EXHIBIT 10.38 DEVELOPMENT AND OPERATING AGREEMENT

 

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                                  EXHIBIT 10.38

 

                       DEVELOPMENT AND OPERATING AGREEMENT

                     (CALCIUM CARBONATES, CIBOLA COUNTY, NM)

 

        This Agreement ("Agreement") is dated this February 14, 2005 ("Effective

Date") by and among TECUMSEH PROFESSIONAL ASSOCIATES, INC., a New Mexico

corporation ("TPA"), TECUMSEH INDUSTIRAL MINERALS, LLC, a New Mexico limited

liability company ("TIML"), and CA PROPERTIES, INC., a Nevada corporation

("CAP"). TPA, TIML, and CPA are sometimes collectively referred to as the

"Parties". The Parties agree:

 

        1. BACKGROUND.

 

                1.1 STATUS OF TECUMSEH. TPA is a small, national business firm

having its principal office in Albuquerque, New Mexico. TPA is engaged (directly

or indirectly through subsidiary and/or "brother/sister" firms) in a variety of

business activities including without limitation government facilities

management and operation services, environmental assessment and remediation

services, oil and gas activities, and information technology services. TIML is a

wholly owned subsidiary of TPA. Tecumseh has the financial capability and

technical expertise to operate a mining and marketing venture for the Mineral

Interests. TPA and TIML are sometimes collectively referred to as "Tecumseh".

 

                1.2 STATUS OF CAP. CAP is a wholly owned subsidiary of CLEAN AGE

MINERALS, INC., a Nevada corporation ("CAMI"). CAMI is a wholly owned subsidiary

of DALECO RESOURCES CORPORATION, a Nevada corporation ("DRC"). DRC is publicly

held, international asset and technology aggregation and monetization company

having its principal office in West Chester, Pennsylvania.

 

                1.3 CAP'S CALCIUM CARBONATE MINERAL INTERESTS. CAP is the lessee

("Lessee") under a Limestone Mining Lease and Agreement dated August 4, 1993

("Limestone Agreement"), wherein New Mexico and Arizona Land Company was the

lessor. On September 10, 2004, the Limestone Agreement was amended by an

Amendment to Limestone Agreement ("First Amendment") wherein NZ Travertine, LLC

is the current lessor ("Lessor"). The Limestone

 

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Agreement as amended by the First Amendment is hereinafter sometimes

collectively referred to as the "Amended Limestone Lease". Copies of the

Limestone Agreement and First Amendment are attached hereto as Exhibit A and

incorporated herein. The Amended Limestone Lease covers land and minerals

located in Cibola County, New Mexico, being part of the Mesa del Oro deposit.

Some of the minerals covered by the Amended Limestone Lease are owned by the

Lessor in fee and some are controlled by the Lessor being the current holder of

a number of federal mining claims for Calcium Carbonate in Cibola County, NM

("Calcium Carbonate Mining Claims") shown on Exhibit B attached hereto and

incorporated herein. All such Calcium Carbonate Mining Claims are active, in

good standing, and have all of the required assessment work completed and

documentation of such assessment work duly filed with the BLM for the calendar

year 2005. All payments and other obligations to be performed by CAP, in its

capacity as the Lessee, under the Limestone Agreement have been timely

paid/performed. However, CAP has not yet completed its production/sales

requirements due under the Limestone Agreement for the lease year ending August

4, 2005. All of CAP's right, title, and interest in and to the minerals, i.e.,

primarily Calcium Carbonate, covered by the Amended Limestone Lease are

hereinafter referred to as the "Mineral Interests".

 

                1.4 CURRENT OPERATIONS. CAP is presently mining the Mineral

Interests and selling products therefrom.

