UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
100 F Street NE
Washington, D.C. 20549
 
FORM 10-Q
[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended May 31, 2011
 
OR
 
[  ]
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ________ to ________
 
Commission File Number: 0-53482
 
Texas Rare Earth Resources Corp.
(Exact name of registrant as specified in its charter)
 
Nevada, United States
87-0294969
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification Number)
 
304 Inverness Way South, Suite 365, Englewood, Colorado 80112
(Address of principal executive offices)
 
(303) 597-8737
(Issuer’s telephone number)
 
3 Riverway, Suite 1800, Houston, Texas 77056
(Former Address of principal executive offices)


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes [X ] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes [  ] No [X]
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one).

Large accelerated filer  [  ]
Accelerated filer  [  ]
Non-accelerated filer  [  ]
Smaller reporting company  [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [ ]  No [X]

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of July 5, 2011, the registrant had 34,455,009 shares of common stock, par value $0.01per share, outstanding.

 
 

 
 
 
     
 
Part I
Page
     
Item 1
Financial Statements
3
Item 2
Management’s Discussion and Analysis of Financial Condition and Results of Operations
12
Item 3
Quantitative and Qualitative Disclosures About Market Risk
16
Item 4
Controls and Procedures
16
     
 
Part II
 
     
Item 1
Legal Proceedings
16
Item 2
Unregistered Sales of Equity Securities and Use of Proceeds
17
Item 3
Defaults upon Senior Securities
17
Item 4
(Removed and Reserved)
17
Item 5
Other Information
17
Item 6
Exhibits
18
     
Signatures
19




 
 

 
 
Texas Rare Earth Resources Corp
 
(Formerly Standard Silver Corporation)
 
BALANCE SHEETS
 
             
   
May 31, 2011
   
August 31, 2010
 
   
(Unaudited)
       
ASSETS
           
             
CURRENT ASSETS
           
Cash & cash equivalents
  $ 9,845,128     $ 74,434  
Prepaid expenses and other current assets
    50,872       -  
Total current assets
    9,896,000       74,434  
                 
Property, plant and equipment, net
    125,711       26,559  
Mineral properties
    130,076       44,539  
Deposits
    6,876       -  
                 
TOTAL ASSETS
  $ 10,158,663     $ 145,532  
                 
LIABILITIES AND SHAREHOLDERS' EQUITY
               
                 
CURRENT LIABILITIES
               
    Accounts payable and accrued liabilities
  $ 201,713     $ 20,624  
    Notes and interest payable to related parties
    -       90,448  
   Total current liabilities
    201,713       111,072  
                 
COMMITMENTS AND CONTINGENCIES
               
                 
SHAREHOLDERS' EQUITY
               
Preferred stock, par value $0.001; 10,000,000 shares authorized, no
               
      shares issued and outstanding as of May 31, 2011 and
               
      August 31, 2010
    -       -  
Common stock, par value $0.01; 100,000,000 shares authorized,
               
   27,636,260 and 23,670,260 issued and outstanding as of
               
   May 31, 2011 and August 31, 2010, respectively
    276,363       236,703  
   Additional paid-in capital
    15,451,466       1,220,391  
   Accumulated deficit
    (5,770,879 )     (1,422,634 )
   Total shareholders' equity
    9,956,950       34,460  
                 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
  $ 10,158,663     $ 145,532  
                 
The accompanying notes are an integral part of these financial statements.
               
 
 
-3-

 
TEXAS RARE EARTH RESOURCES CORP
 
(Formerly Standard Silver Corporation)
 
UNAUDITED STATEMENTS OF OPERATIONS
 
   
   
Nine Months ended May 31,
   
Three Months ended May 31,
 
   
2011
   
2010
   
2011
   
2010
 
                         
                         
OPERATING EXPENSES
                       
   Exploration costs
  $ 365,237     $ 78,711     $ 246,419     $ 48,711  
   General & administrative expenses
    3,991,311       360,446       2,571,134       12,514  
                                 
Total operating expenses
    4,356,548       439,157       2,817,553       61,225  
                                 
LOSS FROM OPERATIONS
    (4,356,548 )     (439,157 )     (2,817,553 )     (61,225 )
                                 
OTHER (INCOME) EXPENSE
                               
Interest and other income
    (9,479 )     (389 )     (6,140 )     (323 )
Interest expense
    1,176       8,892       -       4,860  
                                 
Total other (income) expense
    (8,303 )     8,503       (6,140 )     4,537  
                                 
NET LOSS
  $ (4,348,245 )   $ (447,660 )   $ (2,811,413 )   $ (65,762 )
                                 
Net loss per share:
                               
    Basic and diluted net loss per share
  $ (0.17 )   $ (0.02 )   $ (0.10 )   $ (0.00 )
                                 
Weighted average shares outstanding:
                               
   Basic and diluted
    25,858,428       23,308,593       27,589,237       23,420,260  
                                 
The accompanying notes are an integral part of these financial statements.
                 
 
 
-4-

 
TEXAS RARE EARTH RESOURCES CORP
 
(Formerly Standard Silver Corporation)
 
UNAUDITED STATEMENTS OF CASH FLOWS
 
   
   
Nine Months Ended May 31,
 
   
2011
   
2010
 
             
CASH FLOWS FROM OPERATING ACTIVITIES
           
Net loss
  $ (4,348,245 )   $ (447,660 )
Adjustment to reconcile net loss to net cash
               
   used in operating activities:
               
Depreciation expense
    6,348       2,612  
Stock issued for services
    1,118,221       13,500  
Stock based compensation
    2,320,651       249,000  
 Changes in current assets and liabilities:
               
      Prepaid expenses
    (38,548 )     -  
      Accounts payable and accrued expenses
    163,641       (3,236 )
Net cash used in operating activities
    (777,932 )     (185,784 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES
               
 Investment in mineral properties
    (85,536 )     (5,558 )
 Purchase of  fixed assets
    (105,501 )     (30,536 )
Net cash used in investing activities
    (191,037 )     (36,094 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES
               
Net proceeds from sale of common stock
    10,812,663       452,500  
Repayment of notes payable to related parties
    (73,000 )     -  
Net cash provided by financing activities
    10,739,663       452,500  
NET CHANGE IN CASH
    9,770,694       230,622  
CASH, BEGINNING OF PERIOD
    74,434       -  
CASH, END OF PERIOD
  $ 9,845,128     $ 230,622  
                 
                 
SUPPLEMENTAL INFORMATION
               
    Interest paid
  $ 18,846     $ -  
    Taxes paid
  $ -     $ -  
    Issuance of 131,250 shares of common stock for cash previously received
  $ 1,313     $ -  
    Issuance of 61,000 shares of common stock for services previously recorded
  $ 610     $ -  
    Issuance of 300,000 shares of common stock for director compensation
               
      previously recorded
  $ 3,000     $ -  
                 
The accompanying notes are an integral part of these financial statements.
               
 
-5-

 
Texas Rare Earth Resources Corp
(formerly Standard Silver Corporation)
Notes to Interim Financial Statements
May 31, 2011
(Unaudited)

NOTE 1 – SUMMARY OF ACCOUNTING POLICIES

The accompanying unaudited interim financial statements of Texas Rare Earth Resources Corp. (the "Company") (formerly Standard Silver Corporation) have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission ("SEC"), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company's Form 10-K, dated August 31, 2010, as filed with the SEC. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal year August 31, 2010 as reported in Form 10-K, have been omitted.

NOTE 2 – RELATED PARTY TRANSACTIONS

The Company had periodically received cash advances from the Company’s officers and relatives of the Company’s officers to fund operations.  The advances accrued interest at rates ranging from five percent (5%) to six percent (6%) per annum. In December 2010, the notes payable principal balance of $73,000 plus accrued interest for these advances was paid in full.

NOTE 3 – INVESTMENTS

In August 2010, we entered into a mining lease with the Texas General Land Office covering Sections 7 and 18 of Township 7, Block 71 and Section 12 of Block 72, covering approximately 860 acres at Round Top Mountain in Hudspeth County, Texas.  The mining lease issued by the Texas General Land Office gives us the right to explore, produce, develop, mine, extract, mill, remove, and market beryllium, uranium, rare earth elements, all other base and precious metals, industrial minerals and construction materials and all other minerals excluding oil, gas, coal, lignite, sulfur, salt, and potash.  The term of the lease is twenty years so long as minerals are produced in paying quantities.

Under the lease, we will pay the State of Texas a lease bonus of $197,800, $35,000 of which was paid upon the execution of the lease, $65,000 which was paid in April 2011 when we submitted our initial plan of operations to conduct exploration, and $97,800 which will be due when we submit a supplemental plan of operations to conduct mining.  Upon the sale of minerals removed from Round Top, we will pay the State of Texas a $500,000 minimum advance royalty.  Thereafter, we will pay the State of Texas a production royalty equal to eight percent (8%) of the market value of uranium and other fissionable materials removed and sold from Round Top and six and one quarter percent (6 ¼%) of the market value of all other minerals removed and sold from Round Top.

If production of paying quantities of minerals has not been obtained on or before August 17, 2011, we may pay the State of Texas a delay rental to extend the term of the lease in an amount equal to $44,718.  Thereafter, assuming production of paying quantities has not been obtained, we may pay additional delay rental fees to extend the term of the lease for successive one (1) year periods pursuant to the following schedule:

   
Per Acre Amount
   
Total Amount
 
August 17, 2012 – 2014
 
$
50
   
$
44,718
 
August 17, 2015 – 2019
 
$
75
   
$
67,077
 
August 17, 2019 – 2024
 
$
150
   
$
134,155
 
August 17, 2025 – 2029
 
$
200
   
$
178,873
 
 
 
-6-

 
NOTE 4 – CAPITAL STOCK

The Company’s authorized capital stock consists of 100,000,000 shares of common stock, with a par value of $0.01 per share, and 10,000,000 preferred shares with a par value of $0.001 per share.

All shares of common stock have equal voting rights and, when validly issued and outstanding, are entitled to one non-cumulative vote per share in all matters to be voted upon by shareholders.  The shares of common stock have no pre-emptive, subscription, conversion or redemption rights and may be issued only as fully paid and non-assessable shares. Holders of the common stock are entitled to equal ratable rights to dividends and distributions with respect to the common stock, as may be declared by the Board of Directors out of funds legally available.  In the event of a liquidation, dissolution or winding up of the affairs of the Company, the holders of common stock are entitled to share ratably in all assets remaining available for distribution  to them after payment or provision for all liabilities and any preferential liquidation rights of any preferred stock then outstanding.

The Company received cash proceeds from the sale of its common stock and the exercise of Class A Warrants and Class B Warrants to purchase common stock during the nine months ended May 31, 2011 as follows:

Description
Shares of Common Stock Issued
Cash Proceeds Received
2009-2010 Private Placement (issuances occurred in quarter ended November 30, 2010) (1)
 
 
1,132,500
 
 
$453,000
Exercise of Class A & B Warrants issued in connection with 2009 – 2010 Private Placement (issuances occurred in quarter ended February 28, 2011) (1)
 
 
 
656,250
 
 
 
382,813
January 2011 Private Placement (issuance occurred in quarter ended February 28, 2011) (2)
 
 
1,600,000
 
 
4,000,000
Exercise of options issued in January 2011 Private Placement (cash received and stock issued in quarter ended May 31, 2011)(2)
 
 
40,000
 
 
100,000
Exercise of options issued in January 2011 Private Placement (cash received in quarter ended May 31, 2011 and stock issued subsequent to quarter ended May 31, 2011)(2)
 
 
 
 
-
 
 
 
6,300,000
Net offering costs
-
(383,150)
Total shares of common stock issued and net cash proceeds received from sale of common stock and from the exercise of Class A & B Warrants during the nine months ended May 31, 2011 (3)
 
 
 
 
3,428,750
 
 
 
 
$10,852,663

(1) See “2009-2010 Private Placement” below.
(2) See “January 2011 Private Placement” below.
(3) Does not include an aggregate of 406,000 shares of common stock issued for services rendered during the nine months ended May 31, 2011.  See “Other Equity Issues” below.

2009 – 2010 Private Placement

Between October 2009 and November 2010, the Company raised cash proceeds of $905,500 through the issuance of 2,263,750 shares of common stock and the issuance of Class A Warrants to purchase 2,263,750 shares of common stock and Class B Warrants to purchase 1,131,875 shares of common stock.  Of the $905,500 cash proceeds raised for this private placement, $452,500 was raised prior to September 1, 2010 and $453,000, representing the sale of 1,132,500 shares of common stock, was raised in September through November 2010. The final closing of this private placement was January 10, 2011.

During the nine months ended May 31, 2011, the Company issued 131,250 shares to two investors in connection with our 2009 – 2010 Private Placement that were paid for in a prior period.

In January 2011, Class A Warrants to purchase 62,500 shares of the Company’s common stock and Class B warrants to purchase 31,250 shares of the Company’s common stock were exercised by an investor, resulting in $31,250 of proceeds being raised by the Company for the Class A warrants and $23,438 of proceeds being raised by the Company for the Class B Warrants.  Total proceeds to the Company as a result of the Class A and Class B Warrant exercise was $54,688.  In February 2011, Class A Warrants to purchase 375,000 shares of the Company’s common stock and Class B Warrants to purchase 187,500 shares of the Company’s common stock were exercised by an investor, resulting in $187,500 of proceeds being raised by the Company for the Class A Warrants and $140,625 of proceeds being raised by the Company for the Class B Warrants. Total proceeds to the Company as a result of the Class A and Class B Warrant exercise was $328,125.  The shares of common stock issued upon exercise of the  Class A and Class B Warrants by these two investors was 437,500 and 218,750, respectively (a total of 656,250 shares of common stock), resulting in $382,813 of total cash proceeds to the Company.

 
-7-

 
January 2011 Private Placement

Between January and February 2011, we entered into a series of transactions with accredited investors pursuant to which we sold an aggregate of 1,600,000 shares of our common stock and five year warrants to purchase up to 1,600,000 shares of common stock, exercisable at $2.50 per share, for gross proceeds of $4,000,000. The Company has determined these warrants to have an approximate relative fair value of $950,000. The Company paid cash commissions of $318,000 and issued five year warrants to purchase up to 305,000 shares of its common stock at an exercise price of $2.50 per share in connection with the sale of its securities in the January 2011 Private Placement. The Company has determined these warrants to have an approximate fair value of $900,000. The Black-Scholes pricing model was used to estimate the fair value of the 1,600,000 and 305,000 warrants issued during the period, using the assumptions of a risk free interest rate of 1.1%, dividend yield of 0%, volatility of 404%, and an expected life of 5 years.  The Company paid $65,150 in legal fees associated with the issuance of the shares associated with the January 2011 Private Placement.

