EXHIBIT 10.39
SIERRA KAOLIN(TM) OPERATING LICENSE
Sierra County, New Mexico
This Sierra Kaolin(TM) Operating License ("Agreement") is dated as of
March 11, 2005 ("Effective Date") by and among CA PROPERTIES, INC., a Nevada
Corporation, whose address is 000 Xxxxx Xxxxxx Xxxxxx, Xxxx Xxxxxxx,
Xxxxxxxxxxxx 00000 ("CAP") and TECUMSEH INDUSTRIAL MINERALS, LLC, a New Mexico
limited liability company, whose address is One Sycamore Plaza, 0000 Xxxxxxx
Xxxx., XX, Xxxxx 000, Xxxxxxxxxxx, Xxx Xxxxxx 00000 ("TIML").
BACKGROUND
WHEREAS, CAP is the wholly owned subsidiary of CLEAN AGE MINERALS, INC.
("CAMI") which in turn is a wholly owned subsidiary of DALECO RESOURCES
CORPORATION ("DRC"); and
WHEREAS, TIML is the wholly owned subsidiary of TECUMSEH PROFESSIONAL
ASSOCIATES, INC., a New Mexico corporation ("TPA"); and WHEREAS, DRC and CAMI
entered into that certain Memorandum of Understanding (Sierra Kaolin(TM)
Development)("TPA MOU") dated November 30, 2004; and
WHEREAS, the TPA MOU required the parties to enter into this Agreement
for the development of the Company's Mineral Interest (as such term is defined
in the TPA MOU); and
WHEREAS, CAP is the owner of claims covering the Mineral Interests all
as more fully set forth on Exhibit "A" to the TPA MOU; and
WHEREAS, the primary mineral of interest on said Mineral Interests is
the mineral Kaolin; and
WHEREAS, CAP has partially developed the deposit of Kaolin and has
conducted extensive testing and product development studies that have lead to a
series of Kaolin products which have been trademarked under the name, Sierra
Kaolin(TM). Hereafter the Kaolin Mineral Interest and the products derived there
from shall be referred to collectively as "Sierra Kaolin(TM)"; and
WHEREAS, TPA is a national business firm being engaged (directly and
indirectly though subsidiary and/or "brother/sister" firms, including without
limitation TIML, hereafter
referred to as "Affiliates") in a variety of business activities ranging from
government facilities management and operation and environmental assessment and
remediation services to oil and gas activities and information technology
services; and
WHEREAS, TPA, through TIML and its Affiliates, has the financial
capability and technical expertise, to operate a mining and marketing venture
for the Sierra Kaolin(TM); and
WHEREAS, CAP desires to enter into a commercial relationship with TIML
for the development and monetization of the Sierra Kaolin(TM); and
WHEREAS, CAP is desirous that TIML assume the duties of "Mineral Site
Manager" and be responsible for capital formation and exploitation strategies,
including the exploitation, processing, packaging and marketing functions
associated with the Sierra Kaolin(TM) in accordance with the provisions of this
Agreement and the general terms identified in the TPA MOU.
NOW THEREFORE, for good and valuable consideration receipt of which is
hereby acknowledged, in further consideration of the covenants and obligations
hereinafter set forth, and intending to be legally bound hereby, the parties
hereto agree as follows:
I.
INCORPORATION BY REFERENCE
1.1. The parties hereto incorporate by reference the Background
provisions as though same were set forth at length herein.
II.
DEFINITIONS
2.1. "AFE" shall mean an Authority for Expenditure.
2.2. "BLM" shall mean the Bureau of Land Management, a Federal
Agency and any successor agency.
2.3. "DRC" shall have the meaning set forth above.
2.4. "CAMI" shall have the meaning set forth above
2.5. "Emergency" shall mean any explosion, fire, flood, leakage,
spill, other like event or catastrophes whether man made or act of God, which
could, if not addressed cause harm to life, property or create an unsafe
Environmental Condition.