 

                1.5 INTENTION TO ENTER INTO BUSINESS ARRANGEMENT. The Parties

acknowledge their mutual intention to enter into a business relationship whereby

TIML, directly or through its parent, TPA, subsidiaries, affiliates, agents,

representatives, and other third-party contractors, shall be responsible for the

commercial development, exploration, mining or other extraction, processing,

packaging, storage, transporting, marketing, and administrative operations and

activities related to the Mineral Interests all for the purpose of monetizing

the Mineral Interests, and all in substantial accordance with the provisions of

this Agreement.

 

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        2. DEFINITIONS.

 

                2.1 "AFE" shall mean an Authority for Expenditure.

 

                2.2 "ALLOWABLE COSTS" shall have the meaning ascribed to it in

Exhibit C hereto.

 

                 2.3 "BLM" shall mean the Bureau of Land Management, a Federal

Agency and any successor agency to the BLM.

 

                2.4 "CALCIUM CARBONATE" shall mean all of the Calcium Carbonate,

i.e., all of the CACO3, minerals included within the Mineral Interests. For all

purposes of this Agreement, the term Calcium Carbonate shall include without

limitation limestone, travertine, and all other minerals primarily composed of

Calcium Carbonate and/or all other minerals covered by the Amended Limestone

Agreement.

 

                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 or property or create an unsafe

Environmental Condition.

 

                2.6 "ENVIRONMENTAL CONDITION" shall mean any condition existing

on, in, or under the atmosphere, the ground surface, any surface or subsurface

or ground water, 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 Calcium

Carbonate 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 Calcium

Carbonate.

 

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                2.9 "MINERAL SITE MANAGER" shall mean that entity designated

herein to oversee the daily and long term development, exploration,

exploitation, and marketing of the Calcium Carbonate.

 

                2.10 "NET PROFITS" shall mean that certain residual amount

remaining from all revenues derived from the development, exploration,

exploitation, monetization or other sale or disposition in any manner of the

Calcium Carbonate during the term of this Agreement AFTER DEDUCTING all

Allowable Costs. Net Profits shall be determined by United States generally

accepted accounting principles consistently applied. Capitalized terms not

otherwise defined herein shall have the meaning attributed to them in the text

hereof.

 

        3. OPERATIONS.

 

                3.1 DESIGNATION OF TIML AS MINERAL SITE MANAGER. TIML shall be

the Mineral Site Manager and shall be the operator of record with the BLM and

the State of New Mexico with respect to the Mineral Interests.

 

                3.2 DUTIES OF MINERAL SITE MANAGER. In its capacity as the

Mineral Site Manager during the term of this Agreement, TIML shall:

 

                        3.2.1 GENERAL RESPONSIBILITY FOR OPERATIONS. Be

responsible for capital formation, improvement, and implementation of CAP's

present exploitation strategies with regard to the Mineral Interests, including

without limitation all commercial development, exploration, exploitation, mining

or other extraction, processing, packaging, transportation, marketing, and

administrative operations, activities, and functions associated with or related

to the monetization of the Mineral Interests and as required by the Amended

Limestone Lease;

 

                        3.2.2 GUARANTY OF AMENDED LIMESTONE LEASE. Guaranty the

production of Calcium Carbonate from the Mineral Interests in "paying

quantities" (as such term is defined in the Limestone Agreement) sufficient to

keep the Amended Limestone Lease in full force and effect, all as more fully set

forth in Paragraphs 4, 6, and 7 of the Limestone Agreement; i.e., TIML shall

sell and/or remove from the Mineral Interests a quantity of Calcium Carbonate

(or other products as permitted under the Amended Limestone Lease) sufficient to

result in the requirement for

 

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payment to the Lessor under the Amended Limestone Lease of a production royalty

of not less than the Minimum Annual Royalty as provided for and calculated in

Paragraph 6 of the Limestone Agreement. TIML shall make or cause to be made in a

timely manner all reports required by the Amended Limestone Lease.

 

                3.2.3 CONSULTATION WITH COMPANY. Consult with CAP when

establishing its exploitation, pricing and marketing plans for the Mineral

Interests.

