Assignment and Assumption Agreement, dated December 16, 2011, by and among the Company, Boulder Hill Mines Inc. and Jim Ebisch

A.  

Assignor and Vendor are parties to the Option to Purchase and Royalty Agreement dated July 15, 2008, as amended and supplemented by Amendment No. 1 dated October 14, 2011 (the “Option Agreement”), for Assignor’s option to acquire an undivided 100% of the right, title and interest of Vendor in and to the Montana State Metallferrous Gold Lease M-1974-06 (subject to 5% NSR due to the State of Montana) (hereinafter called the “Lease”). A copy of the Lease is attached to this Agreement as Exhibit A.  A copy of the Option Agreement is attached to this Agreement as Exhibit B.

B.  

Assignor desires to assign its interest in the Option Agreement to Assignee and Assignee desires to assume Assignor’s obligations under the Option Agreement.

Transfer and Assignment by Assignor. Assignor hereby transfers and assigns to Assignee all of Assignor’s right, title and interest, in, to and under the Option Agreement.

Assumption by Assignee. Assignee assumes the assignment of the Option Agreement from Assignor and agrees to be bound, to the extent that Assignor was bound, under the terms and conditions of the Option Agreement. Assignee agrees to perform and observe, each and every one of the covenants, rights, promises, agreements, terms, conditions, obligations, duties and liabilities of Assignor arising under the Option Agreement. Notwithstanding any of the provisions of this Agreement to the contrary, the parties specifically agree that Assignee will not be responsible for rectifying environmental damage, if any, sustained on the property underlying the Lease prior to the Effective Date.

Consideration. In consideration for this Agreement, Assignee shall pay Assignor an amount equal to (a) $25,000 within five days of the Effective Date payable at the Assignor’s option in either cash or 500,000 restricted shares of Assignor common stock, based on the conversion price of $0.05 per share; (b) $25,000 cash payable within twelve (12) months of the Effective Date; and (c) $25,000 cash payable within twenty four (24) months of the Effective Date.

Representations and Warranties:  Assignor and Vendor. Assignor and Vendor  represents and warrants to Assignee as of the Effective Date as follows:

(a)  

Neither Assignor nor Vendor are in default under the Option Agreement.  No state of facts exist which, with or without the passage of time or the giving of notice, or both, would constitute a default under the Option Agreement by either Assignor or Vendor.

(b)  

All of Assignor’s and Vendor’s obligations under the Option Agreement required to be performed as of the Effective Date have been performed.

(c)  

The execution, delivery and performance of this Agreement have been duly authorized by each of Assignor and Vendor.

(d)  

The Lease has been duly and validly recorded in the name set out on the attached Exhibit C, and is in good standing in the office of the county recorder on the date hereof.

(e)  

There is no adverse claim or challenge against or to the ownership of or title to the property underlying the Lease, nor to Assignor’s or Vendor’s knowledge is there any basis therefor, and, except for the Option Agreement being transferred and assigned by Assignor to Assignee hereunder, there are no outstanding agreements or options to acquire or purchase the property underlying the Lease; or Vendor’s interest in the Lease or any portion thereof;

(f)  

There are no outstanding obligations or liabilities, contingent or otherwise, related to environmental, reclamation or rehabilitation work associated with the property underlying the Lease or arising out of exploration work, development work or mining activities previously carried out thereon.

(g)  

The consummation of the transaction herein contemplated will not conflict with or result in any breach of any covenants or agreements contained in, or constitute a default under, or result in the creation of any encumbrance under the provisions of, any indenture, agreement or other instrument whatsoever to which Assignor or Vendor is a party or by which Assignor or Vendor are bound or to which Assignor or Vendor may be subject.

(h)  

There are no proceedings are pending for, and Assignor and Vendor are not aware of any basis for the institution of any proceedings leading to, the placing of Assignor or Vendor in bankruptcy or subject to any laws governing the affairs of insolvent persons

Representations and Warranties:  Assignee. Assignee represents and warrants to Assignor and Vendor as of the Effective Date as follows:

(a)  

The execution, delivery and performance of this Agreement by Assignee have been duly authorized by Assignee.