In May 2011, an investor participating in the January 2011 Private Placement exercised his option and was issued 40,000 shares of common stock and a five-year warrant to purchase up to 40,000 shares of common stock, exercisable at $2.50 per share, resulting in aggregate gross proceeds to the Company of $100,000.  In connection with the option exercise, the Company paid a sales commission of $1,000 in cash and issued a five-year warrant to purchase up to 8,000 shares of common stock at an exercise price of $2.50 per share.

In May 2011, certain investors participating in the January 2011 Private Placement exercised their options to purchase 2,520,000 shares of common stock resulting in gross proceeds to the Company in the amount of $6,300,000 funded in May 2011.  These 2,520,000 shares were issued in June 2011, subsequent to the quarter ended May 31, 2011.  These investors were also issued five-year warrants to purchase up to 2,520,000 shares of common stock, exercisable at $2.50 per share.  In June 2011, and in connection with these option exercises, the Company paid a sales commission of $672,000 in cash and issued a five-year warrant to purchase up to 512,000 shares of common stock at an exercise price of $2.50 per share.

Other Equity Issues

In September 2010, the Company issued 300,000 common shares to a director for compensation recorded in the prior year at a fair value on the date of grant of $249,000.

During the quarter ended November 30, 2010, the Company issued 61,000 shares of common stock to two external consultants as payment for services performed in a prior period.

In November 2010, the Company entered into a non-exclusive investment banking agreement with Sunrise Securities Corp. (“Sunrise”) pursuant to which it agreed to pay a sales commission with respect to certain financings effected, or alternative transactions entered into, by the Company through introductions by Sunrise.  The Company agreed to pay Sunrise a monthly fee of 5,000 shares of restricted common stock beginning in November 2010.  The Company has issued 45,000 shares totaling $67,350 of expense from November through May related to this fee.

In November 2010, the Company also entered into a 24 month institutional public relations retainer agreement with Sunrise Financial Group, Inc., (“SFG”), an affiliate of Sunrise, pursuant to which it agreed to issue SFG five-year options to purchase 250,000 shares at $1.60 per share and 250,000 shares at $5.00 per share, with certain demand registration rights.  The Black-Scholes pricing model was used to estimate the fair value of the 500,000 options, assuming a risk free interest rate of 1.1%, dividend yield of 0%, volatility of 425%, and an expected life of 5 years.  The Company has determined these options to have an approximate fair value of $960,000, which was recognized as an immediate expense during the nine months ended May 31, 2011 in accordance with FASB ASC 505-50-25.

In January 2011, we entered into a finders agreement with Aspenwood Capital (“Aspenwood”) under which Aspenwood would introduce potential investors to the Company.  The Company agreed to pay up to a 10% cash fee and to issue a five year warrant to purchase up to 10% of the number of shares sold to investors introduced to the Company by Aspenwood at an exercise price equal to 100% of the equity purchase price.  The warrant may be exercised on a cashless basis at any time subsequent to August 31, 2011 in the event the Company does not maintain an effective registration statement on file with the SEC.  The Company has paid $25,000 under this agreement as of June 30, 2011.

 
-8-

 
NOTE 4 – CAPITAL STOCK (Continued)

In February 2011, the Company entered into a Director’s agreement with General Gregory Martin pursuant to which the Company issued to General Martin 5-year options to purchase 60,000 shares of the Company’s common stock at $2.50 per share as compensation for serving as a member of the Company’s board of directors.  The Black-Scholes pricing model was used to estimate the fair value of the 60,000 options issued during the period to this director, using the assumptions of a risk free interest rate of 1.1%, dividend yield of 0%, volatility of 421%, and an expected life of 5 years. The Company has determined these options to have an approximate fair value of $150,000.  General Martin’s award immediately vests on the grant date and were awarded for services as a nonemployee director acting in his role as a member of the board of directors. Therefore, the Company has recorded the entire amount of this award on the grant date as an immediate expense for the nine month period ending May 31, 2011 in accordance with FASB ASC 718.

In March 2011, the Company granted to Wm Chris Mathers, its chief financial officer, as a part of his employment arrangement, a five year option to purchase up to 400,000 shares of our common stock at an exercise price of $2.50 per share.  These options vest 1/36 each month provided he is employed by the Company on the vesting dates.  The Black-Scholes pricing model was used to estimate the fair value of the 400,000 options issued during the period, using the assumptions of a risk free interest rate of 1.1%, dividend yield of 0%, volatility of 376%, and an expected life of 5 years. The Company has determined these options to have an approximate fair value of $1,000,000.  Since Mr. Mathers’ award vests over a 36 month period, the Company is expensing approximately $28,000 monthly for this award over the 36 month vesting period in accordance with FASB ASC 718.

In March 2011, the Company entered into a Director’s agreement with Graham Karklin pursuant to which the Company issued to Mr. Karklin a 5-year option to purchase 60,000 shares of the Company’s common stock at $2.50 per share as compensation for serving as a member of the Company’s board of directors.  The Black-Scholes pricing model was used to estimate the fair value of the 60,000 options issued during the period to this director, using the assumptions of a risk free interest rate of 1.1%, dividend yield of 0%, volatility of 325%, and an expected life of 5 years. The Company has determined these options to have an approximate fair value of $150,000.  Mr. Karklin’s award immediately vests on the grant date and were awarded for services as a nonemployee director acting in his role as a member of the board of directors. Therefore, the Company has recorded the entire amount of this award on the grant date as an immediate expense for the nine month period ending May 31, 2011 in accordance with FASB ASC 718.

In March 2011, the Company issued Anthony Marchese a 5-year option to purchase 150,000 shares of the Company’s common stock at $2.50 per share as compensation for serving as a member of the Company’s board of directors.  The Black-Scholes pricing model was used to estimate the fair value of the 150,000 options issued during the period to this director, using the assumptions of a risk free interest rate of 1.1%, dividend yield of 0%, volatility of 323%, and an expected life of 5 years. The Company has determined these options to have an approximate fair value of $375,000.  Mr. Marchese’s award immediately vests on the grant date and were awarded for services as a nonemployee director acting in his role as a member of the board of directors. Therefore, the Company has recorded the entire amount of this award on the grant date as an immediate expense for the nine month period ending May 31, 2011 in accordance with FASB ASC 718.

In April 2011, the Company issued Cecil Wall a 5-year option to purchase 90,000 shares of the Company’s common stock at $4.70 per share as compensation for serving as a member of the Company’s board of directors.  The Black-Scholes pricing model was used to estimate the fair value of the 90,000 options issued during the period to this director, using the assumptions of a risk free interest rate of 1.1%, dividend yield of 0%, volatility of 325%, and an expected life of 5 years. The Company has determined these options to have an approximate fair value of $423,000.  The Company has recorded the entire amount of this award on the grant date as an immediate expense for the nine month period ending May 31, 2011 in accordance with FASB ASC 718.

In April 2011, the Company entered into a Director’s agreement with Jim Graham pursuant to which the Company issued to Mr. Graham a 5-year option to purchase 60,000 shares of the Company’s common stock at $4.00 per share as compensation for serving as a member of the Company’s board of directors.  The Black-Scholes pricing model was used to estimate the fair value of the 60,000 options issued during the period to this director, using the assumptions of a risk free interest rate of 1.1%, dividend yield of 0%, volatility of 322%, and an expected life of 5 years. The Company has determined these options to have an approximate fair value of $240,000.  Mr. Graham’s award immediately vests on the grant date and were awarded for services as a nonemployee director acting in his role as a member of the board of directors. Therefore, the Company has recorded the entire amount of this award on the grant date as an immediate expense for the nine month period ending May 31, 2011 in accordance with FASB ASC 718.

In May 2011, the Company issued Anthony Marchese a 5-year option to purchase 175,000 shares of the Company’s common stock at $4.15 per share as compensation for his appointment as non-executive Chairman of the Company’s board of directors.  The Black-Scholes pricing model was used to estimate the fair value of the 175,000 options issued during the period to this director, using the assumptions of a risk free interest rate of 1.1%, dividend yield of 0%, volatility of 324%, and an expected life of 5 years. The Company has determined these options to have an approximate fair value of $726,000.  Mr. Marchese’s award immediately vests on the grant date and were awarded for services as a nonemployee director acting in his role as a member of the board of directors. Therefore, the Company has recorded the entire amount of this award on the grant date as an immediate expense for the nine month period ending May 31, 2011 in accordance with FASB ASC 718.
 
 
-9-

 

In May 2011, the Company granted to K. Marc LeVier, its chief executive officer, as a part of his employment arrangement, a five year option to purchase up to 2,500,000 shares of our common stock at an exercise price of $2.50 per share.  These options vest 1/36 each month provided he is employed by the Company on the vesting dates.  The Black-Scholes pricing model was used to estimate the fair value of the 2,500,000 options issued during the period, using the assumptions of a risk free interest rate of 1.1%, dividend yield of 0%, volatility of 376%, and an expected life of 5 years. The Company has determined these options to have an approximate fair value of $6,250,000.  Since Mr. LeVier’s award vests over a 36 month period, the Company is expensing approximately $174,000 monthly for this award over the 36 month vesting period in accordance with FASB ASC 718.

In May 2011, the Company entered into an agreement with an investor relations firm that the Company subsequently terminated in July 2011.  In connection with the agreement, the investor relations firm had received $15,575 cash and a warrant to purchase 200,000 shares of the Company’s common stock at an exercise price of $3.75 per share vesting over twelve months.  Upon termination of the agreement, the investor relations firm agreed to accept a vested warrant to purchase only 33,334 shares of the Company’s common stock at an exercise price of $3.75 per share and no future cash payments. The remaining 166,666 warrants were cancelled in conjunction with the termination of the agreement.  The Black-Scholes pricing model was used to estimate the fair value of the 33,334 options, assuming a risk free interest rate of 1.1%, dividend yield of 0%, volatility of 125%, and an expected life of 90 days.  The Company has determined these options to have an approximate fair value of $91,000, which was recognized as an immediate expense during the nine months ended May 31, 2011 in accordance with FASB ASC 505-50-25.

NOTE 5 – CONTINGENCIES AND COMMITMENTS

Registration Rights

In connection with the May and June option exercises associated with the January 2011 Private Placement, the Company entered into certain registration rights agreements.  Key provisions of these registration rights are as follows:

·  
40,000 shares of the Company's common stock issued in May 2011 under the January 2011 Private Placement are subject to registration rights.  Proceeds of $100,000 were received in May 2011 for these shares;

·  
2,520,000 shares of the Company’s common stock issued in June 2011 under the January 2011 Private Placement are subject to registration rights.  Proceeds of $6,300,000 were received in May 2011 for these shares;

·  
3,680,000 shares of the Company’s common stock issued in June under the January 2011Private Placement are subject to registration rights.  Proceeds of $9,200,000 were received in June 2011 for these shares.

·
Term – The Company is required to file a registration statement covering the resale of the shares of common stock and shares of common stock underlying the warrants by July 27, 2011, and the registration is required to be deemed effective by the SEC on or before the 150 th calendar day after the filing of such registration statement.

·
Events requiring transfer of consideration – Failure of the Company to file a registration statement by July 27, 2011 and/or the registration statement not deemed effective by the SEC on or before the 150 th calendar day after the filing of such registration statement.

·
Settlement alternatives – There are no alternative settlement arrangements.

·
Maximum potential amount of consideration – In the event that transfer of consideration is required under the registration rights agreement, the Company is obligated to issue, as liquidated damages, a number of shares of common stock equal to ten percent of the shares of common stock purchased by the respective investors and issued upon the exercise of the warrants for a 30-day period or pro-rated for a period less than one month.  However, in no event shall that amount exceed five times the first month’s liquidated damages amount.
 
·
Liability – Management estimates that transfer of consideration will not be required.  Accordingly, the Company has not accrued a liability related to the registration rights agreements.

NOTE 6 – SUBSEQUENT EVENTS

In June 2011, certain investors participating in the January 2011 Private Placement exercised their options and were issued an aggregate of 3,680,000 shares of common stock and five-year warrants to purchase up to 3,680,000 shares of common stock, exercisable at $2.50 per share, resulting in aggregate gross proceeds to the Company of $9,200,000.  In connection with the option exercises, the Company paid sales commissions of $200,000 in cash and issued five-year warrants to purchase up to 157,360 shares of common stock at an exercise price of $2.50 per share.  As a result of the options exercised in May 2011, as fully described in Note 4, and in June 2011 by the investors described in this paragraph, our cash balance was approximately $17,700,000 as of June 30, 2011.
 
 
-10-

 
NOTE 6 – SUBSEQUENT EVENTS (CONTINUED)
 
In June 2011, SFG exercised a warrant to purchase 250,000 shares on a cashless basis resulting in the issuance of 175,000 shares of common stock.

In June 2011, certain investors exercised Class A Warrants to purchase 302,500 shares of common stock for cash proceeds of $151,250 and Class B Warrants to purchase 141,250 shares of common stock for cash proceeds of $105,938.

On June 27, 2011, the Company’s registration statement registering the resale of 8,908,125 shares of its common stock, which consists of (i) 4,738,750 shares of common stock, (ii) an aggregate of 1,336,250 shares of common stock issuable upon exercise of Class A Warrants, (iii) an aggregate of 678,125 shares of common stock issuable upon exercise of Class B Warrants, (iv) an aggregate of 250,000 shares of common stock issuable upon the exercise of options exercisable at $5.00 per share, and (v) 1,905,000 shares of common stock issuable upon the exercise of warrants exercisable at $2.50 per share issued in the January 2011 private placement, was deemed effective by the SEC.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
-11-

 
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary statement regarding forward-looking statements

In this Quarterly Report on Form 10-Q/A, unless the context requires otherwise, references to “Texas Rare Earth Resources Corp,” “we,” “our” or “us” refer to Texas Rare Earth Resources Corp.

This Quarterly Report on Form 10-Q/A contains forward-looking statements that represent our beliefs, projections and predictions about future events or our future performance. You can identify forward-looking statements by terminology such as “may,” “will,” “would,” “could,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue” or the negative of these terms or other similar expressions or phrases. These forward-looking statements are necessarily subjective and involve known and unknown risks, uncertainties and other important factors that could cause our actual results, performance or achievements or industry results to differ materially from any future results, performance or achievement described in or implied by such statements. Factors that may cause actual results to differ materially from expected results described in forward-looking statements include, but are not limited to: our ability to secure sufficient capital to implement our business plans; our ability to maintain appropriate relations with unions and employees; environmental laws, regulations and permits affecting our business, directly and indirectly, including, among others, those relating to mine reclamation and restoration, climate change, emissions to the air and water and human exposure to hazardous substances used, released or disposed of by us and uncertainties associated with unanticipated geological conditions related to mining.
 
