EXHIBIT 10.39 SIERRA KAOLIN(TM) OPERATING LICENSE

 

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                                  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 120 North Church Street, West Chester,

Pennsylvania 19380 ("CAP") and TECUMSEH INDUSTRIAL MINERALS, LLC, a New Mexico

limited liability company, whose address is One Sycamore Plaza, 5600 Wyoming

Blvd., NE, Suite 150, Albuquerque, New Mexico 87109 ("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

 

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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.

 

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         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.

 

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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

 

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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

 

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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.

 

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                  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 consid