Indemnification.

(a)  

Assignor and Vendor, jointly and severally, hereby agree to indemnify, defend and hold harmless Assignee, and its partners, directors, members, shareholders, affiliates, managers, employees and agents, from, of and against any and all claims, demands, liabilities, losses, damages, costs and expenses (including, without limitation, reasonable attorneys’ fees) arising out of or relating to (i) the breach by Assignor or Vendor of any of the representations, warranties, obligations, terms or covenants of Assignor or Vendor, under or pursuant to the Option Agreement, which obligations, terms or covenants accrued prior to the date hereof or (ii) any breach or inaccuracy of any representation or warranty made by Assignor or Vendor under Section 4 hereunder.

(b)  

Assignee hereby agrees to indemnify, defend and hold harmless Assignor and Vendor, and its partners, officers, directors, members, shareholders, affiliates, managers, employees and agents, from, of and against any and all claims, demands, liabilities, losses, damages, costs and expenses (including, without limitation, reasonable attorneys’ fees) arising out of or relating to any breach or inaccuracy of any representation or warranty made by Assignee under Section 5 hereunder.

Further Assurances.  The parties hereto covenant and agree to execute such further instruments and take such further action as may be reasonably required by either party to fully effectuate the terms and provisions of this Assignment and the transactions contemplated herein.

Survival of Provisions. The representations, warranties, covenants and obligations contained in this Agreement shall survive the consummation of the closing of the transactions contemplated by this Agreement and this assignment shall bind and inure to the benefit of the parties hereto and their respective successors and assigns.

Entire Agreement. This Agreement embodies the entire agreement between the parties with respect to the transactions contemplated in this Agreement. There are no agreements, representations or warranties between the parties, other than those set forth or provided for in this Agreement.

Governing Law. This Agreement and the rights of the parties under this Agreement shall be construed and interpreted in accordance with the laws of the State of Nevada.

Attorneys’ Fees. In the event any party to this Agreement initiates litigation to enforce the terms of this Agreement or the Option Agreement, the prevailing party in the action shall be reimbursed by the other party or parties for any and all costs incurred by the prevailing party in prosecuting the action, including (without limitation) attorneys’ fees, filings fees and court costs.

Counterparts. This Agreement may be executed in counterparts which, when integrated, shall constitute one original of this Agreement.

 

THIS AGREEMENT made as of the 15th day of July 2008.

 

 

James  Ebisch  (50%  owner),  of  12108  N. Forker  Road, ·Spokane, Washington   99217, and  Ryan Reich (50% owner) of  5337 North Greenwood Blvd., Spokane, Washington, 99205

 

 

 

Boulder Hill Mines Inc, a company duly incorporated under the laws of the state of Idaho, whose mailing address is P.O. Box 488, Coeur d' Alene, Idaho, 83816

 

 

(a)

"Approval Date" means July 15, 2008

 

(b)

"Area of Mutual Interest" has the meaning set forth in Section 15;

 

(c)

"dollars" means legal currency of the United States of America;

 

(d)

"Exploration Expenditures" shall include all expenditures and costs made or incurred by BHM or its affiliates or assigns relating directly or indirectly to the Property, including without limitation all expenditures and costs made or incurred: in doing geophysical, geochemical, land, airborne, environmental and/or geological examinations, assessments, assays,  audits  and/or  surveys;  in  linecutting,  mapping,  trenching  and  staking;  in searching   for,   digging,   trucking,   sampling,  working,  developing,  mining   and/or extracting ores, minerals and metals; in doing diamond and other drilling; in obtaining, providing, erecting, mining and milling including, without limitation, installing and operating mining plant, milling or other treatment plant, ancillary facilities, buildings, machinery, tools, appliances and/or equipment; in construction of access roads and other facilities on  or  for  the benefit  of  the Property or  any  part  thereof,  in  transporting personnel, supplies, mining, milling or other treatment plant, buildings, machinery, tools, appliances or equipment in, to or from the Property or any part thereof, in paying reasonable wages and salaries (including "fringe benefits") of personnel directly engaged in performing work on or with respect to the Property; in payment of assessments or contributions  under  applicable