2.6. "Environmental Condition" shall mean any condition of the
said, subsurface, surface, water, ground water, atmosphere or other
environmental medium which results, or could reasonably be expected to result in
any damage, loss, cost, expense, claim, investigation, lien and/or liability
relating or attributable to the Sierra Kaolin(TM) as a result of or under any
Environmental Law.
2.7. "Environmental Law" shall include, by way of example and not
limitation, any Environmental Act; the Clean Air Act, as amended, the Clean
Water Act, as amended, the Comprehensive Environmental Response, Compensation
and Liability Act, as amended and all other Federal, state and local
regulations, orders, implementations or rulings issued thereunder or pursuant
thereto.
2.8. "Environmental Act", shall mean any environmental law or
regulation enacted by the State of New Mexico governing the protection of the
environment, the operation of mines, the permitting of mines, the hauling of
minerals over state roads, or other laws governing, either directly or
indirectly, the mining, extraction, transportation and marketing of the Sierra
Kaolin(TM).
2.9. "Mineral Interests", shall have the meaning set forth above.
2.10. "Mineral Site Manager," shall mean that entity designated to
oversee the daily and long term development, exploration, exploitation, and
marketing of the Sierra Kaolin(TM).
2.11. "Net Profits" shall mean that certain residual amount
remaining from all revenues derived from the development, exploration,
exploitation, monetization or other sale of the Sierra Kaolin(TM) during the
term of this Agreement AFTER DEDUCTING all usual, customary, and necessary
operational and administrative costs and expenditures directly or indirectly
incurred in or related to such development, exploration, exploitation,
monetization or other sale of the Sierra Kaolin(TM), including without
limitation all lease costs, royalty payments, mining claims
maintenance/assessment fees and costs, existing net revenue interest payments,
permit fees, taxes, bond and insurance premiums, and all development,
processing, manufacturing, packaging, exploration, mining and other extraction,
storage, transporting, and marketing costs as shown in Exhibit B to this
Agreement. Net profits shall be determined by generally accepted accounting
principles consistently applied.
2.12. "TPA MOU" shall have the meaning set forth above.
Terms not otherwise defined herein shall have the meaning attributed to them in
the text hereof and the TPA MOU.
III.
OPERATIONS
3.1. TIML shall be Mineral Site Manager and shall be the operator
of record with the BLM and the State of New Mexico.
3.2. TIML shall, as Mineral Site Manager, obtain all mining permits
and such other permits as is necessary for the exploration, exploitation,
processing, marketing and transportation of the Sierra Kaolin(TM).
3.3. For so long as this Agreement is in full force and effect, CAP
shall at all times assist, advise and provide direction to TIML and act as a
third party contract sub-operator to TIML so as to insure that the Sierra
Kaolin(TM)is maintained in good condition as would a prudent operator under the
same or similar conditions consistent with applicable Environmental Laws and
other applicable Federal, state and local laws, regulations and ordinances
governing the operation of the Sierra Kaolin(TM)from time to time.
3.4. Authority for Expenditure.
3.4.1. Year 1 of the Agreement. For the first year of the
Agreement, TIML shall prepare and provide CAP, or its designee, DRC, with an
informational AFE for each capital project, improvement or enhancement to the
Sierra Kaolin(TM) for which the total estimated cost shall exceed $15,000.00. It
being understood that all costs of the operation, exploration, exploitation,
development, marketing, processing and delivering the Sierra Kaolin(TM) during
the first year of this Agreement shall, consistent with the TPA MOU, be the sole
and exclusive obligation of TIML.
