform upon Or for the benefit of the Leased Premises the annual
labor for such assessment year and shall prepare timely proof thereof, record
the same, and furnish Lessor with a copy of such proof as hereinafter provided.
In the performance of annual labor upon or for the benefit of the Leased
Premises, Lessee shall be entitled to perform such work upon any of the claims
or upon any of
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<PAGE>
the groups of claims comprising the Leased Premises or upon other claims lying
outside the Leased Premises so long as such work shall qualify for the purpose
of the development of the Leased Premises as a contiguous group pursuant to the
requirements of law relating to group work on mining claims except as herein
provided.
(2) Assessment work will be completed by July 15 of each year starting
with the 1994 Assessment Year, or Lessor may do the work and charge reasonable
costs time and expenses to Lessee, Lessee will furnish to Lessor a copy of the
proof-of-labor with the County and the BLM time-stamp on it, no later than
September 15th of each year.
B). RESERVED ROYALTY:
(1) To pay lessor a three percent (3%) royalty on all ores, minerals
or products (herein called "Production") mined and removed from the Leased
Premises. Said royalty shall be calculated based upon the gross value of the
Production. In the event Production is removed from the Leased Premises and
stockpiled, royalty shall be payable six(6) months after removal and the gross
value shall be deemed the highest value received for comparable material sold
from the Leased Premises or from the nearest mine or property to the Leased
Premises.
(2) Production royalty shall be paid within thirty (30) days after
receipt of payment for each shipment or when otherwise due, and each payment
shall be accompanied by a statement showing the date(s) of shipment(s), quantity
and value of each shipment, to whom sold and the gross Value received, and any
cost deductions. Production royalty payments not made when due shall bear
interest at the rate of 1 1/2% per calendar month or fraction thereof until paid
in full.
(3) Method of Production royalty payments shall be in U.S. dollars
payable by cash or valid check drawn on available funds, and shall be deemed
made when deposited at Lessor's single depository at:
FIRST UTAH BANK
3826 South 2300 East
Salt Lake City, Utah 84109
phone (801) 272-9454
Lessor may change its single depository at any time by giving written notice to
Lessee.
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<PAGE>
ARTICLE V
---------
APPOINTMENT OF AGENT BY LESSOR
------------------------------
5.1 Lessor hereby appoints Daniel H. Engh as their agent and
attorney-in-fact for the purpose of representing the claim owners as a group,
and authorize him to take all necessary or desirable actions on behalf of
Lessor. This appointment shall be without limitation and remain in force until
said agent resigns or is replaced by a newly appointed agent for the entire
group of owners.
ARTICLE VI
----------
PERIODIC REPORTS
----------------
6.1 Lessee agrees to make semi-annual written reports to lessor (on
or before January 1 and July I each year) detailing the exploration, development
and mining work done upon the leased premises, the dates, quantity and value of
ores, minerals or products shipped from the Leased Premises, the identity of the
buyer(s) thereof or the place where such ores, minerals or products are
stockpiled, the plans for the Leased Premises during the next six (6) month
period, and other activities conducted or planned for the Leased Premises. also,
Lessee will provide Lessor with a copy of all data prepared, collected, and
interpreted by or for it (including maps, drill data, assays, analyses,
geological surveys, topographic surveys, market studies, flow sheets, processing
studies, and all other data) pertaining to the Leased Premises and the Leased
Minerals. Lessee will provide readable copies of all new factual geologic data
and reports by January 1 and July 1 of each year.
6.2 Lessee shall audit all operations upon the Leased Premises at
least annually, and furnish to Lessor a copy of such audit within thirty (30)
days after completion.
ARTICLE VII
-----------
RIGHTS AND OBLIGATIONS OF LESSEE
--------------------------------
7.1 The Lessee will forthwith have and is hereby granted by Lessor
the right and privilege from the date hereof and so long thereafter as this
Lease remains in force and effect of entering into and upon the Leased
Premises and the right to drill and excavate thereon and therein holes, pits,
tunnels, shafts, and other such excavations and to conduct therein and
elsewhere such surveys, exploration, investigations, sampling, milling,
screening and other work
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<PAGE>
similar as well as dissimilar as Lessee in its sole judgment and discretion may
wish to know relating to any and all facts relative to the geology of the Leased
Premises, including but not limited to the geology of the Leased Minerals and
the mining, milling, beneficiating, and: marketing thereof, together with the
right to drain water and materials and to pile overburden at places most
convenient to Lessee, and the right to dig or bore wells and use any water in or
upon said lands and the right to construct and place upon said lands any and all
buildings, dams, drains, machinery, roads, railroads, pipe and power lines and
other improvements that may be convenient for said purposes, all of which
improvements will become the full and complete property of the Lessor upon
termination or assignment of Lease back to Lessor, and Lessee will be under no
further obligation or liability with respect thereto except for reclamation and
except as provided in paragraph 7.5 below. Lessee will have the paramount
possession and control of the Leased Premises with regard to the Leased Mineral
rights obtained herein during and throughout the life of this Lease and shall be
entitled to conduct therein and thereon all mining, milling and beneficiation
uses and purposes reasonably incident thereto as it shall deem satisfactory and
advantageous so far as Lessee tries not to interfere with the rights of the
Federal potassium leases. All work shall be conducted by Lessee as Lessee in its
sole judgment and discretion deems best and in a good and minerlike fashion.
Stockpiles and tailings covered by Lease, remain the property of the Lessor upon
surrender of Lease. Mining timbers in place shall remain affixed as part of the
Leased Premises unless released in writing to Lessee.
7.2 Lessor or his agents duly authorized in writing will have at all
reasonable times and at his own risk access to all parts of Leased Premises and
associated premises for the purposes of reasonable inspection of operations,
record keeping, and accounts to the end that Lessor might verify that the
specified royalty payments are being made properly and that operations are being
conducted in a minerlike fashion. Lessee will keep records in a businesslike
manner.
7.3 Any and all future leases, transfers, encumbrances or conveyances
of interests in the Leased Premises not covered by this Lease shall be
subordinate to and subject to the rights of Lessee, his successors, assigns of
sublessees, so long as this Lease is in force and effect.
7.4 Lessee shall pay all expenses incurred by it and shall permit no
liens to attach to Leased Premises on account of any debt for materials or
services furnished for the benefit of the Leased Premises while this Lease is in
effect.
7.5 Lessee will indemnify and forever hold harmless and defend Lessor
from any demand, claim, suit, judgment or liability resulting from the
exploratory or development activities of Lessee conducted pursuant to this
agreement. Upon request of Lessor, Lessee will furnish evidence of sufficient
workmen's compensation, liability and other insurance to cover anticipated
risks, or evidence that it is adequately self-insured for such contingencies.
7.6 Lessee agrees that Leased Mineralsfrom the Leased Premises shall
not be mixed or co-mingled with minerals, ore, substances or materials from
other properties or lands except as agreed by Lessor.
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<PAGE>
ARTICLE VIII
------------
PATENT OF CLAIMS
----------------
8.1 Upon request of Lessee at any time during the term of this Lease,
the Lessor agrees to undertake to obtain patent to any of the mining claims
designated by Lessee. Lessee, at its own expense, shall prepare all documents,
compile all data and comply in all respects with all applicable laws in this
endeavor, and Lessor shall execute all documents required for this purpose and
shall cooperate fully with Lessee in the patent application and proceedings.
8.2 The rights of Lessor and Lessee under this Lease will extend to
any and all amended, relocated, or patented claims referred to in Exhibit A.
Lessor and Lessee agree that all amendments, relocations, or staking new claims
in the claimed area, of the claims referred to in Exhibit A, will be made in the
name of Lessor. Some claims need amending and it is known hereby to the Lessee.
Any valid mining claims staked by Lessor, or his agents, within the Leased
Premises shall fall under and be a part of this Lease.
ARTICLE VIII
------------
DEFAULT AND FORCE MAJEURE
-------------------------
9.1 If Lessee will be in default in performing any obligations
(except the timely payment of royalties), Lessee shall lose no rights unless,
within sixty (60) days following written notice from Lessor, given at the
address herein specified, specifying such failure or breach, Lessee shall fail
to make such payment or undertake to cure such default by commencement and
follow through of appropriate performance, within a reasonable amount of time.
Upon such failure, Lessor may terminate this Lease.
9.2 If Lessee shall be prevented or delayed from performing its
obligations or performing any work which it desires to perform or is performing
by reason of act of nature, strike or threat of strike, fire, flood, war, mob
violence, court order, unavoidable casualties, or any other enumeration, beyond
the control of Lessee which cannot be overcome by the means normally employed in
performance and at comparable and reasonable expense, then the duration of this
Lease shall be extended for a period equal to the period of Force Majeure and
any failure to perform obligations shall not be deemed a breach of this Lease.
Lessee agrees to use reasonable diligence to remove such causes of disability as
may occur from time to time. This paragraph shall not excuse payment or delay
payment of royalties.
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<PAGE>
ARTICLE X
---------
LEASE PREMISES
--------------
10.1 The parties hereto agree that during the term of this Lease, in
the event title to any of the Leased Premises is contested by any person or
persons, corporation or corporations, or governmental agencies, Lessee will, at
its own election and expense, defend the title to any of the Leased Premises
before any court of competent jurisdiction or any administrative body. Lessee
will defend any actions for damages relating to exploration, development,
or mining activities by Lessee on Leased Premises.
10.2 Lessor, upon execution of this Lease, shall furnish Lessee with
copies of all property maps possessed by Lessor on the Leased Premises and
adjacent lands.
ARTICLE XI
----------
TAXES AND DUTIES
----------------
11.1 Lessee agrees to pay (i) all taxes hereafter levied and assessed
upon all machinery and improvements placed by Lessee upon the Leased Premises,
(ii) taxes hereafter levied upon the Leased Premises, including taxes assessed
by reason of net annual proceeds, and (iii) occupation or severance taxes
imposed upon the mining or production of Leased Minerals from the Leased
Premises or any other taxes, assessments or charges resulting from Lessee
activities on Leased Premises.
11.2 Lessor agrees to promptly transmit to Lessee any notices
pertaining to taxes, assessments and charges which Lessor may receive.
11.3 Lessee, in all operations under this Lease, will comply with
all applicable State and Federal laws, including the social laws relative
to employment, safety, workmen's compensation insurance, social security,
unemployment tax and tax withholding. Lessee shall hold Lessor harmless from
claims of damage to persons or property arising from Lessee's operations under
this Lease. Lessee will comply with hazardous waste, air and water quality
requirements.
11.4 Lessee will do all reclamation work required by the Bureau of
Land Management, the State of Utah or Beaver County in a timely manner.
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<PAGE>
ARTICLE XII
-----------
ASSIGNMENT AND TRANSFER
-----------------------
12.1 Lessee will not convey, assign or transfer its interest in
this lease or any part of this Lease without the prior notification and consent
in writing of the Lessor. The assignee party will, as a condition of consent to
the transfer, agree to be bound by and subject to the terms of this Lease.
Any assignee party will provided a photocopy of the executed copy of assignment
and is delivered to the other party. Overriding royalty assignments will not
become effective, even if otherwise valid without the consent in writing of the
Lessor. Lessee, its successor and assigns, may not assign or convey royalty,
overriding royalty, production payment or like interest in the Leased Premises
without Lessor's prior written consent.
ARTICLE XIII
------------
MISCELLANEOUS
-------------
13.1 This agreement shall be governed by the laws of the State of
Utah.
13.2 Title headings are for convenience only and shall not be deemed
a part of this Lease.
13.3 This Lease and Its Exhibit contain the entire agreement between
the parties and supersedes entirely any prior understandings whether oral
or written.
13.4 If any provisions of this Lease is or becomes void or
unenforceable by Force of Law, the other provisions shall remain valid and
enforceable.
13.5 Lessor's and Lessee's proper address shall be the following,
which either may change by giving written notice to the other.
Daniel H. Engh
2340 East Germania Circle
Sandy, Utah 84093
Utah Clay Technology, Inc.
3985 South 2000 East
Salt Lake City, Utah 8124
13.6 The failure to enforce at any time any provisions of this Lease,
shall in no way be
-14-
<PAGE>
construed to be a waiver of such provisions, or to affect validity of the Lease.
13.7 This Lease shall be binding upon and inure to the benefit of
the successors and permitted assigns of the parties.
13.8 A Memorandum of this Lease may be filed by either party.
13.9 Lessee will diligently explore and conduct operations on or near
Leased Premises throughout the term of this Lease in a manner reasonably
calculated to advance the production of minerals from Leased Premises.
ARTICLE XIV
-----------
EXPLORATION REOUIREMENTS
------------------------
14.1 Lessor agrees to Utah Clay Technology, Inc. as the party that
will be the operator's of the exploration, and mining of the lode and placer
claims referred to in Exhibit A. Lessee agrees that it can not transfer or
assign all or part of being the operator of the exploration, and mining to any
other party.
IN WITNESS WHEREOF, this Lease has been executed and delivered by
Lessor to Lessee as of the day and year first above written.
/s/Daniel H. Engh
- ---------------------------------
Daniel H. Engh
LESSOR
/s/Dennis S. Engh
- ---------------------------------
Dennis S. Engh LESSOR
-15-
<PAGE>
UTAH CLAY TECHNOLOGY, INC.
BY:
------------------------------
President
LESSEE
State of Utah
S.S.
County of Salt Lake
On this day of October, 1996, personally appeared before me,
Daniel H. Engh, Dennis S. Engh, Dennis S. Engh, having authority to sign as
- -------------------------------
President of Utah Clay Technology, Inc. and by authority of the board of
Directors, who acknowledged to me that they executed the foregoing document.
- ---------------------------------
NOTARY PUBLIC RESIDING AT:
----------------------
----------------------------------
----------------------------------
----------------------------------
-16-
<PAGE>
EXHIBIT A
---------
To Mining Lease Agreement dated as of October
_______, 1996, by and among Daniel H. Engh,
Dennis S. Engh, and Utah Clay Technology, Inc.
PART I
- ------
With respect to the Properties, Daniel H. Engh and Dennis S. Engh are in
control of lode and placer claims described below:
The Property consists of Lode Claims and Placer claims. And are located in
TOwnships 13 South Range 11 West and Township 14 South 11 West, and Township 13
South 12 West and Township 13 South Range 10 West Salt Lake Medrian, Utah
County, Utah.
Claim Name Description UMC NUMBER
- ---------- ----------- ----------
Hailstone Sec. 33, Twns. 13 So. R-11 W subdv SE 120109
Hailstone Sec. 33, & 34, Twns. 13 So. R-11 W subdv SE & SW 120110
Hailstone #1 Sec. 33, & 34, Twns. 13 So. R-11 W subdv SE & SW 120111
Nola No. 1 Sec. 33, Twns. 13 So. R-11 W subdv SE 120119
Carole Ann Sec. 4, Twns. 14 So. R-11 W subdv NE 120116
Carol Ann No. 1 Sec. 34, Twns. 13 So. R-11 W subdv SW 120117
Nola Sec. 33, Twns. 13 So. R-11 W subdv NE 120118
Brian #1 Sec. 28, Twns. 14 So. R-11 W subdv NW 120120
Brian #2 Sec. 28, Twns. 14 So. R-ii W subdv NE 120121
Brian #3 Sec. 28, Twns. 14 So. R-11 W subdv SE 120122
Brian #4 Sec. 27, Twns. 14 So. R-11 W subdv NW 120123
Brian #5 Sec. 27, Twns. 14 So. R-11 W subdv SW 120124
Brian #6 Sec. 28, Twns. 14 So. R-ii W subdv SW 120125
Brian #10 Sec. 28, Twns. 14 So. R-1i W subdv NW 120126
Brian #11 Sec. 27, Twns. 14 So. R-11 W subdv NW 120127
Snowflake Sec. 4, Twns. 14 So. R-11 W subdv NE 120132
1
<PAGE>
Snowflake #1 Sec. 4, Twns. 14 So. R-11 W subdv NE 120133
Snowflake #2 Sec. 4, Twns. 14 So. R-11 W subdv NE 120134
Snowflake #3 Sec. 4, Twns. 14 So. R-11 W subdv E2 120135
Linda Sec. 33, & 34, Twns. 13 So. R-ii W subdv SE & SW 120136
Linda #1 Sec. 33, & 34, Twns. 13 So. R-11 W subdv SE & SW 120137
Linda #2 Sec. 33, Twns. 13 So. R-il W subdv E2 120138
Linda #3 Sec. 33, Twns. 13 So. R-11 W subdv E2 120139
Linda #4 Sec. 33, Twns. 13 So. R-11 W subdv E2 120140
Linda #5 Sec. 33, Twns. 13 So. R-11 W subdv E2 120141
Linda #6 Sec. 33, Twns. 13 So. R-11 W subdv E2 120142
Brian #10 Sec. 28, Twns. 14 So. R-11 W subdv all 302968
Brian #11 Sec. 27, Twns. 14 So. R-11 W subdv W2 302969
Linda #5 Sec. 33, Twns. 13 So. R-11 W subdv All 302978
Linda #6 Sec. 33, Twns. 13 So. R-11 W subdv NE 302979
Linda Sec. 34, Twns. 13 So. R-11 W subdv W2 302992
Linda #1 Sec. 34, Twns. 13 So. R-11 W subdv E2 302993
Linda #2 Sec. 34, Twns. 13 So. R-11 W subdv E2 302994
Linda #3 Sec. 33, Twns. 13 So. R-11 W subdv E2 302995
Linda #4 Sec. 33, Twns. 13 So. R-11 W subdv E2 302996
Snowflake Sec. 33, Twns. 13 So. R-11 W subdv SE 302997
Snowflake #1 Sec. 33, Twns. 13 So. R-il W subdv SE 302998
Snowflake #2 Sec. 33, Twns. 13 So. R-11 W subdv SE 302999
Snowflake #3 Sec. 4, Twns. 14 So. R-11 W subdv E2 303000
Hailstone Sec. 33, Twns. 13 So. R-11 W subdv SE 303001
Hailstone #1 Sec. 33 & 34, Twns. 13 So. R-il W subdv SE & SW 303002
Hailstone Sec. 33, Twns. 13 So. R-11 W subdv SE 303025
Nola No 1 Sec. 28, Twns. 13 So. R-11 W subdv SE 303026
Nola Sec. 33, Twns. 13 So. R-11 W subdv NE 303027
Carole Ann Sec. 4, Twns. 14 So. R-11 W subdv NE 303028
Carole Ann #1 Sec. 4, Twns. 14 So. R-11 W subdv SW 303029
Brian #1 Sec. 28, Twns. 13 So. R-1i W subdv NW 303034
Brian #2 Sec. 28, Twns. 13 So. R-11 W subdv NE 303035
Brian #3 Sec. 28, Twns. 13 So. R-11 W subdv SE 303036
Brian #4 Sec. 27, Twns. 13 So. R-11 W subdv NW 303037
Brian #5 Sec. 27, Twns. 13 So. R-11 W subdv SW 303038
Brian #6 Sec. 28, Twns. 13 So. R-11 W subdv SW 303039
This mining lease contains a Reserved Royalty of 3% on all ores,
2
<PAGE>
minerals or Products (called "Production,,) mined and removed from the leased
Premises. Said Royalty shall be Calculated based upon the gross value of the
production. Additionally, the claims above, lode or placer claims have a minimum
royalty of $5,000.00 and or a production royalty of $2.50/ton which is adjusted
by the Consumer Prices Index for all Urban Consumers for U.S. City average as
published by the U.S. Department of Labor Bureau of Labor Statistics.
With respect to the Properties, Daniel H. Engh and Dennis S. Engh have a mining
lease Dated June 19th 1993 by and between Don W. Fullmer (Lessor) and Daniel H.
Engh, Dennis S. Engh (Lessee). All terms and conditions of the June 19, 1993
mining lease will be a part of this mining lease. Said claims of this mining
lease are described above:
3
<PAGE>
Dated October --, 1996
PART 2
- ------
Area of Interest
All lands within the following described Areas of Interest including:
T13S, RllW
T14S, RllW
T14S, R12W
T13S, R12W
and any lands in Township 13 South 13 West, Township 14 South 14 West
to define the boundary of Area of interest.
4
<PAGE>
ADDENDUM TO MINING LEASE
This Addendum to Mining Lease is made this l$th day of March, 2000 by
and between Don W. Fullmer and Arnola B. Fullmer, his wife, 905 North Main
Street, Fillmore: Utah 94631, hereinafter referred to as "Lessor" and Daniel H.
Engh and Dennis S. Engh whose address is 2340 East Gennama Circle, Sandy, Utah
84093-1174, hereinafter referred to as "Lessee."
In consideration, of bringing minimum royalty payments up to date
though payments in the amount of $19,775.62, the receipt and adequacy of which
is hereby acknowledged. Lessor hereby acknowledges that the items of default
contained in file Notice dated December 31, 1999, incorporated by this
reference, are hereby satisfied in full or waived as to past acts only.
In consideration of the foregoing funds paid to Lessor, Lessor also
ratifies file following Mining Lease No. 2-dated June 19, 1993 with Daniel H.
Engh and Dennis S. Engh as being in full force and effect, without any
modification of the lease or any waiver of the lease terms as to future
performance, except at Paragraph 3.1 of the Mining Lease, the primary term and
the requirement to obtain commercial production are extended for five (5) years
from the date hereof.
The leases and claims covered thereby are more particularly described
on the attached Exhibit A, incorporated by this reference.
This Addendum shall be effective on the date above.
/s/Don W. Fullmer /s/Daniel H. Engh
- --------------------------------- ----------------------------------
Don W. Fullmcr, (Lessor) Daniel H. Engh, (Lessee)
/s/Arnola B. Fullmer /s/Dennis S. Engh
- --------------------------------- ----------------------------------
Areola B. Fullmer, (Lessor) Dennis S. Engh, (Lessee)
<PAGE>
To The ADDENDUM TO MINING LEASE
Page 2
STATE OF UTAH
SS
County of Millard
On this 15 day of March, 2000, personally appeared before me Don W. Fullmer
and Areola B. Fullmer, his wife, who acknowledged to me that they executed the
foregoing Addendum to Mining Lease.
