Document:

Texas Mineral Resources Corp. 10-K 

 

 

Exhibit 10.4

 

Purchase
Option Arrangement dated September 2014 with the State of Texas

 

 

September 29, 2014

 

Texas Rare Earth Resources Corp

c/o Dan Gorski

PO Box 539

539 W El Paso Street

Sierra Blanca, TX 79851

 

Texas Rare Earth Resources Corp.

c/o Laura Lynch

1211 St. Vrain

No. 27

El Paso, TX 79902

 

RE: Executed Option Agreement and Groundwater Lease.

 

Dear Mr. Gorski:

 

The Texas General Land Office (GLO) Option
Agreement and Groundwater Lease with Texas Rare Earth Resources Corp. have been fully executed. Enclosed is an original copy of
the executed documents for your records. An identical set of originals have been retained for the GLO archives.

 

Exhibit B of the Option Agreement is the
Memorandum of Option. The Memorandum should be recorded by Texas Rare Earth Resources Corp. in the Hudspeth County records no later
than 60 days following the receipt of this letter, with receipt ofrecording provided to the GLO for its archives.

 

Similarly, the Groundwater Lease must be
recorded in the Hudspeth County records no later 60 days following the receipt of this letter, with a receipt of recording provided
to the GLO.

 

Should you have any questions, please feel
free to contact Bill Farr by phone at 512-475-1502, or by email at bill.farr@glo.texas.gov.

 

Sincerely,

 

	/s/ Michael Lemonds	 

Michael Lemonds

Director, Asset Management & Commercial Leasing

Texas General Land Office

 

	Enclosures:	Option Agreement

Groundwater Lease

 

Texas
General Land Office 

Stephen
F. Austin Building• 1700 North Congress Avenue,
Texas 78701-1495

Post Office
Box 12873 • Austin,
Texas 78711-2873

Phone:
512-463-5001 • 800-998-4GLO

www.glo.state.
tx.us

 

     

     

    

 

 

PURCHASE OPTION AGREEMENT

 

This Purchase Option
Agreement (“Agreement”) is made and entered into by and between the State
of Texas, Acting By and Through the Commissioner of the General Land Office and Chairman of the School Land Board, on Behalf of
the Permanent School Fund (“Seller”) and Texas Rare Earth
Resources Corp., a Delaware corporation (“Buyer”), to be effective on the day this Agreement
has been executed by both Seller and Buyer (the “Effective Date”’).

 

RECITALS:

 

A.           Seller
is the fee simple owner of certain property described on Exhibit A attached here to and made a part hereof for all purposes,
located in Hudspeth County, Texas (the “Option Property”) .

 

B.           Seller
has agreed to grant, and Buyer has agreed to procure, an option to purchase the Option Property upon the terms and pro visions
as hereinafter set forth ;

 

AGREEMENT:

 

NOW, THEREFORE, in
consideration of the mutual covenants, representations, warranties, and agreements contained herein. and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, Seller and Buyer covenant and agree as follows:

 

1.            Grant
of Option. Subject to the terms and provisions of this Agree ment, Seller does hereby grant to Buyer the exclusive right and
option during the Option Term (defined in Section 3) to purchase the Option Property upon the terms and conditions as set forth
herein (the “Option’’). Seller acknowledges that as Buyer develops detailed plans for its mining project, it may wish
to make some adjustments to the boundary of the Option Property, and Seller agrees to reasonably cooperate with Buyer in making
such adjustments

 

2.            Consideration.

 

a.          As
consideration for the Option. Buyer shall pay to Seller the amount of Ten Thousand and No./100
Dollars ($10,000 .00) within five (5) Business Days (define d in Sec ti o n 18. k) a fter the Effective Date and on each
annual anniversary of the Effective Date during the Option Term (the “Op tion Fee”). The Option Fee shall not
be credited towards the Purchase Price (defined in Section 7), and shall be nonrefundable, except as provided in Section 15 of
this Agreement. If Buyer fail s to timely make a payment of the Option Fee, this Agreement shall terminate and neither party hereto
shall have any other liability, obligation or duty pursuant to this Agreement.

 

b.          As
further consideration for this Opt ion, Grantee agrees to use the Property (defined in Section 5 ) solely in connection with its
operation of a mine of rare earth minerals and/or other minerals covered under Mining Lease M-1 l 3117 , filed for record on October
6, 20 11, and recorded as Instrument # I 3 48 36, of the Records of Hudspeth County, Texas (the “Mining Lease M-113117”),
including without limitation, prospecting, exploring, developing, mining (by drilling, boring, open pit, underground mining, strip
mining, solution mining, or any other method permitting in the Mining Lease M-113117 ), extracting, milling, removing, processing,
converting, and marketing the minerals identified in Mining Lea se M-113117, treatment, storage, and disposal of wastes generated
by operations, and construction of improvements associated with these activities. If the Mining Lease expires or is terminated,
the title to any portion of the Property that was not used in connection with the mining operations under Mining Lease M-113117,
Mining Lease M-11 3629, filed for record on December 2, 2011, and recorded as Instrument # I 35079 (“Mining Lease M- I
I 3629’’), or any other mining lease between Seller and Buyer, shall, at the sole option of the Seller, revert to the Seller, and
the conveyance of the Property shall be of no further force or effect. Reversion of the surface estate to the Seller shall not
alleviate Buyer’s obligations under its Plan of Operations or its mining leases.

 

     

     

    

  

3.            Option
Term. The “Option Term” shall mean that period of time commencing on the Effective Date and ending on the
date Mining Lease M-113117, filed for record on October 6, 2011, and recorded as Instrument #134836, of the Records of Hudspeth
County, Texas, expires or terminates.

 

4.            Memorandum
of Option. Contemporaneously with the execution of this Agreement, Seller and Buyer agree to execute and deliver the Memorandum
of Option in the form of Exhibit B attached hereto and made a part hereof for all purposes, which may be recorded in the real property
records of Hudspeth County, Texas. Buyer agrees to execute a release of the Memorandum of Option, to the extent that Buyer’s Option
has expired or terminated, promptly upon request from Seller.

 

5.            Exercise
of Option. Buyer may exercise the Option at any time during the Option Term by giving to Seller written Notice (defined in
Section 15.e) of its intent to exercise the Option on all or a portion of the Option Property to be defined by Buyer in the Notice
(the “Property”). Buyer agrees to define the Property in such a manner that it will not “land-lock’ any tracts
retained by Seller. The date on which Buyer gives Notice of its intent to exercise the Option shall be the “Option Exercise
Date.” In the event the Buyer does not exercise the Option during the Option Term, Seller shall be entitled to retain
the Option Fee, and this Agreement shall terminate and neither party hereto shall have any other liability, obligation or duty
pursuant to this Agreement. The Option shall terminate on the Option Exercise Date for all purposes on all Option Property not
included in the Property defined in Buyer’s Notice of exercise of the Option.

 

6.             Agreement
of Purchase and Sale. Effective as of the Option Exercise Date, Seller agrees to sell to Buyer, and Buyer agrees to purchase
from Seller, the Property in accordance with the terms and conditions of this Agreement. Seller reserves all interests in and right
to remove all oil, gas, groundwater, sulphur and other minerals, including rare earth minerals, together with all attendant mineral
rights, water rights, royalty interests , and development rights, together with any and all rights of leasing, exploration and
development, and the unrestricted right to access and use of the sur face in connection with all interests retained by the Seller.
Further, Buyer shall have no right to surface damages for exploration, mining, crushing, milling, treating, processing, stockpiling,
waste disposal, or any other activity required to exploit the mineral or water resources retained by the Seller.

 

BUYER AGREES AND
ACKNOWLEDGES THAT SELLER IS SELLING THE PROPERTY STRICTLY ON AN “AS IS, WHERE IS” BASIS, WITHOUT WARRA TY, EXPRESS OR
IMPLIED, WITH ANY AND ALL LATENT AND PATE T DEFECTS. BUYER HAS INSPECTED THE PHYSICAL CONDITION OF THE PROPERTY, INCLUDING
ALL IMPROVEMENTS THEREON, AND ACCEPTS TITLE TO THE SAME “AS IS” IN ITS EXISTING PHYSICAL CONDITION. BY EXECUTION
OF THIS AGREEMENT BUYER ACKNOWLEDGES THAT IT IS NOT RELYING UPON ANY REPRESENTATION, WARRANTY, STATEME T OR OTHER ASSERTION
OF THE STATE OF TEXAS, AS SELLER, INCLUDI G THE GE ERAL LAND OFFICE, THE SCHOOL LA D BOARD, OR ANY OFFICIAL , AGENT , REPRESE TATIVE
OR EMPLOYEE OF THE FOREGOING, WITH RESPECT TO THE PROPERTY’S CO DITION. BUYER IS RELYING SOLELY AND WHOLLY ON BUYER’S OWN EXAMINATION
OF THE PROPERTY. THE STATE OF TEXAS A D ITS AGENCIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES A D SPECIFICALLY MAKE NO
WARRANTIES OF HABITABILITY, MERCHANT ABILITY, SUITABILITY, FIT ESS FOR ANY PURPOSE, OR ANY OTHER WARRA TY WHATSOEVER. BUYER IS
PUT ON NOTICE THAT ANY PRIOR GRANT AND/OR ENCUMBRANCE MAY BE OF RECORD AND BUYER IS ADVISED TO EXAMINE ALL PUBLIC RECORDS AVAILABLE
REGARDING THE PROPERTY. THE PROVISIONS OF THIS SECTION, DISCLAIMING A Y AND ALL WARRA TIES OF ANY KIND , SHALL SURVIVE THE CLOSING
OF THE SALE OF THE PROPERTY.