3.4.2. Year Two and Subsequent Years. For the second year of
the Agreement and for so long there after as it shall remain in full force and
effect, TIML shall prepare and provide CAP, or its designee, DRC, with an AFE
for each capital project, improvement or enhancement to the Sierra Kaolin(TM)
for which the total estimated cost shall exceed $15,000.00. The AFE shall set
forth the proposed operation, its estimated cost and the rationale for the
proposed operation. CAP understands that an AFE is only an estimate of the costs
reasonably anticipated to be incurred in the performance of the proposed
operation and is not a guaranteed
or "turnkey price." Upon the approval and execution of an AFE by CAP, either as
originally proposed or as amended by the parties hereto, CAP shall have
unequivocally committed to fund its 35% of the proposed operation.
3.5. Emergencies. TIML shall cause to be taken such actions as
reasonably and prudently necessary, in its sole and absolute opinion and
discretion, to deal with an Emergency to safeguard life and property. In such
event, TIML shall promptly report the occurrence of an Emergency to CAP, the
nature of the Emergency and the actions taken in response to the Emergency. TIML
shall be entitled to reimbursement, in full, of its actual costs and expenses
incurred in connection with such an Emergency.
3.6. TIML Equipment. To the extent that TIML shall use any
personnel or equipment other than its own to perform its duties and services
under this Agreement, TIML shall insure that the rate charged by such other
person or persons are competitive with the rates prevailing in the area for
services similar to those provided or equipment or supplies furnished.
IV.
POLLUTION
4.1. Pollution Liability. Each party shall maintain their
respective equipment, facilities and machinery in sound working condition at all
times. Any pollution resulting from the failure of said equipment, facility or
machinery shall be the responsibility of the owner/operator of that equipment,
facility or machinery. Any pollution resulting from human error shall be the
responsibility of the employer of the person committing the error. TIML
employees shall report the spill to his supervisor immediately. The TIML
supervisor shall then immediately report the situation to a designated CAP
representative.
4.2. Pollution Prevention Response Plan. TIML has in place and
shall maintain a "Pollution Prevention Response Plan" for any breach of an
Environmental Law.
4.2.1. TIML represents and warrants that it and its
designated personnel are qualified to meet all requirements of and to provide
and implement a "Pollution Prevention Response Plan" in full compliance with the
Environmental Laws
4.2.2. TIML agrees to reimburse CAP for any and all actual
costs and expenses incurred by CAP in regards to an Emergency or subsequent
fine, obligation, penalty or
costs (including the costs of CAP's, CAMI's and/or DRC's counsel) resulting from
the violation of an Environmental Law consistent with Paragraph 5.1 below.
V.
LIABILITY AND INSURANCE
5.1. TIML agrees to indemnify and hold CAP, its officers,
directors, employees, agents, representatives and affiliated entities (CAMI and
DRC) harmless from any and all liability, claim, cause of action or damage
("Claim") (including attorney's fees and settlement costs) which CAP, its
officers, directors, employee, representatives, agents and affiliated entities
(CAMI and DRC) may sustain or become liable, except if such Claim is caused by
the gross negligence or willful misconduct of CAP. TIML agrees to carry the
following minimum insurance protection at all times during which operations are
being conducted hereunder:
5.1.1. All Workers' Compensation obligations required
by the State of New Mexico.
5.1.2. Maintain in effect such insurance (including, without
limitation, liability and property damage coverage) as is customarily maintained
by TIML in the mineral operation business in Sierra County, New Mexico. Such
insurance policies shall, at a minimum, provide coverage of the type and amount
normally provided in said industry and shall provide limits of not less than the
following:
Bodily Injury $1,000,000 per occurrence
Property Damage $5,000,000 per occurrence;
and shall name CAP as an additional insured under TIML's policy as indicated in
the Master Service Agreement required by CAP's Insurance Carrier and attached
hereto for reference. If an unrelated party is retained by TIML to perform
authorized services, TIML shall require said party(s) to maintain similar
coverage to that required of TIML and shall name CAP as an additional insured.
5.1.3. Policy CAP agrees to indemnify and hold TIML, its
officers, directors, employees and agents harmless from any and all Claim which
TIML may sustain or become liable for by reason of injury or death to any of
TIML's employees while performing services hereunder, except if such injury is
caused by the gross negligence or willful misconduct of TIML.