----------------------------------
NOTARY PUBLIC
Residing at: 390 S. 100E
----------------------
My Commission Expires: Fillmore, UT
- ---------------------
To The ADDENDUM TO MINING LEASE
Page 2
STATE OF UTAH
SS
County of Millard
On this 15 day of March, 2000, personally appeared before me Don W. Fullmer
and Areola B. Fullmer, his wife, who acknowledged to me that they executed the
foregoing Addendum to Mining Lease.
----------------------------------
NOTARY PUBLIC
Residing at: 390 S. 100E
----------------------
My Commission Expires: Fillmore, UT
- ---------------------
STATE OF UTAH
SS
County of Millard
On this 15 day of March, 2000, personally appeared before me Daniel H.
Engh and Dennis S. Engh, who acknowledged to me that they executed the foregoing
Addendum to Mining Lease.
----------------------------------
NOTARY PUBLIC
Residing at: 390 S. 100E
----------------------
My Commission Expires: Fillmore, UT
- --------------------
<PAGE>
To The ADDENDUM TO MINING LEASE
Page 3
Exhibit A
Mining Lease #2
- ---------------
With respect to tile Propez~ics. Daniel H. Engh and Dennis S, Engh have a MINING
LEASE AGREEMENT Dated June 19tj 1993 by and between Don W. Fullmer (Lessor) and
Daniel H. Engh. Dennis S. Engh (Lessee). All terms said conditions of the June
19, 1993 MINING LEASE AGREEMENT will be a part of this Letter Agreement. Said
claims of this MINING LEASE AGREEMENT are described below:
Tile Property consists of Lode Claims and Placer claims. And are located in
Townships 13 South Range 11 West and Township 14 South 11 West and Township 13
South 12 West and Township 13 South Range 10 West Salt Lake Medrian, Juab
County, Utah.
Claim Name Description UMB NUMBER
---------- ----------- ----------
Hailstone Sec. 33, Twns. 13 So. R-1l W subdv SE 120109
Hailstone Sec. 33, & 34, Twns, 13 So. R-11 W subdv SE & SW 120110
Hailstone #1 Sec. 33, & 34, Twns. 13 So. R-11 W subdv SE & SW 120111
Nola No. 1 Sec. 33, Twns. 13 So. R-11 W subdv SE 120119
Carole Ann Sec. 4, Twns. 14 So. R-11 W subdv NE 120116
Carol Ann No. 1 Sec. 34, Twns. 13 So. R-11 W subdv SW 120117
Nola Sec. 33, Twns. 12 So. R-11 W subdv NE 120118
Brian #1 Sec. 28 Twns. 14 So. R-11 W subdv NW 120120
Brian #2 Sec. 28, Twns. 14 So. R-11 W subdv NE 120121
Brian #3 Sec. 28, Twns. 14 So. R-11 W subdv SE 120122
Brian #4 Sec. 27, Twns. 14 So. R-11 W subdv NW 120123
Brian #5 S%c. 27, Twns. 14 So. R-1l W subdv SW 120124
Brian #6 Sec. 28, Twns. 14 So. R-11 W subdv SW 120125
Brian #10 Sec. 28, Twns. 14 So. R-1l W subdv NW 120126
Brian #11 Sec. 27, Twns. 14 So. R-1l W subdv NW 120127
Snowflake Sec. 4, Twns. 14 So. R-11 W subdv NE 120132
Snowflake #1 Sec. 4, Twns. 14 So. R-11 W subdv NE 120133
Snowflake #2 Sec. 4, Twns. 14 So. R-11 W subdv NE 120134
Snowflake #3 Sec. 4, ?wns. 14 So. R-11 W subdv E2 120135
Linda Sec. 33, & 34, Twns. 13 So. R-1l W subdv SE & SW 120136
Linda #1 Sec. 33, & 34, Twns. 13 So. R-1l W subdv SE & SW 120137
Linda #2 Sec. 33, Twns. 13 So. R-11 W subdv E2 120138
Linda #3 Sec. 33, Twns. 13 So. R-11 W subdv E2 120139
Linda #4 Sac. 33, Twns. 13 So. R-1l W subdv E2 120140
Linda #5 Sec. 33, Twns. 13 So. R-11 W subdv E2 120141
<PAGE>
To The ADDENDUM TO MINING LEASE
Page 4
Linda #6 Sec. 33, Twns. 13 So. R-l1 W subdv E2 120142
Brian #10 Sec. 28, Twns. 14 So. R-11 W subdv all 302968
Brian #11 Sec. 27, Twns. 14 So. R-11 W subdv W2 302969
Linda #5 Sec. 33, Twns. 13 So. R-11 W subdv All 302978
Linda #6 Sec. 33, Twns. 13 So. R-11 W subdv NE 302979
Linda Sec. 34, Twns. 13 Sc. R-11 W subdv W2 302992
Linda #1 Sec. 34, Twns. 13 So. R-11 W subdv E2 302993
Linda #2 Sec. 34, Twns. 12 So. R-1l W subdv E2 302994
Linda #3 Sec. 33, Twns. 13 So. R-11 W subdv E2 202995
Linda #4 Sec. 23, Twns. 13 So. R-11 W subdv E2 302996
Snowflake Sec. 33, Twns. 13 So. R-11 W subdv SE 302997
Snowflake #1 Sec. 32, Twns. 13 So. R-II W subdv SE 302998
Snowflake #2 Sec. 22, Twns. 13 So. R-11 W subdv SE 302999
Snowflake #3 Sec. 4, Twnns. 14 So. R-11 W subdv E2 303000
Hailstone Sec. 33, Twns. 13 So. R-11 W subdv SE 303001
Hailstone #1 Sec. 33 & 24, Twns. 13 So. R-11 W subdv SE & SW 303002
Hailstone Sec. 33, Twns. 13 So. R-11 W subdv SE 303025
Nola No 1 Sec. 28, Twns. 13 So. R-l1 W subdv SE 303026
Nola Sec. 33, Twns. 13 So. R-1l W subdv NE 303027
Carole Ann Sec. 4, Twns. 14 So. R-ll W subdv NE 303028
Carole Ann #1 Sec. 4, Twns. 14 So. R-1l W subdv SW 303029
Brian #1 Sec, 28, Twns. 12 So. R-11 W subdv NW 303034
Brian #2 Sec. 28, Twns. 12 So. R-11 W subdv NE 303035
Brian #3 Sec. 28, Twns. 13 So. R-11 W subdv SE 303036
Brian #4 Sec. 27, Twns. 12 So. R-11 W subdv NW 303037
Brian #5 Sec. 27, Twns, 13 So. R-11 W subdv SW 303038
Brian #6 Sec. 28, Twns. 13 So. R-11 W subdv SW 303039
End of Exhibit A.
<PAGE>
ADDENDUM TO OPTION TO ENTER INTO MINING LEASE
(JOY AREA)
This Addendum to the OPTION TO ENTER INTO MINING LEASE, herein referred
to as "Option", made and entered into the 27th day of March, 2000, by and
between Daniel H. Engh, Dennis S. Engh (Optionor) and Kaolin Of The West, LLC.
(Optionee), a Utah Limited Liability Company:
In consideration, of providing copies of testing, analysis and
geological mapping of the Joy Area claims describe in Exhibit A and the
acknowledgment of the payments due the Optionor from the starting date of
September 30th, 1996, the receipt of information and acknowledgment of payments
due is adequacy of which is hereby acknowledged.
In consideration of the foregoing acknowledgment to Optionor, Optionor
also ratifies the following OPTION TO ENTER INTO MINING LEASE for the Joy Area
claims described in Exhibit A - dated September 30th, 1996 with KAOLIN OF THE
WEST, LLC., as being in full force and effect, without any modification of the
option or any waiver of the option terms as to future performance, except at
Paragraph 2 of the OPTION TO ENTER INTO MINING LEASE, the exercising the option
is extended for four (4) years from the date hereof.
The leases and claims covered thereby are more particularly described on
the attached Exhibit A, incorporated by this reference.
IN WITNESS WHEREOF, this ADDENDUM TO OPTION TO ENTER INTO MINING LEASE
has been executed and delivered by Optionor to Optionee as of the day and year
first above written.
<PAGE>
To The ADDENDUM TO OPTION TO ENTER INTO MINING LEASE (JOY AREA)
Page 5 of 4
Signed this 27th day of March, 2000.
Kaolin Of The West, LLC.
/s/ Daniel H. Engh BY: /s/ Dennis S. Engh
- --------------------------------- -----------------------------------
Daniel H. Engh, Optionor Its: Manager
Optionee
/s/ Dennis S. Engh
- ---------------------------------
Dennis S. Engh, Optionor
<PAGE>
To The ADDENDUM TO OPTION TO ENTER INTO MINING LEASE (JOY AREA)
Page 3 of 4
Exhibit A
ADDENDUM TO OPTION TO ENTER INTO MINING LEASE (JOY AREA)
- --------------------------------------------------------
To the OPTION TO ENTER INTO MINING LEASE Agreement dated as of September 30th,
1996, by and among Daniel H. Engh, Dennis S. Engh and Kaolin Of The West, LLC.,
a Utah Limited Liability Company:
PART 1
- ------
With respect to the Properties, Daniel H. Engh and Dennis S. Engh are in
control of lode and placer claims described below:
The Property consists of Lode Claims and Placer claims. And are located in
Townships 13 South Range 11 West and Township 14 South 11 West, and Township 13
South 12 West and Township 13 South Range 10 West Salt Lake Medrian, Juab
County, Utah.
Claim Name Description UMC NUMBER
- --------------------------------------------------------------------------------
Hailstone Sec. 33, Twns. 13 So. R-11 W subdv SE 120109
Hailstone Sec. 33, & 34, Twns. 13 So. R-11 W subdv SE & SW 120110
Hailstone #1 Sec. 33, & 34, Twns. 13 So. R-11 W subdv SE & SW 120111
Nola No. 1 Sec. 33, Twns. 13 So. R-11 W subdv SE 120119
Carole Ann Sec. 4, Twns. 14 So. R-11 W subdv NE 120116
Carol Ann No. 1 Sec. 34, Twns. 13 So. R-11 W subdv SW 120117
Nola Sec. 33, Twns. 13 So. R-11 W subdv NE 120118
Brian #1 Sec. 28, Twns. 14 So. R-11 W subdv NW 120120
Brian #2 Sec. 28, Twns. 14 So. R-11 W subdv NE 120121
Brian #3 Sec. 28, Twns. 14 So. R-11 W subdv SE 120122
Brian #4 Sec. 27, Twns. 14 So. R-11 W subdv NW 120123
Brian #5 Sec. 27, Twns. 14 So. R-11 W subdv SW 120124
Brian #6 Sec. 28, Twns. 14 So. R-11 W subdv SW 120125
Brian #10 Sec. 28, Twns. 14 So. R-11 W subdv NW 120126
Brian #11 Sec. 27, Twns. 14 So. R-11 W subdv NW 120127
Snowflake Sec. 4, Twns. 14 So. R-11 W subdv NE 120132
Snowflake #1 Sec. 4, Twns. 14 So. R-11 W subdv NE 120133
Snowflake #2 Sec. 4, Twns. 14 So. R-11 W subdv NE 120134
Snowflake #3 Sec. 4, Twns. 14 So. R-11 W subdv E2 120135
Linda Sec. 33, & 34, Twns. 13 So. R-11 W subdv SE & SW 120136
Linda #1 Sec. 33, & 34, Twns. 13 So. R-11 W subdv SE & SW 120137
Linda #2 Sec. 33, Twns. 13 So. R-11 W subdv E2 120138
<PAGE>
To The ADDENDUM TO OPTION TO ENTER INTO MINING LEASE (JOY AREA)
Page 3 of 4
Linda #3 Sec. 33, Twns. 13 So. R-11 W subdv E2 120139
Linda #4 Sec. 33, Twns. 13 So. R-11 W subdv E2 120140
Linda #5 Sec. 33, Twns. 13 So. R-11 W subdv E2 120141
Linda #6 Sec. 33, Twns. 13 So. R-11 W subdv E2 120142
Brian #10 Sec. 28, Twns. 14 So. R-11 W subdv all 302968
Brian #11 Sec. 27, Twns. 14 So. R-11 W subdv W2 302969
Linda #5 Sec. 33, Twns. 13 So. R-11 W subdv All 302978
Linda #6 Sec. 33, Twns. 13 So. R-11 W subdv NE 302979
Linda Sec. 34, Twns. 13 So. R-11 W subdv W2 302992
Linda #1 Sec. 34, Twns. 13 So. R-11 W subdv E2 302993
Linda #2 Sec. 34, Twns. 13 So. R-11 W subdv E2 302994
Linda #3 Sec. 33, Twns. 13 So. R-11 W subdv E2 302995
Linda #4 Sec. 33, Twns. 13 So. R-11 W subdv E2 302996
Snowflake Sec. 33, Twns. 13 So. R-11 W subdv SE 302997
Snowflake #1 Sec. 33, Twns. 13 So. R-11 W subdv SE 302998
Snowflake #2 Sec. 33, Twns. 13 So. R-11 W subdv SE 302999
Snowflake #3 Sec. 4, Twns. 14 So. R-11 W subdv E2 303000
<PAGE>
To The ADDENDUM TO OPTION TO ENTER INTO MINING LEASE (JOY AREA)
Page 4 of 4
Hailstone Sec. 33, Twns. 13 So. R-11 W subdv SE 303001
Hailstone #1 Sec. 33 & 34, Twns. 13 So. R-11 W subdv SE & SW 303002
Hailstone Sec. 33, Twns. 13 So. R-11 W subdv SE 303025
Nola No 1 Sec. 28, Twns. 13 So. R-11 W subdv SE 303026
Nola Sec. 33, Twns. 13 So. R-11 W subdv NE 303027
Carole Ann Sec. 4, Twns. 14 So. R-11 W subdv NE 303028
Carole Ann #1 Sec. 4, Twns. 14 So. R-11 W subdv SW 303029
Brian #1 Sec. 28, Twns. 13 So. R-11 W subdv NW 303034
Brian #2 Sec. 28, Twns. 13 So. R-11 W subdv NE 303035
Brian #3 Sec. 28, Twns. 13 So. R-11 W subdv SE 303036
Brian #4 Sec. 27, Twns. 13 So. R-11 W subdv NW 303037
Brian #5 Sec. 27, Twns. 13 So. R-11 W subdv SW 303038
Brian #6 Sec. 28, Twns. 13 So. R-11 W subdv SW 303039
This mining lease contains a Reserved Royalty of 3% on all ores, minerals or
Products (called "Production") mined and removed from the leased Premises. Said
Royalty shall be calculated based upon the gross value of the production.
Additionally, the claims above, lode or placer claims have a minimum royalty of
$5,000.00 and or a production royalty of $2.50/ton which is adjusted by the
Consumer Prices Index for all Urban Consumers for U.S. City average as published
by the U.S. Department of Labor Bureau of Labor Statistics.
<PAGE>
To The ADDENDUM TO OPTION TO ENTER INTO MINING LEASE (JOY AREA)
Page 5 of 4
With respect to the Properties, Daniel H. Engh and Dennis S. Engh have a mining
lease Dated June 19th 1993 by and between Don W. Fullmer (Lessor) and Daniel H.
Engh, Dennis S. Engh (Lessee). All terms and conditions of the June 19, 1993
mining lease will be a part of this mining lease. Said claims of this mining
lease are described above:
End of Exhibit A.
<PAGE>
ADDENDUM TO OPTION TO ENTER INTO MINING LEASE
(JOY AREA)
This Addendum to the OPTION TO ENTER INTO MINING LEASE, herein referred
to as "Option", made and entered into the 27th day of March, 2000, by and
between Kaolin Of The West, LLC., a Utah Limited Liability Company at 4532
Briarcreek Street, Salt Lake City, Utah 84117 hereinafter referred to as the
(Optionor) and Utah Clay Technology, Inc., at 3985 South 2000 East, Salt Lake
City, Utah 84124, hereinafter referred to as (Optionee), a Utah corporation:
In consideration, of providing copies of testing, analysis and
geological mapping of the Joy Area claims describe in Exhibit A and the
acknowledgment of the payments due the Optionor from the starting date of
September 30th, 1996, the receipt of information and acknowledgment of payments
due is adequacy of which is hereby acknowledged.
In consideration of the foregoing acknowledgment to Optionor, Optionor
also ratifies the following OPTION TO ENTER INTO MINING LEASE for the Joy Area
claims described in Exhibit A - dated September 30th, 1996 with UTAH CLAY
TECHNOLOGY INC., as being in full force and effect, without any modification of
the option or any waiver of the option terms as to future performance, except at
Paragraphs 1(C) and 2 of the OPTION TO ENTER INTO MINING LEASE, the exercising
the option is extended for four (4) years from the date hereof.
The leases and claims covered thereby are more particularly described on
the attached Exhibit A, incorporated by this reference.
<PAGE>
ADDENDUM TO OPTION TO ENTER INTO MINING LEASE
(JOY AREA)
IN WITNESS WHEREOF, this ADDENDUM TO OPTION TO ENTER INTO MINING LEASE
has been executed and delivered by Optionor to Optionee as of the day and year
first above written.
Signed this 27th day of March, 2000.
Kaolin Of The West, LLC. Utah Clay Technology, Inc.
BY: /s/ Dennis S. Engh BY: /s/ Dennis S. Engh
- --------------------------------- ----------------------------------
Its: Manager Its: President
Optionor Optionee
<PAGE>
To The ADDENDUM TO OPTION TO ENTER INTO MINING LEASE (JOY AREA)
Page 3 of 4
Exhibit A
ADDENDUM TO OPTION TO ENTER INTO MINING LEASE (JOY AREA)
- --------------------------------------------------------
To the OPTION TO ENTER INTO MINING LEASE Agreement dated as of September 30th,
1996, by and among Kaolin Of The West, LLC., a Utah Limited Liability Company,
and Utah Clay Technology, Inc., a Utah Corporation.
PART 1
- ------
With respect to the Properties, Daniel H. Engh and Dennis S. Engh are in
control of lode and placer claims described below:
The Property consists of Lode Claims and Placer claims. And are located in
Townships 13 South Range 11 West and Township 14 South 11 West, and Township 13
South 12 West and Township 13 South Range 10 West Salt Lake Medrian, Juab
County, Utah.
Claim Name Description UMC NUMBER
- --------------------------------------------------------------------------------
Hailstone Sec. 33, Twns. 13 So. R-11 W subdv SE 120109
Hailstone Sec. 33, & 34, Twns. 13 So. R-11 W subdv SE & SW 120110
Hailstone #1 Sec. 33, & 34, Twns. 13 So. R-11 W subdv SE & SW 120111
Nola No. 1 Sec. 33, Twns. 13 So. R-11 W subdv SE 120119
Carole Ann Sec. 4, Twns. 14 So. R-11 W subdv NE 120116
Carol Ann No. 1 Sec. 34, Twns. 13 So. R-11 W subdv SW 120117
Nola Sec. 33, Twns. 13 So. R-11 W subdv NE 120118
Brian #1 Sec. 28, Twns. 14 So. R-11 W subdv NW 120120
Brian #2 Sec. 28, Twns. 14 So. R-11 W subdv NE 120121
Brian #3 Sec. 28, Twns. 14 So. R-11 W subdv SE 120122
Brian #4 Sec. 27, Twns. 14 So. R-11 W subdv NW 120123
Brian #5 Sec. 27, Twns. 14 So. R-11 W subdv SW 120124
Brian #6 Sec. 28, Twns. 14 So. R-11 W subdv SW 120125
Brian #10 Sec. 28, Twns. 14 So. R-11 W subdv NW 120126
Brian #11 Sec. 27, Twns. 14 So. R-11 W subdv NW 120127
Snowflake Sec. 4, Twns. 14 So. R-11 W subdv NE 120132
Snowflake #1 Sec. 4, Twns. 14 So. R-11 W subdv NE 120133
Snowflake #2 Sec. 4, Twns. 14 So. R-11 W subdv NE 120134
Snowflake #3 Sec. 4, Twns. 14 So. R-11 W subdv E2 120135
<PAGE>
Linda Sec. 33, & 34, Twns. 13 So. R-11 W subdv SE & SW 120136
Linda #1 Sec. 33, & 34, Twns. 13 So. R-11 W subdv SE & SW 120137
Linda #2 Sec. 33, Twns. 13 So. R-11 W subdv E2 120138
Linda #3 Sec. 33, Twns. 13 So. R-11 W subdv E2 120139
Linda #4 Sec. 33, Twns. 13 So. R-11 W subdv E2 120140
Linda #5 Sec. 33, Twns. 13 So. R-11 W subdv E2 120141
Linda #6 Sec. 33, Twns. 13 So. R-11 W subdv E2 120142
Brian #10 Sec. 28, Twns. 14 So. R-11 W subdv all 302968
Brian #11 Sec. 27, Twns. 14 So. R-11 W subdv W2 302969
Linda #5 Sec. 33, Twns. 13 So. R-11 W subdv All 302978
Linda #6 Sec. 33, Twns. 13 So. R-11 W subdv NE 302979
Linda Sec. 34, Twns. 13 So. R-11 W subdv W2 302992
Linda #1 Sec. 34, Twns. 13 So. R-11 W subdv E2 302993
Linda #2 Sec. 34, Twns. 13 So. R-11 W subdv E2 302994
Linda #3 Sec. 33, Twns. 13 So. R-11 W subdv E2 302995
Linda #4 Sec. 33, Twns. 13 So. R-11 W subdv E2 302996
Snowflake Sec. 33, Twns. 13 So. R-11 W subdv SE 302997
Snowflake #1 Sec. 33, Twns. 13 So. R-11 W subdv SE 302998
Snowflake #2 Sec. 33, Twns. 13 So. R-11 W subdv SE 302999
Snowflake #3 Sec. 4, Twns. 14 So. R-11 W subdv E2 303000
Hailstone Sec. 33, Twns. 13 So. R-11 W subdv SE 303001
Hailstone #1 Sec. 33 & 34, Twns. 13 So. R-11 W subdv SE & SW 303002
Hailstone Sec. 33, Twns. 13 So. R-11 W subdv SE 303025
Nola No 1 Sec. 28, Twns. 13 So. R-11 W subdv SE 303026
Nola Sec. 33, Twns. 13 So. R-11 W subdv NE 303027
Carole Ann Sec. 4, Twns. 14 So. R-11 W subdv NE 303028
Carole Ann #1 Sec. 4, Twns. 14 So. R-11 W subdv SW 303029
Brian #1 Sec. 28, Twns. 13 So. R-11 W subdv NW 303034
Brian #2 Sec. 28, Twns. 13 So. R-11 W subdv NE 303035
Brian #3 Sec. 28, Twns. 13 So. R-11 W subdv SE 303036
Brian #4 Sec. 27, Twns. 13 So. R-11 W subdv NW 303037
Brian #5 Sec. 27, Twns. 13 So. R-11 W subdv SW 303038
Brian #6 Sec. 28, Twns. 13 So. R-11 W subdv SW 303039
This mining lease contains a Reserved Royalty of 3% on all ores, minerals or
Products (called "Production") mined and removed from the leased Premises. Said
Royalty shall be calculated based upon the gross value of the production.