 

FURTHER, BUYER ACKNOWLEDGES
THAT AN INSPECTION OF THE PROPERTY HAS BEEN OR WILL BE PERFORMED BY BUYER OR IN ITS BEHALF. BUYER ACK OWLEDGES THAT SELLER
HAS 1ADE THE PROPERTY AVAILABLE FOR INSPECTION BY BUYER AND BUYER’S REPRESENTATIVES IN ITS BEHALF.

 

     

     

    

 

NO EMPLOYEE OR AGENT
OF SELLER lS AUTHORIZED TO MAKE ANY REPRESENTATION OR WARRANTY , AS TO THE QUALITY OR CONDITION OF THE PROPERTY , MERCHANTABILITY,
SUITABILITY OR FIT ESS OF THE PROPERTY FOR ANY USE WHATSOEVER, KNOWN OR UNKNOWN TO SELLER, OR COMPLIANCE WITH ANY EVIRONMENTAL
PROTECTION, POLLUTION OR LAND USE LAWS, RULES , REGULATIONS, ORDERS , OR REQUIREME TS INCLUDING, BUT OT LIMITED TO, THOSE PERTAINING
TO THE HANDLING, GENERA TING, TREATING, STORING, OR DISPOSING OF ANY HAZARDOUS WASTE OR SUBSTANCE. IN NO EVENT SHALL SELLER BE
RESPONSIBLE OR LIABLE FOR LATENT OR PATENT DEFECTS OR FAULTS, IF ANY, IN THE PROPERTY, OR FOR REMEDYING OR REPAIRING THE SAME INCLUD
ING, WITHOUT LIMITATIO , DEFECTS RELATED TO ASBESTOS OR ASBESTOS CONTAINING MATERIALS, LEAD, LEAD-BASED PAINT, UNDERGROUND
STORAGE TANKS OR HAZARDOUS OR TOXIC MATERIALS, CHEMICALS OR WASTE, OR FOR CONSTRUCTING OR REPAIRING ANY STREETS , UTILITIES OR
OTHER IMPROVEMENTS SHOWN ON ANY PLAT OF THE PROPERTY.

 

EFFECTIVE AS OF
THE CLOSING DATE (DEFINED IN SECTION 14.A. OF THIS AGREEMENT), BUYER ACKNOWLEDGES THAT BUYER HAS FULLY INSPECTED THE PROPERTY,
IS FULLY SATISFIED WITH THE PROPERTY IN ALL RESPECTS “AS IS, WHERE IS, WITH ANY AND ALL FAULTS”, IS NOT RELYING ON ANY
REPRESENTATION OR WARRANTY OF SELLER IN PURCHASING THE PROPERTY FROM SELLER, A D ACCEPTS ANY LIABILITIES OR COSTS ARISING IN
CO ECTIO WITH THE CONDITION OF THE PROPERTY, INCL UDING BUT NOT LIMITED TO ANY COSTS OR LIABILITIES PERTAINING TO ANY ENVIRONMENTAL
CONDITION ON THE PROPERTY. THE RESERVATIO SAND LIMITATIONS CONTAINED IN THIS SECTION SHALL SURVIVE THE CLOSING OF THIS TRA
SACTION AND SHALL BE INCLUDED IN THE DEED FROM SELLER TO BUYER.

 

7.            Purchase
Price. The “Purchase Price” to be paid by Buyer to Seller for the Property shall be the market value as determined
and approved, at Seller’s expense, by the Texas General Land Office’s Chief Appraiser. Seller shall endeavor to have the appraisal
of the Property completed and approved within sixty (60) days of the Option Exercise Date. The date on which Seller gives Buyer
written Notice of the appraised market value of the Property shall be the “Appraisal Date.” Prior to the twentieth
(20th) day after the Appraisal Date, Buyer may at Buyer’s sole option, give Notice to Seller and the Title
Company that Buyer has terminated this Agreement, and thereafter Seller and Buyer shall have no further obligations or liabilities
to each other under this Agreement.

 

8.             Title
Commitment. At any time prior to the Closing Deadline, Buyer may, at Seller’ s sole cost and expense, obtain a current title
commitment (the “Title Commitment”) for issuance of an owner’s policy of title insurance, issued by title company
to be agreed upon by Buyer and Seller (the “Title Company’’), setting forth the status of title of the Property and
all exceptions, including rights-of-way, easements, restrictions, covenants, reservations, and other conditions, if any, affecting
the Property which would appear in an owner’s title insurance policy conforming with Form TLTA-T-1 (“Owner’s Policy of
Title Insurance’’), if issued, together with complete and legible copies of all instruments referred to in the Title Commitment
affecting title to the Property. Seller shall have no obligation to cure or pay the cost of curing any Schedule B or C exceptions
in the Title Commitment. Buyer may see k to cure any Schedule B or C exceptions in the Title Commitment at Buyer’s cost and expense.
Any action initiated by Buyer to cure any exceptions shall not be a basis for failing to close this transaction timely.

 

9.             Tax
Certificates. At any time prior to the Closing Dead line, Buyer may obtain through either the Hudspeth Central Appraisal District
or the Title Company copies of tax certificates for the Option Property, evidencing whether all ad valorem taxes due and payable
for periods prior to the calendar year in which the Closing occurs have been paid in full.

 

10.           Survey.
Buyer may, at its option and expense, at any time prior to the Closing Date, have furnished to Seller and the Title Company, a
survey of the Property or any portion thereof (the “Survey”).

 

     

     

    

 

11.         Representations
and Warranties of Seller. Seller represents and warrants to Buyer that the execution and delivery by the Seller of this Agreement
has been authorized by all necessary action on behalf of the Seller, and this Agreement has been duly executed and delivered by
the Seller and is a legal, valid and binding agreement of the Seller enforceable against the Seller in accordance with its terms.
subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating
to creditors’ rights generally, and subject, as to enforceability, to general principles of equity (regardless of whether enforcement
is sought in a proceeding at law or in equity) and principles of sovereign immunity.

 

12.          Seller’s
Covenants.

 

a.           Limitation
on Conveyances. Seller shall not convey or lease any interest in the Option Property that may be inconsistent with Buyer’ s
proposed mining activities for the Option Property, without obtaining Buyer’ s prior written consent, which shall not be unreasonably
withheld.

 

b.           Special
Assessments. Seller will notify Buyer promptly in writing of the levy (or threatened levy) of any special governmental assessment
or similar occurrence and will pay any such assessment levied prior to the Closing.

 

c.           Litigation.
Seller will advise Buyer promptly of any litigation or arbitration proceeding or any administrative hearing (including condemnation)
before any governmental agency which concerns or affects the Option Property in any manner and which is instituted after the Effective
Date.

 

d.           Cooperation.
Seller will assist and cooperate with Buyer prior to Closing ( i) in obtaining all necessary permits and licenses to operate the
Property for its planned use, and (ii) with any evaluation, inspection, audit or stud y of the Property prepared by, for or at
the request of Buyer.

 

13.          Conditions
Precedent To Buyer’s Performance. Buyer’s obligations to close the purchase and sale of the Property under this Agreement are
conditioned upon

 

a.           The
representations and warranties set out in Section 11 being true and correct in all material respects on the Closing Date;

 

b.           Seller’s
compliance with the Seller’s covenants set out in Section 12.

 

c.           Buyer
shall have the right to waive the satisfaction of such conditions or to terminate the Agreement for failure of such condition by
Notice in writing to Seller.

 

14.          Closing.

 

a.           Date
and Place of the Closing. The closing of the purchase and sale contemplated by this Agreement (the “Closing”)
shall take place on or before 5:00 p.m. Dallas, Texas time, on or before the thirtieth (30th) day after
the Appraisal Date (the “Closing Deadline”), at a time mutually agreed to by Seller and Buyer in the offices of
the Title Company or at such other location as the parties may mutually agree in writing. The date on which the Closing occurs
is the “Closing Date.’’

 

b.           Items
to be Delivered at Closing.

 

i.             By
Seller. At or prior to the Closing, Seller shall deliver to the Title Company, at Seller’s sole cost and expense, each of the
following items:

 

1.          An
Owner’s Policy of Title Insurance (without endorsements, deletions or modifications unless paid for by Buyer) on the standard TLTA-T-1
form, issued by the Title Company in the amount of the Purchase Price and dated at or after Closing, insuring Buyer’ s fee simple
title to the Property to be good and indefeasible.