5.1.4. and shall name TIML as an additional insured under
CAP' policy
5.1.5. If an unrelated party is retained by CAP to perform
authorized services, CAP shall require said party(s) to maintain similar
coverage to that required of CAP.
VI.
REVENUE ALLOCATION AND ADDITIONAL CONSIDERATION
6.1. All Net Profits from the Sierra Kaolin(TM) operation shall be
allocated 35% to CAP and 65% to TIML.
6.2. TIML shall be entitled to receive reimbursement for its direct
expenses and an administrative overhead allocation in accordance with Exhibit B
hereto as the Mineral Site Operator. All third party costs shall be charged to
the venture at cost, giving effect to all discounts received or for which the
operation was entitled whether or not actually taken or realized.
6.3. In accordance with the MOU, as additional consideration for
CAP entering into this Agreement, TIML agrees to pay DRC the following:
6.3.1. At execution of this Agreement, TIML shall pay to DRC
the sum of Eighty Thousand Dollars ($80,000), and DRC shall issue to TPA One
Hundred Sixty Thousand (160,000) shares of DRC's registered, unrestricted,
common, capital stock; and
6.3.2. As soon as possible after the execution of this
Agreement, TIML shall use its best efforts to raise, either from internal funds
or from third parties, sufficient funds to test, analyze, and develop a market
for the Sierra Kaolin(TM); provided, however, if TIML has not developed a market
for the Sierra Kaolin(TM) by December 31, 2005, then no later than January 15,
2006, TIML shall have the right to pay to DRC another Eighty Thousand Dollars
($80,000.00), and, upon receipt of such payment, DRC shall issue to TIML another
One Hundred Sixty Thousand (160,000) shares of SRCs registered, unrestricted,
common, capital stock, and thereafter TIML shall have an additional year, i.e.,
until December 31, 2006, to develop a market for the Sierra Kaolin(TM). If TIML
fails to develop a market for the Sierra Kaolin(TM) within the times set forth
in this paragraph, then, at CAP's option, CAP may terminate this Agreement and
thereafter TIML shall have no further rights or obligations under this
Agreement.
VII.
TERM OF THE AGREEMENT
7.1. Except as otherwise set forth herein, this Agreement shall be
for an initial term of three (3) years ("initial term") and, so long as TIML
produces Sierra Kaolin(TM) in reasonably commercial quantities, the term of this
Agreement shall be automatically renewed for additional two (2) year periods
unless earlier terminated pursuant to this Paragraph VII.
7.2. Voluntary Termination by TIML. At any time with or without
cause, TIML may terminate this Agreement on not less than three (3) months prior
notice to CAP. The termination of this Agreement pursuant to any notice of
termination shall be effective on the next anniversary of the effective date of
this Agreement.
7.3. Involuntary Termination. TIML may be removed for:
7.3.1. Good cause. For the purposes of this Paragraph 7.3.1,
"good cause" shall mean, gross negligence, willful misconduct, the material
breach of or inability to meet the standards of a prudent mining site operator,
developer and marketer under the same or similar circumstances in New Mexico; or
7.3.2. TIML's material failure to perform any of its
obligations under this Agreement.
Unless mutually agreed to by the parties hereto, the removal of TIML as
Mineral Site Manager in accordance with this Paragraph 7.3 shall become
effective only after TIML has received written notice from CAP detailing the
alleged deficiency and TIML's failure to cure or to take the necessary steps to
implement a remediation of the deficiency within thirty (60) days following
receipt by TIML of such notice.
VIII.
RECORDS, PRODUCTION DATA AND BONDING
8.1. TIML shall maintain complete records relating to the Sierra
Kaolin(TM) and shall make copies of such reports to CAP as and when required.
TIML shall render monthly reports to CAP setting forth the status of the project
and the production, commercialization, and monetization of the Sierra
Kaolin(TM).
