CONTRACT ASSIGNMENT AND SURETY TRANSFER AGREEMENT
CONTRACT
ASSIGNMENT AND
SURETY
TRANSFER AGREEMENT
THIS CONTRACT ASSIGNMENT AND SURETY
TRANSFER AGREEMENT (the “Agreement”), entered into
effective the 30th day of
September 2009, (the “Effective
Date”) is by and between Desert Hawk Gold Corp., a Nevada corporation
(the “Company”), and
▇▇▇▇▇▇▇ Mining Company, a Utah corporation (“▇▇▇▇▇▇▇ Mining”).
RECITALS:
WHEREAS, the Company entered into a
Mining Venture Agreement dated July 24, 2009, with ▇▇▇▇▇▇▇ Mining (the “Mining Venture Agreement”),
whereby the Company agreed to act as operator of the mining property represented
in the Mining Venture Agreement (the “Mining
Property”);
WHEREAS, on or about April 10, 2002,
▇▇▇▇▇▇▇ Mining, as the operator under Notice of Intention File No. M/045/049,
entered into a Reclamation Contract with the Utah Division of Oil, Gas and
Mining (the “Division”),
which agreement was amended by the parties on or about March 29, 2006 (as
amended, the “Reclamation
Contract”);
WHEREAS, the mining property
represented by the Reclamation Contract is included in the Mining Venture
Agreement under which the Company has agreed to act as operator in lieu of
▇▇▇▇▇▇▇ Mining;
WHEREAS, pursuant to the terms of the
Reclamation Contract ▇▇▇▇▇▇▇ Mining acquired a certificate of deposit in the
principal amount of $38,800 (the “CD”) which is being used as
surety to guarantee the availability of reclamation funds for the mine
site;
WHEREAS, on or about March 29, 2006,
▇▇▇▇▇▇▇ Mining posted an additional $3,500, with a current value of
approximately $3,776.50, in the form of a cash deposit with the Division (the
“Cash Surety”) as
additional surety under the Reclamation Contract;
WHEREAS, the Company has agreed to
assume and ▇▇▇▇▇▇▇ Mining has agreed to assign its rights and obligations under
the Reclamation Contract to the Company and the Company has agreed to purchase,
and ▇▇▇▇▇▇▇ Mining has agreed to sell its ownership interest in the CD and the
Cash Surety to the Company, all subject to the terms and conditions of this
Agreement;
WHEREAS, the Company may be required
hereafter to provide additional surety amounts under the Reclamation Contract,
which additional amounts are not intended to be covered by this Agreement and
are intended to be the separate property of the Company notwithstanding any
other provisions of this Agreement;
NOW, THEREFORE, in consideration of the
mutual terms and conditions of this Agreement, and other good and valuable
consideration, the mutual receipt of which is hereby acknowledged by the parties
hereto, the Company and ▇▇▇▇▇▇▇ Mining hereby agree as follows:
1. Assignment of Reclamation
Contract. In accordance with the terms hereof, and for the
consideration set forth in Section 3 below, ▇▇▇▇▇▇▇ Mining hereby agrees to
assign all of its rights, title and interest in the Reclamation Contract to the
Company and the Company hereby assumes all of the duties and obligations of
▇▇▇▇▇▇▇ Mining under the Reclamation Contract. Promptly, but in no
event later than five (5) business days following the date of this Agreement,
▇▇▇▇▇▇▇ Mining shall complete the assignment of the Reclamation
Contract. The Company shall cooperate in providing any required
documents or information to facilitate this assignment.
2. Sale and Transfer of
Ownership in CD and Cash Surety. In accordance with the terms
hereof, and for the consideration set forth in Section 3 below, ▇▇▇▇▇▇▇ Mining
hereby bargains, sells, transfers, and conveys to the Company, and the Company
hereby purchases from ▇▇▇▇▇▇▇ Mining, all of the ownership interest of ▇▇▇▇▇▇▇
Mining in and to the CD and the Cash Surety, subject to the pledge of these
instruments to the Division as set forth in the Reclamation
Contract. Any quarterly interest payable after the date of this
Agreement on either the CD or the Cash Surety shall be the property of the
Company and shall not be divided pro rata between the
parties. Promptly, but in no event later than five (5) business days
following the date of this Agreement, ▇▇▇▇▇▇▇ Mining shall execute and deliver
the necessary documents to the Division and to Desert Hawk for
signature. Upon receipt of the executed document, ▇▇▇▇▇▇▇ Mining
shall file with the financial institution holding the CD and with the Division
for the Cash Surety to transfer ownership of the CD and the Cash Surety to the
Company. The Company will not sell or assign the CD or the Cash
Surety unless the assignee shall agree to be bound by the terms of Section 6 of
this Agreement.
