EXHIBIT 10.6
MINERAL LEASE
THIS MINERAL LEASE
(hereinafter the
"Lease") is made and entered into
as of this__________ day
of_________________, _______________, by and between
________________________________________________________________________________
hereinafter collectively referred to as
"Lessor," and MINERAL RECOVERY SYSTEMS,
INC., a Nevada corporation, Lessee
(hereinafter referred to as "MRS").
W I T N E S S E T H :
WHEREAS, Lessor is the
owner of that certain property situated in the
County of , State of Tennessee,
containing acres, more
or less, which property,
including all Ore and Minerals (as hereinafter defined) situated therein,
thereon and thereunder and all improvements
thereon and
appurtenances
thereto,
is hereinafter referred to as the "Premises" and is more fully described as
follows:
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
WHEREAS, MRS desires
to lease the Premises
from Lessor, and Lessor
desires to lease said Premises to MRS, for the purposes of exploring for,
developing and mining Ore and Minerals
situated therein, thereon and thereunder;
NOW, THEREFORE,
in consideration of _______________ Dollars
($_____________) in hand paid to Lessor,
the receipt and
sufficiency of which
are hereby acknowledged, and further in consideration of the covenants
hereinafter set forth, Lessor and MRS agree
as follows:
1. DEMISE. Lessor does
hereby lease and demise the Premises to MRS for
the Term and upon the covenants and
conditions
set forth in this
Lease for the
purposes of exploring for, developing, mining, processing and selling the Ore
and Minerals lying in, under and upon such
Premises and for other
purposes set
forth herein.
2. DEFINITIONS.
The following
words and terms
wherever used in
this
Lease are defined as follows:
"Concentrates" means upgraded intermediate products obtained
after Ore
is mined and processed.
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"F.O.B. Mine Value" shall mean the amount received F.O.B. the mine
site
by MRS from any purchaser in payment for
the Ore, Concentrates,
or other first
salable product mined from the Premises
and sold, less
government
severance,
sales or production taxes (other than any based on net
income), third party
royalties, sales commissions and any other expenses
borne by MRS in connection
with the sale of such Ore, Concentrates or other first
salable products. In the
event such Ore, Concentrates or other first salable
products are shipped
to a
mill or other treatment facility owned and/or operated by
MRS, the F.O.B.
Mine
Value as defined herein on which royalties are calculated shall be no less
favorable to Lessor than if such Ore, concentrates or other first salable
products had been shipped to the nearest competitive custom mill or other
treatment facility which would accept said Ore, Concentrates or other first
salable products.
"Minerals" shall mean all minerals and mineral substances of
whatsoever
nature and character (other than coal, oil and gas) now
known to exist or which
may be subsequently discovered or
subsequently classified as minerals or mineral
substances, irrespective of whether at the time of the
execution of this Lease
any said mineral or substance was
considered in connection with the Premises.
"Ore" shall
mean rock, sediments, and other materials containing
Minerals mined or extracted by or for MRS which MRS, in its
sole discretion,
deems valuable for its mineral content.
"Tailings" shall
mean the reject material and residue of Ore and
Minerals after processing not incorporated in the processed form of Ore
and
Minerals.
"Term" shall mean the initial term of this Lease and any
extension and
renewal thereof.
"Waste Material"
shall mean material
mined or extracted by or for MRS
which MRS in its sole discretion,
determines not to be
valuable for its mineral
content.