8.2. TIML shall prepare and file, as necessary, any and all
reports, if any, with the State of New Mexico and the BLM, to include by way of
example and not limitation, all production reports, water usage, and water
disposal if any.
8.3. TIML shall be responsible for and cause all required bonds to
be in place and properly maintained, from time to time, covering the operation
of the Sierra Kaolin(TM), to include by way of example and not limitation:
8.3.1. mining bond;
8.3.2. restoration bond; and
8.3.3. all bonds required by the Environmental Protection
Agency or any agency of the State of New Mexico.
IX.
MISCELLANEOUS
9.1. Notice. Any notice required to be given hereunder shall be in
writing and shall be deemed properly made if hand delivered, or upon receipt if
deposited in the United States mail, postage prepaid, certified mail return
receipt requested or by a reputable overnight courier. Notice may also be sent
by facsimile transmission but only if the original of such transmission is
delivered to the addressee by 5 P.M. eastern time the next business day
following the date of the facsimile transmission.
Notice shall be sent to:
If to CAP: CA Properties
c/o Daleco Resources Corporation
000 Xxxxx Xxxxxx Xxxxxx
Xxxx Xxxxxxx, XX 00000
ATTN: Xxxx X. Xxxxxxxxx
FAX NO: 000-000-0000
If to TIML: Tecumseh Industrial Minerals, LLC
0000 Xxxxxxx XX, Xxxxx 000
Xxxxxxxxxxx, XX 00000
ATTN: Xxxxxx X. Xxxxxxxx
FAX NO: 000-000-0000
Either party may change their address for notice by giving the other party not
less than ten (10) days notice thereof.
9.2. Complete Agreement. This Agreement embodies the complete
understanding between the parties hereto, superceding all prior agreements
and/or
understandings, and may only be amended or modified by written instrument
executed by the parties hereto or their successor; provided, however, except to
the extent that the terms of this Agreement are inconsistent with the terms of
any other written agreement between or among TIML, TPA, DRC, CAMI, and CAP, all
such other written agreements are ratified and confirmed.
9.3. Binding Agreement. This Agreement shall be binding upon the
successors and assigns of the parties hereto.
9.4. Governing Law. This Agreement shall be construed in accordance
with, and governed in all respects by, the laws of the State of Nevada, without
giving effect to conflicts of law provisions.
9.5. Counterparts. This Agreement may be executed in one or more
counterparts with each counterpart constituting an original and all such
counterparts constituting one agreement.
9.6. Independent Contractor. TIML shall in all instances be an
independent contractor. All work done by TIML shall be performed in accordance
with good industry practice and in a xxxxxxx like manner.
9.7. Conflicts. Any conflict between this Agreement and the TPA MOU
shall be resolved in favor of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the Effective Date.
CA PROPERTIES, INC.
Dated: March 15, 2005
By /S/ XXXXXX X. XXXXXX
------------------------------
XXXXXX X. XXXXXX, President
TECUMSEH INDUSTRIAL MINERALS, LLC
BY: TECUMSEH PROFESSIONAL
ASSOCIATES, INC., MANAGER
Dated: March 11, 2005
By /s/ XXXXXX X. XXXXXXXX
-----------------------------
XXXXXX X. XXXXXXXX, President
EXHIBIT "A"
Sierra Kaolin(TM) Claims
EXHIBIT "B"
For the purposes of this Agreement, all of the following costs shall be
deemed deductible direct or indirect costs for the purpose of determining Net
Profits under the Agreement:
1. LEASE, ROYALTY, AND CLAIMS MAINTENANCE COSTS.
1.1 All underlying lease and/or royalty obligations, if any,
relative to the Mineral Interests;
1.2 All existing net revenue interest obligations, if any,
relative to the Mineral Interests;
1.3 All fees, costs, and expenditures related to the maintenance,
protection, and preservations of the parties' rights, title, and interest in any
mining claims relative to the Mineral Interests.