Additionally, the claims above, lode or placer claims have a minimum royalty of
$5,000.00 and or a production royalty of $2.50/ton which is adjusted by the
Consumer Prices Index for all Urban Consumers for U.S. City average as published
by the U.S. Department of Labor Bureau of Labor Statistics.
<PAGE>
With respect to the Properties, Daniel H. Engh and Dennis S. Engh have a mining
lease Dated June 19th 1993 by and between Don W. Fullmer (Lessor) and Daniel H.
Engh, Dennis S. Engh (Lessee). All terms and conditions of the June 19, 1993
mining lease will be a part of this mining lease. Said claims of this mining
lease are described above:
End of Exhibit A.
ADDENDUM TO OPTION TO ENTER INTO MINING LEASE
(JOY AREA)
This Addendum to the OPTION TO ENTER INTO MINING LEASE, herein referred
to as "Option", made and entered into the 27th day of March, 2000, by and
between Kaolin Of The West, LLC., a Utah Limited Liability Company at 4532
Briarcreek Street, Salt Lake City, Utah 84117 hereinafter referred to as the
(Optionor) and Utah Clay Technology, Inc., at 3985 South 2000 East, Salt Lake
City, Utah 84124, hereinafter referred to as (Optionee), a Utah corporation:
In consideration, of providing copies of testing, analysis and
geological mapping of the Joy Area claims describe in Exhibit A and the
acknowledgment of the payments due the Optionor from the starting date of
September 30th, 1996, the receipt of information and acknowledgment of payments
due is adequacy of which is hereby acknowledged.
In consideration of the foregoing acknowledgment to Optionor, Optionor
also ratifies the following OPTION TO ENTER INTO MINING LEASE for the Joy Area
claims described in Exhibit A - dated September 30th, 1996 with UTAH CLAY
TECHNOLOGY INC., as being in full force and effect, without any modification of
the option or any waiver of the option terms as to future performance, except at
Paragraphs 1(C) and 2 of the OPTION TO ENTER INTO MINING LEASE, the exercising
the option is extended for four (4) years from the date hereof.
The leases and claims covered thereby are more particularly described on
the attached Exhibit A, incorporated by this reference.
<PAGE>
To The ADDENDUM TO OPTION TO ENTER INTO MINING LEASE(JOY AREA)
Page 5 of 4
IN WITNESS WHEREOF, this ADDENDUM TO OPTION TO ENTER INTO MINING LEASE
has been executed and delivered by Optionor to Optionee as of the day and year
first above written.
Signed this 27th day of March, 2000.
Kaolin Of The West, LLC. Utah Clay Technology, Inc.
BY: /s/ Dennis S. Engh BY: /s/ Dennis S. Engh
- --------------------------------- -----------------------------------
Its: Manager Its: President
Optionor Optionee
<PAGE>
Exhibit A
ADDENDUM TO OPTION TO ENTER INTO MINING LEASE(JOY AREA)
To the OPTION TO ENTER INTO MINING LEASE Agreement dated as of September 30th,
1996, by and among Kaolin Of The West, LLC., a Utah Limited Liability Company,
and Utah Clay Technology, Inc., a Utah Corporation.
PART 1
With respect to the Properties, Daniel H. Engh and Dennis S. Engh are in
control of lode and placer claims described below:
The Property consists of Lode Claims and Placer claims. And are located in
Townships 13 South Range 11 West and Township 14 South 11 West, and Township 13
South 12 West and Township 13 South Range 10 West Salt Lake Medrian, Juab
County, Utah.
Claim Name Description UMC NUMBER
Hailstone Sec. 33, Twns. 13 So. R-11 W subdv SE 120109
Hailstone Sec. 33, & 34, Twns. 13 So. R-11 W subdv SE & SW 120110
Hailstone #1 Sec. 33, & 34, Twns. 13 So. R-11 W subdv SE & SW 120111
Nola No. 1 Sec. 33, Twns. 13 So. R-11 W subdv SE 120119
Carole Ann Sec. 4, Twns. 14 So. R-11 W subdv NE 120116
Carol Ann No. 1 Sec. 34, Twns. 13 So. R-11 W subdv SW 120117
Nola Sec. 33, Twns. 13 So. R-11 W subdv NE 120118
Brian #1 Sec. 28, Twns. 14 So. R-11 W subdv NW 120120
Brian #2 Sec. 28, Twns. 14 So. R-11 W subdv NE 120121
Brian #3 Sec. 28, Twns. 14 So. R-11 W subdv SE 120122
Brian #4 Sec. 27, Twns. 14 So. R-11 W subdv NW 120123
Brian #5 Sec. 27, Twns. 14 So. R-11 W subdv SW 120124
Brian #6 Sec. 28, Twns. 14 So. R-11 W subdv SW 120125
Brian #10 Sec. 28, Twns. 14 So. R-11 W subdv NW 120126
Brian #11 Sec. 27, Twns. 14 So. R-11 W subdv NW 120127
Snowflake Sec. 4, Twns. 14 So. R-11 W subdv NE 120132
Snowflake #1 Sec. 4, Twns. 14 So. R-11 W subdv NE 120133
Snowflake #2 Sec. 4, Twns. 14 So. R-11 W subdv NE 120134
Snowflake #3 Sec. 4, Twns. 14 So. R-11 W subdv E2 120135
Linda Sec. 33, & 34, Twns. 13 So. R-11 W subdv SE & SW 120136
Linda #1 Sec. 33, & 34, Twns. 13 So. R-11 W subdv SE & SW 120137
Linda #2 Sec. 33, Twns. 13 So. R-11 W subdv E2 120138
<PAGE>
Linda #3 Sec. 33, Twns. 13 So. R-11 W subdv E2 120139
Linda #4 Sec. 33, Twns. 13 So. R-11 W subdv E2 120140
Linda #5 Sec. 33, Twns. 13 So. R-11 W subdv E2 120141
Linda #6 Sec. 33, Twns. 13 So. R-11 W subdv E2 120142
Brian #10 Sec. 28, Twns. 14 So. R-11 W subdv all 302968
Brian #11 Sec. 27, Twns. 14 So. R-11 W subdv W2 302969
Linda #5 Sec. 33, Twns. 13 So. R-11 W subdv All 302978
Linda #6 Sec. 33, Twns. 13 So. R-11 W subdv NE 302979
Linda Sec. 34, Twns. 13 So. R-11 W subdv W2 302992
Linda #1 Sec. 34, Twns. 13 So. R-11 W subdv E2 302993
Linda #2 Sec. 34, Twns. 13 So. R-11 W subdv E2 302994
Linda #3 Sec. 33, Twns. 13 So. R-11 W subdv E2 302995
Linda #4 Sec. 33, Twns. 13 So. R-11 W subdv E2 302996
Snowflake Sec. 33, Twns. 13 So. R-11 W subdv SE 302997
Snowflake #1 Sec. 33, Twns. 13 So. R-11 W subdv SE 302998
Snowflake #2 Sec. 33, Twns. 13 So. R-11 W subdv SE 302999
Snowflake #3 Sec. 4, Twns. 14 So. R-11 W subdv E2 303000
Hailstone Sec. 33, Twns. 13 So. R-11 W subdv SE 303001
Hailstone #1 Sec. 33 & 34, Twns. 13 So. R-11 W subdv SE & SW 303002
Hailstone Sec. 33, Twns. 13 So. R-11 W subdv SE 303025
Nola No 1 Sec. 28, Twns. 13 So. R-11 W subdv SE 303026
Nola Sec. 33, Twns. 13 So. R-11 W subdv NE 303027
Carole Ann Sec. 4, Twns. 14 So. R-11 W subdv NE 303028
Carole Ann #1 Sec. 4, Twns. 14 So. R-11 W subdv SW 303029
Brian #1 Sec. 28, Twns. 13 So. R-11 W subdv NW 303034
Brian #2 Sec. 28, Twns. 13 So. R-11 W subdv NE 303035
Brian #3 Sec. 28, Twns. 13 So. R-11 W subdv SE 303036
Brian #4 Sec. 27, Twns. 13 So. R-11 W subdv NW 303037
Brian #5 Sec. 27, Twns. 13 So. R-11 W subdv SW 303038
Brian #6 Sec. 28, Twns. 13 So. R-11 W subdv SW 303039
This mining lease contains a Reserved Royalty of 3% on all ores, minerals or
Products (called "Production") mined and removed from the leased Premises. Said
Royalty shall be calculated based upon the gross value of the production.
Additionally, the claims above, lode or placer claims have a minimum royalty of
$5,000.00 and or a production royalty of $2.50/ton which is adjusted by the
Consumer Prices Index for all Urban Consumers for U.S. City average as published
by the U.S. Department of Labor Bureau of Labor Statistics.
With respect to the Properties, Daniel H. Engh and Dennis S. Engh have a mining
lease Dated June 19th 1993 by and between Don W. Fullmer (Lessor) and Daniel H.
Engh, Dennis S. Engh (Lessee). All terms and conditions of the June 19, 1993
mining lease will be a part of this mining lease. Said claims of this mining
lease are described above:
End of Exhibit A.
AMENDMENT AGREEMENT
THIS AMENDMENT AGREEMENT made and entered into this 9th day of
November, 1992, to the EXPLORATION FOR MINING AND MINERAL DEVELEPMENT LEASE,
WITH OPTION TO PURCHASE PLACER AND LODE MINING CLAIMS, dated July I4, 1989, and
the AMENDMENT AGREEMENT, dated January 20, 1992, by and between DON W. FULLMER,
whose address is 800 NORTH MAIN, FILMORE, UTAH 84631, herein referred to as
"Lessor" or "Owner" and DANIEL H. ENGH, DENNIS S. ENGH whose address is 2340
EAST GERMANIA CIRCLE, SANDY, UTAH 84093-1174, hereinafter referred to as
"Lessee"
WITNESSETH:
WHEREAS, Lessee wishes to change the above mentioned agreements,
and Owner wishes to change the same agreements, here by agree to amend the above
mentioned agreements,
WHEREAS, the owner is the sole owner, or the agent for the
association which is the sole owner of the unpatented mining claims listed in
Exhibit "A" of this agreement, hereinafter referred to as the "Leased Property",
and
WHEREAS, Lessee desires to lease the Leased Property, Owner and
Lessee hereby agree to the following (hereinafter referred to as the
"Agreement"):
WHEREAS, Lessor is owner of certain properties and property rights
situated in Beaver County, State of Utah, and more particularly described in the
attached Exhibit "A", incorporated by reference, and hereinafter referred to as
the "Leased Premises"; and
<PAGE>
AMENDMENT AGREEMENT
November 09, 1992
Page 2 o f 20
WHEREAS, Lessee desires to lease certain rights in and to the Leased
Premises which Lessor is willing to grant to Lessee;
NOW THEREFORE, in consideration of $100.00 paid by Lessee to
Lessors receipt of which is hereby acknowledged and the payments, covenants and
agreements hereinafter set forth the parties agree as follows:
1. The Leased Premises.
-------------------
The "Leased Premises" shall mean all of the property described in
Exhibit "A" attached hereto and made a part hereof, together with all of the
ores, minerals and materials thereon and thereunder, and all right, title and
all water, water rights, easements and rights of way now and hereafter owned or
held by Owner in, upon or under the said property, or in any way pertaining
thereto.
2. Warranties and Representations.
------------------------------
Owner represents to Lessee: (1) that subject to the matters
specifically set forth in Exhibit "A," and subject to the matters set forth
below with respect to unpatented mining claims, Owner has the exclusive
possession of the mining claims and (2) that the Owner has the full right, power
and capacity to enter into this Lease upon the terms set forth herein. Since the
Leased Premises, as described in Exhibit "A" includes unpatented mining claims,
Owner represents and warrants to Lessee: (1) that Owner's title is subject to
paramount title of the United States of America and to the rights, if any, of
surface patentees; (2) that the acts of location performed by Owner on the
unpatented mining claims described in Exhibit "A" have been completed in
compliance with the
<PAGE>
AMENDMENT AGREEMENT
November 09 , 1992
Page 3 of 20
laws of the State of Utah and of the United States of America; and (3) that the
Notice Of Intent To Hold has been completed and filed with the Beaver County
Recorder and the BLM in Salt Lake City, Utah. (4) Lessee represents to owner:
(A) that Lessee has made a preliminary search of the Bureau of Land Management
records with regard to the leased premises and (B) That Lessee is aware of some
conflicting claims within the boundaries of the leased premises and (C) That
Lessee intends to do additional title research and to take such actions as are
necessary to perfect title in the Lessors favor, insofar as possible and (D)
That Lessee will refrain from or abandon all attempts to obtain title to the
Leased Premises except as provided by this by this lease, without first
obtaining owners written consent.
I. GRANT
1.1 Lessor hereby grants and leases to Lessee for and in
consideration of, and subject to all of the terms provisions and conditions
hereinafter set forth, the exclusive right and privilege to mine, extract~
remove and dispose of the all locarable Minerals in, upon or under the Leased
Premises, together with the right to use and occupy so much of the surface of
the Leased Premises as may be required for all purposes reasonably incident to
the mining, extracting, removal and disposal of the locatable Minerals according
to the provisions of this Lease.
II. LEASED MINERALS
2.1 "Leased Minerals" Or "Locatable Minerals" as used shall mean all
locatable minerals acquired by virtue of the placer or lode mining claims owned
by owner.
<PAGE>
AMENDMENT AGREEMENT
November 09, 1992
Page 4 of 20
2.2 Lessee understands and acknowledges hereby that there are current
Federal Potassium Leases on some of the same area as the Leased Premises. That
the Lessor can only convey the rights that it possesses in relation to placer
and 1ode mining claims being staked over the Federal Potassium Leases, as
allowed by the Multiple Minerals Development Act, 30 U.S.C. s 521 (1970), and
other State and Federal law.
III. TERM
3.1 The primary term of this Lease shall be for a period of five (5)
years from the date hereof and for so long thereafter as Leased Minerals are
produced in commercial quantities at more than 500 tons/month from the lands
described in Exhibit A by the Lessee, their partners, successors or assigns, for
at least ten months of each year after the first year term has expired, subject
to extension or termination as hereinafter provided.
3.2 This Lease and the terms and conditions of this Lease agreement
issued by the Lessor are made with the Lessee herein on condition that Lessee
and any lawful successor in interest to Lessee shall perform all covenants and
terms and conditions herein set forth to be performed by Lessee or its lawful
assigns including payment of royalties as herein provided. Lessor may issue
written notice of termination and cancellation of this Lease, and forfeiture,
subject to paragraph 9.1: declaring that the Leased Premises and each and every
part thereof have thereby reverted to the Lessor, including any and all fixtures
and improvements required to be left with the property upon expiration,
<PAGE>
AMENDMENT AGREEMENT
November 09, 1992
Page 5 of 20
termination, or cancellation of this Lease.
3.3 Lessee may terminate this Lease at any time by giving Lessors at
least ninety (90) days prior written notice, together with a check in full
settlement of any royalties that are due and unpaid; upon giving such notice of
termination, Lessee shall be released of all its obligations except those
obligations which have theretofore accrued. Within Thirty (30) days after date
of termination, Lessee shall execute and record a release and quitclaim deed
releasing all of Lessee's right, title and interest in and to the Leased
Premises.
3.4 Upon the effective date of termination by Lessee, Lessor shall be
entitled to retain all funds paid to it by Lessee pursuant to this Lease.
3.5 Within sixty (60) days after termination from this Lease, Lessee
or its successor or assign will provide Lessor with a copy of all data prepared,
collected, and interpreted by or for it (including maps, drill data, assays,
analyses, geological surveys, topographic surveys, and other data pertaining to
the Leased Premises and the Leased Minerals. Lessee will provide readable copies
of all new factual geologic data and reports by February 15th of each year.
IV. CONSIDERATION
4.1 The Lessee in consideration of the granting of the rights and
privileges granted herein hereby covenants and agrees as follows:
<PAGE>
AMENDMENT AGREEMENT
November 09, 1992
Page 6 of 20
(1) $5,000.00 due June 15, i993 and $5,000.00 annual minimum
royalty beginning on the first anniversary of This lease and thereafter minimum
$5,000.00 each anniversary until Lessee terminates its rights. The minimum
royalty of $5,000.00, will be adjusted by the Consumer Prices Index for All
Urban Consumers for U.S. City Average as published by the U.S. Department of
Labor Statistics who is created pursuant to Sec. 5(a) of Public Law 304, 79th
Congress. The average at the end of December 1992 will be the base year and any
cahange in the Consumer Prices Index for All Urban Consumers for U.S. City
Average for the following year ended December will determine the percent change
in the $5,000.00 for the following year. Each year becomes the new base year to
measure change from.
(2) Production Royalty: A production royalty on Leased Minerals
which shall be Two Dollars and 50 Cents per ton ($2.50/ton) of ore removed from
or mined and processed upon the Leased Property.
(3) The production royalty of $2.50/ton stated in IV (2), will be
adjusted by the Comsumer Prices Index for All Urban Consumers for U.S. City
Average as published by the U.S. Department of Labor Bureau of Labor Statistics
The average at the end of December 1992 will be the base year and any change in
the Consumer Prices Index for All Urban Consumers for U.S. City Average for
the following year ended will determine the percent change in the $2.50/ton for
the following year. Each year becomes the new base year to measure change from.
A). Annual Labor:
------------
(1) To perform upon the Leased Premises the annual
<PAGE>
AMENDMENT AGREEMENT
November 09, 1992
Page 7 of 20
assessment work as set forth under the laws of the United States and the State
of Utah, and to prepare timely proof of the performance of such labor and to
record and file the same as required by law, and to furnish Lessor with a copy
thereof. Should this Lease be terminated as herein provided and the effective
date of such termination shall be ninety (90) days, or less, prior to the end
of the then current assessment year, Lessee shall nevertheless be required to
perform upon of the Leased Premises the annual labor for such assessment year
and shall prepare timely proof thereof, record the same, and furnish Lessor with
a copy of such proof as hereinafter provided. In the performance of annual labor
upon or for the benefit of the Leased Premises, Lessee shall be entitled to
perform such work upon any of the claims or upon any of the groups of claims
comprising the Leased Premises so long as such work shall qualify for the
purpose of the development of the Leased Premises as a contiguous group pursuant
to the requirements of law relating to group work on mining claims except as
herein provided.
(2) Assessment work will be completed by July 15 of each
year starting with the 1993 Assessment Year, or Lessor may do the work and
charge reasonable costs time and expenses to Lessee. Lessee will furnish to
Lessor a copy of the proof-of-labor with the County, no later than September
15th of each year.
B). PRODUCTION ROYALTY PAYMENTS:
---------------------------
(1) Production royalty shall be paid within thirty (30)
days after receipt of payment for each shipmen or when otherwise due, and each
payment shall be accompanied by a statement showing the date(s) of shipment(s),
<PAGE>
AMENDMENT AGREEMENT
November 09, 1992
Page 8 of 20
quantity and value of each shipment, to whom sold and the gross value received,
and any cost deductions.
(2) Method of Production royalty payments shall be in U.S.
dollars payable by cash or valid check drawn on available funds, and shall
be deemed made when deposited at Lessor's single depository at:
Paradise Management Co.
PO Box 368
Filmore, Utah 84631
Phone (801) 743-5848
Lessor may change its single depository at any time by giving written notice to
Lessee.
V. PERIODIC REPORTS
5.1 Lessee agrees to make semi-annual written reports to lessor (on
or before January 1 and July 1 each year) detailing the exploration, development
and mining work done upon the leased premises, quantity of ores, minerals or
products shipped from the Leased Premises, the identity of the buyer(s) thereof
or the place where such ores, minerals or products are stockpiled, the plans for
the Leased Premises during the next six (6) month period, and other activities
conducted or planned for the Leased Premises.
5.2 Lessee shall audit all operations upon the Leased Premises at
least annually, and furnish to Lessor a copy of such audit within thirty (30)
days after completion.
<PAGE>
AMENDMENT AGREEMENT
November 09, 1992
Page 9 of 20
VI. RIGHTS AND OBLIGATIONS OF LESSEE
6.1 The Lessee will forthwith have and is hereby granted by Lessor
the right and privilege from the date hereofand so long thereafter as this Lease
remains in force and effect of entering into and upon the Leased Premises and
the right to drill and excavate thereon and therein holes, Pits, tunnels,
shafts, and other such excavations and to conduct therein and elsewhere such
surveys, exploration, investigations, sampling, milling, screening and other
work similar as well as dissimilar as Lessee in its sole judgment and discretion
may wish to know relating to any and all facts relative to the geology of the
Leased Premises, including but not limited to the geology of the Leased Minerals
and the mining, milling, beneficiating, and marketing thereof, together with the
right to drain water and materials and to pile overburden at places most
convenient to Lessee, and the right to dig or bore wells and use any water in or
upon said lands and the right to construct and place upon said lands any and all
buildings, dams, drains, machinery, roads, railroads, pipe and power lines and
other improvements that may be convenient for said purposes, all of which
improvements will become the full and complete property of the Lessor upon
termination or assignment of Lease back to Lessor, and Lessee will be under no
further obligation or liability with respect thereto except for reclamation and
except as provided in 6.7 paragraph below. Lessee will have the paramount
possession and control of the Leased Premises with regard to the Leased Mineral
rights obtained herein during and throughout the life of this Lease and shall be
entitled to conduct therein and thereon all mining, milling and beneficiation
uses and purposes reasonably incident thereto as it shall deem satisfactory
and advantageous so far as Lessee tries not to interfere with the rights of the
Federal potassium leases. All work shall be conducted by Lessee as Lessee in its
sole judgment and discretion deems best and in a good and
<PAGE>
AMENDMENT AGREEMENT
November 09, 1992
Page 10 of 20
minerlike fashion. Stockpiles and tailings covered by Lease, remain the property
of the Lessor upon surrender of Lease. Mining timbers in place shall remain
affixed as part of the Leased Premises unless released in writing to Lessee.