 

employment  legislation  relating  to  workers' compensation, unemployment insurance and other applicable legislation or ordinances relating to such personnel; in supplying food, lodging and other reasonable needs for such personnel; in obtaining and maintaining any insurance; in the management of and accounting for work and providing supervisory, legal, accounting, consulting and other contract  or  professional services  or  facilities  relating  to  work  performed  or  to  be performed hereunder, in paying any taxes, fees, charges, payments or rentals (including payments made in lieu of assessment work) or otherwise incurred to transfer the Property or any  part  thereof or interest  therein pursuant  to this  Agreement  and  to keep  the Property or any part thereof in good standing; in acquiring access and surface rights to the Property; in carrying out any negotiations and preparing, settling and executing any agreements or other documents relating to environmental or indigenous peoples' claims, requirements or matters; in carrying out any requirements or prerequisites in order to obtain and obtaining all necessary or appropriate approvals, permits, consents or permissions relating to the carrying out of work, including, without limitation, environmental  permits,   approvals   or   consents;   in   carrying   out   reclamation   or remediation; in improving, protecting, or perfecting title in the Property or any part thereof, in carrying out mineral, soil, water, air or other testing; in preparing engineering, geological, financing, marketing or environmental studies and/or reports and test work related thereto; and in preparing one or more feasibility studies including any work or reports preliminary or supplementary thereto.

 

Where Exploration Expenditures are charged BHM by an affiliate of BHM for services rendered  by such  affiliate, such  Exploration Expenditures shall  not  exceed  the  fair market value of the services rendered.

 

BHM shall be entitled to include in Exploration Expenditures a charge for management supervision and administrative services of BHM equal to:

 

(e)

"Mineral Products" means the products derived from operating the Property as a mine;

 

(f)

"Net Smelter Returns" means the proceeds received by BHM from any smelter or other purchaser from the sale of any ores, concentrates or minerals produced from the Property after deducting from such proceeds the following charges only to the extent that they are not deducted by the smelter or other purchaser in computing the proceeds:

 

(g)

"Option" means the option granted by the Vendor to BHM pursuant to Section 3;

 

(h)

"Operating the Property as a mine" or "Operation of the Property as a mine" means any or all of the mining,  milling, smelting, refining or other recovery of  ores, minerals, metals or concentrates or values thereof, derived from the Property;

 

(i)

"Property" means those claims listed on page 1 of this Agreement together with any land included by operation of the "Area of Mutual Interest" provision set out in Section 15; and

 

(j)

"Royalty" means the royalty to be paid by BHM to the Vendor pursuant to Subsection  9.1.

 

(a)

it is a body corporate duty incorporated, organized and validly subsisting under the laws of its incorporating jurisdiction;

 

(b)

it has full power and authority to carry on its business and to enter into this Agreement and. any agreement or instrument referred to or contemplated by this Agreement;

 

(c)

neither the execution and delivery of this Agreement nor any of the agreements referred to herein or contemplated hereby, nor the consummation of the transactions hereby contemplated will conflict with, result in the breach of or accelerate the performance required by any agreement to which BHM is a party; and

 

(d)

the execution  and  delivery  of this Agreement  and the agreements  contemplated hereby will not violate or result in the breach of laws of any jurisdiction applicable or pertaining thereto or of its constating documents.