Any forward-looking statement you read in this Quarterly Report on Form 10-Q reflects our current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our operations, operating results, growth strategy and liquidity. You should not place undue reliance on these forward-looking statements because such statements speak only as to the date when made. We assume no obligation to publicly update or revise these forward-looking statements for any reason, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future, except as otherwise required by applicable law.
 
The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included herein.
 
This Quarterly Report on Form 10-Q may also contain statistical data and estimates we obtained from industry publications and reports generated by third parties. Although we believe that the publications and reports are reliable, we have not independently verified their data.

Overview and Organizational History
 
We were incorporated in the State of Nevada in 1970 as Standard Silver Corporation.  In July, 2004, our Articles of Incorporation were amended and restated to increase the number of shares of common stock to 25,000,000, and in March 2007, we affected a 1-for-2 reverse stock split.  In September, 2008 we amended and restated our Articles of Incorporation to allow the increase of the number of shares of common stock from 25,000,000 to 100,000,000, and to authorize an additional 10,000,000 shares of preferred stock, to be issued at management’s discretion.  In September 2010, we amended our Amended and Restated Articles of Incorporation to change our name from Standard Silver Corporation to Texas Rare Earth Resources Corp.

We are a mining company engaged in the business of the acquisition and development of mineral properties.  We currently hold a twenty year lease, executed in August 2010, to explore and develop an 860 acre rare earth uranium-beryllium prospect located in Hudspeth County, Texas known as “Round Top” and prospecting permits covering an adjacent 9,345 acres.  We also hold prospecting permits on certain other mineral properties located in Texas and New Mexico.  We are currently not evaluating any additional prospects, and intend to focus the primarily on the development of our Round Top rare earth prospect.  We currently have limited operations and have not established that our Round Top property contains any proven reserves or probable reserves.  The strategic necessity of developing rare earth resources, the compelling fundamentals of uranium and the future potential for beryllium in the nuclear fuel cycle all present what we believe to be excellent opportunities for us.
 
 
-12-

 

We intend to (i) conduct a geologic, and radiometric study of the surface of the rhyolite to define areas where beryllium, rare earth minerals and thorium are concentrated in fractures, breccias or magmatic segregations, and to understand the distribution of uranium in this rock (ii) conduct radiation and geologic mapping underground to better define the distribution and habit of occurrence of the uranium, (iii) re-log drill samples that are stored on the property with emphasis on uranium and rare metal distribution (iv) conduct a sampling and laboratory examination program to determine the precise mineralogy of the rare elements in the rhyolite and (v) use these results to develop a drill program to test higher grade rare earth targets deeper in the rhyolite.

We currently do not have any producing properties and consequently, we have no current operating income or cash flow and have not generated any revenues.  Further exploration will be required before a final evaluation as to the economic and practical feasibility of any of the properties is determined.  We plan to raise additional capital to exploit current projects, including Round Top, and to acquire, evaluate, and develop new properties.

Our common stock is currently listed for quotation in the Pink Sheets OTCQB, a centralized quotation service maintained by OTC Markets Inc. that collects and publishes market maker quotes for over-the-counter securities (PK:TRER).

Between 2003 and 2007, our operations were minimal.  In 2007 we acquired (i) interests in two mineral properties, the Old Hadley and the Macho Mines, located in southwestern New Mexico, (ii) a 28.5% interest in La Cañada Mining and Exploration LLC (“La Cañada”), (iii) the King Mine located in Boise County, Idaho, and (iv) rights to lease the Round Top Beryllium Deposit (“Round Top Deposit”) located in Hudspeth County, Texas.  In June 2008, the Old Hadley and Round Top Deposit mines were assigned to La Cañada in exchange for La Cañada’s commitment to finance and develop the assigned properties.  In September 2008, La Cañada assigned these two mines back to us.  In October 2009, La Cañada redeemed our 28.5% interest.  In January 2009, the Company relinquished all of its rights to the King Mine.

Results of Operations

General & Revenue

We had no operating revenues during the nine months (“nine month period”) and three months (“three month period”) ended May 31, 2011 and 2010. We are not currently profitable.  As a result of ongoing operating losses, we had an accumulated deficit of $5,770,879 as of May 31, 2011.

Operating expenses and resulting losses from Operations .

We incurred exploration costs for the nine month period ended May 31, 2011 and 2010 in the amount of approximately $365,000 and $79,000, respectively, and approximately $246,000 and $49,000 for the three month period ended May 31, 2011 and 2010, respectively.  These expenditures were primarily related to outside geological consulting and sampling services relating to our Round Top project.

Our general and administrative (“G&A”) expenses for the nine month period ended May 31, 2011 and 2010 were approximately $3,991,000 and $360,000, respectively.  Our G&A expenses for the nine month period ended May 31, 2011 included approximately $1,238,000 for public relations fees, of which approximately $1,118,000 of this amount was stock compensation for services; approximately $177,000 for fees paid to auditors and other professionals associated with the audits and reviews of our financial statements and a registration statement; and $80,000 for other outside professional services.  For the nine month period ended May 31, 2011, we incurred G&A expenses of approximately $2,064,000 for stock based compensation to directors and $257,000 for stock based compensation to employees.  The remainder of our G&A expenses for the nine month period ended May 31, 2011 were working capital and corporate expenditures necessary to our operations.  Our G&A expenses for the nine month period ended May 31, 2010 were primarily related to the audits of our financial statements and approximately $263,000 in stock-based compensation to a director and fees to other professional consultants.

Our G&A expenses for the three month period ended May 31, 2011 and 2010 were approximately $2,571,000 and $12,500, respectively.  Our G&A expenses for the three month period ended May 31, 2011 included approximately $187,000 for public relations fees, of which approximately $120,000 of this amount was stock compensation for services; approximately $72,000 to include fees paid to auditors and other professionals associated with the audits and reviews of our financial statements and a registration statement and other outside professional services.  For the three month period ended May 31, 2011, we incurred G&A expenses of approximately $1,914,000 for stock based compensation to directors and $257,000 for stock based compensation to employees. The remainder of our G&A expenses for the three month period ended May 31, 2011 were working capital and corporate expenditures.  Our G&A expenses for the three month period ended May 31, 2010 were primarily related to expenses necessary to conduct our corporate operations.

We accrued interest expense on related party notes payable in the amount of $1,200 and $9,000 for the nine month period ended May 31, 2011 and 2010, respectively.  In December 2010, the notes payable principal balance of $73,000, and accrued interest for the advances to certain officers, were paid in full.
 
 
-13-

 

Our net loss for the nine-month period ended May 31, 2011 and 2010 was approximately $4,348,000 and $448,000, respectively.  Our net loss for the three-month period ended May 31, 2011 and 2010 was approximately $2,811,000 and $66,000, respectively.

Liquidity and Capital Resources

As of May 31, 2011, we had a working capital surplus of approximately $9,694,000, resulting primarily from our January 2011 Private Placement and associated options exercised by these investors in May 2011.  In May 2011 we received proceeds of $100,000 and issued 40,000 shares of common stock; also in May 2011we received additional proceeds of $6,300,000 and issued the associated 2,520,000 shares of common stock in June 2011.  In June 2011, subsequent to the end of our May 31, 2011 quarter, we received proceeds of $9,200,000 and issued 3,680,000 shares of common stock.  As of June 30, 2011, we had approximately $17,700,000 in cash and cash equivalents.  Our shareholder’s equity as of June 30, 2011 was approximately $17,900,000.

During the nine month period ending May 31, 2011, we invested $85,000 in mineral properties, including $65,000 paid in April with the submission of our Initial Plan of Operations to the State of Texas.  During the nine months ended May 31, 2011, we purchased approximately $50,000 of equipment for our Round Top property and approximately $55,000 for office equipment and mining software.

Over the next twelve to eighteen months we plan to conduct significant geological studies, sampling and drilling at our Round Top property.  The timing of these expenditures is dependent upon a number of factors, including the availability of drilling contractors. We estimate these expenditures will total approximately $2,200,000 for exploration costs, $150,000 relating to the approval of our initial plan of operations and permitting fees, $170,000 in capital expenditures, and approximately $1,325,000 in general and administrative expenditures.

Our exploration costs are estimated to be approximately $2,200,000, and our timeline includes (i) conducting and interpreting an airborne geophysical survey planned for the third quarter of this fiscal year, (ii) drilling approximately 12,000 feet and the collection of approximately 5,000 samples that will be ongoing through January 2012, (iii) metallurgical analysis of these samples that will take place during this timeframe, (iv) onsite contract geological services that will be ongoing through February 2012, and (v) ongoing other expenditures over the next twelve months that are necessary to accomplish our exploration efforts.  There is no assurance that we will be able to complete these activities in the timeframe set forth above, or at all. Our airborne geophysical survey was completed in June 2011 and we are awaiting its interpretation.

We estimate that we will incur approximately $150,000 in expenditures to file our initial plan of operations with the State of Texas and to acquire necessary permits.  Our initial plan of operations was approved in April 2011 and triggered an additional one time property cost of $65,000.  We will be required to pay a $45,000 lease payment to the State of Texas in August 2011 for our Round Top project.  We estimate that in July 2011 we will be required to pay a $20,000 permitting and compliance fee to the Texas Railroad Commission, and in September and October 2011, we will be required to pay approximately $20,000 for prospecting permits to the State of Texas for our Round Top project.  The estimated timeframe for these payments, including the amounts, may change.

Our capital expenditures for the next twelve months are estimated to be $170,000, which will include the following:  (i) in July and August 2011, we intend to spend approximately $75,000 to purchase transportation equipment and to construct a field office; (ii) in September 2011 we intend to purchase ventilation equipment for our Round Top project for approximately $10,000, and (iii) approximately $75,000 for additional office and field equipment necessary to carry out our operations. The remaining $10,000 will be spent on other miscellaneous equipment necessary for us to conduct our exploration.  The estimated timeframe for these payments, including the amounts, may change.

We have estimated that our general and administrative expenditures, which will be spent ratably over the next twelve months, to total approximately $1,325,000.  Payroll, payroll taxes, benefits and associated travel for four employees is estimated to be $520,000 over this period of time.  We estimate that we will incur professional fees of approximately $120,000 over the next twelve months.  These fees will be primarily associated with the audit and reviews of our financial statements and Exchange Act filings, which will occur after each quarter end and after our fiscal year end.  We estimate that we will incur approximately $600,000 for professional fees associated with the assistance of the management and supervision of our field operations.  The remainder of our general and administrative expenditures totaling $85,000 will be spent on items necessary for us to conduct our general business affairs.  Our exploration activities will be carried out by our geologic staff and such qualified outside contractors as is necessary. We have an office/lab trailer at the site.  We will expand these facilities as the project develops.  We believe that we have sufficient capital to fund operations and exploration activity on our Round Top prospect through the end of calendar year 2012.  We will, however, need to raise additional funding subsequent to calendar year 2011 to continue our exploration and development activities.

As of the date hereof, the Company is not able to quantify the amount of capital needed to fund its working capital needs after calendar 2011, nor is it able to quantify the amount of capital needed to develop the Round Top project. The amount of capital will be dependent upon the Company’s business strategy to exploit the Round Top project.  The Company intends to raise additional working capital through best efforts debt or equity financing, as we have no firm commitments for equity capital investments to any established credit facility.  No assurance can be given that additional financing will be available, on terms acceptable to the Company.  The Company’s viability is contingent upon its ability to receive external financing.  Failure to obtain sufficient working capital may result in management resorting to the sale of assets or otherwise curtailing operations.

 
-14-

 

Off-Balance Sheet Arrangements

In May 2011, we executed a 36 month lease for office space in Englewood, Colorado that we occupied in June 2011.  As an inducement to execute the lease we received rent abatement through August 2011.  The Company is responsible for its share of property tax, maintenance, utility costs and other operating expenses of the office building in excess of these expenses over the base year.  The lease expires at the end of May 2014.

Future minimum payments under the office lease described above are as follows:
 
September 1, 2011 through August 31, 2012
  $ 66,063  
September 1, 2012 through August 31, 2013
    55,971  
September 1, 2013 through May 31, 2014
    42,390  
    $ 164,424  

In May 2011, we executed an 18 month lease for office space in Sierra Blanca, Texas that we occupied in June 2011.  The Company is also responsible for payment of its utilities.  The lease expires on December 15, 2012 with an option to renew for an additional 18 months.

Future minimum payments under the office lease described above are as follows:
 
September 1, 2011 through August 31, 2012
  $ 19,200  
September 1, 2012 through December 15, 2012
    5,600  
    $ 24,800  

 In June 2011, we executed a 24 month lease for an office-warehouse space in El Paso, Texas that we will occupy in July 2011.  The Company is responsible for its share of property tax and insurance in excess of these expenses over the base year and all utility costs.  The lease expires at the end of June 2013 with an option to extend the lease for an additional 18 months thereafter.

Future minimum payments under the office-warehouse lease described above are as follows:
 
September 1, 2011 through August 31, 2012
  $ 60,000  
September 1, 2012 through June 30, 2013
    50,000  
    $ 110,000  

Recent Financings

Between October 2009 and November 2010, the Company raised $905,500 through the issuance of 2,263,750 shares of common stock and the issuance of Class A Warrants to purchase 2,263,750 shares of common stock and Class B Warrants to purchase 1,131,875 shares of common stock.   Between November 2010 and January 2011, Class A Warrants to purchase 437,500 shares were exercised, and Class B Warrants to purchase 218,750 shares were exercised, resulting in $382,813 of proceeds being raised by the Company.  The final closing of this private placement was January 10, 2011.

Between January and February 2011, we entered into a series of transactions with accredited investors pursuant to which we sold an aggregate of 1,600,000 shares of our common stock and five year warrants to purchase up to 1,600,000 shares of common stock, exercisable at $2.50 per share, for gross proceeds of $4,000,000.   As additional consideration for the purchase of the shares and warrants, the Company issued to the investors an option for 120 days from the date of investment to purchase up to 6,400,000 shares of common stock at $2.50 per share with 100% warrant coverage through the issuance of warrants to purchase up to 6,400,000 shares of common stock at an exercise price of $2.50 per share. 