6.2 Lessor or his agents duly authorized in writing will have at all
reasonable times and at his own risk access to all parts of Leased Premises and
associated premises for the purposes of reasonable inspection of operations,
record keeping, and accounts to the end that Lessor might verify that the
specified royalty payments are being made properly and that operations are being
conducted in a minerlike fashion. Lessee will keep records in a businesslike
manner.
6.3 Any and all future leases, transfers, encumbrances or
conveyances of interests in the Leased Premises not covered by this Lease shall
be subordinate to and subject to the rights of Lessee, his successors, assigns
of sublessees, so long as this Lease is in force and effect.
6.4 Lessee shall pay all expenses incurred by it and shall permit no
liens to attach to Leased Premises on account of any debt for materials or
services furnished for the benefit of the Leased Premises while this Lease is in
effect.
6.5 Lessee will indemnify and forever hold harmless and defend
Lessor from any demand, claim, suit, judgment or liability resulting from the
exploratory or development activities of Lessee conducted pursuant to this
agreement. Upon request of Lessor, Lessee will furnish evidence of sufficient
workmen's compensation, liability and other insurance to cover anticipated
risks, or evidence that it is adequately self-insured for such contingencies.
<PAGE>
AMENDMENT AGREEMENT
November 09 , 1992
Page i1 of 20
6.6 Lessee agrees that Leased minerals from the Leased Premises shall
not be mixed or co-mingled with minerals, ore, subsLances or materials from
other properties or lands except as agreed by Lessor.
6.7 In the event of the termination of this Lease by lapse of time
or otherwise, Lessee shall grade and slope and otherwise reclaim that portion of
the land being leased pursuant hereto, which was the site of actual mining
operations, in accordance with the requirements of the State and Federal
regulations then in effect and Owner may elect to assume the burden of
reclaiming the land, by notifying Lessee in writing of his intent to assume said
burden, in which event, Lessee will obtain not more than three (3) bids for
performance of the reclamation work required by this paragraph, and will pay
over to owner a sum equal to ninety-five percent (95%) of the lowest of said
bids. Thereafter, Lessee shall be relieved from all duties, expenses or
responsibility with respect to such reclamation and Owner, simultaneously with
or prior to the receipt of said payment, shall obtain from the
appropriate-Government agencies and deliver to Lessee all documents necessary to
release Lessee from all further responsibility for the performance of such
reclamation work.
VII. PATENT OF CLAIMS
7.1 Upon request of Lessee at any time during the term of this
Lease, the Lessor agrees to undertake to obtain patent to any of the mining
claims designated by Lessee. Lessee, at its own expense, shall prepare all
documents, compile all data and comply in all respects with all applicable laws
in this endeavor, and
<PAGE>
AMENDMENT AGREEMENT
November 09 , 1992
Page 12 of 20
Lessor shall execute all documents required for this purpose and shall cooperate
fully with Lessee in the patent application and proceedings.
7.2 The rights of Lessor and Lessee under this Lease will extend to
any and all amended, relocated, or patented claims referred to in Exhibit A.
Lessor and Lessee agree that all amendments, relocations, or staking new cla~ims
in the claimed area, of the claims referred to in Exhibit A, will be made in the
name of Lessor. Some claims need amending and it is known hereby to the Lessee.
Any valid mining claims staked by Lessor, or his agents, within the Leased
Premises shall fall under and be a part of this Lease.
VIII. DEFAULT AND FORCE MAJEURE
8.1 If Lessee will be in default in performing any obligations
(except the timely payment of royalt(pound)es), Lessee shall lose no rights
unless, within sixty (60) days following written notice from Lessor, given at
the address herein specified, specifying such failure or breach, Lessee shall
fail to make such payment or undertake to cure such default by commencement and
follow through of appropriate performance, within a reasonable amount of time.
Upon such failure, Lessor may terminate this Lease.
8.2 If Lessee shall be prevented or delayed from performing its
obligations or performing any work which it desires to perform or is performing
by reason of act of nature, strike or threat of strike, fire, flood, war, mob
violence, court order, unavoidable casualties, or any other enumeration, beyond
<PAGE>
AMENDMENT AGREEMENT
November 09, 1992
Page 13 of 20
the control of Lessee which cannot be overcome by the means normally
employed in performance and at comparable and reasonable expense, then the
duration of this Lease shall be extended for a period equal to the period of
Force Majeure and any failure to perform obligations shall not be deemed a
breach of this Lease. Lessee agrees to use reasonable diligence to remove such
causes of disability as may occur from time to time. This paragraph shall not
excuse payment or delay payment of royalties.
IX. LEASE PREMISES.
9.1 The parties hereto agree that during the term of this Lease, in
the event title to any of the Leased Premises is contested by any person or
persons, corporation or corporations, or governmental agencies, Lessee will, at
its own election and expense, defend the title to any of the Leased Premises
before any court of competent jurisdiction or any administrative body. Lessee
will defend any actions for damages relating to exploration, development,
or mining activities by Lessee on Leased Premises.
9.2 Lessor, upon execution of this Lease, shall furnish Lessee with
copies of all property maps possessed by Lessor on the Leased Premises and
adjacent lands.
X. TAXES AND DUTIES.
10.1 Lessee agrees to pay (i) all taxes hereafter levied and assessed
upon all machinery and improvements placed by Lessee upon the Leased Premises,
(ii) taxes hereafter levied upon the Leased Premises, including taxes assessed
by reason of net annual proceeds, and (iii) occupation or severance taxes
imposed upon the mining or production of Leased Minerals from the Leased
<PAGE>
AMENDMENT AGREEMENT
November 09, 1992
Page 14 of 20
Premises or any other taxes, assessments or charges resulting from Lessee
activities on Leased Premises.
10.2 Lessor agrees to promptly transmit to Lessee any notices
pertaining to taxes, assessments and charges which Lessor may receive.
10.3 Lessee, in all operations under this Lease, will comply with all
applicable State and Federal laws, including the social laws relative to
employment, safety, workmen's compensation insurance, social security,
unemployment tax and tax withholding. Lessee shall hold Lessor harmless from
claims of damage to persons or property arising from Lessee's operations under
this Lease. Lessee will comply with hazardous waste, air and water quality
requirements.
10.4 Lessee will do all reclamation work required by the Bureau of
Land Management, the State of Utah or Beaver County in a timely manner.
XI. ASSIGNMENT AND TRANSFER
11.1 Lessee can convey, assign or transfer its interest in this lease
or any part of this Lease without the prior notification and consent in writing
of the Lessor. The assignee party will, as a condition of consent to the
transfer, agree to be bound by and subject to the terms of this Lease. Any
assignee party will provided a photocopy of the executed copy of assignment and
is delivered to the other party. Overriding royalty assignments will 'not become
effective, even if otherwise valid without the consent in writing of the Lessor.
Lessee, its successor and assigns, may not assign or convey royalty, overriding
royalty, production payment or like interest in the Leased Premises
<PAGE>
AMENDMENT AGREEMENT
November 09, 1992
Page 15 of 20
without Lessor's prior written consent.
XII. MISCELLANEOUS
12.1 This agreement shall be governed by the laws of the State of
Utah.
12.2 Title headings are for convenience only and shall not be deemed
a part of this Lease.
12.3 This Lease and Its Exhibit contain the entire agreement between
the parties and supersedes entirely any prior understandings whether oral or
written.
12.4 If any provisions of this Lease is or becomes void or
unenforceable by Force of Law, the other provisions shall remain valid and
enforceable.
12.5 Lessor's and Lessee's proper address shall be the following, which
either may change by giving written notice to the other.
Don W. Fullmer
P.O. Box 268
800 North Main
Filmore, Utah 84631
Daniel H. Engh, Dennis S. Engh
2340 East Germania Circle
Sandy, Utah 84093-1174
12.6 The failure to enforce at any time any provisions of this Lease,
shall in no way be construed to be a waiver of such provisions, or to affect
validity of the Lease.
12.7 This Lease shall be binding upon and inure to the
<PAGE>
AMENDMENT AGREEMENT
November 09, 1992
Page 16 of 20
benefit of the successors and permitted assigns of the parties.
12.8 A Memorandum of this Lease may be filed by either party.
12.9 Lessee will diligently explore and conduct operations on or near
Leased Premises throughout the term of this Lease in a manner reasonably
calculated to advance the production of minerals from Leased Premises.
IN WITNESS WHEREOF, this Lease has been executed and delivered by
Lessor to Lessee as of the day and year first above written.
/s/Don W. Fuller
- --------------------------------------
Don W. Fullmer
LESSOR
<PAGE>
/s/Daniel H. Engh /s/Dennis S. Engh
- -------------------------------------- -----------------------------------
Daniel H. Engh Dennis S. engh
LESSEE LESSEE
<PAGE>
AMENDMENT AGREEMENT
November 09, 1992
Page 17 of 20
ACKNOWLEDGMENT
STATE OF UTAH
SS.
COUNTY OF MILLARD
On this 9th day of November, 1992, before me personally appeared DON W.
FULLMER to me known to be the person described in and who executed the foregoing
instrument and acknowledged that he executed the same as a free act and deed
Given under my hand and seal this 9th day of November, 1992.
My Commission Expires 4-15-95
---------------------------
/s/Lisa M. Morey
---------------------------
ACKNOWLEDGMENT
STATE OF UTAH
SS.
COUNTY OF SALT LAKE
On this 9th day of November, 1992, before me personally appeared DANIEL
H. ENGH to me known to be the person described in and who executed the foregoing
instrument and acknowledged that he executed the same as a free act and deed.
Given under my hand and seal this 9th day of November, 1992.
My Commission Expires 4-15-95
-----------------------
/s/Lisa M. Morey
-----------------------
<PAGE>
AMENDMENT AGREEMENT
November 09, 1992
Page 18 of 20
ACKNOWLEDGMENT
STATE OF UTAH
SS.
COUNTY OF SALT LAKE
On this 9th day of November, 1992, before me personally appeared DENNIS
S. ENGH to me known to be the person described in and who executed the foregoing
instrument and acknowledged that he executed the same as a free act and deed.
Given under my hand and seal this 9th day of November, 1992.
My Commission Expires 4-15-95
-------------------------
Lisa M. Morey
-------------------------
<PAGE>
AMENDMENT AGREEMENT
November 09, 1992
Page 19 of 20
EXHIBIT A
To the Mining Lease Agreement
Between Don W. Fullmer, and Daniel H. Enqh, Dennis S. Enqh.
<PAGE>
Dated the ~--~ day of November, 1992.
The Property consists of Lode Claims and Placer claims Plus, all other
claims located in Townships 29 South Range 13 West and Township 29 South 14 West
Salt Lake Medrian, Beaver County, Utah which Owner has claim to in this area.
<PAGE>
CLAIM NAME
DESCRIPTION
UMC NUMB~
<PAGE>
CLAIM NAME DESCRIPTION UMC NUMBER
- --------------- ----------------------------------------- ----------
Julie White #l NW 1/4 SEC. 9. TWNS. 29 SO. R-13. (PLACER) 303016
Julie White #2 SW 1/4 SEC. 9, TWNS. 29 SO. R-13. (PLACER) 303017
Julie White #3 NE 1/4 SEC. 8, TWNS. 29 SO. R-13. (PLACER) 303018
Julie White #4 SE 1/4 SEC. 8, TWNS. 29 SO. R-13. (PLACER) 303019
Julie White #5 NW 1/4 SEC. 8, TWNS. 29 SO. R-13. (PLACER) 303020
Julie White #6 NE 1/4 SEC. 7, TWNS. 29 SO. R-13. (PLACER) 303021
Julie White #7 NW 1/4 SEC. 7, TWNS. 29 SO. R-13. (PLACER) 303022
Julie White #8 NE 1/4 SEC. 12,TWNS. 29 SO. R-14. (PLACER) 303023
Julie White #9 SE 1/4 SEC. 1, TWNS. 29 SO. R-14. (PLACER) 303024
(LODES CLAIMS)
--------------
Julie White #ll NE 1/4 SEC. 7 & NW 1/4 SEC. 8,TWNS. 29 SO. R-13 W. 302980
Julie White #12 NE 1/4 SEC. 7 & NW 1/4 SEC. 8,TWNS. 29 SO. R-13 W. 302981
Julie White #13 NW 1/4 SEC. 8, TWNS. 29 SO. R-13 W. 302982
Julie White #14 NW 1/4 & NE 1/4 Sec. 8, TWNS. 29 SO. R-13 W. 302983
Julie White #15 NW 1/4 SEC. 8. TWNS, 29 SO. R-13 W. 302984
Julie White #16 NW 1/4 & NE 1/4 Sec. 8, TWNS. 29 SO. R-13 W. 302985
Julie White #l7 NE 1/4 SEC. 8, TWNS. 29 SO. R-13 W. 302986
Julie White #18 NE 1/4 SEC. 8, TWNS. 29 SO. R-13 W. 302987
Julie White #19 NE 1/4 SEC. 8, TWNS. 29 SO. R-13 W. 302988
Julie White #20 NE & NW 1/4 SEC. 8, TWNS. 29 SO. R-13 W. 302989
Julie White #21 NE 1/4 SEC. 8, TWNS. 29 SO. R-13 W. 302990
Julie White #22 NE & SE 1/4 SEC. 8, TWNS. 29 SO. R-13 W. 302991
Situated in Township 29 South, Range 13 West, Township 29 South, Range 14,
Salt Lake Meridian, Beaver County, Utah.
<PAGE>
AMENDMENT AGREEMENT
November 09, 1992
Page 20 of 20
CLAIM NAME UMC NUMBER
Julie White #23 326947
Julie White #24 326948
Julie White #25 326949
Julie White #26 326950
Julie White #27 326951
Julie White #28 326952
Julie White #29 326953
Julie White #30 326954
Julie White #31 326955
Julie White #32 326956
Julie White #33 326957
Julie White #34 326958
Julie White #35 326959
Julie White #36 326960
Julie White #37 326961
Julie White #38 326962
Situated in Township 29 South, Range 13 West, Salt Lake Meridian, Beaver
County, Utah.
<PAGE>
MINING LEASE
BETWEEN
DANIEL H. ENGH, CONNIE L. ENGH, DENNIS S. ENGH,
JUDY A. ENGH, DARIN ENGH, HOLLY ENGH (a.k.a. HOLLY KINGDON)
AND
UTAH CLAY TECHNOLOGY 1NC.
(A UTAH CORPORATION)
MARCH 1, 1994
<PAGE>
TABLE OF CONTENT
----------------
ARTICLE Page No.
- ------- --------
I - DEFINITIONS............................................................1
1.1 "Agreement"..............................................1
1.2 "Area of Interest".......................................2
l.3 "Assets".................................................2
1.4 "Leased Minerals"........................................2
1.5 "Development"............................................2
1.6 "Dollars" or "$".........................................2
1.7 "Exploration" ' .........................................2
1.8 "Effmtxve Date...........................................2
1.9 "Exploration Period".....................................2
1.10 "Exploration Rights .....................................2
1.11 "Mining" ................................................2
1.12 "Operations".............................................3
1.13 "Prime Rate".............................................3
1.14 "Products"...............................................3
1.15 "Program"................................................3
1.16 "Propertion".............................................3
1.17 "Transfer"...............................................3
1.18 "Work Expenditures"......................................3
II - REPRESENTATIONS AND WARRANTIES; COVENANTS;
TITLE TO ASSETS
2.1 Capaeity of Participants.................................3
2.2 Representations and Warranties...........................4
2.3 Disclosures..............................................6
2.4 Covenants................................................6
2.5 Record Title Jmd Lessor's Interest ......................6
2.6 Federal Potassium Leases.................................6
III - NAME, PURPOSES AND TERM...............................................7
3.1 General..................................................7
3.2 Name ....................................................7
3.3 Purposes.................................................7
3.4 Limitation...............................................7
3.5 Term.....................................................7
3.6 Terms and Conditions.....................................8
3.7 Termination..............................................8
3.8 Funds Paid...............................................8
3.9 Copy of all Data.........................................8
i
<PAGE>
ARTICLE Page No.
- ------- --------
IV - CONSIDERATION.........................................................8
4.1 Consideration............................................8
4.1(A) Annual Labor ............................................8
4.1(B) Reserved Royalty.........................................8
V - APPOINTMENT OF AGENT BY LESSOR.......................................10
5.1 Appointment of Agent....................................10
VI - PERIODIC REPORTS ....................................................10
6.1 Semi-annual Wirtten Reports.............................10
6.2 Audit all Operations....................................10
VII - RIGHTS AND OBLIGATIONS OF LESSEE ....................................10
7.1 Entering Leased Premises ...............................10
7.2 Inspection of Operations, records ......................11
7.3 Transfers, Encumbrances or Conveyances .................11
7.4 Expenses and Liens......................................11
7.5 Indemnification.........................................11
7.6 Mixed or Co-mingle minerals.............................12
VIII - PATENT OF CLAIMS.....................................................12
8.1 Obtaill Patent to Mining Claims.........................12
8.2 Rights extend to Amendments.............................12
IX - DEFAULT AND FORCE MAJEURE ...........................................12
9.1 Default Performaing Obligations.........................12
9.2 Prevented or Delayed from Obligations...................12
X - LEASE PREMISES.......................................................13
10.1 Defend Title............................................13
10.2 Copies Map..............................................13
XI - TAXES AND DUTIES.....................................................13
11.1 Lessee Agrees to Pay Taxes..............................13
11.2 Notices to Lessee.......................................13
11.3 Comply with all State and Federal Laws..................13
11.4 Reclamation Work....................................... 13
XII - ASSIGNMENT AND TRANSFER
12.1 Assign or Transfer......................................14
XIII - MISCELLANEOUS........................................................14
13.1 Governed by Utah Laws...................................14
13.2 Title for Convenience...................................14
13.3 Contain Entire Agreement................................14
13.4 Force of Law............................................14
13.5 Proper Address's........................................14
13.6 Affect Validity of thc Lease............................14
13.7 Benefit of the Successors...............................15
ii
<PAGE>
ARTICLE Page No.
- ------- --------
13.8 Memorandum of Lease.....................................15
13.9 Diligently Explore......................................15
XIV - EXPLORATION REQUIREMENTS .............................................15
14.1 Operator of Exploration, Mining.........................15
EXHIBITS
- --------
EXHIBIT A - PROPERTIES .............................................1
PART I. - Proporties and Title Exceptions..........................1
PART 2. - Area of Interest.........................................4
iii
<PAGE>
MINING LEASE
THIS MINING LEASE, herein referred to as "Lease", made and entered into
this 1st day of March, 1994, by and between DANIEL H. ENGH, CONNIE L. ENGH, at
2340 East Germania Circle, Sandy, Utah 84093-1174, DENNIs S. ENGH, JUDY A. ENGH,
at 4532 Briarcreek Drive, Salt Lake City, Utah 84124, DARIN ENGH, at 437 Elise
Street, Sandy, Utah 84070, HOLLY ENGH (a.k.a. HOLLY KINGDON) at 9064 Cheyenne
Way, Park City, Utah 84060 hereinafter referred to as "Owner or Lessor", and
UTAH CLAY TECHNOLOGY INC., a Utah corporation, having an address at 3985 South
2000 East, Salt Lake City, Utah 84124 (hereinafter designated as "Lessee"):
WITNESSETH:
WHEREAS, Lessor is owner of certain properties and property fights
situated in Beaver County, State of Utah, and more particularly described in the
attached Exhibit "A", incorporated by reference, and hereinafter referred to as
the "Leased Premises"; and
WHEREAS, Lessee desires to lease certain fights in and to the Leased
Premises which Lessor is willing to grant to Lessee;
NOW THEREFORE, in Consideration of $10.00 paid by Lessee to Owner
receipt of which is hereby acknowledged and the payments, covenants and
agreements hereinafter set forth the parties agree as follows:
GRANT, Lessor hereby grants and leases to Lessee for and in consideration
of, and subject to all of the terms provisions and conditions hereinaftg set
forth, the exclusive right and privilege to mine, extract, remove and dispose of
the all locatable Minerals in, upon or under the Leased Premises, together with
the right to use and occupy so much of the surface of the Leased Premises as may
be required for all purposes reasonably incident to the mining, extracting,
removal and disposal of the locatable Minerals according to the provisions of
this Lease.
ARTICLE I
---------
DEFINITIONS
-----------
1.1 "Agreement" means this Mining Lease, including all amendments and
modifications thereof, and all schedules and exhibits, which are incorporated
herein by this reference.
-1-
<PAGE>
1.2 "Area of Interest" means the area described in Part 2 of Exhibit A.
1.3 "Assets" means the Properties, Products and all other real and
personal property, tangible and intangible, held for the benefit of the Lessor
hereunder.
1.4 "Leased Minerals" or "Locatable Minerals" as used herein shall mean
all locatable minerals acquired by virtue of the placer or lode mining claims
owned by owner.
1.5 "Development" means all preparation for the removal and recovery of
Products, including the construction or installation of a mill or any other
improvements to be used for the mining, handling milling, processing or other
beneficiation of Products.
1.6 "Dollars" or "$" means dollars in the currency of the United
States.
1.7 "Exploration" means all activities directed toward ascertaining the
existence, location, quantity, quality or commercial value of deposits of
Products.
1.8 "Effective Date" means the date first written above.
1.9 "Exploration Period" means the period of time during which Lessee
is conducting Exploration Operations pursuant to Article VII. The Exploration
Period shall begin on the Effective Date and, unless this Agreement sooner
terminates, shall end on the date a processing mill is placed into production
with Leased Minerals.
1.10 "Exploration Rights" mean collectively the following:
(a) the sole and exclusive right of Lessee and its agents,
employees, contractors, subcontractors and workers, to enter upon and occupy the
Properties for Exploration purposes during the Exploration Period and to conduct
thereon such prospecting, trenching, drilling, sampling, examination, testing
development, engineering and feasib'dity studies for kaolin and other or
associated clays or metals and all other ores and minerals whatever kind or
character as desired by Lessee; and
(b) the right to do such other things as Lessee, in its sole
discretion, deems advisable or necessary to maintain and to fully evaluate the
mineral potential of the Properties to determine the feasibility of Development
of the Properties, including the right to remove bom the Properties such limited
volumes of minerals and materials as are necessary for test and assaying;
provided, however, that Lessee shall not have the right during the Exploration
Period to mine and remove such minerals and materials for sale.