 

     

     

    

 

2.          A
Deed Without Warranty, in the form of Exhibit C attached hereto and made a part hereof for all purposes, duly executed and
acknowledged by Seller, and in form for recording, conveying good and indefeasible title to the Property to Buyer (the “Deed”).
The Deed shall be recorded upon Closing in the real property records of Hudspeth County, Texas.

 

3.          All
additional documents and instruments as may reasonably be requested by the Title Company or Buyer to carry out the term s and obligations
of this Agreement.

 

4.          All
additional documents and instruments which Buyer’s counsel and Seller’s counsel may mutually and reasonably determine are necessary
to the proper consummation of this transaction.

 

ii.           By
Buyer. At or prior to the Closing, Buyer hall deliver to the Title Company, at Buyer’ s sole cost and expense, each of the
following items:

 

1.          The
Purchase Price for the Property in immediately available funds.

 

2.          The
Statutory Sales Fee in an amount equal to one and one-half percent (1.5%) of the Purchase Price as required by Texas Natural Resource
Code § 32. 110, in immediately available funds.

 

3.          All
additional documents and instruments as may reasonably be requested by the Title Company or Seller to carry out the terms and obligations
of this Agreement.

 

4.          All
additional documents and instruments which Buyer’s counsel and Seller’s counsel may mutually and reasonably determine are necessary
to the proper consummation of this transaction.

 

c.            Adjustments
at the Closing. Notwithstanding anything to the contrary contained herein, the provisions of this Section 14.c shall survive
the Closing. The following items shall be adjusted or prorated between Seller and Buyer at the Closing:

 

i.            Seller
shall pay: 1⁄2 of reasonable escrow fees, recording fee, tax certification fees, and other closing costs associated with the
closing of the transaction; the premium for the standard Owner ’ s Policy of Title Insurance; and any other expenses stipulated
to be paid by Seller at Closing under other provisions of this Agreement. Buyer shall pay: 1⁄2 of reasonable esc row fees,
recording fees, tax certification fees; the premium for any endorsements, deletions or modifications to the Owner’s Policy of Title
Insurance; and other closing costs associated with the closing of the transaction, and other expenses stipulated to be paid by
Buyer at Closing under other provisions of this Agreement.

 

ii.           Seller
is exempt from real estate taxes and assessments. Buyer shall be solely responsible for the payment of taxes and assessments, as
of the Closing, and any roll-back or other taxes that may be assessed after Closing. At Closing, Buyer shall refund to Seller any
ad valorem taxes pre-paid to any taxing authority by Seller or on Seller’s behalf, on a pro rata basis for the period prior to
and including the Closing Date.

 

iii.           All
other assessments relating to the Property shall be paid by Buyer unless such assessments are due and payable prior to the Closing
Date, in which ca e such other assessments shall be prorated between Seller and Buyer as of the Closing Date based on each party’s
respective period of ownership of the Property during the period relating to such assessment.

 

iv.          Except
as otherwise provided herein, all costs and expenses in connection with the transaction contemplated by this Agreement shall be
borne by Seller and Buyer in the manner in which such costs and expenses are customarily allocated between the parties at closing
of real property similar to the Property in the area in which the Property is located . Each party will be responsible for its
own legal fees.

 

     

     

    

 

d.            Possession
and Closing. Full possession of the Property shall be delivered to Buyer by Seller at the Closing.

 

15.          Defaults
and Remedies. Except as otherwise provided in this Agreement or by law, Seller’s sole and exclusive remedy if Buyer fails to
close under this Contract is to terminate this Agreement and to retain the Option Fee as liquidated damages. The parties acknowledge
that Seller’s actual damages for Buyer’s failure to close will be difficult, if not impossible, to ascertain and that the liquidated
damages represent the parties’ best estimate of the damages Seller will suffer. Buyer’s so le and exclusive remedy for Seller’s
failure to close is to terminate this Agreement and receive a refund of the preceding year’s Option Fee ($10,000). Seller and Buyer
have all legal and equitable remedies if Buyer or Seller defaults in the performance of any of their obligations that survive Closing.

 

16.          Condemnation.
lf any part of the Property is condemned prior to Closing, Seller shall promptly give Buyer written notice of such condemnation.
Buyer may either apply the proceeds of any condemnation award on a pro rata basis to reduce the Purchase Price or declare this
Agreement terminated by delivering written no tice of termination to Seller

 

17.          Brokerage
Commisions. Seller and Buyer each represent and warrant to the other, that they know of no brokers or other persons or entities
who have been directly involved in submitting or showing the Property to, or procuring Buyer.

 

18.          Miscellaneous.

 

a.            References.
All references to Article, Articles, Section, or Sections contained herein are, unless specifically indicated otherwise, refer
to Articles and Sections of this Agreement.

 

b.            Exhibits.
All references to Exhibits contained herein are references to exhibits attached hereto, all of which are made a part hereof for
all purposes.

 

c.            Captions.
The captions, headings, and arrangements used in this Agreement are for convenience only and do not in any way affect, limit, amplify,
or modify the terms and provisions hereof.

 

d.            Number
and Gender of Words. Whenever the singular number is used, the same shall include the plural where appropriate, and words of
any gender shall include each other gender where appropriate.

 

e.            Notices.
Any notice, consent, approval, request, demand, or payment required or permitted to be given or made between the parties to this
Agreement (collectively called “Notices”) must be in writing to be effective. Any Notice that is addressed to
the party for whom it is intended at its ad dress specified for the receipt of Notices (which is currently the address set forth
below) will be deemed to have been given or made on the second Business Day after the date it is deposited in the Unite d States
mail, postage prepaid, certified, return receipt requested. Any party may change its address for the receipt of Notices by Notice
in accordance with this Section. Notices given other than by deposit in the United States mail, postage prepaid, certified, return
receipt requested, such as by facsimile. email, or by overnight delivery, will be effective upon receipt; provided, that if delivery
is via facsimile or e mail, and such facsimile or email is received after 5:00 p.m. local time at the location of such receipt,
such facsimile or email shall be dee med delivered on the day after such receipt. The current addresses of the parties for Notices
are as follows:

 

	 	If to
Buyer: 	Texas
                                         Rare Earth Resources Corp.

P.O.
Box 539

539
West El Paso Street

Sierra
Blanca, TX 79851

Attention:
Dan Gorski

Telephone:
(361) 790-5831

bluemtn@sbcglobal.net

 

     

     

    

 

	 	With a
copy to:  	Texas
                                         Rare Earth Resources Corp.

1211
St. Vrain

No.
27

El
Paso, Texas 79902

Allention:
Laura Lynch

  

	 	And:	Guida,
                                         Slavich & Flores, P.C.

750
N. St. Paul Street, Suite 200

Dallas,
Texas 75201

Attention:
Sally A. Longroy

Telephone:
(214) 692-5409

Fax:
(214) 692-6610

Email:
longroy@gsfpc.com

 

	 	If to
Seller:	Texas
                                         General Land Office

1700
N. Congress Avenue, Room 720

Austin,
Texas 78701

Attn:
Energy Resources Division

Telephone:
(512) 305-9 I04

Fax:
(512) 475- 1543

Email:
louis.renaud@glo.texas.gov

 

	 	And:	Texas
                                         General Land Office

Legal
Services Division 

1700
N. Congress Avenue, Room 910

Austin,
TX 78701

Attn:
Jeff Gordon

Phone:
(512) 463-7205

Fax:
(512) 463-63l l

Email:
jeff.gordon@glo.texa s.gov

 

f.           Governing
Law. This Agreement is being executed and delivered. and is intended to be performed , in the State of Texas, and the laws
of such State shall govern the validity, construction, enforcement, and interpretation of this Agreement, unless otherwise specified
herein.

 

g.          Multiple
Counterparts. This Agreement may be executed in any number of identical counterparts. If so executed, each of such counterparts
is to be deemed an original for all purposes, and all such counterparts shall, collectively, constitute one agreement, but, in
making proof of this Agreement, it shall not be necessary to produce or account for more than one such counterpart.

 

h.          Parties
Bound. This Agreement shall be binding upon, and inure to the benefit of, Seller and Buyer, and their respective heirs. personal
representatives, successors, and assigns.

 

i.           Further
Acts. In addition to the acts and deeds recited herein and contemplated to be performed, executed, and/or delivered by Seller
and Buyer, Seller and Buyer agree to perform, execute, and/or deliver or cause to be performed, executed, and/or delivered at the
Closing or after the Closing any and all such further acts, deeds, and assurances as may be necessary to consummate the transactions
contemplated hereby.

 

j.           Time
of the Essence. It is expressly agreed by the parties hereto that time is of the essence with respect to this Agreement.