  During May and June 2011, the Company issued a total of 6,240,000 shares of its common stock in connection with the January and February 2011 financing and warrants to purchase up to 6,240,000 shares of the Company’s common stock.  As a result of the issuance of 6,240,000 shares of common stock, the Company realized gross proceeds in the amount of $15,600,000.

In June 2011, certain investors exercised 302,500 of their $0.50 Class A Warrants and 141,250 of their $0.75 Class B Warrants associated with the Company’s 2009 Private Placement, for total proceeds to the Company of $257,188.  Proceeds from the Class A Warrants exercised were $151,250 and proceeds from the Class B warrants exercised were $105,938.
 
 
-15-

 
Item 3.  Quantitative and Qualitative Disclosures About Market Risk

As smaller reporting company, as defined by Rule 229.10(f)(1), we are not required to provide the information required by this Item.

Item 4. Controls and Procedures

(A) Evaluation of Disclosure Controls and Procedures
 
The Company maintains disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized, accumulated and communicated to the Company’s management, including its Chief Executive Officer ("CEO") and the Company’s Chief Financial Officer ("CFO"), as appropriate, to allow timely decisions regarding required disclosure.
 
As of the end of the period covered by this report, the Company's management carried out an evaluation, under the supervision and with the participation of the Company's CEO and CFO, of the effectiveness of the design and operation of the Company's system of disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on the material weaknesses described herein, the Company's CEO and CFO has concluded that the Company's disclosure controls and procedures were not effective, as of the date of that evaluation, for the purposes of recording, processing, summarizing and timely reporting of material information required to be disclosed in reports filed by the Company under the Exchange Act.

Because of its size, the Company did not have the resources necessary to hire full-time accounting personnel.  On December 1, 2010, the Company hired a full-time CFO and employs the services of a contract bookkeeper. Because of the structure of our staff, we have a failure to maintain effective controls over the selection, application and monitoring of our accounting policies to assure that certain complex equity transactions are accounted for in accordance with generally accepted accounting principles.

Material Weaknesses Identified
 
We had significant deficiencies constituting material weaknesses as defined by the standards of the Public Company Accounting Oversight Board.

The material weaknesses identified were the lack of segregation of duties necessary to maintain proper checks and balances between functions and the lack of procedures to properly account for non-routine transactions.

The absence of qualified full time accounting personnel was a contributing factor to the problems identified. The specific circumstances giving rise to the weaknesses include utilizing the services of contract accountants on a part time basis in the absence of internal accounting personnel.
 
(B) Changes in Internal Controls over Financial Reporting
 
In connection with the evaluation of the Company's internal controls during the Company's last fiscal quarter covered by this report required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, the Company's CEO and CFO has determined that there were no changes to the Company's internal controls over financial reporting that have materially affected, or are reasonably likely to materially effect, the Company's internal controls over financial reporting.

PART II.  OTHER INFORMATION

Item 1. Legal Proceedings

None.
 
 
-16-

 
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table describes all securities we issued during the period covered by this report without registering the securities under the Securities Act.


 
Date
 
Description
 
Number
 
Purchaser
Proceeds
($)
 
Consideration
Exemption
(A)
 
 
May 2011
 
 
Common Stock
 
 
40,000
Private Placement
Investor
 
 
$100,000
 
 
Cash
 
 
4(2)
 
May 2011
 
Common Stock
 
15,000
Sunrise Securities Corp
 
-
 
Services rendered
 
4(2)
 
May 2011
 
Warrants
 
33,334
First Canadian Capital Corp
 
-
 
Services rendered
 
4(2)
 
May/June 2011
 
 
Common Stock
 
 
2,520,000
Private Placement Investors
 
 
$6,300,000 (B)
 
 
Cash
 
 
4(2)
 
 
June 2011
 
 
Common Stock
 
 
3,680,000
Private Placement Investors
 
 
$9,200,000 (C)
 
 
Cash
 
 
4(2)
 
June 2011
 
Common Stock
 
175,000 (D)
Sunrise Securities Corp
 
-
 
(D)
 
4(2)
 
 
June 2011
 
 
Common Stock
 
 
302,500
Private Placement Investors
 
 
$257,188
 
 
Cash
 
 
4(2)
 
June 2011
 
Warrants
 
1,192,000
 
Brokers
 
-
Services rendered/commissions
 
4(2)


(A)  
With respect to sales designated by “Sec. 4(2),” these shares were issued pursuant to the exemption from registration contained in to Section 4(2) of the Securities Act of 1933 as privately negotiated, isolated, non-recurring transactions not involving any public offer or solicitation. Each purchaser represented that such purchaser’s intention to acquire the shares for investment only and not with a view toward distribution. We requested our stock transfer agent to affix appropriate legends to the stock certificate issued to each purchaser and the transfer agent affixed the appropriate legends. Each purchaser was given adequate access to sufficient information about us to make an informed investment decision. Except as otherwise set forth in this Quarterly Report on Form 10-Q/A, none of the securities were sold through an underwriter and accordingly, there were no underwriting discounts or commissions involved.
(B)  
These funds were received in May 2011 with shares being issued in June 2011.
(C)  
These funds were received and shares were issued in June 2011.
(D)  
These shares were issued as a result of a cashless exercise of an outstanding option issued in a prior period.

Item 3. Defaults upon Senior Securities

Not applicable.

Item 4. (Removed and Reserved)

Item 5. Other Information

None.

 
-17-

 
Item 6.  Exhibits

The following exhibits are attached hereto or are incorporated by reference:
 
Exhibit Number
Description
 
3.1
Amended and Restated Bylaws (filed as Exhibit 3.1 to the Form 10 filed with the SEC on October 10, 2008)
3.2
Amended and Restated Articles of Incorporation (filed as Exhibit 3.2 to the Form 10 filed with the SEC on October 10, 2008)
3.3
Amendment to Articles of Incorporation (filed as Exhibit 3.3 to the Form 10-K for the fiscal year ended August 31, 2008 filed with the SEC on February 8, 2011)
4.1
Form of Common Stock Certificate (filed as Exhibit 4.1 to the Form 10-K for the fiscal year ended August 31, 2008 filed with the SEC on February 8, 2011)
10.1(1)*
Amended and Restated 2008Stock Option Plan
10.2
Lease (filed as Exhibit 10.2 to the Form 10-K for the fiscal year ended August 31, 2008 filed with the SEC on February 8, 2011)
10.3
Form of Class A Warrant (filed as Exhibit 10.3 to the Form 10-K for the fiscal year ended August 31, 2008 filed with the SEC on February 8, 2011)
10.4
Form of Class B Warrant (filed as Exhibit 10.4 to the Form 10-K for the fiscal year ended August 31, 2008 filed with the SEC on February 8, 2011)
10.5
Form of Registration Rights Agreement (filed as Exhibit 10.5 to the Form 10-K for the fiscal year ended August 31, 2008 filed with the SEC on February 8, 2011)
10.6*
Director’s Agreement (filed as Exhibit 10.6 to the Form 10-K for the fiscal year ended August 31, 2008 filed with the SEC on February 8, 2011)
10.7
Form of Subscription Agreement for January 2011 Investment (filed as Exhibit 10.7 to the Form 10-K for the fiscal year ended August 31, 2008 filed with the SEC on February 8, 2011)
10.8
Form of Warrant for January 2011 Investment (filed as Exhibit 10.8 to the Form 10-K for the fiscal year ended August 31, 2008 filed with the SEC on February 8, 2011)
10.9
Form of Registration Rights Agreement for January 2011 Investment (filed as Exhibit 10.9 to the Form 10-K for the fiscal year ended August 31, 2008 filed with the SEC on February 8, 2011)
10.10
Shareholders’ Agreement (filed as Exhibit 10.10 to the Form 10-K for the fiscal year ended August 31, 2008 filed with the SEC on February 8, 2011)
10.11*
 
10.12(1)
10.13(1)
Director’s Agreement for General Martin (filed as Exhibit 10.1 to the Form 8-K filed with the SEC on February 23, 2011) Form of Registration Rights Agreement for May and June 2011 Investment
Denver Colorado Facilities Lease
14.1(1)
31.1(1)
Code of Ethics
Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a)
31.2(1)
Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a)
32.1(1)
Certification of Chief Executive Officer Pursuant to Section 18 U.S.C. Section 1350, adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2(1)
Certification of Chief Financial Officer Pursuant to Section 18 U.S.C. Section 1350, adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Management contract or compensatory plan or arrangement.

(1)
Filed as an exhibit to the Form 10-Q for the quarter ended May 31, 2011.

 
 
-18-

 
Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

TEXAS RARE EARTH RESOURCES CORP.

Date: July 15, 2011

/s/ K. Marc LeVier
K. Marc LeVier, duly authorized officer
and Principal Executive Officer



Date: July 15, 2011

/s/ Wm. Chris Mathers
Wm. Chris Mathers, Principal Financial Officer




 
 
 
-19-

 
Exhibit 10.1
Texas Rare Earth Resources Corp.
Amended and Restated
2008 Stock Option Plan
(effective May 3, 2011)

ARTICLE I - PLAN
 
1.1            Purpose.   This Plan is a plan for key employees, officers, directors, and consultants of the Company and its Affiliates and is intended to advance the best interests of the Company, its Affiliates, and its stockholders by providing those persons who have substantial responsibility for the management and growth of the Company and its Affiliates with additional incentives and an opportunity to obtain or increase their proprietary interest in the Company, thereby encouraging them to continue in the employ of the Company or any of its Affiliates.

1.2            Rule 16b-3 Plan .  The Company is subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “1934 Act”), and therefore the Plan is intended to comply with all applicable conditions of Rule 16b-3 (and all subsequent revisions thereof) promulgated under the 1934 Act.  To the extent any provision of the Plan or action by the Board of Directors or Committee fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Committee.  In addition, the Board of Directors may amend the Plan from time to time, as it deems necessary in order to meet the requirements of any amendments to Rule 16b-3 without the consent of the shareholders of the Company.

1.3            Effective Date of Plan .   The Plan, as amended and restated, shall be effective May 3, 2011 (the “Effective Date”).  No Award shall be granted pursuant to the Plan more than ten years after the Effective Date.

ARTICLE II - DEFINITIONS

The words and phrases defined in this Article shall have the meaning set out in these definitions throughout this Plan, unless the context in which any such word or phrase appears reasonably requires a broader, narrower, or different meaning.

2.1           “Affiliate” means any subsidiary corporation.  The term “subsidiary corporation” means any corporation (other than the Company) or other entity in an unbroken chain of corporations or other entities beginning with the Company if, at the time of the action or transaction, each of the corporations or other entities other than the last corporation or other entity in the unbroken chain owns a controlling interest in one of the other corporations or other entities in the chain.  For this purpose, controlling interest has the meaning provided in Final Treasury Regulation 1.409A-1(b)(5)(iii)(E)(1).

           2.2                “Award” means each of the following granted under this Plan: Incentive Option, Nonqualified Option, Stock Appreciation Right, Restricted Stock Award, Performance Stock Award or Stock Award.

2.3           “Board of Directors” means the board of directors of the Company.

 
 

 
2.4           “Code” means the Internal Revenue Code of 1986, as amended.

2.5           “Committee” means the Compensation Committee of the Board of Directors, or if no Compensation Committee has been formed, then it shall mean the entire Board of Directors.

2.6           “Company” means Texas Rare Earth Resources Corp., a Nevada corporation.

2.7           “Consultant” means any person (other than an Employee), including an advisor, engaged by the Company or Affiliate to render services and who is compensated for such services.

2.8           “Eligible Persons” shall mean, with respect to the Plan, those persons who, at the time that an Award is granted, are (i) Employees and all other key personnel, including officers and directors, of the Company or Affiliate, or (ii) Consultants or independent contractors who provide valuable services to the Company or Affiliate as determined by the Committee.

2.9           “Employee” means a common law employee of the Company or any Affiliate.

2.10           “Fair Market Value” of the Stock as of any date means (a) the average of the high and low sale prices of the Stock on that date on the principal securities exchange on which the Stock is listed; or (b) if the Stock is not listed on a securities exchange, the average of the high and low bid quotations for the Stock on that date as reported by the National Quotation Bureau Incorporated or other quotation system on which transactions in Stock are principally reported; or (c) if none of the foregoing is applicable, an amount at the election of the Committee equal to (x), the average between the closing bid and ask prices per share of Stock on the last preceding date on which those prices were reported or (y) that amount as determined by the Committee in good faith in accordance with Code Section 409A and the guidance promulgated thereunder.

2.11           “Incentive Option” means an option to purchase Stock granted under this Plan which is designated as an “Incentive Option” and which is intended to satisfy the requirements of Section 422 of the Code.

2.12           “Non-Employee Directors” means that term as defined in Rule 16b-3 under the 1934 Act.

2.13           “Nonqualified Option” means an option to purchase Stock granted under this Plan other than an Incentive Option.

2.14           “Option” means both an Incentive Option and a Nonqualified Option granted under this Plan to purchase shares of Stock.

2.15           “Option Agreement” means the written agreement by and between the Company and an Eligible Person, which sets out the terms of an Option.

2.16           “Outside Director” shall mean a member of the Board of Directors serving on the Committee who satisfies Section 162(m) of the Code.
 
2.17            “Plan” means this Texas Rare Earth Resources Corp. Amended and Restated 2008 Stock Option Plan, as set out in this document and as it may be amended from time to time.

 
 

 
           2.18           “Plan Year” means the Company’s fiscal year.

           2.19           “Performance Stock Award” means an award denominated in shares of Stock to be issued to an Eligible Person if specified predetermined performance goals are satisfied as described in Article VII.
 
           2.20           “Restricted Stock” means Stock awarded or purchased under a Restricted Stock Agreement entered into pursuant to this Plan, together with (i) all rights, warranties or similar items attached or accruing thereto or represented by the certificate representing the stock and (ii) any stock or securities into which or for which the stock is thereafter converted or exchanged.  The terms and conditions of the Restricted Stock Agreement shall be determined by the Committee consistent with the terms of the Plan.

           2.21           “Restricted Stock Agreement” means an agreement between the Company or any Affiliate and the Eligible Person pursuant to which the Eligible Person receives a Restricted Stock Award subject to Article VI.

           2.22           “Restricted Stock Award” means an Award of Restricted Stock.

           2.23           “Restricted Stock Purchase Price” means the purchase price, if any, per share of Restricted Stock subject to an Award.  The Committee shall determine the Restricted Stock Purchase Price.  It may be greater than or less than the Fair Market Value of the Stock on the date of the Stock Award.