2. PERMITS, ENVIRONMENTAL PROTECTION COSTS, AND TAXES.
2.1 All fees, costs, and expenditures for all necessary or
appropriate permits issued by any governmental agency or entity and required for
the operations contemplated by this Agreement;
2.2 All fees, costs, and expenditures for all necessary or
appropriate environmental assessment, protection, and remediation activities
relative to the Mineral Interests;
2.3 All taxes, including without limitation all gross receipts,
sales, compensating, and extraction taxes, directly related to the Mineral
Interests or TIML's operations and activities under this Agreement.
3. INSURANCE AND BONDING COSTS. All premiums and other fees, costs, and
expenditures for any insurance and bonds relative to the Mineral Interests or
otherwise required under this Agreement.
4. DIRECT OPERATING EXPENSES AND COSTS.
4.1 LABOR. All salaries, wages, benefits, and a reasonable and
fair share of TIML's general and administrative costs of or related to TIML's
personnel directly employed by TIML in the conduct of TIML's operations and
activities under this Agreement;
4.2 MATERIAL. All materials, supplies, and other consumables
purchased or furnished by TIML on the Sierra Kaolin(TM)and actually used on the
Mineral Interests.
4.3 EQUIPMENT.
4.3.1 All third party equipment and rentals hired by TIML
for use on the Sierra Kaolin(TM) site.
4.3.2 Any of TIML's or any Affiliate's equipment used on
the Sierra Kaolin(TM) site shall be charged at prevailing third party rates
after giving effect to any and all available discounts.
4.4 OTHER DIRECT EXPENSES. All other direct expenses, including
without limitation all expenses for power, transportation, communication,
travel, consultants, and other third-party operators used on the Sierra
Kaolin(TM) site or with respect to Mineral Interests or reasonable and necessary
with regard to TIML's operations and activities under this Agreement.
5. GENERAL AND ADMINISTRATIVE COSTS.
5.1 A fair and reasonable sum for TIML's administrative,
accounting, supervisory, and office services related to TIML's operations and
activities under this Agreement;
5.2 All costs associated for first tier supervisors of TIML may be
charged, at an hourly rate commensurate with the First Tier Supervisor's annual
Salary, for that proportionate time associated with his/her duties pertaining to
TIML's operations and activities under this Agreement.
All of the foregoing shall be expended and/or limited to costs, expenses, and
expenditures consistent with similar costs, expenses, and expenditures incurred
by competent and prudent mineral developers and mining operators of similar
minerals in New Mexico and related to their development, exploration,
exploitation, mining, processing, storage, transporting, marketing, and
administrative operations and activities related to such minerals. In addition,
the determination of costs, expenses, and expenditures shall be in accordance
with generally accepted accounting principles consistently applied. Not more
frequently than once each calendar year, CAP shall have the right to require an
audit of TIML's claimed costs, expenses, and expenditures, and the cost of such
audit shall be deemed a deductible expense under this Exhibit B. All disputes
relative to the deductibility of any costs, expenses, and expenditures shall be
resolved pursuant to Paragraph 6 (Dispute Resolution) of the TPA MOU.