 

k.          Dates.
Each date upon which an event is to occur or a period of time is to expire in accordance with the terms of this Agreement will
automatically be postponed and extended to the next Business Day if it falls on a Non-Business Day, and any time periods that are
defined terms in this Agreement will be automatically extended, and their definitions will include such extensions, in accordance
with this Section. A “Business Day” is a day upon which national banks in Dallas, Texas, are open for banking
business, and a “Non-Business Day” is a day upon which national banks in Dallas, Texas, are not open for banking
business.

 

     

     

    

 

l.            Entire
Agreement. Amendment. This Agreement, together with all exhibits hereto and documents referred to herein, if any, constitutes
the entire arrangements and understandings among the parties hereto. This Agreement may not be amended, modified, changed or supplemented,
nor may any obligations hereunder be waived except by a writing signed by the party to be charged or by its agent duly authorized
in writing or as otherwise permitted herein.

 

m.          Severability.
Whenever possible, each provision of this Agreement and every related document shall be interpreted in such manner as to be valid
under applicable law; but, if any provision of any of the foregoing shall be invalid or prohibited under said applicable law, such
provisions shall be ineffective to the extent of such in validity or prohibition without invalidating the remainder of such provisions
or the remaining provisions of this Agreement.

 

n.           Waiver.
No claim of waiver, consent, or acquiescence with respect to any provision of this Agreement shall be made against any party hereto
except on the basis of a written instrument executed by or on behalf of such party. However, the party for whose unilateral benefit
a condition is herein inserted shall have the right to waive such condition.

 

o.           Sovereign
Immunity. Nothing in this Agreement waives Seller’s sovereign immunity.

 

p.           Assignment.
Buyer shall not assign this Agreement to any other person or entity without the prior written consent of the Seller, which shall
not be unreasonably withheld.

 

q.           Disclaimer
of Third Parry Benefit. This Agreement is not intended to give or confer any benefits, rights, privileges, claims, actions
or remedies to any person or entity as a third party beneficiary, decree, or otherwise.

 

r.            Unavoidable
Delays. Whenever a period of time is specified in this Agreement for the performance of an action by Buyer or Seller (other
than the payment of money or delivery of legal documentation in connection with a Closing, which shall not be subject to extension
hereunder), the period of time shall be extended due to acts of God, unavailability of essential materials, inclement weather,
acts of governmental authorities, and other causes preventing development progress reasonably beyond the party’s control.

 

s.           List
of Exhibits. The following is a list of exhibits for convenience only:

 

		Exhibit A	Option Property

		Exhibit B	Memorandum of Option

		Exhibit C	Deed Without Warranty

 

[REST OF PAGE IS INTENTIONALLY LEFT BLANK]

 

     

     

    

 

EXECUTED by Seller and Buyer on the dates set forth below:

 

SELLER:

 

THE STATE OF TEXAS

 

	By:	/s/  Jerry
    E. Patterson	 
	 	JERRY E. PATTERSON, Commissioner of the General
    Land Office and Chairman of the School land Board on behalf of the Permanent School Fund	 

 

Date: 9/18/2014

 

	Approved:	 	 
	Contents:		 
	Legal:		 
	Gen Counsel:		 
	Deputy:		 
	Executive:		 

  

BUYER:

 

Texas
Rare Earth Resources Corp.

a Delaware corporation

 

	By:	/s/  Dan
    Gorski	 
	 	Dan Gorski, President	 

  

Date: 8 September 2014Texas Mineral Resources Corp. 10-K 

 

 

Exhibit 10.5

 

 

The State
of Texas

 

 

Austin, Texas

 

GROUNDWATER LEASE

 

	STATE OF TEXAS	§

	 	§	KNOW ALL MEN BY THESE PRESENTS:

	COUNTY OF HUDSPETH	§

 

This Groundwater Lease (the “Lease”)
is granted by virtue of the authority granted in Chapter 51, TEX. NAT. RES. CODE ANN. 31 TEX. ADMIN. CODE Chapter 13 (Land Resources),
et seq., and all other applicable statutes and rules, as the same may be amended from time to time, and is subject to all applicable
regulations promulgated from time to time.

 

ARTICLE I. PARTIES

 

1.01. For and in consideration of the amounts
stated below and the mutual covenants and agreements set forth herein, the STATE OF TEXAS, acting by and through the Commissioner
of the Texas General Land Office, on behalf of the Permanent School Fund of the State of Texas (the ” Lessor”), and Texas
Rare Earth Resources Corp. (the “Lessee”) whose address is 539 West El Paso Street, Sierra Blanca, TX 79851, the right
to use certain Permanent School Fund land (the “Premises”) for the purposes identified in Article V below.

 

ARTICLE II. PREMISES

 

2.01. The Premises is described or depicted
on the exhibits attached hereto and collectively incorporated by reference for all purposes.

 

	Section	Block	Survey	File No.	Acres	Countv
	37, 38, 47, 48	71	PSL	155401	2,560	Hudspeth
	1, 2	71	PSL	155401	1,280	Hudspeth
	S/2 of 5, 6, 7	48	PSL	155401	1,600	Hudspeth
	10, 11 , 12	48	PSL	155401	2,560	Hudspeth
	13, 14, 15	48	PSL	155401	2,560	Hudspeth
	18, 19, 20	48	PSL	155401	2,560	Hudspeth

 

2.02. LESSEE HAS INSPECTED THE PHYSICAL
AND TOPOGRAPHIC CONDITION OF THE PREMISES AND ACCEPTS SAME “AS IS” IN ITS EXISTING PHYSICAL AND TOPOGRAPHIC CONDITION.
LESSEE IS NOT RELYING ON ANY REPRESENTATION OR WARRANTY OF THE LESSOR REGARDING ANY ASPECT OF THE PREMISES, BUT IS RELYING ON LESSEE’S
OWN INSPECTION OF THE PREMISES. LESSOR DISCLAIMS ANY AND ALL WARRANTIES OF HABITABILITY, MERCHANTABILITY, SUITABILITY, FITNESS
FOR ANY PURPOSE, AND ANY OTHER WARRANTY WHATSOEVER NOT EXPRESSLY SET FORTH IN THIS LEASE. LESSOR FURTHER DISCLAIMS AND MAKES NO
REPRESENTATIONS TO LESSEE ABOUT THE QUANTITY OR QUALITY OF GROUNDWATER THAT MIGHT BE OBTAINED FROM THE PREMISES. LESSEE WILL MAKES
ITS OWN DETERMINATION OF THE USABILITY OF THE GROUNDWATER AND ITS FITNESS FOR CONSUMPTION. LESSOR AND LESSEE HEREBY AGREE AND ACKNOWLEDGE
THAT THE USE OF THE TERMS “GRANT” AND/OR “CONVEY’’ IN NO WAY IMPLIES THAT THIS LEASE OR THE PREMISES ARE FREE OF
LIENS, ENCUMBRANCES AND/OR PRIOR RIGHTS. LESSEE IS HEREBY PUT ON NOTICE THAT ANY PRIOR GRANT AND/OR ENCUMBRANCES MAY BE OF RECORD
AND LESSEE IS ADVISED TO EXAMINE ALL RECORDS OF THE STATE AND COUNTY IN WHICH THE PREMISES IS LOCATED. THE TERMS OF THIS SECTION
SHALL SURVIVE EXPIRATION OR EARLIER TERMINATION OF THIS LEASE.

 

    
	TRER Groundwater Lease	1	 

     

    

 

ARTICLE III. GRANTING CLAUSE

 

3.01.       Lessor
hereby grants, leases and lets to Lessee this Lease, for the sole and only purpose of exploring, evaluating, drilling for, producing,
developing and extracting groundwater from the Premises. This Lease covers only groundwater under or produced, developed, or extracted
from the Premises and Lessee shall not be entitled to, and Lessor retains and reserves, any oil, gas, other minerals and geothermal
resources that may be produced from the Premises.

 

3.02.       This
Lease is subject to all existing and future oil, gas, and mineral leases, all existing surface leases, easements and rights of
way covering or affecting the Premises, and all future surface leases, easements and rights of way covering or affecting the Premises
to the extent the estates and interests created thereby are not inconsistent with the rights herein granted. Lessee agrees that
it shall not be inconsistent with its rights under this Lease for Lessor: (a) to allow its oil, gas or mineral lessees to use water
produced on the Premises to the extent necessary for the lessee’s oil, gas or mineral operations; or (b) to allow its surface lessees
to use waters produced on the Premises to the extent necessary for watering lessee’s permitted livestock and/or wildlife. Lessor
reserves the right and privilege to execute and deliver oil, gas, and mineral leases, surface leases, easements, licenses and rights-of-way
covering all or any part of the Premises. Lessor agrees to provide Lessee with copies of all such leases, easements, licenses and
rights-of-way entered into after the Effective Date (defined in Section 4.01) of this Lease. Lessee agrees to conduct its operations
hereunder in such a manner as not to unduly interfere with any third party having a lease, permit, easement, or any other right
or interest in the Premises, and shall allow any lessee, permit holder, licensee or other agent, assignee or representative of
Lessor the right of ingress and egress over, across and through, and the use of the Premises for any and all purposes authorized
by the Lessor.