            2.24           “Stock” means the common stock of the Company, $.01 par value, or, in the event that the outstanding shares of common stock are later changed into or exchanged for a different class of stock or securities of the Company or another corporation, that other stock or security.

           2.25           “Stock Appreciation Right” and “SAR” means the right to receive the difference between the Fair Market Value of a share of Stock on the grant date and the Fair Market Value of the share of Stock on the exercise date.
 
   2.26           “Stock Award” means an Award of Stock to an Eligible Person.

           2.27           “10% Stockholder” means an individual who, at the time the Option is granted, owns Stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or of any Affiliate, as determined for purposes of Code Sections 422 and 424.


 
 

 
ARTICLE III - ELIGIBILITY

The individuals who shall be eligible to receive Awards shall be those Eligible Persons of the Company or any of its Affiliates as the Committee shall determine from time to time. However, no member of the Committee shall be eligible to receive any Award or to receive Stock, Options, Stock Appreciation Rights, or any Performance Stock Award under any other plan of the Company or any of its Affiliates, if to do so would cause the individual not to be a Non-Employee Director or Outside Director.  The Board of Directors may designate one or more individuals who shall not be eligible to receive any Award under this Plan or under other similar plans of the Company.

ARTICLE IV - GENERAL PROVISIONS RELATING TO AWARDS

           4.1            Authority to Grant Awards.    The Committee may grant to those Eligible Persons of the Company or any of its Affiliates, as it shall from time to time determine, Awards under the terms and conditions of this Plan.  The Committee shall determine subject only to any applicable limitations set out in this Plan, the number of shares of Stock to be covered by any Award to be granted to an Eligible Person.

           4.2            Dedicated Shares.    The total number of shares of Stock with respect to which Awards may be granted under the Plan shall be 5,000,000 shares.  The shares may be treasury shares or authorized but unissued shares.  The number of shares stated in this Section 4.2 shall be subject to adjustment in accordance with the provisions of Section 4.5.  In the event that any outstanding Award shall expire or terminate for any reason or any Award is surrendered, the shares of Stock allocable to the unexercised portion of that Award may again be subject to an Award under the Plan.   Shares withheld in order to cover tax withholding obligations shall reduce the number of shares of Stock available for issuance under the Plan.  The Committee may adopt reasonable counting procedures to ensure appropriate counting, avoid double counting, and make adjustments pursuant to the Plan.   Subject to adjustment as provided in Section 4.5, the maximum number of shares that may be covered by Options or SARs (other than a substitution Award granted pursuant to Section 5.14) issued to an Eligible Person in any calendar year shall not exceed 3,000,000 shares.

           4.3            Non-transferability .  Awards shall not be transferable by the Eligible Person otherwise than by will or under the laws of descent and distribution, or (with respect to Awards other than Incentive Options) pursuant to a qualified domestic relations order (as defined by the Code or the rules thereunder), and shall be exercisable, during the Eligible Person’s lifetime, only by him or a transferee permitted by this Section 4.  Any attempt to transfer an Award other than under the terms of the Plan and the Agreement shall terminate the Award and all rights of the Eligible Person to that Award.

           4.4            Requirements of Law .  The Company shall not be required to sell or issue any Stock under any Award if issuing that Stock would constitute or result in a violation by the Eligible Person or the Company of any provision of any law, statute, or regulation of any governmental authority. Specifically, in connection with any applicable statute or regulation relating to the registration of securities, upon exercise of any Option or pursuant to any Award, the Company shall not be required to issue any Stock unless the Committee has received evidence satisfactory to it to the effect that the holder of that Option or Award will not transfer the Stock except in accordance with applicable law, including receipt of an opinion of counsel satisfactory to the Company to the effect that any proposed transfer complies with applicable law.  The determination by the Committee on this matter shall be final, binding, and conclusive. The Company may, but shall in no event be obligated to, register any Stock covered by this Plan pursuant to applicable securities laws of any country or any political subdivision.  In the event the Stock issuable on exercise of an Option or pursuant to an Award is not registered, the Company may imprint on the certificate evidencing the Stock any legend that counsel for the Company considers necessary or advisable to comply with applicable law. The Company shall not be obligated to take any other affirmative action in order to cause the exercise of an Option or vesting under an Award, or the issuance of shares pursuant thereto, to comply with any law or regulation of any governmental authority.

 
 

 
           4.5            Changes in the Company’s Capital Structure.

           (a)           The existence of outstanding Options or Awards shall not affect in any way the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the Company’s capital structure or its business, or any merger or consolidation of the Company, or any issue of bonds, debentures, preferred or prior preference stock ahead of or affecting the Stock or its rights, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.  If the Company shall effect a subdivision or consolidation of shares or other capital readjustment, the payment of a Stock dividend, or other increase or reduction of the number of shares of the Stock outstanding, without receiving compensation for it in money, services or property, then (a) the number, class, and per share price of shares of Stock subject to outstanding Options under this Plan shall be appropriately adjusted in such a manner as to entitle an Eligible Person to receive upon exercise of an Option, for the same aggregate cash consideration, the equivalent total number and class of shares he would have received had he exercised his Option in full immediately prior to the event requiring the adjustment; (b) the applicable share limits under Article VII and the number and class of shares of Stock then reserved to be issued under the Plan, shall each be adjusted by substituting for the total number and class of shares of Stock at issue that number and class of shares of Stock that would have been received by the owner of an equal number of outstanding shares of each class of Stock as the result of the event requiring the adjustment.

              (b)           If the Company is merged or consolidated with another corporation and the Company is not the surviving corporation, or if the Company is liquidated or sells or otherwise disposes of substantially all of its assets while Options remain outstanding under this Plan (each of the foregoing referred to as a “Corporate Transaction”):

   (i)           Subject to the provisions of clause (ii) below, in the event of such a Corporate Transaction, any unexercised Options shall automatically accelerate so that they shall, immediately prior to the specified effective date for the Corporate Transaction become 100% vested and exercisable; provided, however, that any unexercised Options shall not accelerate if and to the extent such Option is, in connection with the Corporate Transaction, either to be assumed by the successor corporation or parent thereof (the “Successor Corporation”) or to be replaced with a comparable award for the purchase of shares of the capital stock of the Successor Corporation or parent thereof.  Whether or not any unexercised Option is assumed or replaced shall be determined by the Company and the Successor Corporation in connection with the Corporate Transaction.  The Board of Directors shall make the determination of what constitutes a comparable award to the unexercised Option, and its determination shall be conclusive and binding.  The unexercised Option shall terminate and cease to remain outstanding immediately following the consummation of the Corporate Transaction, except to the extent assumed by the Successor Corporation.
 

 
 
 

 
(ii)           All outstanding Options may be canceled by the Board of Directors as of the effective date of any Corporate Transaction, if (i) notice of cancellation shall be given to each holder of an Option and (ii) either (x) the Company shall pay in cash to each holder of an Option the excess (if any) of the value of the consideration received per share of Stock in the Corporate Transaction over the exercise price per share of the Option (multiplied by the number of shares of Stock then subject to the Option), which amount may be paid immediately upon the closing of the Corporate Transaction or may be paid subject to the same terms and conditions (such as escrows, holdbacks, or earnouts) as is the consideration payable to the holders of Stock (provided that any such cash payment or payments shall comply with the rules of Final Treasury Regulation Section 1.409A-3(i)(5)(iv)), or (y) each holder of an Option shall have the right to exercise that Option in full (without regard to any limitations set out in or imposed under this Plan or the Option Agreement granting that Option) during a period set by the Board of Directors preceding the effective date of the merger, consolidation, liquidation, sale, or other disposition and, if in the event all outstanding Options may not be exercised in full under applicable securities laws without registration of the shares of Stock issuable on exercise of the Options, the Board of Directors may limit the exercise of the Options to the number of shares of Stock, if any, as may be issued without registration.  The method of choosing which Options may be exercised, and the number of shares of Stock for which Options may be exercised, shall be solely within the discretion of the Board of Directors.

               (c)           After a merger of one or more corporations into the Company or after a consolidation of the Company and one or more corporations in which the Company shall be the surviving corporation, each Eligible Person shall be entitled to have his Restricted Stock and shares earned under a Performance Stock Award appropriately adjusted based on the manner the Stock was adjusted under the terms of the agreement of merger or consolidation.

(d)           In each situation described in this Section 4.5, the Committee will make similar adjustments, as appropriate, in outstanding Stock Appreciation Rights.

(e)           The issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, for cash or property, or for labor or services either upon direct sale or upon the exercise of rights or warrants to subscribe for them, or upon conversion of shares or obligations of the Company convertible into shares or other securities, shall not affect, and no adjustment by reason of such issuance shall be made with respect to, the number, class, or price of shares of Stock then subject to outstanding Awards.
 
 

 
 
 

 
4.6       Election under Section 83(b) of the Code .  No Employee shall exercise the election permitted under Section 83(b) of the Code without written approval of the Committee.  Any Employee doing so shall forfeit all Awards issued to him under this Plan.

4.7       Book Entry .  Notwithstanding any other provision of this Plan to the contrary, the Company may elect to satisfy any requirement under this Plan for the delivery of stock certificates through the use of electronic or other form of book-entry.

ARTICLE V - OPTIONS AND STOCK APPRECIATION RIGHTS

           5.1            Type of Option .  The Committee shall specify at the time of grant whether a given Option shall constitute an Incentive Option or a Nonqualified Option.  Incentive Stock Options may only be granted to Employees.

5.2       Option Exercise Price .  The price at which Stock may be purchased under an Incentive Option shall not be less than the greater of:  (a) 100% of the Fair Market Value of the shares of Stock on the date the Option is granted or (b) the aggregate par value of the shares of Stock on the date the Option is granted.  The Committee in its discretion may provide that the price at which shares of Stock may be purchased under an Incentive Option shall be more than 100% of Fair Market Value.  In the case of any 10% Stockholder, the price at which shares of Stock may be purchased under an Incentive Option shall not be less than 110% of the Fair Market Value of the Stock on the date the Incentive Option is granted.   The price at which shares of Stock may be purchased under a Nonqualified Option shall be such price as shall be determined by the Committee in its sole discretion but in no event lower than the par value of the shares of Stock on the date the Option is granted; provided, however, that in the event that shares of Stock subject to a Nonqualified Option are or may by the terms of the Option become purchasable at a price that is less than the Fair Market Value of the shares of Stock on the date the Option is granted, such Option shall be subject to the provisions of Section 5.17 below and shall be intended to comply with (as opposed to be exempt from) the requirements of Section 409A of the Code.

5.3       Duration of Options and SARS .  No Option or SAR shall be exercisable after the expiration of ten (10) years from the date the Option or SAR is granted.  In the case of a 10% Stockholder, no Incentive Option shall be exercisable after the expiration of five years from the date the Incentive Option is granted.

5.4       Amount Exercisable -- Incentive Options.    Subject to the provisions of Section 5.17, each Option may be exercised from time to time, in whole or in part, in the manner and subject to the conditions the Committee, in its sole discretion, may provide in the Option Agreement, as long as the Option is valid and outstanding.  To the extent that the aggregate Fair Market Value (determined as of the time an Incentive Option is granted) of the Stock with respect to which Incentive Options first become exercisable by the optionee during any calendar year (under this Plan and any other incentive stock option plan(s) of the Company or any Affiliate) exceeds $100,000, the portion in excess of $100,000 of the Incentive Option shall be treated as a Nonqualified Option.  In making this determination, Incentive Options shall be taken into account in the order in which they were granted.

 
 

 
5.5       Exercise of Options .  Each Option shall be exercised by the delivery of written notice to the Committee setting forth the number of shares of Stock with respect to which the Option is to be exercised, together with:

                (a)           cash, certified check, bank draft, or postal or express money order payable to the order of the Company for an amount equal to the option price of the shares;

(b)           stock at its Fair Market Value on the date of exercise (if approved in advance in writing by the Committee);

                (c)           an election to make a cashless exercise through a registered broker-dealer (if approved in advance in writing by the Committee);

(d)           an election to have shares of Stock, which otherwise would be issued on exercise, withheld in payment of the exercise price (if approved in advance in writing by the Committee); and/or

(e)           any other form of payment which is acceptable to the Committee, including without limitation, payment in the form of a promissory note, and specifying the address to which the certificates for the shares are to be mailed.

As promptly as practicable after receipt of written notification and payment, the Company shall deliver to the Eligible Person certificates for the number of shares with respect to which the Option has been exercised, issued in the Eligible Person’s name. If shares of Stock are used in payment, the aggregate Fair Market Value of the shares of Stock tendered must be equal to or less than the aggregate exercise price of the shares being purchased upon exercise of the Option, and any difference must be paid by cash, certified check, bank draft, or postal or express money order payable to the order of the Company.  Delivery of the shares shall be deemed effected for all purposes when a stock transfer agent of the Company shall have deposited the certificates in the United States mail, addressed to the Eligible Person, at the address specified by the Eligible Person.

Whenever an Option is exercised by exchanging shares of Stock owned by the Eligible Person, the Eligible Person shall deliver to the Company certificates registered in the name of the Eligible Person representing a number of shares of Stock legally and beneficially owned by the Eligible Person, free of all liens, claims, and encumbrances of every kind, accompanied by stock powers duly endorsed in blank by the record holder of the shares represented by the certificates (with signature guaranteed by a commercial bank or trust company or by a brokerage firm having a membership on a registered national stock exchange).  The delivery of certificates upon the exercise of Options is subject to the condition that the person exercising the Option provides the Company with the information the Company might reasonably request pertaining to exercise, sale or other disposition.  Notwithstanding the foregoing, to the extent approved by the Committee, an Eligible Person may choose to deliver shares of Stock to the Company via any reasonable attestation process meeting the requirements of the Code and other applicable law.

 
 

 
5.6            Stock Appreciation Rights .  All Eligible Persons shall be eligible to receive Stock Appreciation Rights.  The Committee shall determine the SAR to be awarded from time to time to any Eligible Person.  The grant of a SAR to be awarded from time to time shall neither entitle such person to, nor disqualify such person from, participation in any other grant of Awards by the Company, whether under this Plan or any other plan of the Company.  If granted as a stand-alone SAR Award, the terms of the Award shall be provided in a Stock Appreciation Rights Agreement.