3. Payment of
Consideration. For and in consideration of the assignment of
the Reclamation Contract and the transfer of the ownership interest of
approximately $42,576.50 representing the principal amount of the CD and the
balance of the Cash Surety, the Company shall issue to ▇▇▇▇▇▇▇ Mining 60,824
shares of the Company’s common stock (the “Shares”). The
Company shall promptly, but in no event later than five (5) business days
following the date of this Agreement, irrevocably instruct the transfer agent to
issue to ▇▇▇▇▇▇▇ Mining a stock certificate representing the
Shares. The stock certificate shall be delivered to ▇▇▇▇▇▇▇ Mining
immediately upon receipt by the Company of the executed assignment of the
Reclamation Contract and the transfer of the ownership interest in the CD and
the Cash Surety. ▇▇▇▇▇▇▇ Mining agrees to assist Desert Hawk in a
quick assignment of the Reclamation Contract and the transfer of the ownership
of the CD and the Cash Surety as set forth in Sections 1 and 2
above.
4. Securities Law
Representations and Warranties. ▇▇▇▇▇▇▇ Mining hereby
represents and warrants to the Company as follows:
4.1 Accredited
Investor. ▇▇▇▇▇▇▇ Mining is an “accredited investor” as
defined in Rule 501(a) of Regulation D promulgated by the SEC in that ▇▇▇▇▇▇▇
Mining is a corporation with total assets in excess of $5,000,000 and was not
formed for the specific purpose of acquiring the Shares.
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4.2 Restricted
Securities. ▇▇▇▇▇▇▇ Mining understands that the Shares have
not been registered pursuant to the Securities Act, or any state securities act,
and thus are “restricted securities” as defined in Rule 144 promulgated by the
SEC and are subject to Paragraph (i) of Rule 144 which prohibits reliance on
Rule 144 by persons holding shares of non-reporting former shell companies until
(i) the issuer ceases to be a shell company, (ii) it files a registration
statement with the SEC, (iii) one year has lapsed since the filing of the
registration statement, and (iv) the issuer has filed all periodic reports for a
period of at least one year, or such shorting period the issuer was required to
file such reports. Thus, under current interpretations and applicable
rules, ▇▇▇▇▇▇▇ Mining will probably have to retain the Shares for a significant
period and at the expiration of such period its sales may be confined to
brokerage transactions of limited amounts requiring certain notification filings
with the SEC and such disposition may be available only if the Company is
current in its filings with the SEC under the Exchange Act, or other public
disclosure requirements. Accordingly, ▇▇▇▇▇▇▇ Mining hereby
acknowledges that it is prepared to hold the Shares for an indefinite
period.
4.3 Investment
Purpose. ▇▇▇▇▇▇▇ Mining acknowledges that the Shares are being
purchased for its own account, for investment, and not with the present view
towards the distribution, assignment, or resale to others or fractionalization
in whole or in part. ▇▇▇▇▇▇▇ Mining does not presently have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participations to such person or to any third person with
respect to any of the Shares.
4.4 Limitations on Resale; No
Registration Rights; Restrictive Legend. ▇▇▇▇▇▇▇ Mining
acknowledges that it will not sell, assign, hypothecate, or otherwise transfer
any rights to, or any interest in, the Shares except (i) pursuant to an
effective registration statement under the Securities Act, or (ii) in any other
transaction which, in the opinion of counsel acceptable to the Company, is
exempt from registration under the Securities Act, or the rules and regulations
of the SEC thereunder. ▇▇▇▇▇▇▇ Mining also acknowledges that the
Company has not agreed to register the resale of the Shares with the SEC or any
state securities agency and that an appropriate legend will be placed upon each
of the certificates representing the Shares stating that the Shares have not
been registered under the Securities Act and setting forth or referring to the
restrictions on transferability and sale of the Shares.