 

ARTICLE IV. TERM

 

4.01       This
Lease shall commence on August 1, 2014 (the “Effective Date”) and shall remain in effect until the termination of Mining
Lease M-113117, which is currently held by Lessee, unless earlier terminated as provided herein. Upon the termination of Mining
Lease M-113117, this Lease shall automatically terminate without any further action required of Lessor and all rights hereunder
will revert to Lessor.

 

ARTICLE V. USE OF THE PREMISES

 

5.01       Lessee
may use the Premises solely for the purpose of exploring, evaluating, drilling for, producing, developing and extracting groundwater
from the Premises for industrial and potable water use in connection with Lessee’s mining project (including, without limitation,
mineral processing and metal extraction/processing), for agricultural/wildlife related uses associated with Lessee’s contiguous
leased or owned properties, and for no other purpose. Lessee shall have the right to pump 2,000 gallons per minute (“gpm”)
at the beginning of production with the opportunity to increase production up to a maximum of 4,800 gpm. Lessee is prohibited from
reselling any groundwater produced under this Lease without advance GLO approval. Lessee is further specifically prohibited from
modifying the Premises in any manner not authorized herein, and from using, or allowing the use by agents, employees or invitees
of the Premises for any other purpose.

 

5.02       Lessee
shall conduct all operations in such a manner as to cause minimum possible surface damages. Lessee shall have the right of ingress
and egress and right of way to any point of Lessee’s operations on the Premises, for the purpose of exploring, evaluating, drilling
for, producing, developing and extracting groundwater from the Premises, provided, however, that such right of way shall result
in the least injury to the occupant of the surface or the holder of any existing or future oil, gas or mineral lease or easement.
Lessee shall have the right, from time to time, to lay, maintain, operate, repair and replace such pipelines, pumping facilities,
tanks, and power lines as may be necessary to produce water on the Premises, subject to all other provisions of this Lease. Lessee
may use only so much of the surface of the Premises as is reasonably necessary for the exploration, evaluation, drilling, production,
development and extraction of groundwater as permitted herein.

 

    
	TRER Groundwater Lease	2	 

     

    

 

5.03.       Lessee
shall, at Lessee’s sole expense, (i) construct and maintain such fences, barricades, and other restrictive devices as
necessary to adequately protect persons or livestock from injury or as Lessor may reasonably request, and comply in all respects
with all enclosure requirements of the Texas commission on Environmental Quality or any successor agency, or any other governmental
entity having jurisdiction; and (ii) fill and level all pits, trenches, and other excavations whenever same are abandoned
or the use thereof is discontinued.

 

5.04.    In conducting its operations
under this Lease, Lessee shall conduct all work and operations in a businesslike manner consistent with good and economical practices
and with due regard for good land management, damage prevention, and environmental protection. Lessee shall not commit waste and
shall keep all improvements and Lessee’s operations in reasonably neat condition. In conducting its operations under this Lease,
Lessee shall use very reasonable means to prevent damage to or contamination of any water-bearing strata and to prevent waste or
loss of water from any water-bearing strata.

 

5.05       Lessee
may not maintain any nuisances or public hazards on the Premises, and shall be under a duty to abate or remove any activity or
property constituting or contributing to a hazard or nuisance that was caused by Lessee, Lessee’s agents, employees, invitees,
or guests. Lessee shall observe, perform, and comply with all laws, statutes, ordinances, rules, and regulations promulgated by
any governmental agency or district and applicable to Lessee’s use of the Premises. Lessee shall not occupy or use the Premises
or permit its agents, employees, invitees, or guests to occupy or use the Premises for any use or purpose which is unlawful, in
part or in whole, or deemed by Lessor to be disreputable in any manner.

 

5.06       In
conducting its operations under this Lease, Lessee shall take all reasonable precautions to suppress and prevent the uncontrolled
spread of fire and shall not purposely attempt to burn any part of the Premises without prior approval of Lessor.

 

5.07       In
conducting its operations under this Lease, Lessee shall use the highest degree of care and all reasonable safeguards to prevent
contamination or pollution of any environmental medium, including soil, surface waters, groundwater, sediments, and surface or
subsurface strata, ambient air, or any other environmental medium, by any waste, pollutant, or contaminant. Without Lessor’s prior
consent, Lessee shall not engage in any activity that is extra hazardous or presents an unreasonable risk of environmental pollution.
Lessee shall use all reasonable efforts to contain any actual or potential release of any water, contaminant, or pollutant to the
environment caused by Lessee, Lessee’s agents, employees, invitees, or guests, and to recapture any such escaped waste, contaminant,
or pollutant. In the event of contamination or pollution of any environmental medium resulting from Lessee’s operations hereunder
or any other act or omission of Lessee, Lessee’s agents, employees, invitees, or guests, Lessee shall, at Lessee’s sole expense,
conduct all soils or surface or groundwater investigations, studies, sampling, and testing and undertake and complete all remedial,
removal, restoration, and other actions necessary, in the reasonable opinion of Lessor and/or as required by any other state or
federal agency, to contain, clean up, and/or remove all such contamination or pollution. In conducting its operations on the Premises,
Lessee will at all times conform to all environmental regulations of county, state, and federal agencies having jurisdiction over
the Premises or Lessee’s operations thereon. The provisions of this Section shall survive the termination or the unauthorized assignment
of this Lease.

 

ARTICLE VI. CONSIDERATION

 

6.01.       Execution
Payment. Upon execution of this Lease, Lessee shall pay, as consideration for the use of the Premises, a one-time Execution
Payment of Five Thousand Dollars and NO /100 ($5,000.00), which shall be credited toward the first Production Payment.

 

    
	TRER Groundwater Lease	3	 

     

    
 

		6.02.	Production Payments.

 

		a.	If Lessee has not commenced production of water from the Premises by the first anniversary of the
Effective Date, Lessee shall make a minimum Production Payment to Lessor of Five Thousand Dollars and NO/100 ($5,000.00). Lessee
shall continue to make this minimum Production Payment in a similar way and for like amount tendered annually, if Lessee has not
commenced production of water from the Premises on the second, third and fourth anniversaries of the Effective Date. Once Lessee
commences production of water from the Premises, minimum Production Payments pursuant to this subsection shall no longer be required
and instead, Lessee shall be obligated to make Production Payments pursuant to subsection (b) below.

 

		b.	On the anniversary of the Effective Date that immediately follows Lessee’s commencement of production
of water from the Premises, Lessee shall make a Production Payment to Lessor equal to the greater of (i) One Thousand Six Hundred
Sixty-Six and 67/100 Dollars ($ 1,666.67) multiplied times the number of months of production of water during the immediately preceding
12-month period ending sixty (60) days before the Production Payment is due, or (ii) ninety -five cents ($0.95) per one thousand
(1,000) gallons of the gross volume of water produced from the Premises covered by this Lease during the immediately preceding
12-month period ending sixty (60) days before the Production Payment is due. On each anniversary of the Effective Date thereafter
annually during the remaining term of the Lease, Lessee shall make a Production Payment to Lessor equal to the greater of (i) Twenty
Thousand Dollars and NO/100 ($20,000.00) or (ii) ninety-five cents ($0.95) per one thousand (1,000) gallons of the gross volume
of water produced from the Premises covered by this Lease during the immediately preceding 12-month period ending sixty (60) days
before the Production Payment is due. The Production Payment rate under this subsection shall be increased by ten percent (10%)
at five (5) year intervals, with the first Production Payment rate increase occurring on the five (5) year anniversary of the first
Production Payment, with further increases occurring at each 5-year interval thereafter.

 

		b.	Lessee shall submit with each Production Payment a report specifying all water produced from the
Premises during the previous year. Said annual report shall consist of a statement showing the gross amount of water produced from
the Premises during the previous year, all meter readings, other memoranda necessary to show the correct amount of water produced
from the Premises and any other supporting data or documents that may be reasonably requested by Lessor. All such reports and documents
are to be in a form approved by and acceptable to Lessor.

 

6.03       Delay
Rentals. If no production from a groundwater supply well is commenced by Lessee on the Premises within five (5) years of the
Effective Date of the Lease, the Lease shall terminate automatically and all rights hereunder will revert to Lessor, unless on
or before such date Lessee pays to Lessor the sum of Five Thousand Dollars and NO / 100 ($5,000.00) (the “Delay Rentals”),
which shall cover the privilege of deferring commencement of water production operations for a period of one (1) year from said
date. In a similar way and upon like payments tendered annually by Lessee, the commencement of production from a ground water supply
well may be further deferred for four additional one (1) year delay rental periods extending for no more than ten (l0) years from
the Effective Date of the Lease.

 

6.04       Cessation
of Production. Lessee shall continuously operate ground water supply wells on the Premises during the production phase of the
Lease. The Lease shall terminate automatically if the Lessee is not continuously operating groundwater supply wells on the Premises,
unless Lesee pays Lessor an annual Product ion Payment (as defined in Section 6.02) and, if applicable, an annual Delay Rental
(as defined in Section 6.03). Lessee shall give written notice to Lessor within thirty (30) days of any cessation of production.