5.7            Stock Appreciation Rights in Tandem with Options .  Stock Appreciation Rights may, at the discretion of the Committee, be included in each Option granted under the Plan to permit the holder of an Option to surrender that Option, or a portion of the part which is then exercisable, and receive in exchange, upon the conditions and limitations set by the Committee, an amount equal to the excess of the Fair Market Value of the Stock covered by the Option, or the portion of it that was surrendered, determined as of the date of surrender, over the aggregate exercise price of the Stock.  In the event of the surrender of an Option, or a portion of it, to exercise the Stock Appreciation Rights, the shares represented by the Option or that part of it which is surrendered, shall not be available for reissuance under the Plan.  Each Stock Appreciation Right issued in tandem with an Option (a) will expire not later than the expiration of the underlying Option, (b) may be for no more than 100% of the difference between the exercise price of the underlying Option and the Fair Market Value of a share of Stock at the time the Stock Appreciation Right is exercised, (c) is transferable only when the underlying Option is transferable, and under the same conditions, and (d) may be exercised only when the underlying Option is eligible to be exercised.

5.8            Conditions of Stock Appreciation Rights .  All Stock Appreciation Rights shall be subject to such terms, conditions, restrictions or limitations as the Committee deems appropriate, including by way of illustration but not by way of limitation, restrictions on transferability, requirement of continued employment, individual performance, financial performance of the Company, or payment of any applicable employment or withholding taxes.

5.9            Payment of Stock Appreciation Rights .  The amount of payment to which the Eligible Person who reserves an SAR shall be entitled upon the exercise of each SAR shall be equal to the amount, if any by which the Fair Market Value of the specified shares of Stock on the exercise date exceeds the Fair Market Value of the specified shares of Stock on the date of grant of the SAR.  The SAR shall be paid in either cash or Stock, as determined in the discretion of the Committee as set forth in the SAR agreement.  If the payment is in Stock, the number of shares to be paid shall be determined by dividing the amount of such payment by the Fair Market Value of Stock on the exercise date of such SAR.

5.10          Exercise on Termination of Employment .  Unless it is expressly provided otherwise in the Option or SAR agreement, Options and SAR’s granted to Employees shall terminate three months after severance of employment of the Employee from the Company and all Affiliates for any reason, with or without Cause (defined below), other than death, retirement under the then established rules of the Company, or severance for disability.  The Committee shall determine whether authorized leave of absence or absence on military or government service shall constitute severance of the employment of the Employee at that time.  Notwithstanding anything contained herein, no Option or SAR may be exercised after termination of employment for any reason (whether by death, disability, retirement or otherwise) if it has not vested as at the date of termination of employment.  Cause shall mean any of the following: (A) conviction of a crime (including conviction on a nolo contendere plea) involving a felony or dishonesty, or moral turpitude; (B) deliberate and continual refusal to perform employment duties reasonably requested by the Company or an affiliate after thirty (30) days’ written notice by certified mail of such failure to perform, specifying that the failure constitutes cause (other than as a result of vacation, sickness, illness or injury); (C) fraud or embezzlement as determined by an independent certified public accountant firm; or (D) gross misconduct or gross negligence in connection with the business of the Company or an affiliate which has substantial effect on the Company or the affiliate.

 
 

 
                5.11          Death .  If, before the expiration of an Option or SAR, the Eligible Person, whether in the employ of the Company or after he has retired or was severed for disability, or otherwise dies, the Option or SAR may be exercised until the earlier of the Option’s or SAR’s expiration date or six months following the date of his death, unless it is expressly provided otherwise in the Option or SAR agreement.  After the death of the Eligible Person, his executors, administrators, or any persons to whom his Option or SAR may be transferred by will or by the laws of descent and distribution shall have the right, at any time prior to the Option’s or SAR’s expiration or termination, whichever is earlier, to exercise it, to the extent to which he was entitled to exercise it immediately prior to his death, unless it is expressly provided otherwise in the Option or SAR’s agreement.

5.12          Retirement .  Unless it is expressly provided otherwise in the Option Agreement, before the expiration of an Option or SAR, the Employee shall be retired in good standing from the employ of the Company under the then established rules of the Company, the Option or SAR may be exercised until the earlier of the Option’s or SAR’s expiration date or three months following the date of his retirement, unless it is expressly provided otherwise in the Option or SAR agreement.

5.13          Disability .  If, before the expiration of an Option or SAR, the Employee shall be severed from the employ of the Company for disability, the Option or SAR shall terminate on the earlier of the Option’s or SAR’s expiration date or six months after the date he was severed because of disability, unless it is expressly provided otherwise in the Option or SAR agreement.

5.14            Substitution Options .  Options may be granted under this Plan from time to time in substitution for stock options held by employees of other corporations who are about to become employees of or affiliated with the Company or any Affiliate as the result of a merger or consolidation of the employing corporation with the Company or any Affiliate, or the acquisition by the Company or any Affiliate of the assets of the employing corporation, or the acquisition by the Company or any Affiliate of stock of the employing corporation as the result of which it becomes an Affiliate of the Company.  The terms and conditions of the substitute Options granted may vary from the terms and conditions set out in this Plan to the extent the Committee, at the time of grant, may deem appropriate to conform, in whole or in part, to the provisions of the stock options in substitution for which they are granted.   Any substitute Options granted pursuant to this paragraph shall meet the requirements set forth in Final Treasury Regulation Sections 1.424-1 and 1.409A-1(b)(5)(v)(D), as applicable.

5.15          Reload Options .   Without in any way limiting the authority of the Board of Directors or Committee to make or not to make grants of Options hereunder, the Board of Directors or Committee shall have the authority (but not an obligation) to include as part of any Option Agreement a provision entitling the Eligible Person to a further Option (a “Reload Option”) in the event the Eligible Person exercises the Option evidenced by the Option Agreement, in whole or in part, by surrendering other shares of Stock in accordance with this Plan and the terms and conditions of the Option Agreement.  Any such Reload Option (a) shall be for a number of shares equal to the number of shares surrendered as part or all of the exercise price of such Option; (b) shall have an expiration date which is the greater of (i) the same expiration date of the Option the exercise of which gave rise to such Reload Option or (ii) one year from the date of grant of the Reload Option; and (c) shall have an exercise price which is equal to one hundred percent (100%) of the Fair Market Value of the Stock subject to the Reload Option on the date of exercise of the original Option.   Notwithstanding the foregoing, a Reload Option which is an Incentive Option and which is granted to a 10% Stockholder, shall have an exercise price which is equal to one hundred ten percent (110%) of the Fair Market Value of the Stock subject to the Reload Option on the date of exercise of the original Option and shall have a term which is no longer than five (5) years.

 
 

 
Any such Reload Option may be an Incentive Option or a Nonqualified Option, as the Board of Directors or Committee may designate at the time of the grant of the original Option; provided, however, that the designation of any Reload Option as an Incentive Option shall be subject to the provisions of the Code. There shall be no Reload Options on a Reload Option.  Any such Reload Option shall be subject to the availability of sufficient shares under Section 4.2 herein and shall be subject to such other terms and conditions as the Board of Directors or Committee may determine which are not inconsistent with the express provisions of the Plan regarding the terms of Options.

5.16            No Rights as Stockholder .  No Eligible Person shall have any rights as a stockholder with respect to Stock covered by his Option until the date a stock certificate is issued for the Stock.

5.17            Options Subject to Code Section 409A .  Notwithstanding anything to the contrary herein, Options granted under this Article V that are intended to provide for the deferral of compensation and to be subject to the requirements of Code Section 409A shall contain such terms and conditions (including, by example and not by way of limitation, fixed exercise dates) as may be necessary or desirable for the Option to comply with the requirements of Code Section 409A.

ARTICLE VI - AWARDS

6.1            Restricted Stock Awards.   The Committee may issue shares of Stock to an Eligible Person subject to the terms of a Restricted Stock Agreement. The Restricted Stock may be issued for no payment by the Eligible Person or for a payment below the Fair Market Value on the date of grant.  Restricted Stock shall be subject to restrictions as to sale, transfer, alienation, pledge or other encumbrance and generally will be subject to vesting over a period of time specified in the Restricted Stock Agreement.  The Committee shall determine the period of vesting, the number of shares, the price, if any, of Stock included in a Restricted Stock Award, and the other terms and provisions which are included in a Restricted Stock Agreement.

6.2            Restrictions .  Restricted Stock shall be subject to the terms and conditions as determined by the Committee, including without limitation, any or all of the following:
 
 
(a)           a prohibition against the sale, transfer, alienation, pledge, or other encumbrance of the shares of Restricted Stock, such prohibition to lapse at such time or times as the Committee shall determine (whether in annual or more frequent installments, at the time of the death, disability, or retirement of the holder of such shares, or otherwise);

(b)           a requirement that the holder of shares of Restricted Stock forfeit, or in the case of shares sold to an Eligible Person, resell back to the Company at his cost, all or a part of such shares in the event of termination of the Eligible Person’s employment during any period in which the shares remain subject to restrictions;

(c)           a prohibition against employment of the holder of Restricted Stock by any competitor of the Company or its Affiliates, or against such holder’s dissemination of any secret or confidential information belonging to the Company or an Affiliate;

(d)           unless stated otherwise in the Restricted Stock Agreement, (i) if restrictions remain at the time of severance of employment with the Company and all Affiliates, other than for reason of disability or death, the Restricted Stock shall be forfeited; and (ii) if severance of employment is by reason of disability or death, the restrictions on the shares shall lapse and the Eligible Person or his heirs or estate shall be 100% vested in the shares subject to the Restricted Stock Agreement.
 
 
6.3            Stock Certificate.    Shares of Restricted Stock shall be registered in the name of the Eligible Person receiving the Restricted Stock Award and deposited, together with a stock power endorsed in blank, with the Company. Each such certificate shall bear a legend in substantially the following form:

“The transferability of this certificate and the shares of Stock represented by it is restricted by and subject to the terms and conditions (including conditions of forfeiture) contained in the Texas Rare Earth Resources Corp. Amended and Restated 2008 Stock Option Plan, and an agreement entered into between the registered owner and the Company.  A copy of the Plan and agreement is on file in the office of the Secretary of the Company.”

 
 

 
6.4            Rights as Stockholder .   Subject to the terms and conditions of the Plan, each Eligible Person receiving a certificate for Restricted Stock shall have all the rights of a stockholder with respect to the shares of Stock included in the Restricted Stock Award during any period in which such shares are subject to forfeiture and restrictions on transfer, including without limitation, the right to vote such shares.  Dividends paid with respect to shares of Restricted Stock in cash or property other than Stock in the Company or rights to acquire stock in the Company shall be paid to the Eligible Person currently.  Dividends paid in Stock in the Company or rights to acquire Stock in the Company shall be added to and become a part of the Restricted Stock.

6.5            Lapse of Restrictions .  At the end of the time period during which any shares of Restricted Stock are subject to forfeiture and restrictions on sale, transfer, alienation, pledge, or other encumbrance, such shares shall vest and will be delivered in a certificate, free of all restrictions, to the Eligible Person or to the Eligible Person’s legal representative, beneficiary or heir; provided the certificate shall bear such legend, if any, as the Committee determines is reasonably required by applicable law.  By accepting a Stock Award and executing a Restricted Stock Agreement, the Eligible Person agrees to remit when due any federal and state income and employment taxes required to be withheld.

6.6            Restriction Period .  No Restricted Stock Award may provide for restrictions continuing beyond ten (10) years from the date of grant.

6.7            Award of Stock .  The Committee may award shares of Stock, without any cash payment for such shares or without any restrictions, to designated Eligible Persons for services rendered to the Company. The Stock may be subject to purchase at, above or below the Fair Market Value on the date of grant (or for no amount at all).  The designation of a Stock Award shall be made by the Committee in writing at any time after such Eligible Person has provided value to the Company (or within such period as permitted by IRS regulations).  The Committee reserves the right to make adjustments in the amount of an Award if in its discretion unforeseen events make such adjustment appropriate.

ARTICLE VII - PERFORMANCE STOCK AWARDS

7.1            Award of Performance Stock .  The Committee may award shares of Stock, without any payment for such shares, to designated Eligible Persons if specified performance goals established by the Committee are satisfied. The terms and provisions herein relating to these performance-based awards are intended to satisfy Section 162(m) of the Code and regulations issued thereunder.  The designation of an employee eligible for a specific Performance Stock Award shall be made by the Committee in writing prior to the beginning of the period for which the performance is measured (or within such period as is permitted by IRS regulations).  The Committee shall establish the maximum number of shares of Stock to be issued to a designated Employee if the performance goal or goals are met; provided, however, that no individual may receive Performance Stock Awards in any calendar year covering more than 300,000 shares of Stock.  The Committee reserves the right to make downward adjustments in the maximum amount of an Award if in its discretion unforeseen events make such adjustment appropriate.

 
 

 
7.2            Performance Goals .  Performance goals determined by the Committee shall be established in writing prior to the beginning of the period for which performance is measured (or within such period as is permitted by IRS regulations) based on one or more of the following criteria: specified increases in cash flow; net profits; Stock price; Company, segment, or Affiliate sales; market share; earnings per share; return on assets; and/or return on stockholders’ equity.

7.3            Eligibility .  The employees eligible for Performance Stock Awards are the senior officers (i.e., chief executive officer, president, vice presidents, secretary, treasurer, and similar positions) of the Company and its Affiliates, and such other key Employees of the Company and its Affiliates as may be designated by the Committee.

7.4            Certificate of Performance .  The Committee must certify in writing that a performance goal has been attained prior to issuance of any certificate for a Performance Stock Award to any Employee.  If the Committee certifies the entitlement of an Employee to the Performance Stock Award, the certificate will be issued to the Employee as soon as administratively practicable, and subject to other applicable provisions of the Plan, including but not limited to, all legal requirements and tax withholding.  However, payment may be made in shares of Stock, in cash, or partly in cash and partly in shares of Stock, as the Committee shall decide in its sole discretion.  If a cash payment is made in lieu of shares of Stock, the number of shares represented by such payment shall not be available for subsequent issuance under this Plan.

7.5            Committee to Comply with Section 162(m) .  Notwithstanding anything to the contrary herein, the “Committee,” for purposes of this Article VII shall consist solely of two or more Outside Directors.

ARTICLE VIII - ADMINISTRATION

The Committee shall administer the Plan.   All questions of interpretation and application of the Plan and Awards shall be subject to the determination of the Committee.  A majority of the members of the Committee shall constitute a quorum.  All determinations of the Committee shall be made by a majority of its members. Any decision or determination reduced to writing and signed by a majority of the members shall be as effective as if it had been made by a majority vote at a meeting properly called and held.  In carrying out its authority under this Plan, the Committee shall have full and final authority and discretion, including but not limited to the following rights, powers and authorities, to:

(a)           determine the Eligible Persons to whom and the time or times at which Options or Awards will be made;

                (b)           determine the number of shares and the purchase price of Stock covered in each Option or Award, subject to the terms of the Plan;
 
(c)           determine the terms, provisions, and conditions of each Option and Award, which need not be identical;

 
 

 
(d)           accelerate the time at which any outstanding Option or SAR may be exercised, or Restricted Stock Award will vest;

(e)           define the effect, if any, on an Option or Award of the death, disability, retirement, or termination of employment of the Employee;

(f)           prescribe, amend and rescind rules and regulations relating to administration of the Plan; and

(g)           make all other determinations and take all other actions deemed necessary, appropriate, or advisable for the proper administration of this Plan.