 

                        3.2.4 DISCLOSURE OF MARKET LEADS. Disclose to CAP all

client and market potential leads and consult with CAP in order to further the

commercialization and monetization of the Mineral Interests;

 

                        3.2.5 MINING PERMITS. Obtain all mining permits and such

other permits as is necessary for the development, exploration, exploitation,

mining or other extraction, processing, packaging, marketing, and transportation

of the Calcium Carbonate and assist CAP in obtaining the cancellation,

termination, and/or release of its permits with respect to the Calcium

Carbonate;

 

                        3.2.6 ACCOUNTING. Prepare all reasonable, necessary, and

appropriate accounting with regard to its operations under this Agreement,

including without limitation accounting for all production and sales of Calcium

Carbonate under the Limestone Agreement and the payment of all royalties due

under the Amended Limestone Lease, and provide to CAP and, as required, the

Lessor, in a timely manner copies of all such accounting;

 

                        3.2.7 SALES IN ACCORDANCE WITH PRICING PARAMETERS. Sell

or otherwise dispose of limited quantities of specific Calcium Carbonate

products, including without limitation limestone and/or travertine, within the

Mineral Interests ONLY in conformance with the pricing parameters established by

CAP and subject to review by CAP's management and/or Board of Directors. For the

purpose of this Paragraph 3.2.7, the term "limited quantities of specific

Calcium Carbonate products within the Mineral Interests" shall mean quantities

less than all or substantially all of the Calcium Carbonate minerals within the

Mineral Interests;

 

                        3.2.8 DISPOSITION OF ENTIRE MINERAL INTEREST. Sell or

otherwise dispose of all or substantially all of the Calcium Carbonate minerals

within the Mineral Interests ONLY upon

 

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prior written notice to CAP with all of the specifics of the proposed

transaction fully disclosed to CAP AND ONLY with the prior written consent of

CAP to the proposed transaction; provided, however, within ten (10) days after

the effective date of receipt of TIML's written notice in accordance with

Paragraph 10 below, fully disclosing all information which a prudent seller

would want to know about the transaction so that an informed decision could be

made. CAP shall respond in writing consistent with Paragraph 10 below to TIML

(i) by rejecting the proposed transaction, (ii) by accepting the proposed

transaction, or (iii) by making a good faith, reasonable request for additional

information which CAP may need to make an informed decision.

 

                3.3 DUTIES OF CAP. During the term of this Agreement, CAP shall:

 

                        3.3.1 Provide TIML with a complete list of all of CAP's

current customers, prospective customers and leads for products from the Mineral

Interests together with all pricing information relative to such customers and

products;

 

                        3.3.2 From time to time as reasonably requested by TIML,

assist, advise and provide information to TIML with regard to the Mineral

Interest;

 

                        3.3.3 Neither engage in any mining activities on or with

respect to the Mineral Interests nor take any action to terminate, modify,

amend, or change in any manner whatsoever the Amended Limestone Lease or any

provision thereof without the prior written consent of TIML .

 

                3.4 AUTHORITY FOR EXPENDITURE.

 

                        3.4.1 REGULAR AFES. During the term of this Agreement,

TIML shall prepare and provide to CAP, or its designee, DRC, a detailed AFE for

each capital project, improvement or enhancement, and operation with respect to

the Calcium Carbonate for which the total estimated cost shall exceed

$15,000.00. Each AFE shall set forth the proposed project, improvement or

enhancement, or operation, its estimated cost and the rationale for the proposed

project, improvement or enhancement, or operation. CAP acknowledges that an AFE

is only an estimate of the costs reasonably anticipated to be incurred in the

performance of the proposed project, improvement or enhancement, or operation

and is not a guaranteed or "turnkey price." Subject to the provisions of

Paragraph 3.4.2 below, upon the approval and execution of an AFE by CAP,

 

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either as originally proposed or as amended by the parties hereto, CAP shall

have unequivocally committed to fund its thirty-five percent (35%) of the

proposed project, improvement or enhancement, or operation.