3. RIGHTS OF MRS. Lessor grants unto MRS the following exclusive
rights
and privileges on the Premises:
(a) The right and
privilege during the Term of this Lease to
enter upon, take possession of, prospect,
explore for, test, drill, dig, develop
and mine by any methods now known or hereinafter developed, including strip
mining, dredging and other surface mining methods and underground mining
methods, and to extract, crush, mill,
blend, concentrate,
beneficiate,
refine,
reduce or otherwise process, and sell, or
otherwise dispose of, any and all Ore,
Minerals, Concentrates and other materials
which may be found within or upon the
Premises, and the products thereof, in such manner as MRS, in its sole
discretion, deems advisable;
(b) The right to use and affect as much of the Premises,
including the surface and subsurface
thereof, as may be
necessary or incidental
to the exercise of the rights herein
granted;
(c) The right of ingress and egress over, upon, under and
through
the Premises and other lands owned by
Lessor adjacent to the
Premises as may be
necessary or incidental to the exercise of
the rights herein granted;
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(d) The right to stockpile Ore, Minerals and Concentrates from
the Premises on other lands owned or
controlled by MRS;
(e) The right to build on the Premises stockpiles of Ore,
Minerals and Concentrates and to dispose of or deposit Waste Material and
Tailings on the Premises whether produced from the Premises
or from other lands
being mined by MRS as part of a mine plan
which includes the Premises;
(f) The right to commingle Ore, Minerals, Concentrates, and
other
materials and products thereof derived from the Premises and
products thereof
with Ore, Minerals, Concentrates, and other materials and products thereof
produced from other lands owned or
controlled by MRS;
provided, however,
that
prior to such commingling, MRS shall weigh and sample the Ore, Minerals,
Concentrates, and other materials derived from the Premises and the
products
thereof in accordance with sound mining and
metallurgical
practice, and shall
make such analyses and keep and make
available to Lessor
such records and data
as shall be reasonably necessary to
accurately determine
the quantity,
quality
and character of such Ore, Minerals,
Concentrates,
and other materials
derived
from the Premises and the products
thereof;
(g) The right to excavate pit slopes on the Premises in
connection with mining operations of MRS on
adjacent lands;
(h) The right to
construct,
assemble, erect, use, maintain,
improve, repair, replace, rebuild, remove and relocate in or
upon the Premises
such buildings, shops, plants, machinery, equipment, mills, structures,
facilities, and such other improvements and
services, including roads, inclines,
drifts, entry ways, pipelines, telephone lines, electric transmission lines,
railroads, conveyors, and other
transportation facilities (including facilities
for the operation, use and maintenance of aircraft) and the
right to excavate
such shafts, pits, tunnels and ditches and to create such lakes,
ponds and
settling basins, as may be necessary or incidental to the exploration,
development, mining, extraction, removal, processing, sale and disposition
of
Ore, Minerals, Concentrates, and the products
thereof whether produced from the
Premises or from other lands being mined by MRS as part of a mine
plan which
includes the Premises;
(i) The right to use,
subject to applicable laws, rules and
regulations, any surface or ground water
situated within or upon the Premises in
connection with MRS's operations
hereunder;
provided, however, that MRS shall
not take water from Lessor's existing
wells, tanks or surface reservoirs without
the written consent of Lessor, which
consent shall not be unreasonably withheld;
(j) The right, to be exercised in connection with MRS's
operations hereunder, to cut and use timber
situated upon the Premises, subject
to the provisions of Paragraph 5 below;
(k) The right to mine and remove Ore, Minerals, Concentrates,
Waste Material and Tailings from the
Premises or from other lands upon which MRS
may be conducting mining operations as part of a
mining plan which includes the
Premises over, upon, across, under or through the Premises or other lands
adjacent to the Premises owned by Lessor, and to enjoy mining rights, dump
rights, drainage rights, haulage rights and ventilation rights, as may be
necessary or convenient from time to time
in the conduct of MRS's operations on
the Premises or on other lands upon which MRS may be conducting mining
operations as part of a mining plan which
includes the Premises.
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(l) all other rights and privileges which are incidental to or
which may be useful, desirable or convenient to MRS in the exercise of any
or
all of the rights hereinabove set forth which are not in conflict with
applicable state, federal or local laws,
ordinances and regulations.
4. TERM. The Term of
this Lease
shall commence on the date of this
Lease first set forth above and shall,
subject to MRS's right
to terminate
as
set forth in Paragraph 14 below, and to
Lessor's right to terminate as set forth
in Paragraph 15 below, continue for a period of ten (10)
years from said date
and so long thereafter as MRS is conducting
exploration,
development, or mining
operations on the Premises or upon other
lands pursuant to a
mining plan which
embraces or had embraced the Premises. However, unless the contrary is
established, MRS shall not be presumed to
have ceased to conduct such operations
except where the Premises have not been so
used for a period of one (1) year.
5. DAMAGES.
MRS shall pay Lessor reasonable compensation for any
damages to fences, existing buildings or other
tangible improvements,
timber,
crops or livestock resulting from MRS's operations on the Premises, but MRS
shall not be liable for consequential, special or incidental damages such as,
but not limited to, loss of opportunity or loss of future profits. The
determination of reasonable compensation for damages shall be mutually
agreed
upon by the parties hereto; but if the parties are unable to
agree, then each
shall appoint at its own expense a
qualified appraiser to
separately
appraise
the applicable amount of damages. The average of such two (2)
appraisals shall
be the basis of compensation and shall be binding on both
parties. This
Lease
shall not interfere with the Lessor's right to harvest
and sell timber from the
Premises as long as such harvesting and sale of timber does not
interfere with
MRS's development or mining operations on
the Premises.