6. MISCELLANEOUS PROVISIONS RELATED TO ALLOWABLE COSTS. The following shall
apply to all direct or indirect costs, expenses, and expenditures claimed by
TIML to be Allowable Costs under this Agreement:
6.1 EXPANSION AND/OR LIMITATION GENERALLY. All of the foregoing
listed costs shall be expanded and/or limited to direct or indirect costs,
expenses, and expenditures consistent with similar costs, expenses, and
expenditures incurred by competent and prudent mineral developers and mining
operators of similar minerals in New Mexico and related to their commercial
development, exploration, exploitation, mining or other extraction, processing,
packaging, storage, transporting, marketing, and administrative operations and
activities related to such minerals;
6.2 GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. The determination of
all costs, expenses, and expenditures shall be in accordance with United States
generally accepted accounting principles consistently applied;
6.3 CAP'S AUDIT RIGHTS. Not more frequently than once each
calendar year, CAP shall have the right to require an audit of TIML's claimed
costs, expenses, and expenditures, and the cost of such audit shall be deemed a
deductible expense and Allowable Cost under this Exhibit B; provided, however,
if the auditor finds substantial irregularities, i.e., substantial over-claiming
by TIML of costs, expenses, and expenditures as Allowable Costs, TIML shall pay
all costs of the audit, and in such event such costs of the audit shall not be
deemed deductible expenses or Allowable Costs under this Exhibit B. For the
purpose of this Paragraph 6.3, the terms "substantial irregularities" and
"substantial over-claiming by TIML of costs, expenses, and expenditures as
Allowable Costs" shall mean an over-claiming by TIML of a net aggregate of more
than Ten Thousand Dollars ($10,000.00) of costs, expenses, and expenditures as
Allowable Costs in the year being audited. Thus, by way of example and not
limitation, if TIML over-charged $5,000.00 for fuel and $12,000.00 for
transportation costs, but under-charged $8,000.00 for equipment rentals, the net
aggregate over-claimed for those categories would be $9,000.00.
6.4 LOWEST COST. All of TIML's (or any Affiliate's) equipment
and/or services used on the Sierra KaolinTM site shall be charged at the lower
of (i) actual cost, or (ii) prevailing competitive third-party rates in New
Mexico, after giving effect to any and all available discounts, whether or not
actually taken or realized;
6.5 DISPUTE RESOLUTION. In the event of any dispute between the
parties, the parties shall resolve such disputes as follows:
6.5.1 ORAL PROPOSAL AND DISCUSSION. The parties shall
attempt to resolve any disputes which might arise between or among them by
discussing with one another their relative positions and interests.
6.5.2 WRITTEN PROPOSALS. The party who desires a change
from the status quo ("Claimant") shall give the other party ("Respondent") a
written request for the proposed change and a concise written statement of the
reasons for such proposed change. The Claimant's request and supporting
statement shall provide enough information so that the Respondent may reasonably
investigate the facts and circumstances asserted as the basis for the proposed
change. The Respondent shall investigate the asserted facts and circumstances
and, within ten (10) days after such receipt, shall respond in writing with an
acceptance, rejection, or counter-proposal to the requested change.
6.5.3 MEDIATION. If the parties are unable to resolve their
dispute after compliance with Paragraphs 6.5.1 and 6.5.2 above, Claimant and
Respondent shall participate in good faith in non-binding mediation with an
impartial, professional mediator for at least two (2) hours. Either party may
give written notice of the proposal for mediation. The proposal shall contain
the name, address, and telephone number(s) of a proposed mediator. If the other
disputant rejects the proposed mediator, then, within five (5) days after
receipt of the notice of proposal for mediation, such other disputant shall
advise the proposing disputant of such rejection and name an additional proposed
mediator. The two (2) proposed mediators shall designate the mediator who shall
conduct the mediation. Subject to the mediator's availability, the mediation
shall be conducted within twenty (20) days after the date of the original
proposal for mediation.
6.5.4 ARBITRATION. If the parties are unable to resolve
their dispute after compliance with Paragraphs 6.5.1, 6.5.2, and 6.5.3 above,
the dispute shall be decided by BINDING ARBITRATION on a confidential basis
using a professional arbitrator experienced in mining and/or development and
monetization of mineral resource matters as hereinafter provided. The
requirement to arbitrate disputes shall be specifically enforceable under the
prevailing arbitration law.
6.5.4.1 NOTICE OF DEMAND. The Claimant shall deliver
to the Respondent a written demand for arbitration setting forth with reasonable
specificity the nature of Claimant's claim and the relief sought by Claimant.