4.5 Information. The
undersigned representative of ▇▇▇▇▇▇▇ Mining has been furnished (i) with all
requested materials relating to the business, finances, management, and
operations of the Company; (ii) with information deemed material to making an
informed investment decision; and (iii) with additional requested information
necessary to verify the accuracy of any documents furnished to ▇▇▇▇▇▇▇ Mining by
the Company. Such person has been afforded the opportunity to ask
questions of the Company and to discuss with management of the Company the
business, management, financial affairs of the Company and the terms and
conditions of the offering of the Shares to ▇▇▇▇▇▇▇ Mining.
4.6 Knowledge and Experience in
Business and Financial Matters. The undersigned representative
of ▇▇▇▇▇▇▇ Mining has such knowledge and experience in business and financial
matters that he is capable of evaluating the risks of the prospective
investment, and that the financial capacity of ▇▇▇▇▇▇▇ Mining is of such
proportion that the total cost of such person’s commitment in the Shares would
not be material when compared with its total financial
capacity.
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4.7 No Public
Market.
▇▇▇▇▇▇▇ Mining understands that no public market now exists for the common stock
of the Company and that the Company has made no assurances that a public market
will ever exist for the Company’s securities.
5. Lockup
Provisions. Resale of the Shares by ▇▇▇▇▇▇▇ Mining shall be
subject to the following limitations:
5.1 Lockup of
Shares. ▇▇▇▇▇▇▇ Mining hereby agrees that it will not, without
the prior written consent of the Company (which consent may not be unreasonably
withheld), directly sell, contract or grant any option to sell or otherwise
dispose of any Shares for a period of two years from the date of this Agreement
(the “Initial Lockup
Period”).
6. Option
Grants. The parties hereto grant the following options pertaining to
the Shares and the CD and Cash Surety (the “Redemption Options”), subject
to the terms and conditions set forth below:
6.1 Grant of Purchase
Option. ▇▇▇▇▇▇▇ Mining hereby grants to the Company, or its
assigns, the right to repurchase the Shares during the Initial Lockup Period
(the “Stock Purchase
Option”). The exercise price for the Stock Purchase Option
shall be $48,000, payable to ▇▇▇▇▇▇▇ Mining by the Company or its assigns by
cashier’s check. Promptly following exercise of the Stock Purchase
Option by the Company, but in no event later than five (5) business days
thereafter, the parties agree to mutually set a closing time and place to
exchange the stock certificate representing the Shares, duly endorsed by ▇▇▇▇▇▇▇
Mining, and the cashier’s check representing the exercise price.
6.2 Grant of Put
Option. The Company hereby grants to ▇▇▇▇▇▇▇ Mining the option
to require the Company to repurchase the Shares for $48,000 (the “Put Option”) at any time
during the period commencing on the day following the expiration of the Initial
Lockup Period and ending one hundred eighty (180) days thereafter (the “Put Option
Period”). Promptly following exercise of the Put Option by
▇▇▇▇▇▇▇ Mining, but in no event later than five (5) business days thereafter,
the parties agree to mutually set a closing time and place to exchange the stock
certificate representing the Shares, duly endorsed by ▇▇▇▇▇▇▇ Mining, and the
cashier’s check representing the exercise price. In the event that
the Company fails to deliver the $48,000 within such period, the Company shall
promptly, but in no event later than five (5) business days, transfer to ▇▇▇▇▇▇▇
Mining the Company’s ownership interest in the original face value of the CD and
the Cash Surety, plus accrued interest on the original face value.
6.3 Grant of Bond Reversionary
Right. The Company hereby grants to ▇▇▇▇▇▇▇ Mining a
reversionary interest right to be noticed on the reclamation bond and to the
Division on the Cactus Mill Mine Site to prevent the reclamation of the Cactus
Mill Mine Site without ▇▇▇▇▇▇▇ Mining’s express written
consent.
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6.4 Method of
Exercise. The Redemption Options may be exercised by delivery
of a written notice of exercise to the appropriate party hereto as set forth in
Section 19 hereof.
6.5 Restrictive
Legend. Each certificate representing the Shares shall be
designated with the following legend on the stock records of the Company (and on
any stock certificate representing the Shares):
The
transfer, sale, assignment or other alienation of this stock, or the ownership
interest evidenced thereby, is restricted by the provisions of the Redemption
Options granted to the issuer pursuant to an agreement executed by the owner
thereof, which option expires by its terms two years from the date of issue, a
copy of which is on file with the secretary of issuer.
7. Representations and
Warranties.