6. ADVANCE ROYALTY. MRS shall pay Lessor an advance royalty,
except as
otherwise provided herein and subject to
termination under Paragraphs 14 and 15,
of
$_____ per
acre upon the execution of this Lease, being the
consideration
mentioned
hereinbefore, and a
like amount per
acre on or before the first and second anniversaries of this
Lease for each acre then held under this Lease;
$_____ per
acre on or before the third, fourth and fifth
anniversaries of this Lease for each acre then held under this
Lease; and
$_____
per acre on or
before the sixth
anniversary of this Lease for
each acre then held under this Lease, and a like amount per
acre on or before each
subsequent anniversary
of this Lease
for each acre then held under this Lease.
All advance royalties paid under the terms of this Paragraph 6
shall be
a credit against production royalty payments due or thereafter
becoming due
under Paragraph 7 below.
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7. PRODUCTION
ROYALTY.
In the event that MRS shall sell Ore,
Concentrates or other first salable products derived from any part of the
Premises, MRS shall pay to Lessor a
production royalty
equal to _____
percent
(_____%) of the F.O.B. Mine Value thereof.
Actual payments to Lessor of sums due
under this Paragraph 7 shall be made only
after and to the extent that accrued
production royalties exceed the credit for
all advance royalties paid under the
terms of Paragraph 6 above. Once actual payments of production royalties to
Lessor begin, MRS's obligation to pay advance
royalties under Paragraph 6 shall
terminate. However, should MRS discontinue
mining for any reason and payment of
production royalty ceases and such
discontinuance has been ongoing for more than
six (6) months preceding a Lease anniversary, then payment of advance
royalty
shall be resumed and continued until the payment of production royalty is
resumed. All amounts payable to Lessor as
production royalty on account of Ore,
Concentrates or other first salable
products derived from
the Premises and sold
during any calendar quarter shall be paid by mailing
payment to Lessor on
or
before the forty-fifth day of the calendar
quarter next
succeeding the calendar
quarter during which MRS receives the
F.O.B. Mine Value attributable to the sale
of such Ore, Concentrates or other first
salable products.
8. TAILINGS AND WASTE
MATERIAL. Lessor
agrees that Waste Material may
be mined or otherwise extracted from the
Premises without obligation upon MRS to
replace the same except as may be required
by law. Lessor
shall have no
right,
title or interest to such Tailings or Waste Material except that any Ore,
concentrates or other first salable
products, recovered from such Tailings
or
Waste Material from a subsequent processing
for the recovery of mineral content,
shall be subject to the regular
production
royalty provided
herein. MRS shall
have no right, title or interest in Waste
Material or Tailings or other material
on the Premises after termination of this
Lease.
9. BOOKS AND RECORDS;
INSPECTION.
MRS shall keep books and records
necessary to document the quantity and quality of all Ore and
Minerals mined
from the Premises, and the F.O.B. Mine Value received
from the sale of said Ore
and Minerals or Concentrates or other
products derived therefrom. At reasonable
times, Lessor or Lessor's representatives, at their sole risk and
liability,
shall, for the purpose of inspection, have access to the Premises and to the
books and records of MRS necessary to document the royalty
accruing to
Lessor,
it being understood that such inspections by Lessor shall not interfere
with
MRS's operations and shall be subject to MRS's instructions as to matters
relating to health and safety. In the event that Lessor and MRS
cannot agree as
to what records must be reviewed to permit
a determination
of the accuracy of
the royalty calculation, then MRS's independent public
accountants shall review
the royalty calculation and verify the accuracy thereof. The results of the
review by the independent public accountants shall be binding on
both parties.
If no written objection to the calculation of
royalties shall be made by Lessor
to MRS within one year after the
payment thereof, the amount of such payment
shall be conclusively deemed correct.
10. PERFORMANCE OBLIGATIONS
(a) Operations. MRS
shall conduct its operations on the Premises
in a careful and workmanlike manner and in compliance with all
applicable laws,
ordinances and regulations of all
governmental
authorities having
jurisdiction
over MRS's operations, but without any other restrictions on the methods
employed.
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(b) Reclamation.
MRS shall perform such
reclamation work as
is
required by the applicable rules,
regulations and laws
of the state(s) in which
the Premises are located and of the United
States or any other
governmental
authority with jurisdiction over the Premises, and Lessor