 

6.05       Water
Meters. Lessee shall install a water meter or meters at sufficient locations to accurately measure the gross volume of water
produced from the Premises, prior to treatment or otherwise making the water ready for sale or use. Following the completion of
construct ion of any groundwater production well, Lessee shall submit regular annual reports specifying all water produced from
the Premises, including all meter readings, during the preceding year. Such report shall be in a form approved by and acceptable
to Lessor. Copies of the original calibration certificate for each meter installed by Lessee shall be provided to Lessor following
installation. Upon Lessor’s request at any reasonable time (but not to exceed once annually so long as meters appear to be functioning
correctly), Lessee shall, at Lessee’s sole expense, have any water meter in operation hereunder calibrated by a reputable meter
calibration firm. Lessee shall provide reasonable written notice to Lessor prior to having meters calibrated so that Lessor may
witness such calibration. Lessor shall have the right, at Lessor’s expense, to install its own water meter(s) at any and each well
head operated by Lessee for the purpose of verifying the amount of groundwater produced from the Premises.

 

    
	TRER Groundwater Lease	4	 

     

    

 

ARTICLE VII. WELLS

 

7.01       Investigation
and Well Drilling. During the investigation phase of the Lease, Lessee shall have access to the Premises to conduct, at Lessee’s
sole cost and expense, feasibility studies, surveys, testing, and well borings to determine the potential for the aquifer(s) to
supply water to Lessee ’ mining project. This grant of access shall constitute a lease and not an easement. Testing shall include
pumping tests, water level measurements, and analysis for selected water quality constituents. All final reports, including test
data, will be shared with GLO. Lessor approves the construction and operation of water wells on the Premises as follows:

 

		a.	Lessee shall be permitted to use existing and /or ins tall and operate pumps to perform tests
on existing wells 48-45-602 and 48-45-603, as well as any other existing wells with in the Premises. Lessee shall notify Lessor
at least ten (10) days in advance of planned testing on existing wells, including the latitudinal and longitudinal coordinates
for the wells to be tested. Lessor agrees to provide Lessee access to any existing records , data and reports associated with the
wells identified in the paragraph.

 

		b.	Lessee shall also be permitted to install and operate new test holes, and construct and test new
constructed wells. Lessee will notify Lessor at least ten (10) days in advance of all new test hole and well installation. Such
notice shall include the latitudinal and longitudinal coordinates of the new hole or well, the proposed depth and the approximate
date on which drilling operations will be commenced. Lessor shall have ten (10) days from receipt of said notice to issue Lessee
a notice to proceed or reject Lessee’s proposed drill request. Lessee’s proposed drill request shall be considered approved if
Lessor fails to approve or disapprove said request within ten (10) days of receipt of notice from Lessee under this section. Drill
pads fortet wells will be approximately I00 x 100 feet. Test wells will be 8 inches in diameter and approximately 1,500 feet deep, or deeper with prior approval of GLO.

 

7.02       Well
Information. For all water well(s) under this Lease, Lessee shall, upon request by Lessor at any time during the term of this
Lease, provide to Lessor (i) a sample log or driller’s log for the well, designating the producing interval and all water-bearing
zones; ( ii) a report showing the producing capacity of such well; (iii) a chemical analysis of a sample of the water produced
from such well, performed by an independent water laboratory; (iv) a cross-sectional drawing of the well showing total depth, casing
and pump settings, gravel pack interval, cement, geologic formations, static and pumping water levels, and all other available
downhole information; (v) a map or plat of the Premises showing the location and GPS values of the well, tank s, water meters,
roads, and structures and operational facilities; and (vi) any other well data or information requested by Lessor related to Lessee’s
water production from the Premises .

 

7.03       Plugging.
Each well installed by Lessee under this Lease must be plugged or properly closed with in ninety (90) days after termination or
ex pi ration of this Lease or earlier if necessary in order to prevent pollution or to meet environmental or other requirements
hereunder, except that no plugging shall occur without first requesting per miss ion in writing from Lessor and obtaining written
approval to plug from Lessor. So long as Lessee has requested Lessor’s approval to plug the wells within 60 days after termination
or expiration of this Lease or within 30 days of Lessee’s knowledge of the need to plug or close a well in order to prevent pollution
or to meet environmental or other requirements, Lessee’s deadline to plug or properly close the wells shall be changed to 60 days
after receipt of Lessor’s approval. If Lessor refuses to approve plugging, Lessee agrees to be responsible for the plugging of
the well until a new operator of the well has been approved by Lessor. Lessee also agrees to comply with all rules and regulations
of TCEQ, or other governmental authority with jurisdiction over unplugged and/or open water wells.

 

    
	TRER Groundwater Lease	5	 

     

    

 

7.04       Access.
Lessor, or Lessor’s authorized representative, may enter upon the Premises and shall have access to Lessee’s wells, water meters
and operations sites at all times.

 

ARTICLE VIII. ASSIGNMENTS AND ENCUMBRANCES

 

8.01 Lessee shall not assign the rights
granted herein, in whole or part, to any third party for any purpose without the prior written consent of Lessor, which shall not
be unreasonably withheld. Upon the authorized assignment of this Lease and the assumption of the obligations under this Lease
by the assignee of this Lease, the assignor of this Lease shall thereupon be released and discharged from all covenants and obligations
accruing from and after the date of the assignment. Any unauthorized assignments hall be void and of no effect and such unauthorized
assignment shall not relieve Lessee of any liability for any obligation, covenant, or condition of this Lease. THIS PROVISION
AND THE PROHIBITION AGAINST ASSIGNMENT CONTAINED HEREIN SHALL SURVIVE EXPIRATION OR EARLIER TERMINATION OF THIS LEASE. For
purposes of this Lease, an assignment is any transfer, including by operation of law, to another of all or part of rights herein
granted.

 

8.02       Lessee
shall not mortgage, hypothecate, encumber, or grant any deed of trust or security interest that encumbers the Premises or the interests
created by this Lease. Further, Lessee may not collaterally assign any rent or other income generated from Lessee’s use of the
Premises, except that this Section 8.02 shall impose no limits whatsoever on Lessee’s rights to collaterally assign any rent or
other income generated from Lessee’s mining operations.

 

8.03       Lessee
shall not permit any mechanic’s or materialman’s lien or liens to be placed on the Premises during the term of this Lease caused
by or resulting from any work performed, materials furnished, or obligation incurred by or at the request of Lessee. In the case
of the filing of any such lien, Lessee will promptly pay, bond off, or obtain the release of same to the satisfaction of Lessor.
If Lessee’s failure to comply with the provisions of this section shall continue for a period of twenty (20) days, Lessor shall
have the right, at Lessor’s option, of paying the same or any portion thereof without inquiry as to the validity thereof, and any
amounts so paid, including expenses and interest, shall be repaid by Lessee to Lessor immediately upon demand.

 

ARTICLE IX. PROTECTION OF NATURAL and HISTORICAL
RESOURCES

 

9.01.       LESSEE
IS EXPRESSLY PLACED ON NOTICE OF THE NATIONAL HISTORICAL PRESERVATION ACT OF 1966 (16 USC § 470, ET SEQ.) AND THE TEXAS A
TIQUITIES CODE (TEX. NAT. RES. CODE CH. 191), AS THE SAME MAY BE AMENDED FROM TIME TO TIME. IN THE EVENT THAT ANY SITE, OBJECT,
LOCATION, ARTIFACT OR OTHER FEATURE OF ARCHEOLOGICAL, SCIENTIFIC, EDUCATIONAL, CULTURAL OR HISTORIC INTEREST IS ENCOUNTERED DURING
ANY ACTIVITY ON THE PREMISES, LESSEE SHALL IMMEDIATELY CEASE SUCH ACTIVITIES AND SHALL IMMEDIATELY NOTIFY LESSOR AND THE TEXAS
HISTORICAL COMMISSION, P.O. BOX 12276, AUSTIN, TEXAS 78711, SO THAT ADEQUATE MEASURES MAY BE UNDERTAKEN TO PROTECT OR RECOVER SUCH
DISCOVERIES OR FINDINGS, AS APPROPRIATE.

 

ARTICLE X. INDEMNITY AND INSURANCE

 

10.01.     LESSEE SHALL BE FULLY LIABLE
AND RESPONSIBLE FOR ANY DAMAGE, OF ANY NATURE, ARISING OR RESULTNG FROM ITS OWN ACTS OR OMISSIONS RELATED TO ITS EXERCISE OF THE
RIGHTS GRANTED HEREIN. LESSEE AGREES TO AND SHALL INDEMNIFY AND HOLD LESSOR, LESSOR’S OFFICERS, AGENTS, AND EMPLOYEES, HARMLESS
FROM AND AGAINST CLAIMS, SUIT, COSTS, LIABILITY OR DAMAGES OF ANY KIND, INCLUDING STRICT LIABILITY CLAIMS, WITHOUT LIMIT AND WITHOUT
REGA RD TO CA SE OF THE DAMAGES OR THE NEGLIGENCE OF ANY PARTY, EXCEPT FOR THE CONSEQUENCES OF THE NEGLIGENT ACTS OR WILLFUL MISCONDUCT
OF LESSOR, LESSOR’S OFFICERS, AGENTS, EMPLOYEES, OR INVITEES, ARISING DIRECTLY OR INDIRECTLY FROM LESSEE’S USE OF THE PREMISES
(OR ANY ADJACENT OR CONTIGUOUS PERMANENT SCHOOL FUND LAND) OR FROM ANY BREACH BY LESSEE OF THE TERMS CONTAINED HEREIN. THE PROVISIONS
OF THIS SECTION SHALL SURVIVE EXPIRATION OR EARLIER TERMINATION OF THIS LEASE.