▇▇▇▇▇▇▇
Mining hereby represents and warrants to the Company as follows:
7.1 Reclamation
Contract. With respect to the Reclamation Contract: (i) it is
legal, valid, binding, enforceable, and in full force and effect in all material
respects; (ii) to the knowledge of ▇▇▇▇▇▇▇ Mining no party is in material breach
or default, and to the knowledge of ▇▇▇▇▇▇▇ Mining no event has occurred that
with notice or lapse of time would constitute a material breach or default, or
permit termination, modification, or acceleration, under such agreement; and
(iii) no party has repudiated any material provision of the Reclamation
Contract.
7.2 CD and Cash
Surety. Each of the CD and the Cash Surety are duly owned by
▇▇▇▇▇▇▇ Mining and validly pledged to the Division pursuant to the terms of the
Reclamation Contract. No other party has any legal or beneficial
interest in or to the CD or the Cash Surety. ▇▇▇▇▇▇▇ Mining has the
sole right to convey any ownership interest in the CD and the Cash Surety, free
and clear of all liens, claims, security interests or encumbrances, except as
set forth in the Reclamation Contract.
7.3 No
Conflicts. The terms of this Agreement do not conflict with
the terms and conditions of the Reclamation Contract. In addition,
▇▇▇▇▇▇▇ Mining (i) is not a party to or bound by or subject to any agreement or
instrument, or any judgment, order or decree of any court or governmental agency
or authority, which will be violated by, or will materially impair, the carrying
out of this Agreement; and (ii) is not a party to any pending, and ▇▇▇▇▇▇▇
Mining does not know of any threatened, action, suit, proceeding or
investigation in, before or by any court, governmental agency or authority or
arbitrator which may have a material adverse effect on this Agreement, the CD or
the Cash Surety.
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7.4 Authorization; Enforcement;
Compliance with Other Instruments. (i) ▇▇▇▇▇▇▇ Mining has the
requisite corporate power and authority to enter into and perform all actions
required under this Agreement; (ii) the execution and delivery of this Agreement
by ▇▇▇▇▇▇▇ Mining and the consummation by it of the transactions contemplated
hereby have been duly and validly authorized by ▇▇▇▇▇▇▇ Mining’s Board of
Directors and no further consent or authorization is required by it, its Board
of Directors, or its shareholders; (iii) this Agreement has been duly and
validly executed and delivered by ▇▇▇▇▇▇▇ Mining; and (iv) this Agreement
constitutes the valid and binding obligations of ▇▇▇▇▇▇▇ Mining enforceable by
the Company in accordance with its terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors’ rights and
remedies.
The
Company hereby represents and warrants to ▇▇▇▇▇▇▇ Mining as
follows:
7.6 Legality of Shares to be
Issued. The Shares to be issued by the Company pursuant to
this Agreement, when so issued and delivered, will have been duly and validly
authorized and issued by the Company and will be fully paid and
nonassessable.
7.7 No
Conflicts. The terms of this Agreement do not conflict with
the terms and conditions of any other agreement of which the Company is a
party. In addition, the Company (i) is not a party to or bound by or
subject to any agreement or instrument, or any judgment, order or decree of any
court or governmental agency or authority, which will be violated by, or will
materially impair, the carrying out of this Agreement; and (ii) is not a party
to any pending, and the Company does not know of any threatened, action, suit,
proceeding or investigation in, before or by any court, governmental agency or
authority or arbitrator which may have a material adverse effect on this
Agreement, the Company or the Stock.
7.8 Authorization; Enforcement;
Compliance with Other Instruments. (i) The Company has the
requisite corporate power and authority to enter into and perform all actions
required under this Agreement; (ii) the execution and delivery of this Agreement
by the Company and the consummation by it of the transactions contemplated
hereby have been duly and validly authorized by the Company’s Board of Directors
and no further consent or authorization is required by it, its Board of
Directors, or its shareholders; (iii) this Agreement has been duly and validly
executed and delivered by the Company; and (iv) this Agreement constitutes the
valid and binding obligations of the Company enforceable by ▇▇▇▇▇▇▇ Mining in
accordance with its terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors’ rights and
remedies.
Miscellaneous
Provisions
8. Default. Should
any party to this Agreement default in any of the covenants, conditions, or
promises contained herein, the defaulting party shall pay all costs and
expenses, including a reasonable attorney’s fee, which may arise or accrue from
enforcing this Agreement, or in pursuing any remedy provided hereunder or by
statute.