 

                        3.4.2 TIML'S SOLE RESPONSIBILITY FOR FIRST YEAR

EXPENSES. Notwithstanding the provisions of Paragraph 3.4.1 above, during the

first year of the initial term of this Agreement, TIML shall have the sole and

exclusive obligation to pay all costs of the operation, exploration,

exploitation, development, marketing, processing and delivering the Calcium

Carbonate.

 

                        3.4.3 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 for all of its reasonable actual costs

and expenses incurred in connection with such an Emergency.

 

        4. RECORDS, REPORTS, AND BONDING.

 

                4.1 RECORD KEEPING. TIML shall maintain complete records

relating to its operations relative to the Mineral Interests under this

Agreement, and TIML shall provide copies of such records to CAP as and when

reasonably requested by CAP and to the Lessor as required by the Amended

Limestone Lease. TIML shall render monthly reports to CAP setting forth the

status of the project and the production, commercialization, and monetization of

the Calcium Carbonate.

 

                4.2 PREPARATION AND FILING OF REPORTS. TIML shall prepare and

file, as necessary, all reports, if any, with the State of New Mexico and the

BLM, including by way of example and not limitation, all production reports,

water usage reports, and water disposal reports.

 

                4.3 BONDING. 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 Calcium Carbonate, including by way of example and

not limitation:

 

                        4.3.1 mining bond;

 

                         4.3.2 restoration bond; and

 

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                        4.3.3 all bonds required by the Environmental Protection

Agency or by any agency of the State of New Mexico. In addition, TIML shall

assist CAP obtaining the cancellation, termination, and/or release of all its

bonds with respect to the Calcium Carbonate.

 

        5. POLLUTION.

 

                5.1 POLLUTION LIABILITY. TIML shall maintain its 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.

To the extent that TIML is not the owner/operator of the equipment, TIML shall

require the owner/operator of the equipment to carry sufficient insurance to

cover the costs of any pollution caused by such equipment. Each TIML employee

having actual knowledge of any spill of hazardous material greater than five (5)

gallons shall immediately report such spill to his supervisor. The TIML

supervisor shall then immediately report the situation to a designated CAP

representative.

 

                5.2 POLLUTION PREVENTION RESPONSE PLAN. TIML has in place and

shall maintain a "Pollution Prevention Response Plan" for any breach of an

Environmental Law.

 

                        5.2.1 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.

 

                        5.2.2 Consistent with Paragraph 6.1 (TPA's Duty to

Indemnify CAP) below, TIML shall reimburse CAP for 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.

 

                5.3 PRE-EXISTING CONDITIONS. Within thirty (30) days after the

Effective Date of this Agreement, TIML shall inspect the Mineral Interests and

designate in writing (with appropriate photographic and/or other documentation)

to CAP each pre-existing environmental condition, hazard, or violation of any

Environmental Law with respect to the Mineral Interests for which TIML declines

to be responsible under this Agreement ("Pre-Existing Environmental

 

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Conditions"). Nothing in this Agreement shall be interpreted or construed to

impose upon TIML any liability for any Pre-Existing Environmental Condition,

hazard, or violation of any Environmental Law with respect to the Mineral

Interests. Except as otherwise limited by the provisions of this Paragraph 5.3,

TIML shall accept the Mineral Interests AS IS and WHERE IS for all purposes.

 

        6. INDEMNIFICATION AND INSURANCE.

 

                6.1 TPA'S DUTY TO INDEMNIFY CAP. TIML and TPA shall indemnify

and hold CAP, its officers, directors, employees, agents, representatives and

affiliated entities, including without limitation CAMI and DRC, harmless from

all losses, liability, claims, cause of action or damage (including attorney's

fees and settlement costs) and/or loss of the Amended Limestone Lease

(collectively "Claims") which CAP, its officers, directors, employees,

representatives, agents and affiliated en