 

    
	TRER Groundwater Lease	6	 

     

    

 

10.02.      Lessee
shall obtain and maintain at all time during this Lease commercial general liability insurance coverage in a minimum amount of
One Million and No/100 Dollars ($1,000,000.00), which policy shall insure against bodily injury, death and property damage and
shall include (i) coverage for the Premises and operations and (ii) contractual liability coverage insuring the obligations
of Lessee hereunder, including, without limitation, the indemnity obligations of Lessee. The liability insurance policy shall name
Lessor as an additional insured, shall be non-cancelable on less than thirty (30) days prior written notice to Lessor and shall
include a waiver of subrogation endorsement in a form acceptable to Lessor. Lessee shall furnish Lessor with a certificate of insurance
evidencing the foregoing coverage prior to entry onto the Premises.

 

ART1CLE XI. TAXES

 

11.01.      Lessor
is exempt from taxation. If any taxes are levied on Lessee’s interest under this Lease, or if any other taxes or assessments are
appropriately levied against the Premises, Lessee hall pay such taxes and assessment not less than five (5) days prior to the date
of delinquency thereof directly to the taxing authority. Lessee may in good faith and at its sole cost contest any such taxes or
assessment, and shall be obligated to pay the contested amount only if and when finally determined to be owed. LESSEE AGREES
TO AND SHALL PROTECT AND HOLD THE LESSOR HARMLESS FROM LIABILITY FOR ANY AND ALL TAXES, CHARGES, AND ASSESSMENTS LEVIED AGAINST
THE PREMISES OR LESSEE’S INTEREST UNDER THIS LEASE, TOGETHER WITH ANY PENALTIES AND INTEREST THERETO, AND FROM ANY SALE OR OTHER
PROCEEDING TO ENFORCE PAYMENT THEREOF.

 

ARTICLE XII. DEFAULT, TERMINATION AND
EXPIRATION

 

12.01       Early
Termination. If Lessee determines the ground water supply is not suitable for Lessee’s mining project, Lessee shall have the
right to terminate the Lease by sending written notice of such termination to Lessor in accordance with Article XIV of this Lease.
Upon ending of such written notice, this Lease shall automatically terminate and all rights granted herein to Lessee shall revert
to Lessor. Such termination shall not prejudice the rights of Lessor to collect any money due or to seek recovery on any claim
arising hereunder.

 

12.02       Lessor
and Lessee agree and acknowledge that it shall be an event of default if Lessee or Lessee’s employees, guests, or invitees engage
in any use of the Premises not authorized by this Lease, Lessee fails to pay any money due hereunder, or breaches any other term
or condition of this Lease. Lessee shall have thirty (30) days following written notice from Lessor specifying the default or breach
of this Lease to cure this default or breach, except that Lessee shall be allowed additional time as is reasonably necessary to
cure any non-monetary default or breach so long as Lessee (i) commences to cure the failure within the thirty (30) day period following
Lessor’s written notice, and (2) diligently pursues the course of action that will cure the failure and bring Lessee back into
compliance with this Lease. If Lessee fails to cure all defaults or breaches within the notice and time period to cure set forth
in this Section, Lessor shall have the right, at its option and its sole discretion, to terminate this Lease and all rights inuring
to Lessee herein by ending written notice of such termination to Lessee in accordance with Article XIV of this Lease. Upon ending
of such written notice, this Lease shall automatically terminate and all rights granted herein to Lessee shall revert to Lessor.
Such termination shall not prejudice the rights of Lessor to collect any money due or to seek recovery on any claim arising hereunder.

 

    
	TRER Groundwater Lease	7	 

     

    

 

12.03       Upon
expiration or earlier termination of this Lease, Lessee shall restore the Premises to its original topographical condition that
existed as of the Effective Date, to the extent the topographical condition has been altered by Lessee or on behalf of Lessee.
Lessor may also require that Lessee remove all related infrastructure improvements placed or constructed on the Premises by or
on behalf of Lessee from the Premises, or Lessee may elect to take possession of such infra structure improvements. THE TERMS
OF THIS SECTION SHALL SURVIVE EXPIRATION OR EARLIER TERMINATION OF THIS LEASE.

 

12.04.       Lessor
and Lessee agree that, in the event Lessee fails to restore the Premises as required by Section 12.03 or remove its personal property
or improvement within the time specified in a notice provided pursuant to Section 12.02 above, then Lessor may, at its sole option,
remove and dispose of such property ( with no obligation to sell or otherwise maintain such property in accordance with the Uniform
Commercial Code), at Lessee’s sole cost and expense, or Lessor may elect to own such property by written notice of such election
provided pursuant to Section 12.02 above. If Lessor elects to remove Lessee’s property and dispose of it pursuant to this Section,
then in such an event Lessee shall be obligated to reimburse Lessor for the reasonable costs of such removal and disposal within
ten (10) days of Lessor’s demand for reimbursement. THE TERMS OF THIS SECTION SHALL SURVIVE EXPIRATION OR EARLIER TERMINATION
OF THIS LEASE.

 

12.05.      The
Premises are subject to sale or trade. Lessor and Lessee acknowledge that Lessor may permit entry by prospective or actual buyers.
In the event Lessor enters into an agreement to sell or trade the Premises to a third party, Lessor agrees that the Premises shall
be sold subject to this Lease and Lessor shall assign this Lease to the buyer and the buyer shall assume the obligations under
this Lease.

 

12.06.       Lessor
reserves the right to remove from this Lease any portion of the Premises as Lessor may reasonably determine necessary for purposes
other than those described herein, so long as such removal does not interfere with Lessee’s use or intended use of the Premises.
Prior to removing any property from the Premises, Lessor will give Lessee at least thirty (30) days prior written notice of its
intent to remove property, which notice will describe in detail the property intended to be removed. Lessee must raise any objections
it has to Lessor’s removal, as outline in Lessor’s notice, within thirty (30) days of Lessee’s receipt of Lessor’s notice, in which
event, Lessor and Lessee agree to reasonably cooperate with one another to ensure that Lessor’s removal will not interfere with
Lessee’s use or intended use of the Premises. Lessee’s rights under this Lease to that portion of the Premises so removed shall
be considered terminated and the Lease shall be amended to reflect the remaining portion of the Premises. Lessor acknowledges that
Lessee may later seek to restore rights to the portion of the Premises so removed and agrees to reasonably cooperate with Lessee
to restore such rights as needed for the project.

 

12.07.       In
the event of a condemnation proceeding that affects all or part of the Premises, Lessor will have the exclusive authority to negotiate
with the condemning authority. In the event of a total condemnation, this Lease shall terminate. In the event of a partial condemnation,
Lessor may elect to continue or to terminate this Lease, but, if Lessor elects to continue the Lease, the Consideration shall be
proportionately reduced. All condemnation proceeds, except for those allocated to improvements or personal property belonging to
Lessee, shall be the property of Lessor and shall be payable to Lessor.

 

12.08.       If
Lessee files a petition for bankruptcy or becomes the subject of an involuntary bankruptcy or other similar proceeding under the
federal bankruptcy laws, this Lease shall automatically terminate upon such filing without necessity of notice.

 

ARTICLE XIII. HOLD OVER

 

13.01.       If
Lessee holds over and continues in possession of the Premises after expiration of this Lease or the earlier termination of Lessee’s
rights under this Lease, Lessee shall be deemed to be occupying the Premises on the basis of a month-to-month tenancy subject
to all of the terms and conditions of this Lease, except that as liquidated damages by reason of such holding over, the amounts
payable by Lessee under this Lease shall be increased such that the Consideration payable under Article VI of this Lease and any
other sums payable hereunder shall be one hundred twenty-five percent (125 %) of the amount payable to Lessor by Lessee for the
applicable period immediately preceding the first day of the holdover period. Lessee acknowledge that in the event it holds over,
Lessor’s actual damages will be difficult, if not impossible, to ascertain, and the liquidated damages herein agreed to be paid
are reasonable in amount and are payable in lieu of actual damages and are not a penalty. Lessee further acknowledges that acceptance
of hold over Consideration does not imply Lessor’s consent to hold over.

 

    
	TRER Groundwater Lease	8	 

     

    

 

13.02.      The
tenancy from month-to-month described in Section 13.01 of this Lease may be terminated by either party upon thirty (30) days written
notice to the other.