1.11 "Mining" means the mining, extracting, producing, handling, milling
or other processing of Products.
-2-
<PAGE>
1.12 "Operations" means the activities carried out under this Agreement.
1.13 "Prime Rate" means the interest rate published as the Prime Rate in
the "Money Rates" column of The Wall Street Journal, as said rate may change
-----------------------
from day to day, or if said column sets forth a range of rates on a single day,
the arithmetic mean thereof.
1.14 "Products" means all ores, minerals and mineral resources produced
from the Properties under this Agreement.
1.15 "Program" means a description in reasonable detail of Operations to
be conducted and objectives to be accomplished by the Lessee for a specified
period.
1.16 "Properties" means those interests in real property described in
Part 1 of Exhibit A and all other interests in real property within the Area of
Interest which are acquired and held subject to this Agreement.
1.17 "Transfer" means sell, grant, assign, ea~nnher, pledge or otherwise
commit or dispose of.
1.18 "Work Expenditures" means the 'minimum work obligations described
in Sections 3.5 and 4.1 below and shall include, for purposes of this Agreement,
the value of all time, money or equipment contn]~uted to or used on or in
connection with the Properties or the Area of Interest by Lessee in good faith,
including but not limited to all consultants' time, all costs of testing and
assaying and all other expenses reasonably necessary to evaluate the Properties
or the Area of Interest. Work Expenditures shall include (a) geological
evaluation, geophysical study, geochemical analysis, rock and soil sampling,
geological mapping and similar activities affecting the Properties or the Area
of Interest; (b) drilling, trenching, road construction and pad construction
(plus associated stand-by time) and other physical work on the Properties or the
Area of Interest; (c) environmental, permitting and reclamation ~ (d) title
examination and title curative, remonumentation of unpatented mining claims,
survey (or re-survey), claim filing fees, taxes, and all other reasonable
project maintenance or associated costs on or for the benefit of the Properties
or the Area of Interest, including without limitation the maintenance activities
described in Sections 3.2 and 4.1 acquisition of property within the Area of
interest.
ARTICLE II
----------
REPRESENTATIONS AND WARRANTIES; COVENANTS; TITLE TO ASSETS
----------------------------------------------------------
2.1 Capacity of Participants. Lessee and Lessor, each for itself
--------------------------
represent and warrant as follows:
-3-
<PAGE>
(a) That it is a corporation and individuals respectively duly
incorporated and in good standing in its state of incorporation and that
it is qualified to do business and is in good standing in those states
where necessary in order to carry out the purposes of this Agreement;
(b) That it has the capacity to enter into and perform this
Agreement and all transactions contemplated herein and that all
corporate and other actions required to authorize it to enter into
and perform this Agreement have been properly taken;
(c) That it will not breach any other agreement or arrangement by
entering into or performing this Agreement; and
(d) That this Agreement has been duly executed and delivered by it
and is valid and binding upon it in accordance with its terms.
2.2 Representations and Warranties. Lessor make the following
--------------------------------
representations and warranties effective on the Effective Date:
The Leased Premises. The "Leased Premises" shall mean all of the
---------------------
Property described in Exhibit "A" attached hereto and made a part hereof,
together with all of the ores, minerals and materials thereon and thereunder,
and all right, title and all water, water rights, easements and rights of way
now and hereafter owned or held by Lessor in, upon or under the said property,
or in any way pertaining thereto.
(a) With respect to those Properties Lessor claimed through the
Bureau Of Land Management and those Properties Lessor has enter into a
mineral leases with the State of Utah, if any, Lessor are in exclusive
possession mining rights of such Properties free and clear of all
defects, royalties, liens and encumbrances except those specifically
identified in Part I of Exhibit A.
(b) With respect to those Properties in which Lessor hold an
interest under leases or other contracts: (i) Lessor are in exclusive
possession of such Properties; (ii) neither Lessor has received any
notice of default of any of the terms or provisions of such contracts;
(iii) Lessor have the authority under such contracts to perform
fully their obligations under this ~ (iv) such contracts are valid and
are in good standing; and (v) the properties covered thereby are free
and clear of all defects, royalties, liens and encumbrances except for
those specifically identified in Part I of Exhibit A or in such
contracts.
(c) With respect to unpatented mining claims that are included
within the Properties, except as provided in Part 1 of Exhibit A and
subject to the paramount title of the United States, the claims are
free and clear of defects, royalties, liens and encumbrances except for
those specifically identified in Part 1 of Exhibit A and to the best of
Lessor's knowledge and belief, (i) the unpatented mining claims were
properly laid out and monumented; (ii) all required location and
validation work was properly performed; and (iii)
-4-
<PAGE>
all assessment work required to hold the unpatented mining claims has
been performed in a manner consistent with that required of the
Lessee pursuant to Section 4. l(A) of this Agreement through the
assessment year ending September I, 1994. With respect to such
unpatented mining claims located by or on behalf of Lessor or one of
their Affiliates, except as provided in Part 1 of Exhibit A and
subject to the paramount title of the United States, all location
notices and certificates and all affidavits of assessmem work and other
filings required to maintain the claims in good standing have been
properly and timely recorded and filed with appropriate governmental
agencies, with respect to such unpatented mining claims that were not
located by or on behalf of Lessor or one of their Affiliates, Lessor
make the representation and warranty contained in the foregoing sentence
to the best of their knowledge and belief. Additionally, Lessor have no
knowledge of any claims conflicting with the claims described in Part 1
of Exhibit A. Nothing in this Section 2.2(c), however, shall be deemed
to be a representation or a warranty that any of the unpatented mining
claims described in Part 1 of Exhibit A contains a discovery of
minerals.
Lessor represents to Lessee: (1) that subject to the matters
specifically set forth in Exhibit "A," and subject to the matters set
forth below with respect to unpatented mining claims, Lessor has the
exclusive possession of the Leased Premises and (2) that the Lessor has
the full right, power and capacity to enter into this Lease upon the
terms set forth herein. Since the Leased Premises, as described in
Exhibit "A" includes unpatented mining claims, Owner represents and
warrants to Lessee: (1) that Lessor's title is subject to paramount
title of the United States of America and to the rights, if any, of
surface patentees; (2) that the acts of location performed by Lessor on
the unpatented mining claims described in Exhibit "A" have been
completed in compliance with the laws of the State of Utah and of the
United States of America; and (3) that the Notice Of Intent To Hold has
been completed and filed with the Beaver County Recorder and the BLM in
Salt Lake City, Utah.
(d) Lessor have delivered to Lessee all information concerning
title to the Properties in Lessor's possession or control, including but
not limited to, true and correct copies of all leases or other contracts
relating to the Properties of which Lessor has knowledge.
(e) Except as disclosed in Exhibit A, there are no pending or
threatened actions, suits, claims or proceedings with respect to the
Properties.
(f) Except as disclosed in Exhibit A, Lessor is aware of any
adverse environmental condition on or affecting the Properties.
(g) Except as disclosed in Exhibit A, Lessor has any material
contractual commitments obligations which relate to or affect the
Properties.
Notwithstanding any other provision of this Section 2.2, Lessor makes the
representations and warranties contained in this Section to the best of its
knowledge and belief, except that with respect
-5-
<PAGE>
to claims arising by, through or under Lessor or any its Affiliates, such
representations and warranties (except those contained in Section 2.2(c)
identified as being made on knowledge and belief) shall be absolute. The
representations and warranties set forth above shall survive the execution
and delivery of any documents of Transfer provided under this Agreement.
2.3 Disclosures. Each of the Participants represents and warrants that
-----------
it is unaware of any material facts or circumstances which have not been
disclosed in this Agreement, which should be disclosed to the other Participant
in order to prevent the representations in this Article II from being materially
misleading.
2.4 Covenants. Lessee covenant and agree as follows:
---------
(a) At any time, they will give prompt notice Lessor (during the
Exploration Period) of any notice of default, lawsuit, proceeding, action or
damage of which either Lessee becomes aware and which might affect the
Properties either Participant's title to the Properties.
(b) Notwithstanding any other provision of this Agreement, during
the Exploration Period neither of them will Transfer any interest in any
property located in the Area of Interest, except as between themselves and then
only upon 14-day prior notice to Lessee, nor will either of them conduct,
without Lessor's prior written consent, any property acquisition, exploration,
claim staking or mining operations within the Area of Interest.
(c) At any time, they will use their best efforts to assist
Lessor (during the Exploration Period) in obtaining necessary permits or
approvals, access to the Properties and water rights to the extent required by
or for operations hereunder, and to assist Lessee in informing Lessor of legal,
title and mining problems which may affect the Properties.
(d) They will make available to Lessor, its employees and agents,
any and all data, maps, other documents or information which either of them may
have or may acquire pertaining to the Properties.
2.5 Record Title and Lessor's Interest
----------------------------------
(a) Title to the mining claims shall be held by Lessor.
(b) Lessee will at all times maintain Utah Clay Technology, Inc.,
in good standing and qualified to own Property under the laws of the State of
Utah.
2.6 Lessee understands and acknowledges hereby that there are current
Federal Potassium Leases on some of the same area as the Leased Premises. That
the Lessor can only convey the rights that it possesses in relation to placer
and lode mining claims being staked over the Federal Potassium Leases, as
allowed by the Multiple Minerals Development Act, 30 U.S.C. s 521 (1970), and
other State and Federal law.
-6-
<PAGE>
Since law hasn't clearly defined exact cutoffs between the two mineral
domains (Federal leases and later mining claim locations) and their rights, it
behooves both the Lessor and Lessee, or their successors, to make agreements
with the Potassium lessee as necessary to prevent entanglements, both as to
mineral and other rights.
ARTICLE III
-----------
NAME, PURPOSES AND TERM
-----------------------
3.1 General. Lessor and Lessee hereby enter into this Agreement for the
-------
purposes hereinafter stated and agree that all of their rights and all of the
Operations on or in connection with the Properties or the Area of Interest shall
be subject to and governed by this Agreement.
3.2 Name. The name of this mine shall be The Blawn Wash Clay. Lessee
----
during the Exploration Period and, thereai~er, shall accomplish any registration
required by applicable assumed or fictitious name statutes and similar statutes.
3.3 Purposes. This Agreement is entered into for the following purposes
--------
and for no others, and shall serve as the exclusive means by which the
Participants, or either of them, accomplish such purposes:
(a) to conduct Exploration within the Area Interest,
(b) to acquire additional Properties within the Area of Interest,
(c) to evaluate the possible Development of the Properties,
(d) to engage in Development and Mining Operations on the
Properties,
(e) to engage in marketing Products, and
(f) to perform any other activity necessary appropriate, or
incidental to any of the foregoing.
3.4 Limitation. Unless the Participants otherwise agree in writing,
----------
the development and operations shall be limited to the purposes described in
Section 3.3, and nothing in this Agreement shall be construed to enlarge such
purposes.
3.5 Term. The primary term of this Lease shall be for a period of three
----
(3) years from the date hereof and for so long thereai~er as Leased Minerals are
produced in commercial
-7-
<PAGE>
quantities at more than 500 tons/month from the lands described in Exhibit A by
the Lessee, their partners, successors or assigns, for at least ten months of
each year after the initial three (3) year term has expired, subject to
extension or termination as hereinafter provided.
3.6 This Lease and the terms and conditions of this Lease agreement
issued by the Lessor are made with the Lessee herein on condition that Lessee
and any lawful successor in interest to Lessee shall perform all covenants and
terms and conditions herein set forth to be performed by Lessee or its lawful
assigns including payment of royalties as herein provided. Lessor may issue
written notice of termination and cancellation of this Lease, and forfeiture,
subject to paragraph 9.1: declaring that the Leased Premises and each and every
part thereof have thereby reverted to the Lessor, including any and all fixtures
and improvements required to be left with the property upon expiration,
termination, or cancellation of this Lease.
3.7 Lessee may terminate this Lease at any time by giving Lessors at
least ninety (90) days prior written notice, together with a check in fidl
settlement of any royalties that are due and unpaid; upon giving such notice of
termination, Lessee shall be released of all its obligations except those
obligations which have theretofore accrued. Within Thirty (30) days after date
of termination, Lessee shall execute and record a release and quitclaim deed
releasing all of Lessee's right, title and interest in and to the Leased
Premises.
3.8 Upon the effective date of termination by Lessee, Lessor shall be
entitled to retain all funds paid to it by Lessee pursuant to this Lease.
3.9 Within sixty (60) days after termination from this Lease, Lessee or
its successor or assign will provide Lessor with a copy of all data prepared,
collected, and interpreted by or for it (including maps, drill data, assays,
analyses, geological surveys, topographic surveys, market studies, flow sheets,
processing studies, and all other data) pertaining to the Leased Premises and
the Leased Minerals. Lessee will provide readable copies of all new factual
geologic data and reports by February 15th of each year.
ARTICLE IV
----------
CONSIDERATION
-------------
4.1 The Lessee in consideration of the granting of the rights and
privileges granted herein hereby covenants and agrees as follows:
A). Annual Labor:
------------
(1) To perform upon or for the benefit of the Leased Premises the
annual assessment work as set forth under the laws of the United States and the
State of Utah, and to prepare timely proof of the performance of such labor and
to record and file the same as required by law,
-8-
<PAGE>
and to furnish Lessor with a copy thereof Should this Lease be terminated as
herein provided and the effective date of such termination shall be ninety (90)
days, or less, prior to the end of the then current assessment year, Lessee
shall nevertheless be required to perform upon or for the benefit of the Leased
Premises the annual labor for such assessment year and shall prepare timely
proof thereof, record the same, and furnish Lessor with a copy of such proof as
hereinafter provided. In the performance of annual labor upon or for the benefit
of the Leased Premises, Lessee shall be entitled to perform such work upon any
of the claims or upon any of the groups of claims comprising the Leased Premises
or upon other claims lying outside the Leased Premises so long as such work
shall qualify for the purpose of the development of the Leased Premises as a
contiguous group pursuant to the requirements of law relating to group work on
mining claims except as herein provided.
(2) Assessment work will be completed by July 15 of each year starting
with the 1994 Assessment Year, or Lessor may do the work and charge reasonable
costs time and expenses to Lessee. Lessee will furnish to Lessor a copy of the
proof-of-labor with the County and the BLM time-stamp on it, no later than
September 15th of each year.
B). RESERVED ROYALTY:
(1) To pay lessor a three percent (3%) royalty on all ores, minerals or
products (herein called "Production") mined and removed from the Leased
Premises. Said royalty shall be calculated based upon the gross value of the
Production. In the event Production is removed from the Leased Premises and
stockpiled, royalty shall be payable six(6) months after removal and the gross
value shall be deemed the highest value received for comparable material sold
from the Leased Premises or from the nearest mine or property to the Leased
Premises.
(2) Production royalty shall be paid within thirty (30) days after
receipt of payment for each shipment or when otherwise due, and each payment
shall be accompanied by a statement showing the date(s) of shipment(s), quantity
and value of each shipmer~, to whom sold and the gross value received, and any
cost deductions. Production royalty payments not made when due shall bear
interest at the rate of I 1/2% per calendar month or fraction thereof until paid
in full.
(3) Method of Production royalty payments shall be in U.S. dollars
payable by cash or valid check drawn on available funds, and shall be deemed
made when deposited at Lessor's single depository at:
FIRST UTAH BANK
3826 South 2300 East
Salt Lake City, Utah 84109
phone (801) 272-9454
-9-
<PAGE>
Lessor may change its single depository at any time by giving written notice to
Lessee.
ARTICLE V
---------
APPOINTMENT OF AGENT BY LESSOR
------------------------------
5.1 Lessor hereby appoints Daniel H. Engh as their agent and attorney-
in-fact for the purpose of representing the claim owners as a group, and
authorize him to take all necessary or desirable actions on behalf of Lessor.
This appointment shall be without limitation and remain in force until said
agent resigns or is replaced by a newly appointed agent for the entire group of
owners.
ARTICLE VI
----------
PERIODIC REPORTS
----------------
6.1 Lessee agrees to make semi-annual written reports to lessor (on or
before January 1 and July 1 each year) detailing the exploration, development
and mining work done upon the leased premises, the dates, quantity and value of
ores, minerals or products shipped from the Leased Premises, the identity of the
buyer(s) thereof or the place where such ores, minerals or products are
stockpiled, the plans for the Leased Premises during the next six (6) month
period, and other activities conducted or planned for the Leased Premises, also,
Lessee will provide Lessor with a copy of all data prepared, collected, and
interpreted by or for it (including maps, drill data, assays, analyses,
geological surveys, topographic surveys, market studies, flow sheets, processing
studies, and all other data) pertaining to the Leased Premises and the Leased
Minerals. Lessee will provide readable copies of aH new factual geologic data
and reports by January I and July 1 of each year.
6.2 Lessee shall audit all operations upon the Leased Premises at least
annually, and furnish to Lessor a copy of such audit within thirty (30) days
after completion.
ARTICLE VII
-----------
RIGHTS AND OBLIGATIONS OF LESSEE
--------------------------------
7.1 The Lessee will forthwith have and is hereby granted by Lessor the
right and privilege from the date hereof and so long thereafter as this Lease
remains in force and effect of
- 10 -
<PAGE>
entering into and upon the Leased Premises and the right to drill and excavate
thereon and therein holes, pits, tunnels, shafts, and other such excavations and
to conduct therein and elsewhere such surveys, exploration, investigations,
sampling, milling, screening and other work similar as well as dissimilar as
Lessee in its sole judgment and discretion may wish to know relating to any and
all facts relative to the geology of the Leased Premises, including but not
limited to the geology of the Leased Minerals and the mining, milling,
beneficiating, and marketing thereof, together with the right to drain water and
materials and to pile overburden at places most convenient to Lessee, and the
right to dig or bore wells and use any water in or upon said lands and the right
to construct and place Upon said lands any and ali buildings, dams, drains,
machinery, roads, railroads, pipe and power lines and other improvements that
may be convenient for said purposes, all of which improvements will become the
full and complete property of the Lessor upon termination or assignment of Lease
back to Lessor, and Lessee will be under no further obligation or liability with
respect thereto except for reclamation and except as provided in paragraph 7.5
below. Lessee will have the paramount possession and control of the Leased
Premises with regard to the Leased Mineral rights obtained herein during and
throughout the life of this Lease and shall be entitled to conduct therein and
thereon all mining, milling and beneficiation uses and purposes reasonably
incident thereto as it shall deem satisfactory and advantageous so far as Lessee
tries not to interfere with the rights of the Federal potassium leases. All work
shall be conducted by Lessee as Lessee in its sole judgment and discretion deems
best and in a good and minerlike fashion. Stockpiles and tailings covered by
Lease, remain the property of the Lessor upon surrender of Lease. Mining timbers
in place shall remain affixed as part of the Leased Premises unless released in
writing to Lessee.
7.2 Lessor or his agents duly authorized in writing will have at ail
reasonable times and at his own risk access to all parts of Leased Premises and
associated premises for the purposes of reasonable inspection of operations,
record keeping, and accounts to the end that Lessor might verify that the
specified royalty payments are being made properly and that operations are being
conducted in a minerlike fashion. Lessee will keep records in a businesslike
manner.
7.3 Any and all future leases, transfers, encumbrances or conveyances
of interests in the Leased Premises not covered by this Lease shall be
subordinate to and subject to the fights of Lessee, his successors, assigns of
sublessees, so long as this Lease is in force and effect.
7.4 Lessee shall pay all expenses incurred by it and shall permit
no liens to attach to Leased Premises on account of any debt for materials or
services furnished for the benefit of the Leased Premises while this Lease is in
effect.
7.5 Lessee will indemnify and forever hold harmless and defend Lessor
from any demand, claim, suit, judgment or liability resulting fi.om the
exploratory or development activities of Lessee conducted pursuant to this
agreement. Upon request of Lessor, Lessee will furnish evidence of sufficient
workmen's compensation, liability and other insurance to cover anticipated
risks, or evidence that it is adequately self-insured for such contingencies.
-11-
<PAGE>
7.6 Lessee agrees that Leased Minerals from the Leased Premises shall
not be mixed or co-mingled with minerals, ore, substances or materials from
other properties or lands except as agreed by Lessor.
ARTICLE VIII
------------
PATENT OF CLAIMS
----------------
8.1 Upon request of Lessee at any time during the term of this Lease,
the Lessor agrees to undertake to obtain patent to any of the mining claims
designated by Lessee. Lessee, at its own expense, shall prepare all documents,
compile all data and comply in all respects with all applicable laws in this
endeavor, and Lessor shall execute all documents required for this purpose and
shall cooperate fully with Lessee in the patent application and proceedings.
8.2 The rights of Lessor and Lessee under this Lease will extend to any
and ali amended, relocated, or patented claims referred to in Exhibit A. Lessor
and Lessee agree that all amendments, relocations, or staking new claims in the
claimed area, of the claims referred to in Exhibit A, will be made in the name
of Lessor. Some claims need amending and it is known hereby to the Lessee. Any
valid mining claims staked by Lessor, or his agents, within the Leased Premises
shall fail under and be a part of this Lease.
ARTICLE IX
----------
DEFAULT AND FORCE MAJEURE
-------------------------
9.1 If Lessee will be in default in performing any obligations (except
the timely payment of royalties), Lessee shall lose no rights unless, within
sixty (60) days following written notice from Lessor, given at the address
herein specified, specifying such failure or breach, Lessee shall fail to make
such payment or undertake to cure such default by commencement and follow
through of appropriate performance, within a reasonable amount of time. Upon
such failure, Lessor may terminate this Lease.
9.2 If Lessee shall be prevented or delayed from performing its
obligations (degree)r performing any work which it desires to perform or is
performing by reason of act of nature, strike or threat of strike, fire, flood,
war, mob violence, court order, unavoidable casualties, or any other
enumeration, beyond the control of Lessee which cannot be overcome by the means
normally employed in performance and at comparable and reasonable expense, then
the duration of this Lease shall be extended for a period equal to the period of
Force Majeure and any failure to perform obligations shall not be deemed a
breach of this Lease. Lessee agrees to use reasonable
-12-
<PAGE>
diligence to remove such causes of disability as may occur from time to time.