 

(a)

the Property  has been duly and validly staked and recorded,  is accurately described  on page 1 of this agreement. is presently  in good standing under the laws of the jurisdiction in which it is located and, except as set forth herein, is free and clear of all liens, charges and encumbrances;

 

(b)

 

 

(c)

the Vendor is the sole beneficial  owner of a 100% interest  in and to the Property  and has the exclusive  right to enter into this Agreement and all necessary  authority  to dispose of an undivided  100%  interest  in and to the Property  in accordance with the terms  of this Agreement;

 

 

(d)

no person, firm or corporation has any proprietary or possessory interest  in the Property other than the Vendor and no person  is entitled  to any royalty  or other  payment  in the nature  of rent or royalty on any minerals, ores, metals or concentrates or any other such products removed from the Property, except for royalties  due the state of Montana  upon the state lease;

 

(e)

neither the execution and delivery of this Agreement  nor any of the agreements referred to herein or contemplated hereby, nor the consummation of the transactions hereby contemplated will conflict  with.  result  in the  breach  of or accelerate the  performance required by any agreement to which the Vendor is a Party or by which he is bound;

 

(f)

the execution  and delivery  of this Agreement  and the agreements  contemplated hereby will  not  violate  or  result  in  the  breach  of  the  laws  of  any  jurisdiction applicable or pertaining thereto.

 

3.2

In addition to the cash payments and Exploration Expenditures set out in Section 3.1 above, BHM shall, in order to maintain its interest in the Property:

 

(a)

make advance Royalty payments to the Vendor, commencing on July 15, 2015 and continuing on the 15th day of July each and every year thereafter for so long as BHM or its assigns retains its interest in the Property, of $25,000 per year; and

 

(b)

subject to Section 3.3, incur a minimum of $100,000 of annual Exploration Expenditures on the Property on or before July 15th  each and every year after July 15,2011.

 

8.

 

8.1

Once  BHM  has  incurred  Exploration  Expenditures of  a minimum of  $210,000  as  set  out  in Subsection 3.1(b) and made the  payments  totaling  $80,000  plus  any  stipulated JV and  BP payments as set out in Subsection 3.1(a), BHM will, subject to the right of the Vendor to receive the Royalty  (including  the annual advance Royalty payments as set out in Subsection 3.2), own an undivided 100% of the Vendor's right, title, and interest in and to the Property.

 

9.1

BHM will pay to the Vendor an annual royalty equal to one and one half (1.5%) of Net Smelter Returns, subject to Section 9.4.

 

9.2

After the exercise  of the Option, payment of the Royalty will be made quarterly  within  30 days after the end of each yearly quarter based upon a year commencing on the lst  day of February and expiring on the 31st day of January in any year in which production  occurs.  Within 60 days after the end of each year for which the Royalty is payable, the records relating to the calculation of  Net  Smelter  Returns  for  such  year  will  be  audited  by  BHM  and  any  adjustments in  the payment of the Royalty will be made forthwith after completion of the audit.  All payments of the Royalty  for  a year will  be deemed  final and in full satisfaction of all obligations of BHM in respect thereof if such payments or calculations thereof are not disputed by the Vendor  within 60 days after receipt by the Vendor of the said audit statement.  BHM will maintain accurate records relevant  to the determination of Net Smelter  Returns  and the Vendor, or his. authorized agent, shall be permitted the right to examine such records at all reasonable times.

 

9.3

The  determination of  Net  Smelter  Returns royalty  hereunder is  based  on  the  premise   that production will  be developed  solely  on  the  Property  except  that  BHM  will  have  the  right  to commingle ore mined from the Property with ore mined and produced from other properties provided  BHM  will  adopt  and  employ  reasonable  practices  and  procedures  for  weighing, sampling  and  assaying,  in  order  to  determine  the  amounts  of  products  derived  from,  or attributable to ore mined and produced from the Property. BHM will maintain accurate records of  the  results of  such  sampling, weighing and analysis  with respect  to any  ore  mined  and produced from the Property. The Vendor or her authorized agents will be permitted the right to examine  at  all  reasonable  times such  records  pertaining to  commingling of  ore  or  to  the calculation of Net Smelter Returns.