 

13.03       The
Consideration due after notice of termination has been given is to be calculated according to Section 13.01 hereinabove on a pro
rata basis. If, upon notice of termination by Lessor, Lessee pays Consideration in excess of the amount due and payable and Lessor
accepts such payment, the acceptance of such payment will not operate as a waiver by Lessor of the notice of termination unless
such waiver is in writing and signed by Lessor. Any such excess amounts paid by Lessee and accepted by Lessor shall be promptly
refunded by Lessor after deducting therefrom any amounts owed to Lessor.

 

ARTICLE XIV. NOTICE

 

14.01. Any notice which may or shall
be given under the terms of this Leases hall be in writing and shall be either delivered by hand, by facsimile, or sent by
United States first class mail, adequate postage prepaid, as follows:

 

If for Lessor:

Texas General Land Office

Deputy Commissioner, Professional Services

1700 North Congress Avenue

Austin, Texas 78701-1495

FAX : (512) 463-5304

 

If for Lessee:

 

Texas Rare Earth Resources Corp.

P.O. Box 539

539 West El Paso Street

Sierra Blanca, TX 79851

Attention: Dan Gorski

Telephone: (361) 790-5831

 

With a copy to:

 

Texas Rare Earth Resources Corp.

1211 St. Vrain

No. 27

El Paso, Texas 79902

Attention: Laura Lynch

 

And:

 

Guida, Slavich & Flores, P.C.

750 N. St. Paul Street, Suite 200

Dallas, Texas 75201

Attention: Sally A. Longroy

Telephone: (214 ) 692-5409

Fax: (214) 692-6610

 

    
	TRER Groundwater Lease	9	 

     

    

 

Any party’s address may be changed from
time to time by such party by giving notice as provided above, except that the Premises may not be used by Lessee as the sole notice
address. No change of address of either party shall be binding on the other party until notice of such change of address is given
as herein provided.

 

14.02.      For
purposes of the calculation of various time periods referred to in this Lease, notice delivered by hand shall be deemed received
when delivered to the place for giving notice to a party referred to above. Notice mailed in the manner provide d above shall be
deemed completed upon the earlier to occur of (i) actual receipt as indicated on the signed return receipt , or (ii) three (3)
business days (excluding federal holidays) after posting as here in provided.

 

ARTICLE XV. INFORMATIONAL REQUIREMENTS

 

15.01       Lessee
shall promptly provide written notice to Lessor of any change in Lessee’s name, address, corporate structure, legal status or any
other information relevant to this Lease. Lessee shall provide to Lessor any other information reasonably requested by Lessor in
writing within fifteen (15) days following such request or such other time period approved by Lessor (such approval not to be unreasonably
withheld ).

 

ARTICLE X. MISCELLANEOUS PROVISIONS

 

15.02       With
respect to terminology in this Lease, each number (singular or plural) shall include all numbers, and each gender (male, female
or neuter) shall include all genders. If any provision of this Lease shall ever be held to be in valid or unenforceable, such invalidity
or unenforceability shall not affect any other provisions of the Lease, but such other provisions shall continue in full force
and effect.

 

15.03.      The
titles of the Articles in this Lease shall have no effect and shall neither limit nor amplify the provisions of the Lease itself.
This Lease shall be binding upon and shall accrue to the benefit of Lessor, its successors and assigns, and Lessee, Lessee’s successors
and assigns (or heirs, executor, administrators and assigns, as the case may be); however, this clause does not constitute a consent
by Lessor to any assignment by Lessee.

 

15.04.      Neither
acceptance of Consideration (or any portion thereof) or any other sums payable by Lessee hereunder (or any portion thereof) to
Lessor nor failure by Lessor to complain of any action, non-action or default of Lessee shall constitute a waiver as to any breach
of any covenant or condition of Lessee contained herein nor a waiver of any of Lessor’s rights hereunder. Waiver by Lessor of
any right for any default of Lessee shall not constitute a waiver of any right for either a prior or subsequent default of the
same obligation or for any prior or subsequent default of any other obligation. No right or remedy of Lessor here under or covenant,
duty or obligation of Lessee hereunder shall be deemed waived by Lessor unless such waiver be in writing, signed by a duly authorized
representative of Lessor. Nothing herein shall constitute a waiver of Lessor’s sovereign immunity.

 

15.05.      No
provision of this Lease shall be construed in such a way as to constitute Lessor and Lessee joint ventures or partners or to make
Lessee the agent of Lessor or make Lessor liable for the debts of Lessee.

 

15.06.      In
all instances where Lessee is required hereunder to pay any sum or do any act at a particular indicated time or within an indicated
period, it is understood that time is of the essence.

 

15.07.      Under
no circumstances whatsoever shall Lessor or Lessee ever be liable hereunder for consequential damages or special damages. The terms
of this Lease shall only be binding on Lessor during the period of its ownership of the Premises, and in the event of the transfer
of such ownership interest, Lessor shall thereupon be released and discharged from all covenants and obligations thereafter accruing,
but such covenants and obligations shall be binding during the Lease term upon each new owner for the duration of such owner’s
ownership.

 

    
	TRER Groundwater Lease	10	 

     

    

 

15.08.      All
monetary obligations of Lessor and Lessee (including, without limitation, any monetary obligation for damages for any breach of
the respective covenants, duties or obligation of either party hereunder) are performable exclusively in Austin, Travis County,
Texas. This Lease shall be construed and interpreted in accordance with the laws of the State of Texas.

 

15.09.      Lessee’s obligations to pay Consideration
and to perform Lessee’s other covenants and duties under this Lease constitute independent, unconditional obligations. Lessee waives
and relinquishes all rights which Lessee might have to claim any nature of lien against Lessor and the Premises, or withhold or
deduct from or offset against any Consideration or other sums provided hereunder to be paid to Lessor by Lessee. Lessee waives
and relinquishes any right to assert, either as a claim or as a defense, that Lessor is bound to perform or is liable for the nonperformance
of any implied covenant or implied duty of the Lessor not expressly set forth in this Lease. Lessor waives and relinquishes any
right to assert, either as a claim or as a defense, that Lessee is bound to perform or is liable for the nonperformance of any
implied covenant or implied duty of the Lessee not expressly set forth in this Lease.

 

15.10       This
Lease, including any exhibits to the same, constitutes the entire agreement between Lessor and Lessee, no prior or contemporaneous
written or oral promises or representations shall be binding. Every term and provision of this Lease is intended to be severable.
If any term or provision hereof is illegal or invalid for any reason whatsoever, such term or provision will be enforced to the
maximum extent permitted by law and, in any event, such illegality or invalidity shall not affect the validity of the remainder
of this Lease.

 

ARTICLE XVI. FILING

 

16.01.      Lessee
shall, at its sole cost and expense, record a Memorandum of Lease in the Official Public Records of the county or counties in which
the Premises are located and provide a file marked copy of same to Lessor within sixty (60) days after this Lease is executed
by all parties.

 

ARTICLE XVI. ENTIRE AGREEMENT

 

16.01.     This
Lease, including any exhibits to the same, constitutes the entire agreement between Lessor and Lessee, no prior or contemporaneous
written or oral promises or representations shall be binding. The sub mission of this Lease for examination by Lessee or Lessor
and/or execution thereof by the Lessee or Lessor does not constitute a reservation of or option for the Premises and this Lease
shall become effective only upon execution by all parties hereto and delivery of a fully executed counterpart thereof by Lessor
to the Lessee. This Lease shall not be amended, changed or extended except by written instrument signed by both parties thereto.

 

IN TESTIMONY WHEREOF, witness my hand and
the Seal of Office.

 

LESSOR:

 

THE STATE OF TEXAS

 

	By:	/s/  Jerry E. Patterson	 
	 	
        JERRY E. PATTERSON

        Commissioner, General Land Office
	 

 

	Date:	9/18/2014	 
	 	 	 

 

    
	TRER Groundwater Lease	11	 

     

    
 

APPROVED:

 

	Contents:	 	 
	Legal:	 	 
	Deputy:	 	 
	Executive:	 	 

  

    
	TRER Groundwater Lease	12	 

     

    

 

LESSEE:

 

TEXAS RARE EARTH RESOURCES CORP.

 

	By:	/s/  Dan Gorski	 
	 	Dan Gorski, its President	 
	 	 	 
	Date:	9 September 2014	 

 

ACKNOWLEDGMENT OF LESSEE

 

	STATE OF TEXAS	§

		§

	COUNTY OF ARANSAS	§

 

This instrument was acknowledged before me on the 8th
day of September, 2014, by Dan Gorski, President of Texas Rare Earth Resources Corp., on behalf of said corporation.

 

	 	/s/ Gloria H. Vela

 

	 	Notary Public, State of Texas

 

	 	My commission expires: 7/31/2016

 

Information collected by electronic
mail and by web form is subject to the Public Information Act, Chapter 552, Government Code.

 

    
	TRER Groundwater Lease	13

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