This paragraph shall not excuse payment or delay payment of royalties.
ARTICLE X
---------
LEASE PREMISES
--------------
10.1 The parties hereto agree that during the term of this Lease, in the
event title to any of the Leased Premises is contested by any person or persons,
corporation or corporations, or governmental agencies, Lessee will, at its own
election and expense, defend the title to any of the Leased Premises before any
court of competent jurisdiction or any administrative body. Lessee will defend
any actions for damages relating to exploration, development, or mining
activities by Lessee on Leased Premises.
10.2 Lessor, upon execution of this Lease, shall furnish Lessee with
copies of all property maps possessed by Lessor on the Leased Premises and
adjacent lands.
ARTICLE XI
----------
TAXES AND DUTIES
----------------
11.1 Lessee agrees to pay (i) all taxes hereat~er levied and assessed
upon all machinery and improvements placed by Lessee upon the LeaSed Premises,
(ii) taxes herea~er levied upon the Leased Premises, including taxes assessed by
reason of net annual proceeds, and (iii) occupation or severance taxes imposed
upon the mining or production of Leased Minerals from the Leased Premises or any
other taxes, assessments or charges resulting from Lessee activities on Leased
Premises.
11.2 Lessor agrees to promptly transmit to Lessee any notices pertaining
to taxes, assessments and charges which Lessor may receive.
11.3 Lessee, in all operations under this Lease, will comply with all
applicable State and Federal laws, including the social laws relative to
employment, safety, workmen's compensation insurance, social security,
unemployment tax and tax withholding. Lessee shall hold Lessor harmless from
chims of damage to persons or property arising from Lessee's operations under
this Lease. Lessee will comply with hazardous waste, air and water quality
requirements.
11.4 Lessee will do all reclamation work required by the Bureau of Land
Management, the State of Utah or Beaver County in a timely manner.
-13-
<PAGE>
ARTICLE XII
-----------
ASSIGNMENT AND TRANSFER
-----------------------
12.1 Lessee will not convey, assign or transfer its interest in this
lease or any part of this Lease without the prior notification and consent in
writing of the Lessor. The assignee party will, as a condition of consent to the
transfer, agree to be bound by and subject to the terms of this Lease. Any
assignee party will provided a photocopy of the executed copy of assignment and
is delivered to the other party. Overriding royalty assignments will not become
effective, even if otherwise valid without the consent in writing of the Lessor.
Lessee, its successor and assigns, may not assign or convey royalty, overriding
royalty, production payment or like interest in the Leased Premises without
Lessor's prior written consent.
ARTICLE XIII
------------
MISCELLANEOUS
-------------
13.1 This agreement shall be governed by the laws of the State of Utah.
13.2 Title headings are for convenience only and shall not be deemed a
part of this Lease.
13.3 This Lease and Its Exhibit contain the entire agreement between the
parties and supersedes entirely any prior understandings whether oral or
written.
13.4 If any provisions of this Lease is or becomes void or unenforceable
by Force of Law, the other provisions shall remain valid and enforceable.
13.5 Lessor's and Lessee's proper address shall be the following, which
either may change by giving written notice to the other.
Daniel H. Engh
2340 East Germania Circle
Sandy, Utah 84093
Utah Clay Technology, Inc. 3985 South 2000 East
Salt Lake City, Utah 8124
13.6 The failure to enforce at any time any provisions of this Lease,
shall in no way be construed to be a waiver of such provisions, or to affect
validity of the Lease.
-14-
<PAGE>
13.7 This Lease shall be binding upon and inure to the benefit of the
successors and permitted assigns of the parties.
13.8 A Memorandum of this Lease may be filed by either party.
13.9 Lessee will diligently explore and conduct operations on or near
Leased Premises throughout the term of this Lease in a manner reasonably
calculated to advance the production of minerals from Leased Premises.
ARTICLE XIV
-----------
EXPLORATION REQUIREMENTS
------------------------
14.1 Lessor agrees to Utah Clay Technology, Inc. as the party that will
be the operator's of the exploration, and mining of the lode and placer claims
referred to in Exhibit A. Lessee agrees that it can not transfer or assign ail
or part of being the operator of the exploration, and mining to any other party.
IN WITNESS WHEREOF, this Lease has been executed and delivered by
Lessor to Lessee as of the day and year first above written.
/s/Daniel H. Engh
- -------------------------------
Daniel H. Engh
Lessor
/s/Connie L. Engh
- -------------------------------
Connie L. Engh
Lessor
/s/Dennis S. Engh
- -------------------------------
Dennis S. Engh
Lessor
-15-
<PAGE>
/s/Judy A. Engh
- -------------------------------
Judy A. Engh
Lessor
/s/Darin Engh
- -------------------------------
Darin Engh
Lessor
/s/Holly Engh Kingdon
- -------------------------------
Holly Engh (a.k.a. Holly Kingdon
Lessor
UTAH CLAY TECHNOLOGY, INC.
BY:/s/Dennis S. Engh
----------------------------
President
Lessee
State of Utah
S.S.
County of Salt Lake
On this 22nd day of October, 1996, personally appeared before me.
Daniel H. Engh, Connie L. Engh, Dennis S. Engh, Judy A. Engh, Darin Engh, Holly
- --------------------------------------------------------------------------------
Engh (a.k.a. Holly Kingdon). Dennis S. Engh, having authority to sign as
- ----------------------------
President of Utah Clay Technology, Inc. and by authority of the board of
Directors, who acknowledged to me that they executed the foregoing document.
- ------------------------------ RESIDING AT:
-----------------------
-----------------------------------
-----------------------------------
-----------------------------------
-16-
<PAGE>
EXHIBIT A
---------
To Mining Lease Agreement dated as of March 1st,
1994, by and among Daniel H. Engh, Connie L. Engh,
Dennis S. Engh, Judy A. Engh, Darin Engh, Holly Engh
(a.k.a. Holly Kingdon) and Utah Clay Technology, Inc.
PART 1
- ------
With respect to the Properties, Daniel H. Engh and Dennis S. Engh are in
control and ownership of Engh Family placer claims described below:
The Following Property consists of Placer Claims plus, all other claims
located in Townships 29 South Range 13 & 14 West Salt Lake Medrian, Beaver
County, Utah which Owner has claim to in this area.
NAME TYPE OF
OF CLAIM CLAIM FILING DATE BOOK & PAGE UMC NUMBER
-------- ------- ----------- ----------- ----------
BLUE #201 (PLACER) 07/22/88 238 374 313316
BLUE #202 (PLACER) 07/22/88 238 375 313317
BLUE F203 (PLACER) 07/22/88 238 376 313318
BLUE F204 (PLACER) 07/22/88 238 377 313319
BLUE #205 (PLACER) 07/22/88 238 378 313320
BLUE #206 (PLACER) 07/22/88 238 379 313321
BLUE F207 (PLACER) 07/22/88 238 380 313322
BLUE F208 (PLACER) 07/22/88 238 381 313323
BLUE #209 (PLACER) 07/22/88 238 382 313324
BLUE #210 (PLACER) 07/22/88 238 383 313325
BLUE//211 (PLACER) 07/22/88 238 384 313326
BLUE #212 (PLACER) 07/22/88 238 385 313327
BLUE//213 (PLACER) 07/22/88 238 386 313328
BLUE F214 (PLACER) 07/22/88 238 387 313329
BLUE #215 (PLACER) 07/22/88 238 388 313330
1
<PAGE>
BLUE #216 (PLACER) 07/22/88 238 389 313331
BLUE #217 (PLACER) 07/22/88 238 390 313332
BLUE #218 (PLACER) 07/22/88 238 391 313333
BLUE//219 (PLACER) 07/22/88 238 392 313334
BLUE #220 (PLACER) 07/22/88 238 393 313335
The above claims are Located and Recorded in Beaver County, Utah.
This mininG lease contains a Reserved Royalty of 3% on all ores, minerals or
Products (called "Production") mined and removed from the leased Premises. Said
Royalty shall be calculated based upon the gross value of the production.
Additionally, the below Julie White lode or placer claims have a minimum royalty
of $5,000.00 and or a production royalty of $2.50/ton which is adjusted by the
Consumer Prices Index for all Urban Consumers for U.S. City average as published
by the U.S. Department of Labor Bureau of Labor Statistics.
With respect to the Properties, Daniel H. Engh and Dennis S. Engh have a mining
lease Dated November 9th 1992 by and between Don W. Fullmer (Lessor) and Daniel
H. Engh, Dennis S. Engh (Lessee). All terms and conditions of the November 9,
1992 mining lease will be a part of this minin~ lease. Said claims of this
mining lease are described below:
The Property consists of Lode Claims and Placer claims Plus, all other
claims located in Townships 29 South Range 13 West and Township 29 South 14 West
Salt Lake Medrian, Beaver County, Utah which Owner has claim to in this area.
CLAIM NAME DESCRIPTION UMC NUMBER
- -------------- ----------------------------------- ----------
Julie White #1 NW 1/4 SEC. 9, TWNS. 29 SO. R-13. (PLACER) 303016
Julie White #2 SW 1/4 SEC. 9, TWNS. 29 SO. R-13. (PLACER) 303017
Julie White #3 NE 1/4 SEC. 8, TWIGS. 29 SO. R-13. (PLACER) 303018
Julie White #4 SE 1/4 SEC. 8, TWIGS. 29 SO. R-13. (PLACER) 303019
Julie White #5 NW 1/4 SEC. 8, TWNS. 29 SO. R-13. (PLACER) 303020
Julie White #6 NE 1/4 SEC. 7, TWNS. 29 SO. R-13. (PLACER) 303021
Julie White #7 NW 1/4 SEC. 7, TWNS. 29 SO. R-13. (PLACER) 303022
Julie White #8 NE 1/4 SEC. 12,TWNS. 29 SO. R-14. (PLACER) 303023
Julie White #9 SE 1/4 SEC. 1, TWNS. 29 SO. R-14. (PLACER) 303024
2
<PAGE>
(LODES CLAIMS)
------------------
Julie White #11 NE 1/4 SEC. 7 & NW ~ SEC. 8,TWNS. 29 SO. R-13 W 302980
Julie White #12 NE 1/4 SEC. 7 & NW ~ SEC. 8,TWNS. 29 SO. R-13 W 302981
Jutie White #13 NW 1/4 SEC. 8, TWNS. 29 SO R-13 W. 302982
Julie White #14 NW 1/4 & NE 1/4 SEC. 8, TWNS 29 SO. R-13 W. 302983
Julie White #15 NW 1/4 SEC. 8. TWNS. 29 SO R-13 W. 302984
Julie White #16 NW 1/4 & NE 1/4 SEC. 8, TWNS 29 SO. R-13 W. 302985
Julie White #17 NE 1/4 SEC. 8, TWNS. 29 SO R-13 W. 302986
Julie White #18 NE 1/4 SEC. 8, TWNS. 29 SO R-13 W. 302987
Julie White #19 NE 1/4 SEC. 8, TWNS. 29 SO R-13 W. 302988
Julie White #20 NE & NW 1/4 SEC. 8, TWNS. 29 SO. R-13 W. 302989
Julie White #21 NE 1/4 SEC. 8, TWNS. 29 SO. R-13 W. 302990
Julie White #22 NE & SE 1/4 SEC. 8, TWNS. 29 SO. R-13 W. 302991
Situated in Township 29 South, Range 13 West, Township 29 South, Range
14, Salt Lake Meridian, Beaver County, Utah.
<PAGE>
Dated March 1st, 1994
PART 2
- ------
Area of Interest
ALl lands within the following described Areas of Interest including:
T29S, R13W Sections 2-6, 7-11, 14-18
T29S, R14W Sections 1-2, 11-14
T28S, R12W Section 31
T28S, R13W Sections 35, 36
T29S, R12W Sections 5-7, 18
T29S, R13W Sections 1-13
T29S, R14W Sections 1, 12, 13
and any lands in Township 29 South 13 West, Township 29 South 14 West to
define the boundary of Area of interest.
4
<PAGE>
AMENDMENT AGREEMENT
THIS AMENDMENT AGREEMENT made and entered into this 9th, day of
November, 1992, to the EXPLORATION FOR MINING AND MINERAL DEVELOPMENT LEASE,
-------------------------------------------------------
WITH OPTION TO PURCHASE PLACER AND LODE MINING CLAIMS, dated July 14, 1989, and
- -----------------------------------------------------
the AMENDMENT AGREEMENT, dated January 20, 1992, by and between DON W. FULLMER,
-------------------
whose address is 800 NORTH MAIN, FILMORE, UTAH 84631, herein referred to as
"Lessor" or "Owner" and DANIEL H. ENGH, DENNIS S. ENGH whose address is 2340
EAST GERMANIA CIRCLE, SANDY, UTAH 84093-1174, hereinafter referred to as
"Lessee"
WITNESSETH:
WHEREAS, Lessee wishes to change the above mentioned agreements, and
Owner wishes to change the same agreements, here by agree to amend the above
mentioned agreements,
WHEREAS, the owner is the sole owner, or the agent for the
association which is the sole owner of the unpatented mining claims listed in
Exhibit "A" of this agreement, hereinafter referred to as the "Leased Property",
and
WHEREAS, Lessee desires to lease the Leased Property, Owner and
Lessee hereby agree to the following (hereinafter referred to as the
"Agreement"):
WHEREAS, Lessor is owner of certain properties and property rights
situated in Beaver County, State of Utah, and more particularly described in the
attached Exhibit "A", incorporated by reference, and hereinafter referred to as
the "Leased Premises"; and
<PAGE>
AMENDMENT AGREEMENT
- -------------------
November 09 , 1992
Page 2 of 20
WHEREAS, Lessee desires to lease certain rights in and to the Leased
Premises which Lessor is willing to grant to Lessee;
NOW THEREFORE, in consideration of $100.00 paid by Lessee to Lessors
receipt of which is hereby acknowledged and the payments, covenants and
agreements hereinafter set forth the parties agree as follows:
1. The Leased Premises.
-------------------
The "Leased Premises" shall mean all of the property described in
Exhibit "A" attached hereto and made a part hereof, together with all of the
ores, minerals and materials thereon and thereunder, and all right, title and
all water, water rights, easements and rights of way now and hereafter owned or
held by Owner in, upon or under the said property, or in any way pertaining
thereto.
2. Warranties and Representations
------------------------------
Owner represents to Lessee: (1) that subject to the matters
specifically set forth in Exhibit "A," and subject to the matters set forth
below with respect to unpatented mining claims, Owner has the exclusive
possession of the mining claims and (2) that the Owner has the full right, power
and capacity to enter into this Lease upon the terms set forth herein. Since the
Leased Premises, as described in Exhibit "A" includes unpatented mining claims,
Owner represents and warrants to Lessee: (1) that Owner's title is subject to
paramount title of the United States of America and to the rights, if any, of
surface patentees; (2) that the acts of location performed by Owner on the
unpatented mining claims described in Exhibit "A" have been completed in
compliance with the
<PAGE>
AMENDMENT AGREEMENT
- -------------------
November 09 , 1992
Page 3 of 20
laws of the State of Utah and of the United States of America; and (3) that the
Notice Of Intent To Hold has been completed and filed with the Beaver County
Recorder and the BLM in Salt Lake City, Utah. (4) Lessee represents to owner:
(A) that Lessee has made a preliminary search of the Bureau of Land Management
records with regard to the leased premises and (B) That Lessee is aware of some
conflicting claims within the boundaries of the leased premises and (C) That
Lessee intends to do additional title research and to take such actions as are
necessary to perfect title in the Lessors favor, insofar as possible and (D)
That Lessee will refrain from or abandon all attempts to obtain title to the
Leased Premises except as provided by this by this lease, without first
obtaining owners written consent.
I. GRANT
1.1 Lessor hereby grants and leases to Lessee for and in
consideration of, and subject to all of the terms provisions and conditions
hereinafter set forth, the exclusive right and privilege to mine, extract,
remove and dispose of the all locatable Minerals in, upon or under the Leased
Premises, together with the right to use and occupy so much of the surface of
the Leased Premises as may be required for all purposes reasonably incident to
the mining, extracting, removal and disposal of the locatable Minerals according
to the provisions of this Lease.
II. LEASED MINERALS
2.1 "Leased Minerals" or "Locatable Minerals" as used herein shall
mean all locatable minerals acquired by virtue of
<PAGE>
AMENDMENT AGREEMENT
- -------------------
November 09 , 1992
Page 4 of 20
the placer or lode mining claims owned by owner.
2.2 Lessee understands and acknowledges hereby that there are current
Federal Potassium Leases on some of the same area as the Leased Premises. That
the Lessor can only convey the rights that it possesses in relation to
placer and 1ode mining claims being staked over the Federal Potassium Leases, as
allowed by the Multiple Minerals Development Act, 30 U.S.C. s 521 (1970),
and other State and Federal law.
III. TERM
3.1 The primary term of this Lease shall be for a period of five (5)
years from the date hereof and for so long thereafter as Leased Minerals are
produced in commercial quantities at more than 500 tons/month from the lands
described in Exhibit A by the Lessee, their partners, successors or assigns, for
at least ten months of each year' after the first year term has expired, subject
to extension or termination as hereinafter provided.
3.2 This Lease and the terms and conditions of this Lease agreement
issued by the Lessor are made with the Lessee herein on condition that Lessee
and any lawful successor in interest to Lessee shall perform all covenants
and terms and conditions herein set forth to be performed by Lessee or its
lawful assigns including payment of royalties as herein provided. Lessor may
issue written notice of termination and cancellation of this Lease, and
forfeiture, subject to paragraph 9.1: declaring that the Leased Premises and
each and every part thereof have thereby reverted to the Lessor, including any
and all fixtures and improvements required to be left with the property upon
expiration,
<PAGE>
AMENDMENT AGREEMENT
- -------------------
November 09 , 1992
Page 5 of 20
termination, or cancellation of this Lease.
3.3 Lessee may terminate this Lease at any time by giving Lessors
at least ninety (90) days prior written notice, together with a check in full
settlement of any royalties that are due and unpaid; upon giving such notice of
termination, Lessee shall be released of all its obligations except those
obligations which have theretofore accrued. Within Thirty (30) days after date
of termination, Lessee shall execute and record a release and quitclaim deed
releasing all of Lessee's right, title and interest in and to the Leased
Premises.
3.4 Upon the effective date of termination by Lessee, Lessor shall be
entitled to retain all funds paid to it by Lessee pursuant to this Lease.
3.5 Within sixty (60) days after termination from this Lease, Lessee
or its successor or assign will provide Lessor with a copy of all data prepared,
collected, and interpreted by or for it (including maps, drill data, assays,
analyses, geological surveys, topographic surveys, and other data pertaining to
the Leased Premises and the Leased Minerals. Lessee will provide readable copies
of all new factual geologic data and reports by February 15th of each year.
IV. CONSIDERATION
4.1 The Lessee in consideration of the granting of the rights and
privileges granted herein hereby covenants and agrees as follows:
<PAGE>
AMENDMENT AGREEMENT
- -------------------
November 09 , 1992
Page 6 of 20
(1) $5,000.00 due June 15, 1993 and $5,000.00 annual minimum royalty
beginning on the first anniversary of this lease and thereafter minimum
$5,000.00 each anniversary until Lessee terminates its rights. The minimum
royalty of $5,000 00, will be adjusted by the Consumer Prices Index for All
Urban Consumers for U.S. City Average as published by the U.S. Department of
Labor, Bureau of Labor Statistics who is created pursuants toSec. 5(a) of Public
Law 304, 79th Congress. The average at the end of December 1992 will be the
base year and any changes in the Consumer Prices Index for All Urban Consumers
U.S. City Average for the following year ended December will determine the
percent change in the $5,000.00 for the following year. Each year becomes the
new base year to measure change from.
(2) Production Royalty: A production royalty on Leased Minerals
which shall be Two Dollars and 50 Cents per ton ($2.50/ton) of ore removed from
or mined and processed upon the Leased Property.
(3) The production royalty of $2.50/ton stated in IV (2), will be
adjusted by the Consumer Prices Index for All Urban Consumers for U.S. City
Average as published by the U.S. Department of Labor, Bureau of Labor Statistics
who is created pursuant to Sec. 5(a) of Public Law 304, 79th Congress. The
average at the end of December 1992 will be the base year and any change in the
Consumer Prices Index for All Urban Consumers for U.S. City Average for the
following year ended December will determine the percent change in the $2.50/ton
for the following year. Each year becomes the new base year to measure change
from.
A). Annual Labor:
------------
(l) To perform upon the Leased Premises the annual
<PAGE>
AMENDMENT AGREEMENT
- -------------------
November 09 , 1992
Page 7 of 20
assessment work as set forth under the laws of the United States and the State
of Utah, and to prepare timely proof of the performance of such labor and to
record and file the same as required by law, and to furnish Lessor with a copy
thereof. Should this Lease be terminated as herein provided and the effective
date of such termination shall be ninety (90) days, or less, prior to the end
of the then current assessment year, Lessee shall nevertheless be required to
perform upon of the Leased Premises the annual labor for such assessment year
and shall prepare timely proof thereof, record the same, and furnish Lessor
with a copy of such proof as hereinafter provided. In the performance of annual
labor upon or for the benefit of the Leased Premises, Lessee shall be
entitled to perform such work upon any of the claims or upon any of the groups
of claims comprising the Leased Premises so long as such work shall qualify for
the purpose of the development of the Leased Premises as a contiguous group
pursuant to the requirements of law relating to group work on mining claims
except as herein provided.
(2) Assessment work will be completed by July 15 of each
year starting with the 1993 Assessment Year, or Lessor may do the work and
charge reasonable costs time and expenses to Lessee. Lessee will furnish to
Lessor a copy of the proof-of-labor with the County, no later than September
15th of each year.
B). PRODUCTION ROYALTY PAYMENTS:
---------------------------
(1) Production royalty shall be paid within thirty (30) days
after receipt of payment for each shipment or when otherwise due, and each
payment shall be accompanied by a statement
<PAGE>
AMENDMENT AGREEMENT
- -------------------
November 09 , 1992
Page 8 of 20
showing the date(s) of shipment(s), quantity and value of each shipment, to whom
sold and the gross value received, and any cost deductions.