The actions of the Committee in exercising all of the rights, powers, and authorities set out in this Article and all other Articles of this Plan, when performed in good faith and in its sole judgment, shall be final, conclusive and binding on all parties.

The Committee may, from time to time, delegate to specified officers of the Company or other committees of the Board of Directors (including Board committees of one) the power and authority to grant or document Awards under the Plan to specified groups of Eligible Persons, subject to such restrictions and conditions as the Committee, in its sole discretion, may impose.  The delegation shall be as broad or as narrow as the Committee shall determine; provided, however, that no such delegation shall result in the loss of an exemption under Rule 16b-3 of the Exchange Act not cause any award to fail to be “performance-based” compensation for purposes of Code Section 162(m).  To the extent that the Committee has delegated the authority to determine certain terms and conditions of an Award, all references in the Plan to the Committee’s exercise of authority in determining such terms and conditions shall be construed to include the person to whom the Committee has delegated the power and authority to make such determination.

ARTICLE IX - AMENDMENT OR TERMINATION OF PLAN

Except as specifically provided otherwise, the Board of Directors may at any time terminate, and from time to time may amend or modify this Plan provided, however, that no amendment or modification may become effective without approval of the stockholders of the Company if stockholder approval is required to enable the Plan to satisfy any applicable statutory or regulatory requirements, of if the Company, on the advice of counsel, determines that stockholder approval is otherwise necessary or desirable.

Except as specifically provided otherwise, no such amendment, modification, or termination of the Plan shall affect adversely in any material way any Award previously granted without the written consent of the Eligible Person holding such Award.
 
 
 

 
ARTICLE X - MISCELLANEOUS

10.1            No Establishment of a Trust Fund .   No property shall be set aside nor shall a trust fund of any kind be established to secure the rights of any Eligible Person under this Plan.  All Eligible Persons shall at all times rely solely upon the general credit of the Company for the payment of any benefit which becomes payable under this Plan.

10.2            No Employment Obligation .  The granting of any Option or Award shall not constitute an employment contract, express or implied, nor impose upon the Company or any Affiliate any obligation to employ or continue to employ any Eligible Person.  The right of the Company or any Affiliate to terminate the employment of any person shall not be diminished or affected by reason of the fact that an Option or Award has been granted to him.

10.3            Forfeiture .  Notwithstanding any other provisions of this Plan, if the Committee finds by a majority vote after full consideration of the facts that an Eligible Person, before or after termination of his employment with the Company or an Affiliate for any reason (a) committed or engaged in fraud, embezzlement, theft, commission of a felony, or proven dishonesty in the course of his employment by the Company or an Affiliate, which conduct damaged the Company or Affiliate, or disclosed trade secrets of the Company or an Affiliate, or (b) participated, engaged in or had a material, financial, or other interest, whether as an employee, officer, director, consultant, contractor, stockholder, owner, or otherwise, in any commercial endeavor in the United States which is competitive with the business of the Company or an Affiliate without the written consent of the Company or Affiliate, the Eligible Person shall forfeit all outstanding Options and all outstanding Awards, and including all exercised Options and other situations pursuant to which the Company has not yet delivered a stock certificate.  Clause (b) shall not be deemed to have been violated solely by reason of the Eligible Person’s ownership of stock or securities of any publicly owned corporation, if that ownership does not result in effective control of the corporation.

The decision of the Committee as to the cause of an Employee’s discharge, the damage done to the Company or an Affiliate, and the extent of an Eligible Person’s competitive activity shall be final.  No decision of the Committee, however, shall affect the finality of the discharge of the Employee by the Company or an Affiliate in any manner.

10.4            Tax Withholding.   The Company or any Affiliate shall be entitled to deduct from other compensation payable to each Eligible Person any sums required by federal, state, or local tax law to be withheld with respect to the grant or exercise of an Option or SAR, lapse of restrictions on Restricted Stock, or award of Performance Stock or other Award.  In the alternative, the Company may require the Eligible Person (or other person exercising the Option, SAR or receiving the Stock) to pay the sum directly to the employer corporation. If the Eligible Person (or other person exercising the Option or SAR or receiving the Stock) is required to pay the sum directly, payment in cash or by check of such sums for taxes shall be delivered on the date on which the withholding is due.  Alternatively, and subject to the prior approval of the Committee, which may be withheld by the Committee in its sole discretion, the Eligible Person may elect to have share of Stock withheld or to deliver shares of Stock previously held by the Eligible Person (for six months or such minimum amount of time as may be required by the Committee to avoid adverse accounting consequences), to satisfy the minimum statutory withholding taxes due.  The shares of Stock delivered or withheld (i) shall not be subject to any repurchase, forfeiture, vesting or similar requirements, and (ii) shall have an aggregate Fair Market Value not in excess of such minimum withholding obligations, with Fair Market Value determined as of the date on which such withholding is required to be performed.  The Company’s obligation to deliver shares upon exercise of any Option or lapse of restrictions on Stock or pursuant to any other Award shall be subject in its entirety to the Eligible Person making arrangements acceptable to the Company to cover all applicable tax withholding.  The Company and its Affiliates shall not be obligated to advise an Eligible Person of the existence of the tax or the amount which the employer corporation will be required to withhold.

 
 

 
10.5           Written Agreement or Course of Conduct.   Each Option and Award shall be embodied in a written agreement which shall be subject to the terms and conditions of this Plan and shall be signed by the Eligible Person and by a member of the Committee on behalf of the Committee and the Company or an executive officer of the Company, other than the Eligible Person, on behalf of the Company.  The agreement may contain any other provisions that the Committee in its discretion shall deem advisable which are not inconsistent with the terms of this Plan.  Notwithstanding the foregoing, a written agreement is not required if the Option or Award is granted in the ordinary course of conduct of the business and the Company has sufficient accounting records reflecting the services rendered in connection with the grant.

10.6           Indemnification of the Committee and the Board of Directors .  With respect  to administration of this Plan, the Company shall indemnify each present and future member of the Committee and the Board of Directors against, and each member of the Committee and the Board of Directors shall be entitled without further act on his part to indemnity from the Company for, all expenses (including attorney’s fees, the amount of judgments, and the amount of approved settlements made with a view to the curtailment of costs of litigation, other than amounts paid to the Company itself) reasonably incurred by him in connection with or arising out of any action, suit, or proceeding in which he may be involved by reason of his being or having been a member of the Committee and/or the Board of Directors, whether or not he continues to be a member of the Committee and/or the Board of Directors at the time of incurring the expenses, including, without limitation, matters as to which he shall be finally adjudged in any action, suit or proceeding to have been found to have been negligent in the performance of his duty as a member of the Committee or the Board of Directors.  However, this indemnity shall not include any expenses incurred by any member of the Committee and/or the Board of Directors in respect of matters as to which he shall be finally adjudged in any action, suit or proceeding to have been guilty of gross negligence or willful misconduct in the performance of his duty as a member of the Committee and the Board of Directors.  In addition, no right of indemnification under this Plan shall be available to or enforceable by any member of the Committee and the Board of Directors unless, within 60 days after institution of any action, suit or proceeding, he shall have offered the Company, in writing, the opportunity to handle and defend same at its own expense.  This right of indemnification shall inure to the benefit of the heirs, executors or administrators of each member of the Committee and the Board of Directors and shall be in addition to all other rights to which a member of the Committee and the Board of Directors may be entitled as a matter of law, contract, or otherwise.

10.7           Gender .  If the context requires, words of one gender when used in this Plan shall include the others and words used in the singular or plural shall include the other.

10.8           Headings .  Headings of Articles and Sections are included for convenience of reference only and do not constitute part of the Plan and shall not be used in construing the terms of the Plan.

10.9           Other Compensation Plans .  The adoption of this Plan shall not affect any other stock option, incentive or other compensation or benefit plans in effect for the Company or any Affiliate, nor shall the Plan preclude the Company from establishing any other forms of incentive or other compensation for employees of the Company or any Affiliate.

                10.10         Other Options or Awards .  The grant of an Option or Award shall not confer upon the Eligible Person the right to receive any future or other Options or Awards under this Plan, whether or not Options or Awards may be granted to similarly situated Eligible Persons, or the right to receive future Options or Awards upon the same terms or conditions as previously granted.

                 10.11        Governing Law .  The provisions of this Plan shall be construed, administered, and governed under the laws of the State of Texas.

10.12         Section 409A .  Notwithstanding anything in this Plan to the contrary, the Plan and Awards made under the Plan are intended to comply with the requirements imposed by Section 409A of the Code, and both the Plan and all Awards issued hereunder shall be interpreted accordingly.  The Committee shall have full power and authority, without the consent of any Eligible Person, to modify in its sole and absolute discretion any outstanding Award or delay the payment of any amounts payable pursuant to an outstanding Award to the minimum extent necessary to meet the requirements of Code Section 409A.  Notwithstanding the foregoing, in no event shall the Company have any liability for failure of any Award to satisfy the requirements of Code Section 409A.

10.13         Changes in Accounting or Tax Rules .  Except a provided otherwise at the time an Award is granted, notwithstanding any other provision of the Plan to the contrary, if, during the term of the Plan, any changes in the financial or tax accounting rules applicable to any Award shall occur which, in the sole judgment of the Committee, nay have a material adverse effect on the reported earnings, assets or liabilities of the Company, the Committee shall have the right and power to modify as necessary and then outstanding Award as to which the applicable services or other restrictions have not been satisfied.

 
 

 
Exhibit 10.12
 
REGISTRATION RIGHTS AGREEMENT
 
This REGISTRATION RIGHTS AGREEMENT (this “ Agreement ”), dated as of date set forth on the signature page hereof, is made by and between Texas Rare Earth Resources Corp., a Nevada corporation (the “ Company ”) and Cranshire Capital LP (the “ Purchaser ”).

WHEREAS, pursuant to that certain subscription agreement, dated as of the date hereof (as amended or supplemented, the “Subscription Agreement”), the Company has agreed to sell to Purchaser, and Purchaser has agreed to purchase for the Purchase Price (defined below) (i) 72,000 shares of Company common stock (the “Shares”) at a purchase price of $2.50 per share and (ii) and a common stock purchase warrant to purchase up to 72,000 shares of Company common stock, exercisable for a period of five (5) years at an exercise price of $2.50 per share (the “Warrant”).

WHEREAS, the Company has undertaken to register the resale of the Shares and the shares of common stock issuable upon the exercise of the Warrant.

NOW, THEREFORE, the Company and the Purchaser hereby covenant and agree as follows:

1.            Definitions . As used herein, the following terms shall have the following respective meanings:
 
Additional Effective Date ” shall mean the date the Additional Registration Statement is declared effective by the SEC.

Additional Filing Deadline ” shall mean if Registrable Securities are required to be included in the Additional Registration Statement, the later of (i) ninety (90) days after the Effective Date or the last preceding Additional Effective Date, as the case may be, or (ii) six (6) months after the Effective Date or the last preceding Additional Effective Date in the event the SEC were to deem the former ninety-day period in (i) as premature for filing the Additional Registration Statement or (iii) the date which is six (6) weeks after substantially all of the Registrable Securities registered under the immediately preceding Registration Statement are sold, as applicable.

Additional Registration Statement ” shall mean a registration statement or registration statements of the Company filed under the Securities Act covering any Registrable Securities.

Common Stock ” shall mean the common stock, par value $0.01, of the Company.

 “ Effective Date ” shall mean the date the Registration Statement is declared effective by the SEC.

Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC thereunder, all as the same shall be in effect at the time.

 
 

 
Holder ” or “ Holders ” shall mean any person or persons to whom Registrable Securities were originally issued or qualifying transferees under Section 2.9 hereof who hold Registrable Securities for purposes of any registration under Section 2.

Liquidated Damages Amount ” means a number of shares of Common Stock equal to 10% of the shares of Common Stock purchased by Purchaser pursuant to the Subscription Agreement and issued upon exercise (partial or full, as applicable) of the Warrant as of the time Purchaser becomes entitled to such Liquidated Damages Amount pursuant to Section 2.10.

Purchase Price ” shall mean $180,000.

Register ,” “ registered ” and “ registration ” each shall refer to a registration effected by preparing and filing a registration statement or statements or similar documents in compliance with the Securities Act and the declaration or ordering of effectiveness of such registration statement or document by the SEC.

Registrable Securities ” means (i) the Shares and (ii) the shares of Common Stock issuable upon the exercise of the Warrant; provided , however , that shares of Common Stock which are Registrable Securities shall cease to be Registrable Securities (a) upon their sale pursuant to a registration statement or Rule 144 under the Securities Act, or (b) upon any sale in any manner to a person or entity which is not entitled to the rights under this Agreement.

Registration Statement ” shall mean any registration statement of the Company filed under the Securities Act that covers the resale of any of the Registrable Securities pursuant to the provisions of this Agreement, amendments and supplements to such Registration Statement, including post-effective amendments, all exhibits and material incorporated by reference in such Registration Statement, as well as any Additional Registration Statement.

Securities Act ” shall mean the Securities Act of 1933, as amended, and the rules and regulations of the SEC thereunder, all as the same shall be in effect at the applicable time.

SEC ” shall mean the U.S. Securities and Exchange Commission, or any other federal agency at the time administering the Securities Act.