9. Governing
Law. This Agreement and the rights and duties of the parties
hereto shall be construed and determined in accordance with the laws of the
State of Utah, and any and all actions to enforce the provisions of this
Agreement, shall be brought in a court of competent jurisdiction in the State of
Utah and in no other place.
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10. Further
Assurances. At any time, and from time to time, after the
Effective Date, ▇▇▇▇▇▇▇ Mining will execute such additional instruments and take
such action as may be reasonably requested by the Company to confirm or perfect
title to any property interests transferred hereunder or otherwise to carry out
the intent and purposes of this Agreement.
11. Successors and
Assigns. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto, their administrators, successors and
assigns.
12. Partial
Invalidity. If any term, covenant, condition, or provision of
this Agreement or the application thereof to any person or circumstance shall to
any extent be invalid or unenforceable, the remainder of this Agreement or
application of such term or provision to persons or circumstances other than
those as to which it is held to be invalid or unenforceable shall not be
affected thereby and each term, covenant, condition, or provision of this
Agreement shall be valid and shall be enforceable to the fullest extent
permitted by law.
13. Interpretation of
Agreement. This Agreement shall be interpreted and construed
as if equally drafted by all parties hereto.
14. Amendment. This
Agreement or any provision hereof may not be changed, waived, terminated, or
discharged except by means of a written supplemental instrument signed by the
party or parties against whom enforcement of the change, waiver, termination, or
discharge is sought.
15. Full
Knowledge. By their signatures, the parties acknowledge that
they have carefully read and fully understand the terms and conditions of this
Agreement, that each party has had the benefit of counsel, or has been advised
to obtain counsel, and that each party has freely agreed to be bound by the
terms and conditions of this Agreement.
16. Headings. The
descriptive headings of the various paragraphs or parts of this Agreement are
for convenience only and shall not affect the meaning or construction of any of
the provisions hereof.
17. Counterparts. This
Agreement may be executed in any number of counterparts and all such
counterparts taken together shall be deemed to constitute one
instrument. Delivery of an executed counterpart of this Agreement by
facsimile shall be equally as effective as delivery of a manually executed
counterpart of this Agreement. Any party delivering an executed
counterpart of this Agreement by facsimile also shall deliver a manually
executed counterpart of this Agreement, but the failure to deliver a manually
executed counterpart shall not affect the validity, enforceability, or binding
effect of this Agreement.
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18. Survival of Representations
and Warranties. All of the representations and warranties of
the parties contained in this Agreement shall survive the execution hereunder
(even if a party knew or had reason to know of any misrepresentation or breach
of warranty at the time of execution of this Agreement) and continue in full
force and effect for a period of one (1) year thereafter, at which time such
representations and warranties shall terminate and expire.
19. Notices. All
notices and other communications provided for hereunder shall be in writing
(including telecopy communication confirmed by mail or delivery) and mailed,
telecopied, e-mailed or delivered:
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(a)
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if
to the Company, to it at:
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▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇
▇
▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇, Chairman
Telephone: (▇▇▇)
▇▇▇-▇▇▇▇
Telecopier: ▇▇▇
▇▇▇-▇▇▇▇
E-mail
Address: ▇▇▇▇▇▇▇@▇▇▇▇▇.▇▇▇
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(b)
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if
to ▇▇▇▇▇▇▇ Mining, to it at:
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▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇
and ▇▇▇▇▇ ▇▇▇▇▇▇▇
Telephone: (▇▇▇)
▇▇▇-▇▇▇▇
Telecopier:
(▇▇▇) ▇▇▇-▇▇▇▇
E-mail
Address: ▇▇▇▇@▇▇▇▇▇▇▇▇.▇▇▇
or, as to
any party, at such other telecopy number or address as shall be designated by
such party in a written notice to the other parties. All such notices
and other communications shall, when mailed, telecopied, e-mailed or delivered,
be effective when received or, in the case of delivery by mail, on the fourth
(4th)
business day after such notice or other communication shall have been deposited
in the mail, postage prepaid, return receipt requested or, in the case of
delivery by overnight express courier, on the business day following the
business day such notice or communication shall have been deposited with such
courier service.
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IN WITNESS WHEREOF, each of the
undersigned has executed this Agreement the respective day and year set forth
below.
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Date: September
30, 2009
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By
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/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇, Chairman
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▇▇▇▇▇▇▇
Mining Company
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Date: September
30, 2009
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By
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/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇, President
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