(2) Method of Production royalty payments shall be in U.S.
dollars payable by cash or valid check drawn on available funds, and shall be
deemed made when deposited at LeSsor's single depository at:
Paradise Management Co.
P.O. Box 368
Filmore, Utah 84631
Phone (801) 743-5848
Lessor may change its single depository at any time by giving written notice to
Lessee.
V. PERIODIC REPORTS
5.1 Lessee agrees to make semi-annual written reports to lessor (on
or before January 1 and July 1 each year) detailing th exploration, development
and mining work done upon the leased premises, quantity of ores, minerals or
products shipped from the Leased Premises, the identity of the buyer(s) thereof
or the place where such ores, minerals or products are stockpiled, the plans for
the Leased Premises during the next six (6) month period, and other activities
conducted or planned for the Leased Premises.
5.2 Lessee shall audit all operations upon the Leased Premises at
least annually, and furnish to Lessor a copy of such audit within thirty (30)
days after completion.
<PAGE>
AMENDMENT AGREEMENT
- -------------------
November 09 , 1992
Page 9 of 20
VI. RIGHTS AND OBLIGATIONS OF LESSEE
6.1 The Lessee will forthwith have and is hereby granted by Lessor
the right and privilege from the date hereof and so long thereafter as this
Lease remains in force and effect of entering into and upon the Leased Premises
and the right to drill and excavate thereon and therein holes, pits, tunnels,
shafts, and other such excavations and to conduct therein and elsewhere such
surveys, exploration, investigations, sampling, milling, screenifig and other
work similar as well as dissimilar as Lessee in its sole judgment and discretion
may wish to know relating to any and all facts relative to the geology of the
Leased Premises, including but not limited to the geology of the Leased Minerals
and the mining, milling, beneficiating, and marketing thereof, together with the
right to drain water and materials and to pile overburden at places most
convenient to Lessee, and the right to dig or bore wells and use any water in or
upon said lands and the right to construct and~ place upon said lands any
and all buildings, dams, drains, machinery, roads, railroads, pipe and power
lines and other improvements that may be convenient for said purposes, all of
which improvements will become the full and complete property of the Lessor
upon termination or assignment of Lease back to Lessor, and Lessee will be under
no further obligation or liability with respect thereto except for reclamation
and except as provided in paragraph 6.7 below. Lessee will have the paramount
possession and control of the Leased Premises with regard to the Leased Mineral
rights obtained herein during and throughout the life of this Lease and shall be
entitled to conduct therein and thereon all mining, milling and beneficiation
uses and purposes reasonably incident thereto as it shall deem satisfactory
and advantageous so far as Lessee tries not to interfere with the rights of the
Federal potassium leases. All work shall be conducted by Lessee as Lessee in its
sole judgment and discretion deems best and in a good and
<PAGE>
AMENDMENT AGREEMENT
- -------------------
November 09 , 1992
Page 10 of 20
minerlike fashion. Stockpiles and tailings covered by Lease, remain the property
of the Lessor upon surrender of Lease. Mining timbers in place shall remain
affixed as part of the Leased Premises unless released in writing to Lessee.
6.2 Lessor or his agents duly authorized in writing will have at all
reasonable times and at his own risk access to all parts of Leased Premises and
associated premises for the purposes of reasonable inspection of operations,
record keeping, and accounts to the end that Lessor might verify that the
specified royalty payments are being made properly and that operations are being
conducted in a minerlike fashion. Lessee will keep records in a businesslike
manner.
6.3 Any and all future leases, transfers, encumbrances or conveyances
of interests in the Leased Premises not covered by this Lease shall be
subordinate to and subject to the rights of Lessee, his successors, assigns
of sublessees, so long as this Lease is in force and effect.
6.4 Lessee shall pay all expenses incurred by it and shall permit no
liens to attach to Leased Premises on account of any debt for materials or
services furnished for the benefit of the Leased Premises while this Lease is in
effect.
6.5 Lessee will indemnify and forever hold harmless and defend Lessor
from any demand, claim, suit, judgment or liability resulting from the
exploratory or development activities of Lessee conducted pursuant to this
agreement. Upon request of Lessor, Lessee will furnish evidence of sufficient
workmen's compensation, liability and other insurance to cover anticipated
risks, or evidence that it is adequately self-insured for such contingencies.
<PAGE>
AMENDMENT AGREEMENT
- -------------------
November 09, 1992
Page 11 of 20
6.6 Lessee agrees that Leased Minerals from the Leased Premises
shall not be mixed or co-mingled with minerals, ore, substances or materials
from other properties or lands except as agreed by Lessor.
6.7 In the event of the termination of this Lease by lapse of time or
otherwise, Lessee shall grade and slope and otherwise reclaim that portion of
the land being leased pursuant hereto, which was the site of actual mining
operations, in accordance with the requirements of the State and Federal
regulations then in effect and Owner may elect to assume the burden of
reclaiming the land, by notifying Lessee in writing of his intent to assume said
burden, in which event, Lessee will obtain not more than three (3) bids for
Performance of the reclamation work required by this paragraph, and will pay
over to owner a sum equal to ninety-five percent (95%) of the lowest of said
bids. Thereafter, Lessee shall be relieved from all duties, expenses or
responsibility with respect to such reclamation and Owner, simultaneously with
or prior to the receipt of said payment, shall obtain from the
appropriate-Government agencies and deliver to Lessee all documents necessary to
release Lessee from all further responsibility for the performance of such
reclamation work.
VII. PATENT OF CLAIMS
7.1 Upon request of Lessee at any time during the term of this
Lease, the Lessor agrees to undertake to obtain patent to any of the mining
claims designated by Lessee. Lessee, at its own expense, shall prepare all
documents, compile all data and comply in all respects with all applicable laws
in this endeavor, and
<PAGE>
AMENDMENT AGREEMENT
- -------------------
November 09, 1992
Page 12 of 20
Lessor shall execute all documents required for this purpose and shall cooperate
fully with Lessee in the patent application and proceedings.
7.2 The rights of Lessor and Lessee under this Lease will extend to
any and all amended, relocated, or patented claims referred to in Exhibit A.
Lessor and Lessee agree that all amendments, relocations, or staking new cl&ims
in the claimed area, of the claims referred to in Exhibit A, will be made in the
name of Lessor. Some claims need amending and it is known hereby to the Lessee.
Any valid mining claims staked by Lessor, or his agents, within the Leased
Premises shall fall under and be a part of this Lease.
VIII. DEFAULT AND FORCE MAJEURE
8.1 If Lessee will be in default in performing any obligations
(except the timely payment of royalties), Lessee shall lose no rights unless,
within sixty (60) days following written notice from Lessor, given at the
address herein specified, specifying such failure or breach, Lessee shall fail
to make such payment or undertake to cure such default by commencement and
follow through of appropriate performance, within a reasonable amount of time.
Upon such failure, Lessormay terminate this Lease.
8.2 If Lessee shall be prevented or delayed from performing its
obligations or performing any work which it desires to perform or is performing
by reason of act of nature, strike or threat of strike, fire, flood, war, mob
violence, court order, unavoidable casualties, or any other enumeration, beyond
the
<PAGE>
AMENDMENT AGREEMENT
- -------------------
November 09, 1992
Page 13 of 20
control of Lessee which cannot be overcome by the means normally employed in
performance and at comparable and reasonable expense, then the duration of this
Lease shall be extended for a period equal tothe period of Force Majeure and any
failure to perform obligations shall not be deemed a breach of this Lease.
Lessee agrees to use reasonable diligence to remove such causes of disability as
may occur from time to time. This paragraph shall not excuse payment or delay
payment of royalties.
IX. Lease Premises.
9.1 The parties hereto agree that during the term of this Lease, in
the event title to any of the Leased Premises is contested by any person or
persons, corporation or corporations, or governmental agencies, Lessee will, at
its own election and expense, defend the title to any of the Leased Premises
before any court of competent jurisdiction or any administrative body. Lessee
will defend any actions for damages relating to exploration, development, or
mining activities by Lessee on Leased Premises.
9.2 Lessor, upon executionof this Lease, shall furnish Lessee with
copies of all property maps possessed by Lessor on the Leased Premises and
adjacent lands.
X. TAXES AND DUTIES
10.1 Lessee agrees to pay (i) all taxes hereafter levied and assessed
upon all machinery and improvements placed by Lessee upon the Leased Premises,
(ii) taxes hereafter levied upon the Leased Premises, including taxes assessed
by reason of net annual proceeds, and (iii) occupation or severance taxes
imposed upon the mining or production of Leased Minerals from the Leased
<PAGE>
AMENDMENT AGREEMENT
- -------------------
November 09, 1992
Page 14 of 20
Premises or any other taxes, assessments or charges resulting from Lessee
activities on Leased Premises.
10.2 Lessor agrees to promptly transmit to Lessee any notices
pertaining to taxes, assessments and charges which Lessor may receive.
10.3 Lessee, in all operations under this Lease, will comply with all
applicable State and Federal laws, including the social laws relative to
employment, safety, workmen's compensation insurance, social security,
unemployment tax and tax withholding. Lessee shall hold Lessor harmless from
claims of damage to persons or property arising from Lessee's operations under
this Lease. Lessee will comply with hazardous waste, air and water quality
requirements.
10.4 Lessee will do all reclamation work required by the Bureau
of Land Management, the State of Utah or Beaver County in a timely manner.
XI. ASSIGNMENT AND TRANSFER
11.1 Lessee can convey, assign or transfer its interest in this lease
or any part of this Lease without the prior notification and consent in writing
of the Lessor. The assignee party will, as a condition of consent to the
transfer, agree to be bound by and subject to the terms of this Lease. Any
assignee party will provided a photocopy of the executed copy of assignment and
is delivered to the other party. Overriding royalty assignments will not become
effective, even if otherwise valid without the consent in writing of the Lessor.
Lessee, its successor and assigns, may not assign or convey royalty, overriding
royalty, production payment or like interest in the Leased Premises
<PAGE>
AMENDMENT AGREEMENT
- -------------------
November 09 , 1992
Page 15 of 20
without Lessor's prior written consent.
XII. MISCELLANEOUS
12.1 This agreement shall be governed by the laws of the State of
Utah.
12.2 Title headings are for convenience only and shall not be deemed
a part of this Lease.
12.3 This Lease and Its Exhibit contain the entire agreement between
the parties and supersedes entirely any prior understandings whether oral or
written.
12.4 If any provisions of this Lease is or becomes void or
unenforceable by Force of Law, the other provisions shall remain valid and
enforceable.
12.5 Lessor's and Lessee's proper address shall be the following,
which either may change by giving written notice to the other.
Don W. Fullmer
P.O. Box 268
800 North Main
Filmore, Utah 84631
Daniel H. Engh, Dennis S. Engh
2340 East Germania Circle
Sandy, Utah 84093-1174
12.6 The failure to enforce at any time any provisions of this Lease,
shall in no way be construed to be a waiver of such provisions, or to affect
validity of the Lease.
12.7 This Lease shall be binding upon and inure to the
<PAGE>
AMENDMENT AGREEMENT
- -------------------
November 09, 1992
Page 16 of 20
benefit of the successors and permitted assigns of the parties.
12.8 A Memorandum of this Lease may be filed by either party.
12.9 Lessee will diligently explore and conduct operations on or
near Leased Premises throughout the term of this Lease in a manner reasonably
calculated to advance the production of minerals from Leased Premises.
IN WITNESS WHEREOF, this Lease has been executed and delivered by
Lessor to Lessee as of the day and year first above written.
/s/Don W. Fullmer
- -------------------------------
Don W. Fullmer
LESSOR
/s/Daniel H. Engh /s/Dennis S. Engh
- -------------------------------- ----------------------------------
Daniel H. Engh Dennis S. Engh
LESSEE LESSEE
<PAGE>
AMENDMENT AGREEMENT
- -------------------
November 09, 1992
Page 17 of 20
ACKNOWLEDGEMENT
STATE OF UTAH
SS.
COUNTY OF Millard
On this 9th day of November, 1992, before me personally appeared DON W.
FULLMER to me known to be the person described in and who executed the foregoing
instrument and acknowledged that he executed the same as a free act and deed.
Given under my hand and seal this 9th day of November, 1992.
My Commission Expires October 11, 1994.
----------------------------------
ACKNOWLEDGEMENT
STATE OF UTAH
SS.
COUNTY OF Salt Lake
On this 9th day of November, 1992, before me personally appeared DANIEL H.
ENGH to me known to be the person described in and who executed the foregoing
instrument and acknowledged that he executed the same as a free act and deed.
Given under my hand and seal this 9th day of November, 1992.
My Commission Expires April 15, 1995.
----------------------------------
<PAGE>
AMENDMENT AGREEMENT
- -------------------
November 09, 1992
Page 18 of 20
ACKNOWLEDGMENT
STATE OF UTAH
SS.
COUNTY OF Salt Lake
On this 9th day of November, 1992, before me personally appeared DENNIS S.
ENGH to me known to be the person described in and who executed the foregoing
instrument and acknowledged that he executed the same as a free act and deed.
Given under my hand and seal this 9th day of November, 1992.
My Commission Expires April 15, 1995.
----------------------------------
<PAGE>
AMENDMENT AGREEMENT
- -------------------
November 09, 1992
Page 19 of 20
EXHIBIT A
To the Mining Lease Agreement
Between Don W. Fullmer, and Daniel H. Enqh, Dennis S. Enqh.
-------------- ------------------------------
Dated the 9th day of November, 1992.
The Property consists of Lode Claims and Placer claims Plus,
all other claims located in Townships 29 South Range 13 West and
Township 29 South 14 West Salt Lake Medrian, Beaver County, Utah which
Owner has claim to in this area.
CLAIM NAME DESCRIPTION UMC NUMBER
- --------------- ------------------------------------------ ----------
Julie White #1 NW 1/4 SEC. 9, TWNS. 29 SO. R-13. (PLACER) 303016
Julie White #2 SW 1/4 SEC. 9, TWNS. 29 SO. R-13. (PLACER) 303017
Julie White #3 NE 1/4 SEC. 8, TWNS. 29 SO. K-13. (PLACER) 303018
Julie White #4 SE 1/4 SEC. 8, TWNS. 29 SO. R-13. (PLACER) 303019
Julie White #5 NW 1/4 SEC. 8, TWNS. 29 SO. R-13. (PLACER) 303020
Julie White #6 NE 1/4 SEC. 7, TWNS. 29 SO. R-13. (PLACER) 303021
Julie White #7 NW 1/4 SEC. 7, TWNS. 29 SO. R-13. (PLACER) 303022
Julie White #8 NE 1/4 SEC. 12,TWNS. 29 SO. R-14. (PLACER) 303023
Julie White #9 SE 1/4 SEC. 1, TWNS. 29 SO. R-14. (PLACER) 303024
(LODES CLAIMS)
--------------------
Julie White #ll NE 1/4 SEC. 7 & NW 1/4 SEC. 8,TWNS. 29 SO. R-13 W 302980
Julie White #12 NE 1/4 SEC. 7 & NW 1/4 SEC. 8,TWNS. 29 SO. R-13 W 302981
Julie White #l3 NW 1/4 SEC. 8, TWNS. 29 SO. R-13 W. 302982
Julie White #14 NW 1/4 % 1/4 NE 1/4 SEC. 8, TWNS. 29 SO. R-13 W. 302983
Julie White #15 NW 1/4 SEC. 8. TWNS. 29 SO. R-13 W. 302984
Julie White #16 NW 1/4 & NE 1/4 SEC. 8, TWNS. 29 SO. R-13 W. 302985
Julie White #17 NE 1/4 SEC. 8, TWNS. 29 SO. R-13 W. 302986
Julie White #18 NE 1/4 SEC. 8, TWNS. 29 SO. R-13 W. 302987
Julie White #19 NE 1/4 SEC. 8, TWNS. 29 SO. R-13 W. 302988
Julie White #20 NE & NW 1/4 SEC. 8, TWNS. 29 SO. R-13 W. 302989
Julie White #21 NE 1/4 SEC. 8, TWNS. 29 SO. R-13 W. 302990
Julie White #22 NE & SE 1/4 SEC. 8, TWNS. 29 SO. R-13 W. 302991
Situated in Township 29 South, Range 13 West, Township 29 South,
Range 14, Salt Lake Meridian, Beaver County, Utah.
<PAGE>
AMENDMENT AGREEMENT
- -------------------
November 09, 1992
Page 20 of 20
CLAIM NAME UMC NUMBER
- --------------------- ----------
Julie White #23 326947
Julie White #24 326948
Julie White #25 326949
Julie White #26 326950
Julie White #27 326951
Julie White #28 326952
Julie White #29 326953
Julie White #30 326954
Julie White #31 326955
Julie White #32 326956
Julie White #33 326957
Julie White #34 326958
Julie White #35 326959
Julie White #36 326960
Julie White #37 326961
Julie White #38 326962
Situated in Township 29 South, Range 13 West, Salt Lake Meridian,
Beaver County, Utah.
<PAGE>
ADDENDUM TO MINING LEASE
This Addendum to Mining Lease is made tlxis lSth day of March, 2000 by and
between Don W. Fullmer and Areola B. Fullmer, his wife. 905 North Main Street,
Fillmore, Utah 94631. hereinafter referred to as "Lessor;" and Daniel H. Engh
and Dennis S. Engh whose address is 2340 East Oennania Circle. Sandy, Utah
84093-1174, hereinafter referred to as "Lessee." In consideration: of bringing
minimum royalty payments up to date through paynents in the amount of
$24.976.21, the receipt and adequacy of which is hereby acknowledged, Lessor
hereby acknowledges that file items of default contained in the Notice dated
December 31, 1999. incorporated by this reference, are hereby satisfied in full
or waived as to past acts only.
In consideration of the foregoing funds paid to Lessor. Lessor also
ratifies the following Mining Lease No. 1 - dated November 9, 1992 with Daniel
H. Engh and Dennis S. Engh as being in full force and effect, without any
modification of the lease or any waiver of the lease term as to future
performance except at Paragraph 3.1 of the Mining Lease, the primary term and
the requirement to obtain commercial production are extended for five (5) years
hereof.
The leases and claims covered thereby are more particularly described on
the attached Exhibit A, incorporated by this reference.
This Addendum shall be effective on the date above.
/s/Don W. Fullmer /s/Daniel H. Engh
- --------------------------------- ----------------------------------
Don W. Fullmer, (Lessor) Daniel H. Engh, (Lessee)
/s/Arnola B. Fullmer /s/Dennis S. Engh
- --------------------------------- ----------------------------------
Arnola B. Fullmer (Lessor) Dennis S. Engh, (Lessee)
<PAGE>
To The ADDENDUM TO MINING LEASE
Page 2
STATE OF UTAH
SS
County of Millard
On this 15th day of March, 2000, personally appeared before me Don W.
Fullmer and Arnola B. Fullmer, his wife, who acknowledged to me
that they executed the foregoing Addendum to Mining Lease.
/s/Barbara-Ann Iverson
----------------------------------
NOTARY PUBLIC
Residing at: 390 S. 100E
---------------------
Fillmore, UT
My Commission Expires:
- ---------------------------------
STATE OF UTAH
SS
COUNTY OF Millard
On this 15th day of March, 2000, personally appeared before me Daniel H.
Engh and Dennis S. Engh, who acknowledge to me that they executed the foregoing
Addendum to Mining Lease.
/s/Barbara-Anne Iverson
----------------------------------
NOTARY PUBLIC
Residing At: 390 S. 100E
----------------------
Fillmore, UT
My Commission Expires:
- ---------------------------------
<PAGE>
To The ADDENDUM TO MINING LEASE
Page 3
Exhibit A
Mining Lease #1
- ---------------
With respect to the Properties, Daniel H. Engh and Dennis S. Engh have a
AMENDMENT AGREEMENT Dated November 9th 1992 by and between Don W. Fullmer
Lessor) and Daniel H. Engh, Dennis S. Engh (Lessee). All terms and conditions of
the November 9, 1992. AMENDMENT AGREEMENT will be a part of this Letter
Agreement. Said claims of this AMENDMENT AGREEMENT are described below:
The Property consists of Lode Claims and Placer claims Plus, all other
claims located in Townships 29 South Range 13 West and Township 29 South 14 West
Salt Lake Medrian. Beaver County, Utah which Owner has claim to in this area.
CLAIM NAME DESCRIPTION UMC NUMBER
- ---------- ------------ ----------
Julia White #1 NW 1/4 SEC. 9, TWNS. 29 SO. R-13. (PLACER) 303016
Julia White #2 SW 1/4 SEC. 9, TWNS. 29 SO. R-13. (PLACER) 303017
Julia White #3 NE 1/4 SEC. 8, TWNS. 29 SO. R-13. (PLACER) 303018
Julie White #4 SE 1/4 SEC. 8, TWNS. 29 SO. R-13. (PLACER) 303019
Julia White #5 NW 1/4 SEC. 6, TWNS. 29 SO. R-13. (PLACER) 303020
Julia White #6 NE 1/4 SEC. 7, TWNS. 29 SO. R-13. (PLACER) 303021
Julia White #7 NW 1/4 SEC. 7, TWNS. 29 SO. R-13. (PLACER) 303022
Julia White #8 NE 1/4 SEC. 12,TWNS. 29 SO. R-14. (PLACER) 303023
Julia White #9 SE 1/4 SEC. 1, TWNS. 29 SO. R-14. (PLACER) 303024
(LODES CLAIMS)
--------------------
Julia White #11 NE 1/4 SEC. 7 & NW 1/4 SEC. 8, TWNS. 29 SO. R-13 W 302980
Julia White #12 NE 1/4 SEC. 7 & NW 1/4 SEC. 8, TWNS. 29 SO. R-13 W 302981
Julia Whi~e #13 NW 1/4 SEC. 8, TWNS. 29 SO. R-13 W. 302982
Julia White #14 NW 1/4 & NE 1/4 SEC. 8, TWONS. 29 SO. R-13 W. 302983
Julia White #15 NW 1/4 SEC. 8, TWNS. 29 SO. R-13 W. 302984
Juli~ White #16 NW 1/4 & NE 1/4 SEC. 8, TWONS. 29 SO. R-13 W. 302985
Juli~ White #17 NE 1/4 SEC. 8, TOWNS. 29 SO. R-13 W. 302986
Julia White #18 NE 1/4 SEC.8, TOWNS. 29 SO. R-13 W. 302987
Julia White #l9 NE 1/4 SEC. 8, TWNS. 29 SO. R-13 W. 302988
Julia.White #20 NE & NW 1/4 SEC. 8, TWNS. 29 SO. R-13 W. 302989
Julia White #21 NE 1/4 SEC. 8, TWNS. 29 SO. R-13 W. 302990
Julia white #22 NE & SE 1/4 SEC. 8, TWNS. 29 SO. R-13 W. 302991
Situated in Township 29 South, Range 13 West, Township 29 South, Range 14,
Salt Lake Meridian, Beaver County, Utah.