The demand shall contain the name, address, and telephone number(s) of
Claimant's proposed arbitrator. The demand for arbitration shall be made within
a reasonable time after written notice of the claim, dispute or other matter in
question has been given, and in no event shall such demand be made after the
date when institution of legal or equitable proceedings based on such claim,
dispute, or other matter in question would be barred by the applicable statute
of limitations, whichever shall first occur.
6.5.4.2 ARBITRATORS. If the Respondent rejects the
proposed arbitrator named in the Claimant's demand, then, within five (5) days
after receipt of the demand, the Respondent shall advise the Claimant of such
rejection and name an additional proposed arbitrator. The two (2) proposed
arbitrators shall designate a third arbitrator (sometime "neutral arbitrator")
who shall act as the sole arbitrator of the dispute unless the parties agree
that all three (3) arbitrators shall decide the dispute. Each party reserves the
right to object to any neutral arbitrator who owns or is employed by or
affiliated with a competing organization or entity.
6.5.4.3 LOCATION OF ARBITRATION. Unless the
disputants otherwise agree, all of the arbitration proceedings shall be held and
conducted in Albuquerque, New Mexico, unless the Claimant and Respondent agree
upon a different location.
6.5.4.4 DISCOVERY. The disputants shall be entitled
to reasonable discovery upon such terms and conditions as the neutral arbitrator
shall determine; provided, however, that without further notice, request, or
demand, not later than thirty (30) days after the notice of demand for
arbitration both the Claimant and Respondent shall have the affirmative duty to
make good faith, full disclosure to the other party of all matters relevant to
the arbitration
including without limitation (i) the names, addresses, contact information of
all witnesses having knowledge of relevant facts, (ii) the names, addresses,
contact information of all witnesses the disclosing party intends to call as
witnesses at the arbitration, (iii) a fair, detailed, and complete summary of
the testimony each such witness is likely to offer at the arbitration, (iv)
copies of all documents (and all other tangible physical evidence) relevant to
the dispute, and (v) copies of all documents (and all other tangible physical
evidence) the disclosing party intends to offer as evidence at the arbitration.
6.5.4.5 AWARD. Except as otherwise provided herein
or agreed upon by the parties, the award rendered by the arbitrator(s) shall be
made within one hundred twenty (120) days after the notice of demand for
arbitration, shall be final, and judgment may be entered upon it in accordance
with applicable laws in any court having jurisdiction. The arbitrator, in the
sole discretion of the arbitrator, may assess all of the costs and expenses of
the arbitration proceeding, including without limitation all attorneys fees,
against the non-prevailing party.
6.5.5 APPEAL OF ARBITRATION AWARD. Notwithstanding the
provisions of Paragraph 6.5.4.5 above, within ten (10) days after notice of the
arbitration award, either Claimant or Respondent may appeal the award to any
court of competent jurisdiction based only on the grounds of lack of
jurisdiction or substantial abuse of discretion by the arbitrator(s), and, upon
such timely appeal, if the court first makes a finding of fact and conclusion of
law that the arbitrator(s) lacked jurisdiction, the matter shall be decided by
the court by trial de novo without reference to or consideration of the
arbitration award, or, if the court first makes a finding of fact and conclusion
of law that the arbitrator(s) committed a substantial abuse of discretion which
resulted in an arbitration award not supported by substantial evidence or was
clearly not in accordance with prevailing law, the court may hear and modify
only those portions of the arbitration award necessary to make a decision based
on substantial evidence and in accordance with prevailing law. The decision of
such court shall be final and binding upon all of the parties.
6.5.6 COSTS OF DISPUTE RESOLUTION. Except as otherwise
provided herein, the fees of the mediator(s) and arbitrator(s) shall be split
equally between the parties; provided, however, any Court judgment shall provide
that the non-prevailing party shall pay all of the reasonable attorney's fees
and costs of the prevailing party unless the prevailing party does not obtain a
judgment from such Court in its favor substantially better than the arbitration
award such prevailing party received.