Exhibit A
Mining Lease Blawn Wash
- -----------------------
To Mining Lease Agreement dated as of December 31st, 1999, by and among Daniel
H. Engh, Connie L. Engh, Dennis S. Engh, Judy A. Engh, Darin Engh, Holly Engh
(a.k.a. Holly Kingdon) and Utah Clay Technology, Inc.
PART 1
- ------
With respect to the Properties, Daniel H. Engh and Dennis S. Engh are in
control and ownership of Engh Family Lode and placer claims described below:
The Following Property consists of Placer Claims plus, all other claims
located in Townships 29 South Range 13 & 14 West Salt Lake Medrian, Beaver
County, Utah which Owner has claim to in this area.
The Property consists of Lode Claims and Placer claims Plus, all other
claims located in Townships 29 South Range 15 West and Township 30 South 15 West
Salt Lake Medrian, Beaver County, Utah which Owner has claim to in this area.
<TABLE>
<CAPTION>
Claim Name UMC Nos.
---------- --------
<S> <C> <C>
Meadow Nos. 15-20 305325-305330
Brooke Nos. 30-33 305331-305334
Blue Nos. 20-46 310617-310643
Blue Nos. 47-62 312037-312052
Blue Nos. 63-64 313298-313299
Blue Nos. 65-66 312053-312054
Blue Nos. 67-68 313300-313301
Blue Nos. 69-70 312055-312056
Blue Nos. 71-76 313302-313307
</TABLE>
Page 1
<PAGE>
<TABLE>
<CAPTION>
CLAIM NAME BOOK PAGE UMC NUMBER
---------- ---- ---- ----------
<S> <C> <C> <C>
BLUE #93 238 366 313308
BLUE #94 238 367 313309
BLUE #95 238 368 313310
BLUE #96 238 369 313311
BLUE #97 238 370 313312
BLUE #98 238 371 313313
BLUE #99 238 372 313314
BLUE #100 238 373 313315
</TABLE>
<TABLE>
<CAPTION>
CLAIM NAME BOOK PAGE UMC NUMBER
---------- ---- ---- ----------
<S> <C> <C> <C>
ENGH #1 252 654 335833
ENGH #2 252 765 335962
(AMENDED) 253 119
ENGH #3 252 766 335963
(AMENDED) 253 120
ENGH #4 252 767 335964
(AMENDED) 253 121
ENGH #5 252 768 335965
(AMENDED) 253 122
ENGH #6 252 769 335966
(AMENDED) 253 123
CLAIM NAME BOOK PAGE UMC NUMBER
---------- ---- ---- ----------
ENGH #7 252 770 335967
(AMENDED) 253 124
ENGH #8 252 771 335968
(AMENDED) 253 125
ENGH #9 252 772 335969
(AMENDED) 253 126
ENGH #10 252 773 335970
(AMENDED) 253 127
ENGH #11 252 774 335971
(AMENDED) 253 128
ENGH #12 252 775 335972
(AMENDED) 253 129
ENGH #13 252 776 335973
</TABLE>
Page 2
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
(AMENDED) 253 130
ENGH #14 252 777 335974
(AMENDED) 253 131
ENGH #15 252 778 335975
(AMENDED) 253 132
ENGH #16 252 779 335976
(AMENDED) 253 133
</TABLE>
<PAGE>
Situated in Township 29 South, Range 15 West, Salt Lake Meridian, Beaver
County, Utah.
<TABLE>
<CAPTION>
NAME TYPE OF
OF CLAIM CLAIM FILING DATE BOOK & PAGE UMC NUMBER
- --------- -------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
BLUE #201 (PLACER) 07/22/88 238 374 313316
BLUE #202 (PLACER) 07/22/88 238 375 313317
BLUE #203 (PLACER) 07/22/88 238 376 313318
BLUE #204 (PLACER) 07/22/88 238 377 313319
BLUE #205 (PLACER) 07/22/88 238 378 313320
BLUE #206 (PLACER) 07/22/88 238 379 313321
BLUE #207 (PLACER) 07/22/88 238 380 313322
BLUE #208 (PLACER) 07/22/88 238 381 313323
BLUE #209 (PLACER) 07/22/88 238 382 313324
BLUE #210 (PLACER) 07/22/88 238 383 313325
BLUE #211 (PLACER) 07/22/88 238 384 313326
BLUE #212 (PLACER) 07/22/88 238 385 313327
BLUE #213 (PLACER) 07/22/88 238 386 313328
BLUE #214 (PLACER) 07/22/88 238 387 313329
BLUE #215 (PLACER) 07/22/88 238 388 313330
BLUE #216 (PLACER) 07/22/88 238 389 313331
BLUE #217 (PLACER) 07/22/88 238 390 313332
BLUE #218 (PLACER) 07/22/88 238 391 313333
BLUE #219 (PLACER) 07/22/88 238 392 313334
BLUE #220 (PLACER) 07/22/88 238 393 313335
</TABLE>
The above claims are Located and Recorded in Beaver County, Utah.
This mining lease contains a Reserved Royalty of 3% on all ores, minerals or
Products (called "Production") mined and removed from the leased Premises. Said
Royalty shall be calculated based upon the gross value of the production.
Additionally, the above claims and the below mineral leases have a minimum
royalty of $5,000.00 and or a production royalty of $2.50/ton which is adjusted
by the Consumer Prices Index for all Urban Consumers for U.S. City average as
published by the U.S. Department of Labor Bureau of Labor Statistics.
Additionally, the property includes subleases to the following Sate of Uah
mineral leases. The State of Utah mineral leases have a 5 1/2% Royalty.
Page 3
<PAGE>
A Sub-Lease to the following State of Utah mineral Leases:
Clay lease ML-43616 (ALL)
Clay lease ML-43648 (All)
Industrial Sands lease ML-43649 (All)
Industrial Sands lease ML-43650 (ALL)
Metalliferous Minerals lease ML-43651 (All)
Metalliferous Minerals lease ML-43652 (All)
The State mineral leases will be subject to the same terms and conditions of
this lease and approval of sub-lease assignment from the State of Utah.
End of Exhibit A.
<PAGE>
Exhibit A
Mining Lease White Mountain
To Mining Lease Agreement dated as of March 1st, 1994, by and among Daniel H.
Engh, Connie L. Engh, Dennis S. Engh, Judy A. Engh, Darin Engh, Holly Engh
(a.k.a. Holly Kingdon) and Utah Clay Technology, Inc.
PART 1
- ------
With respect to the Properties, Daniel H. Engh and Dennis S. Engh are in
control and ownership of Engh Family placer claims described below:
The Following Property consists of Placer Claims plus, all other claims
located in Townships 29 South Range 13 & 14 West Salt Lake Medrian, Beaver
County, Utah which Owner has claim to in this area.
<TABLE>
<CAPTION>
NAME TYPE OF
OF CLAIM CLAIM FILING DATE BOOK & PAGE UMC NUMBER
- --------- -------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
BLUE #201 (PLACER) 07/22/88 238 374 313316
BLUE #202 (PLACER) 07/22/88 238 375 313317
BLUE #203 (PLACER) 07/22/88 238 376 313318
BLUE #204 (PLACER) 07/22/88 238 377 313319
BLUE #205 (PLACER) 07/22/88 238 378 313320
BLUE #206 (PLACER) 07/22/88 238 379 313321
BLUE #207 (PLACER) 07/22/88 238 380 313322
BLUE #208 (PLACER) 07/22/88 238 381 313323
BLUE #209 (PLACER) 07/22/88 238 382 313324
BLUE #210 (PLACER) 07/22/88 238 383 313325
BLUE #211 (PLACER) 07/22/88 238 384 313326
BLUE #212 (PLACER) 07/22/88 238 385 313327
BLUE #213 (PLACER) 07/22/88 238 386 313328
BLUE #214 (PLACER) 07/22/88 238 387 313329
BLUE #215 (PLACER) 07/22/88 238 388 313330
BLUE #216 (PLACER) 07/22/88 238 389 313331
BLUE #217 (PLACER) 07/22/88 238 390 313332
BLUE #218 (PLACER) 07/22/88 238 391 313333
BLUE #219 (PLACER) 07/22/88 238 392 313334
BLUE #220 (PLACER) 07/22/88 238 393 313335
</TABLE>
The above claims are Located and Recorded in Beaver County, Utah.
Page 1
<PAGE>
This mining lease contains a Reserved Royalty of 3% on all ores, minerals or
Products (called "Production") mined and removed from the leased Premises. Said
Royalty shall be calculated based upon the gross value of the production.
Additionally, the below Julie White lode or placer claims have a minimum royalty
of $5,000.00 and or a production royalty of $2.50/ton which is adjusted by the
Consumer Prices Index for all Urban Consumers for U.S. City average as published
by the U.S. Department of Labor Bureau of Labor Statistics.
With respect to the Properties, Daniel H. Engh and Dennis S. Engh have a mining
lease Dated November 9th 1992 by and between Don W. Fullmer (Lessor) and Daniel
H. Engh, Dennis S. Engh (Lessee). All terms and conditions of the November 9,
1992 mining lease will be a part of this mining lease. Said claims of this
mining lease are described below:
The Property consists of Lode Claims and Placer claims Plus, all other
claims located in Townships 29 South Range 13 West and Township 29 South 14 West
Salt Lake Medrian, Beaver County, Utah which Owner has claim to in this area.
<TABLE>
<CAPTION>
CLAIM NAME DESCRIPTION UMC NUMBER
- ---------- ----------- ----------
<S> <C> <C>
Julie White #1 NW1/4SEC. 9, TWNS. 29 SO. R-13. (PLACER) 303016
Julie White #2 SW1/4SEC. 9, TWNS. 29 SO. R-13. (PLACER) 303017
Julie White #3 NE1/4SEC. 8, TWNS. 29 SO. R-13. (PLACER) 303018
Julie White #4 SE1/4SEC. 8, TWNS. 29 SO. R-13. (PLACER) 303019
Julie White #5 NW1/4SEC. 8, TWNS. 29 SO. R-13. (PLACER) 303020
Julie White #6 NE1/4SEC. 7, TWNS. 29 SO. R-13. (PLACER) 303021
Julie White #7 NW1/4SEC. 7, TWNS. 29 SO. R-13. (PLACER) 303022
Julie White #8 NE1/4SEC. 12,TWNS. 29 SO. R-14. (PLACER) 303023
Julie White #9 SE1/4SEC. 1, TWNS. 29 SO. R-14. (PLACER) 303024
</TABLE>
(LODES CLAIMS)
--------------
<TABLE>
<CAPTION>
<S> <C> <C>
Julie White #11 NE1/4SEC. 7 & NW1/4SEC. 8,TWNS. 29 SO. R-13 W 302980
Julie White #12 NE1/4SEC. 7 & NW1/4SEC. 8,TWNS. 29 SO. R-13 W 302981
Julie White #13 NW1/4SEC. 8, TWNS. 29 SO. R-13 W. 302982
Julie White #14 NW1/4& NE1/4SEC. 8, TWNS. 29 SO. R-13 W. 302983
Julie White #15 NW1/4SEC. 8. TWNS. 29 SO. R-13 W. 302984
Julie White #16 NW1/4& NE1/4SEC. 8, TWNS. 29 SO. R-13 W. 302985
Julie White #17 NE1/4SEC. 8, TWNS. 29 SO. R-13 W. 302986
Julie White #18 NE1/4SEC. 8, TWNS. 29 SO. R-13 W. 302987
Julie White #19 NE1/4SEC. 8, TWNS. 29 SO. R-13 W. 302988
Julie White #20 NE & NW1/4SEC. 8, TWNS. 29 SO. R-13 W. 302989
Julie White #21 NE1/4SEC. 8, TWNS. 29 SO. R-13 W. 302990
Julie White #22 NE & SE1/4SEC. 8, TWNS. 29 SO. R-13 W. 302991
</TABLE>
Situated in Township 29 South, Range 13 West, Township 29 South, Range
14, Salt Lake Meridian, Beaver County, Utah.
End of Exhibit A.
<PAGE>
ADDENDUM TO MINING LEASE
(WHITE MOUNTAIN)
This Addendum to the MINING LEASE, herein referred to as "Lease", made
and entered into the 27th day of March, 2000, by and between DANIEL H. ENGH,
CONNIE L. ENGH, at 2340 East Germania Circle, Sandy, Utah 84093-1174, DENNIS S.
ENGH, JUDY A. ENGH, at 4532 Briarcreek Drive, Salt Lake City, Utah 84124, DARIN
ENGH, at 437 Elise Street, Sandy, Utah 84070, HOLLY ENGH (a.k.a. HOLLY KINGDON)
at 9064 Cheyenne Way, Park City, Utah 84060 hereinafter referred to as "Owner or
Lessor", and UTAH CLAY TECHNOLOGY INC., a Utah corporation, having an address at
3985 South 2000 East, Salt Lake City, Utah 84124 (hereinafter designated as
"Lessee"):
In consideration, of providing copies of testing, analysis and
geological mapping of the White Mountain claims describe in Exhibit A and the
acknowledgment of the payments due the Lessor from the starting date of March
1st, 1994, the receipt of information and acknowledgment of payments due is
adequacy of which is hereby acknowledged.
In consideration of the foregoing acknowledgment to Lessor, Lessor also
ratifies the following Mining Lease for the White Mountain claims described in
Exhibit A - dated March 1st, 1994 with UTAH CLAY TECHNOLOGY INC., as being in
full force and effect, without any modification of the lease or any waiver of
the lease terms as to future performance, except at Paragraph 3.5 of the Mining
Lease, the primary term and the requirement to obtain commercial production are
extended for four (4) years from the date hereof.
The leases and claims covered thereby are more particularly described on
the attached Exhibit A, incorporated by this reference.
<PAGE>
To The ADDENDUM TO MINING LEASE (WHITE MOUNTAIN)
Page 2 of 5
IN WITNESS WHEREOF, this Addendum To Mining Lease has been executed and
delivered by Lessor to Lessee as of the day and year first above written.
/s/ Daniel H. Engh
- ---------------------------------
Daniel H. Engh
LESSOR
/s/ Connie L. Engh
- ---------------------------------
Connie L. Engh
LESSOR
/s/ Dennis S. Engn
- ---------------------------------
Dennis S. Engh
LESSOR
/s/ Judy A. Engh
- ---------------------------------
Judy A. Engh
LESSOR
/s/ Darin Engn
- ---------------------------------
Darin Engh
LESSOR
/s/ Holly Engh
- ---------------------------------
Holly Engh (a.k.a. Holly Kingdon)
LESSOR
<PAGE>
To The ADDENDUM TO MINING LEASE (WHITE MOUNTAIN)
Page 3 of 5
UTAH CLAY TECHNOLOGY, INC.
BY:/s/ Dennis S. Engh
------------------------------
President
LESSEE
<PAGE>
To The ADDENDUM TO MINING LEASE (WHITE MOUNTAIN)
Page 4 of 5
Exhibit A
Mining Lease White Mountain
- ---------------------------
To Mining Lease Agreement dated as of March 1st, 1994, by and among Daniel H.
Engh, Connie L. Engh, Dennis S. Engh, Judy A. Engh, Darin Engh, Holly Engh
(a.k.a. Holly Kingdon) and Utah Clay Technology, Inc.
PART 1
- ------
With respect to the Properties, Daniel H. Engh and Dennis S. Engh are in
control and ownership of Engh Family placer claims described below:
The Following Property consists of Placer Claims plus, all other claims
located in Townships 29 South Range 13 & 14 West Salt Lake Medrian, Beaver
County, Utah which Owner has claim to in this area.
<TABLE>
<CAPTION>
NAME TYPE OF
OF CLAIM CLAIM FILING DATE BOOK & PAGE UMC NUMBER
- --------- ------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
BLUE #201 (PLACER) 07/22/88 238 374 313316
BLUE #202 (PLACER) 07/22/88 238 375 313317
BLUE #203 (PLACER) 07/22/88 238 376 313318
BLUE #204 (PLACER) 07/22/88 238 377 313319
BLUE #205 (PLACER) 07/22/88 238 378 313320
BLUE #206 (PLACER) 07/22/88 238 379 313321
BLUE #207 (PLACER) 07/22/88 238 380 313322
BLUE #208 (PLACER) 07/22/88 238 381 313323
BLUE #209 (PLACER) 07/22/88 238 382 313324
BLUE #210 (PLACER) 07/22/88 238 383 313325
BLUE #211 (PLACER) 07/22/88 238 384 313326
BLUE #212 (PLACER) 07/22/88 238 385 313327
BLUE #213 (PLACER) 07/22/88 238 386 313328
BLUE #214 (PLACER) 07/22/88 238 387 313329
BLUE #215 (PLACER) 07/22/88 238 388 313330
BLUE #216 (PLACER) 07/22/88 238 389 313331
BLUE #217 (PLACER) 07/22/88 238 390 313332
BLUE #218 (PLACER) 07/22/88 238 391 313333
BLUE #219 (PLACER) 07/22/88 238 392 313334
BLUE #220 (PLACER) 07/22/88 238 393 313335
</TABLE>
The above claims are Located and Recorded in Beaver County, Utah.
<PAGE>
To The ADDENDUM TO MINING LEASE (WHITE MOUNTAIN)
Page 5 of 5
This mining lease contains a Reserved Royalty of 3% on all ores, minerals or
Products (called "Production") mined and removed from the leased Premises. Said
Royalty shall be calculated based upon the gross value of the production.
Additionally, the below Julie White lode or placer claims have a minimum royalty
of $5,000.00 and or a production royalty of $2.50/ton which is adjusted by the
Consumer Prices Index for all Urban Consumers for U.S. City average as published
by the U.S. Department of Labor Bureau of Labor Statistics.
With respect to the Properties, Daniel H. Engh and Dennis S. Engh have a mining
lease Dated November 9th 1992 by and between Don W. Fullmer (Lessor) and Daniel
H. Engh, Dennis S. Engh (Lessee). All terms and conditions of the November 9,
1992 mining lease will be a part of this mining lease. Said claims of this
mining lease are described below:
The Property consists of Lode Claims and Placer claims Plus, all other
claims located in Townships 29 South Range 13 West and Township 29 South 14 West
Salt Lake Medrian, Beaver County, Utah which Owner has claim to in this area.
<TABLE>
<CAPTION>
CLAIM NAME DESCRIPTION UMC NUMBER
- ---------- ----------- ----------
<S> <C> <C>
Julie White #1 NW1/4SEC. 9, TWNS. 29 SO. R-13. (PLACER) 303016
Julie White #2 SW1/4SEC. 9, TWNS. 29 SO. R-13. (PLACER) 303017
Julie White #3 NE1/4SEC. 8, TWNS. 29 SO. R-13. (PLACER) 303018
Julie White #4 SE1/4SEC. 8, TWNS. 29 SO. R-13. (PLACER) 303019
Julie White #5 NW1/4SEC. 8, TWNS. 29 SO. R-13. (PLACER) 303020
Julie White #6 NE1/4SEC. 7, TWNS. 29 SO. R-13. (PLACER) 303021
Julie White #7 NW1/4SEC. 7, TWNS. 29 SO. R-13. (PLACER) 303022
Julie White #8 NE1/4SEC. 12,TWNS. 29 SO. R-14. (PLACER) 303023
Julie White #9 SE1/4SEC. 1, TWNS. 29 SO. R-14. (PLACER) 303024
</TABLE>
(LODES CLAIMS)
<TABLE>
<CAPTION>
<S> <C> <C>
Julie White #11 NE1/4SEC. 7 & NW1/4SEC. 8,TWNS. 29 SO. R-13 W 302980
Julie White #12 NE1/4SEC. 7 & NW1/4SEC. 8,TWNS. 29 SO. R-13 W 302981
Julie White #13 NW1/4SEC. 8, TWNS. 29 SO. R-13 W. 302982
Julie White #14 NW1/4& NE1/4SEC. 8, TWNS. 29 SO. R-13 W. 302983
Julie White #15 NW1/4SEC. 8. TWNS. 29 SO. R-13 W. 302984
Julie White #16 NW1/4& NE1/4SEC. 8, TWNS. 29 SO. R-13 W. 302985
Julie White #17 NE1/4SEC. 8, TWNS. 29 SO. R-13 W. 302986
Julie White #18 NE1/4SEC. 8, TWNS. 29 SO. R-13 W. 302987
Julie White #19 NE1/4SEC. 8, TWNS. 29 SO. R-13 W. 302988
Julie White #20 NE & NW1/4SEC. 8, TWNS. 29 SO. R-13 W. 302989
Julie White #21 NE1/4SEC. 8, TWNS. 29 SO. R-13 W. 302990
Julie White #22 NE & SE1/4SEC. 8, TWNS. 29 SO. R-13 W. 302991
</TABLE>
To The ADDENDUM TO MINING LEASE (WHITE MOUNTAIN)
Page 6 of 5
Situated in Township 29 South, Range 13 West, Township 29 South, Range
14, Salt Lake Meridian, Beaver County, Utah.
End of Exhibit A.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jun-01-1999
<PERIOD-END> Dec-31-1999
<CASH> 640
<SECURITIES> 0
<RECEIVABLES> 350
<ALLOWANCES> 0
<INVENTORY> 21,568
<CURRENT-ASSETS> 22,558
<PP&E> 130,484
<DEPRECIATION> 0
<TOTAL-ASSETS> 198,115
<CURRENT-LIABILITIES> 837,020
<BONDS> 149,469
0
0
<COMMON> 23,332
<OTHER-SE> (662,322)
<TOTAL-LIABILITY-AND-EQUITY> 198,115
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 261,792
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (261,692)
<INCOME-TAX> 100
<INCOME-CONTINUING> (261,792)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (261,792)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