2.            Registration Rights .

2.1         Demand Registration .

(a)         The Company shall file a Registration Statement on Form S-1 with the SEC covering the resale of all of the Registrable Securities as described herein within thirty (30) days of the effective date of registration statement 333-172116 (“Filing Deadline”) to permit the public resale of Registrable Securities then outstanding from time to time as permitted by Rule 415 of the Securities Act.  The Company shall use commercially reasonable efforts to have the Registration Statement declared effective as soon as practicable. In the event that the Company is unable to register for resale under Rule 415 all of the Registrable Securities on the Registration Statement that it has agreed to file pursuant to Section 2(a) due to limits imposed by the SEC’s interpretation of Rule 415, then the Company shall be obligated to include in such Registration Statement (as withdrawn and refiled if necessary to comply with Rule 415) only such limited portion of the Registrable Securities as the SEC shall permit; any exclusion shall be made first to shares other than the Registrable Securities, and then, to the extent necessary, pro rata among the holders in proportion to the number of Registrable Securities held by such holders. Any request for acceleration of the Registration Statement shall seek effectiveness at 5:00 p.m., Central Time, or as soon thereafter as practicable.  The Company shall notify the Holders by facsimile or e-mail as soon as promptly practicable, and in any event, prior to 9:00 a.m., Central Time, on the day after any Registration Statement is declared effective.  The Company shall file with the SEC under Rule 424 a final prospectus as promptly as practicable, and in any event, prior to 9:00 a.m., Central Time, on the day after any Registration Statement is declared effective.

 
 

 
(b)         The Company shall prepare, and, as soon as practicable but in no event later than the Additional Filing Deadline, file with the SEC an Additional Registration Statement on Form S-1 (or Form S-3, if applicable) covering the resale of all of the Registrable Securities not previously registered in a Registration Statement or a preceding Additional Registration Statement as the case may be.  To the extent the SEC does not permit the aforesaid Registrable Securities to be registered on an Additional Registration Statement, the Company shall file Additional Registration Statements successively trying to register on each such Additional Registration Statement the maximum number of remaining Registrable Securities until the resale of the remaining Registrable Securities have been registered with the SEC.  The Company shall use its commercially reasonable efforts to have each Additional Registration Statement declared effective by the SEC as soon as practicable, but in no event later than the Additional Effectiveness Deadline.  By 9:00 a.m. Central Time on the business day following the Additional Effective Date, the Company shall file with the SEC in accordance with Rule 424 the final prospectus to be used in connection with sales pursuant to such Additional Registration Statement.

2.2           Registration; Holdback Agreement . In connection with any registration of Registrable Securities in connection with an underwritten public offering, each holder of Registrable Securities agrees, if so requested by the underwriter or underwriters, not to effect any sale or distribution (including any sale pursuant to Rule 144 under the Securities Act) of any Registrable Securities, and not to effect any public sale or distribution of any other equity security of the Company or of any security convertible into or exchangeable or exercisable for any equity security of the Company (in each case, other than as part of such underwritten public offering) during 60 days following the Effective Date of the Registration Statement (other than a registration statement on Form S-4 or S-8) or such other period as the managing underwriter of such offering shall reasonably require, or such other period agreed to by the Attorney on behalf of the holders (as defined in Section 2.2(b) hereof), with respect to such other underwritten public offering; provided that all directors, officers, and holders of at least 5% of the Company’s then outstanding equity securities are subject to the same restriction. The foregoing restrictions shall not apply to any Holder that has delivered and not revoked written notice (an “Opt-Out Notice”) to the Company requesting that such Holder not receive notice from the Company of any proposed underwritten public offering; provided, however, that such Holder may later revoke any such notice in writing.
 
2.3          Company Obligations .
 
The Company will use commercially reasonable efforts to effect the registration of the Registrable Securities in accordance with the terms hereof, and pursuant thereto the Company will, as expeditiously as possible:

(a)          use commercially reasonable efforts to cause such Registration Statement to become effective as soon as practicable and to remain continuously effective for a three-year period unless such offering is an underwritten public offering, in which event such effectiveness shall continue until the distribution is complete (the “Effectiveness Period”) and advise the Purchaser in writing when the Effectiveness Period has expired;

(b)          prepare and file with the SEC such amendments and post-effective amendments to the Registration Statement and the Prospectus as may be necessary to keep the Registration Statement effective for the Effectiveness Period and to comply with the provisions of the Securities Act and the Exchange Act with respect to the distribution of all of the Registrable Securities covered thereby;

(c)          provide copies to Holders’ counsel to review each Registration Statement and all amendments and supplements thereto no fewer than three (3) business days prior to their filing with the SEC and not file any document to which such counsel reasonably objects;

(d)          furnish to the Holders’ counsel (i) promptly after the same is prepared and publicly distributed, filed with the SEC, or received by the Company (but not later than two (2) Business Days after the filing date, receipt date or sending date, as the case may be) one (1) copy of any Registration Statement and any amendment thereto, each preliminary prospectus and Prospectus and each amendment or supplement thereto, and each letter written by or on behalf of the Company to the SEC or the staff of the SEC, and each item of correspondence from the SEC or the staff of the SEC, in each case relating to such Registration Statement (other than any portion of any thereof which contains information for which the Company has sought confidential treatment), and (ii) such number of copies of a Prospectus, including a preliminary prospectus, and all amendments and supplements thereto and such other documents as each Holder may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such Holder that are covered by the related Registration Statement;

(e)          use commercially reasonable efforts to (i) prevent the issuance of any stop order or other suspension of effectiveness and, (ii) if such order is issued, obtain the withdrawal of any such order at the earliest possible moment;

(f)           prior to any public offering of Registrable Securities, use best efforts to (i) register or qualify or cooperate with the Holders and their counsel in connection with the registration or qualification of such Registrable Securities for offer and sale under the securities or blue sky laws of such jurisdictions requested by the Holders and (ii) do any and all other acts or things necessary or advisable to enable the distribution in such jurisdictions of the Registrable Securities covered by the Registration Statement; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to (i) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 2.3(f), (ii) subject itself to general taxation in any jurisdiction where it would not otherwise be so subject but for this Section 2.3(f), or (iii) file a general consent to service of process in any such jurisdiction;

 
 

 
(g)          use commercially reasonable efforts to cause all Registrable Securities covered by a Registration Statement to be listed on each securities exchange, interdealer quotation system or other market on which similar securities issued by the Company are then listed;

(h)          immediately notify the Holders, at any time prior to the end of the Effectiveness Period, upon discovery that, or upon the happening of any event as a result of which, the Prospectus includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, and promptly prepare, file with the SEC and furnish to such holder a supplement to or an amendment of such Prospectus as may be necessary so that such Prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing; and

(i)           otherwise use best efforts to comply with all applicable rules and regulations of the SEC under the Securities Act and the Exchange Act, including, without limitation, Rule 172 under the Securities Act, file any final Prospectus, including any supplement or amendment thereof, with the SEC pursuant to Rule 424 under the Securities Act, promptly inform the Holders in writing if, at any time during the Effectiveness Period, the Company does not satisfy the conditions specified in Rule 172 and, as a result thereof, the Holders are required to deliver a Prospectus in connection with any disposition of Registrable Securities and take such other actions as may be reasonably necessary to facilitate the  registration of the Registrable Securities hereunder.

2.4          Obligations of Holders .
 
(a)          Each Holder shall furnish in writing to the Company such information regarding itself, the Registrable Securities held by it and the intended method of disposition of the Registrable Securities held by it, as shall be reasonably required to effect the registration of such Registrable Securities, including a shareholder questionnaire to be provided to the Holder by the Company prior to the filing of the Registration Statement, and shall execute such documents in connection with such registration as the Company may reasonably request.  At least ten (10) business days prior to the first anticipated filing date of any Registration Statement, the Company shall notify each Holder of the information the Company requires from such Holder if such Holder elects to have any of the Registrable Securities including in the Registration Statement.  A Holder shall provide such information to the Company at least five (5) business days prior to the first anticipated filing date of such Registration Statement if such Holder elects to have any of the Registrable Securities included in the Registration Statement.

(b)         Each Holder, by its acceptance of the Registrable Securities agrees to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of a Registration Statement hereunder, unless such Holder has notified the Company in writing of its election to exclude all of its Registrable Securities from such Registration Statement.
 
2.5          Expenses of Registration .
 
All expenses incurred in connection with any registration, qualification or compliance pursuant to Section 2 hereof, including without limitation, all registration, filing and qualification fees, printing expenses, fees and disbursements of counsel for the Company and expenses of any special audits incidental to or required by such registration, shall be borne by the Company except as follows:

(a)         the Company shall not be required to pay fees or disbursements of legal counsel of the Holders; and

(b)         the Company shall not be required to pay underwriters’ fees, discounts or commissions relating to Registrable Securities.

 
 

 
2.6          Indemnification and Contribution
 
(a)          The Company will indemnify and hold harmless each Holder of the Registrable Securities covered by a registration, each other person, if any, who controls such Holder within the meaning of the Securities Act, with respect to which such registration, qualification or compliance that has been effected pursuant to Section 2 hereof, and each underwriter, if any, and each person who controls any underwriter of the Registrable Securities held by or issuable to such Holder from and against all claims, losses, expenses, damages and liabilities (or actions in respect thereto) arising out of or based upon (i) any untrue statement (or alleged untrue statement) of a material fact contained in any prospectus, offering circular or other document (including any related registration statement, notification or the like) incident to any such registration, qualification or compliance, (ii) the omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or (iii) any violation by the Company of any rule or regulation promulgated under the Securities Act or any state securities law applicable to the Company and relating to action or inaction required by the Company in connection with any such registration, qualification or compliance, and will reimburse each such Holder, each of its officers, directors, manager, members and partners, and each person controlling such Holder, each such underwriter and each person who controls any such underwriter, for any reasonable legal and other expenses reasonably incurred by it in connection with investigating, defending or settling any such claim, loss, damage, liability or action; provided, however, that the indemnity agreement contained in this Section 2.6 shall not apply to amounts paid in settlement of any such claim, loss, damage, liability, or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), and provided, further, that the Company will not be liable in any such case if and to the extent that any such loss, claim, damage or liability arises out of or is based upon the Company’s reliance on an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished by any such Holder, any such underwriter or any such controlling person in writing specifically for use in such registration statement or prospectus and the Company shall not be liable in any such case to the extent that any such loss, claim, damage or liability (or action in respect thereof) arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission in such registration statement, which untrue statement or alleged untrue statement or omission or alleged omission is completely corrected in an amendment or supplement to the registration statement and the undersigned indemnitees thereafter fail to deliver or cause to be delivered such registration statement as so amended or supplemented prior to or concurrently with the sale of the Registrable Securities to the person asserting such loss, claim, damage or liability (or actions in respect thereof) or expense after the Company has furnished the undersigned with the same.

(b)         Each Holder of Registrable Securities covered by a registration statement shall, severally and not jointly, indemnify and hold harmless the Company, each of its directors and officers, each underwriter, if any, of the Company’s securities covered by such a registration statement, each person who controls the Company within the meaning of the Securities Act, and each other such Holder, each of its officers, directors, managers, members and partners and each person controlling such other Holder, against all claims, losses, expenses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any such registration statement, prospectus, offering circular or other document, or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company, such other Holders, such directors, officers, mangers, members, partners, persons or underwriters for any reasonable legal or any other expenses incurred in connection with investigating, defending or settling any such claim, loss, damage, liability or action, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such registration statement, prospectus, offering circular or other document in reliance upon and in conformity with written information furnished to the Company by an instrument duly executed by such Holder specifically for use therein; provided, however, the total amount for which any Holder shall be liable under this Section 2.6(b) shall not in any event exceed the aggregate proceeds received by such Holder from the sale of Registrable Securities held by such Holder in such registration.

(c)          Each party entitled to indemnification under Section 2.6 hereof (the “Indemnified Party”) shall give notice to the party required to provide indemnification (the “Indemnifying Party”) promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting there from, provided, that counsel for the Indemnifying Party, who shall conduct the defense of such claim or litigation, shall be approved by the Indemnified Party (whose approval shall not be unreasonably withheld), and the Indemnified Party may participate in such defense at such party’s expense, and provided, further, that the failure of any Indemnified Party to give notice as provided herein, shall not relieve the Indemnifying Party of its obligations hereunder, unless such failure resulted in actual detriment to the Indemnifying Party.  No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation.

(d)          In order to provide for just and equitable contribution to joint liability under the Securities Act in any case in which either (i) any Holder of Registrable Securities exercising rights under this Agreement, or any controlling person of any such holder, makes a claim for indemnification pursuant to Section 2.6 hereof but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that Section 2.6 hereof provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any such selling Holder or any such controlling person in circumstances for which indemnification is provided under Section 2.6 hereof; then, and in each such case, the Company and such Holder will contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (after contribution from others) in such proportion so that such Holder is responsible for the portion represented by the percentage that the public offering price of its Registrable Securities offered by the registration statement bears to the public offering price of all securities offered by such registration statement, and the Company is responsible for the remaining portion; provided, that, in any such case, (A) no such Holder will be required to contribute any amount in excess of the public offering price of all such Registrable Securities offered by it pursuant to such registration statement and (B) no person or entity guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any person or entity who was not guilty of such fraudulent misrepresentation.

 
 

 
2.7          Information by Holder .
 
Each Holder of Registrable Securities included in any registration shall promptly furnish to the Company such information regarding such Holder or Holders as the Company may request in writing and as shall be required in connection with any registration, qualification or compliance referred to herein.

2.8          Rule 144 Reporting .
 
With a view to making available to Holders the benefits of certain rules and regulations of the SEC, which may permit the sale of the Registrable Securities to the public without registration, the Company shall use its best efforts to:

(a)          file an annual report on Form 10-K with the SEC covering the year ended August 31, 2010 along with any other filings required by the SEC within thirty (30) days of the date hereof that comply in all material respects with applicable requirements of the Exchange Act and the applicable accounting requirements and the published rules and regulations of the SEC with respect thereto;

(b)         following the filing of such Form 10-K, make and keep adequate current public information with respect to the Company available in accordance with Rule 144 under the Securities Act at all times, as those terms are understood and defined in SEC Rule 144 under the Securities Act;

(c)          use its best efforts to file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and

(d)         so long as a Holder owns any Registrable Securities, to furnish to such Holder forthwith upon request a written statement by the Company as to its compliance with the reporting requirements of said Rule 144, and of the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements), a copy of the most recent annual or quarterly report of the Company, and such other reports and documents so filed by the Company as the Holder may reasonably request in writing in complying with any rule or regulation of the SEC allowing the Holder to sell any such securities without registration.

 
 
 

 
2.9          Assignment of Registration Rights .
 
The rights to have the Company register Registrable Securities pursuant to this Agreement may be assigned by the Holders to transferees or assignees of such Registrable Securities; provided, that the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned; and provided, further, that the transferee or assignee of such rights assumes in writing the obligations of such Holder under this Agreement.  The term “Holder(s)” as used in this Agreement shall include such permitted assigns.

2.10       Failure To Go Effective .
 
If a Registration Statement or Additional Registration Statement covering the Registrable Securities is not filed with the SEC on or prior to the Filing Deadline or Additional Filing Deadline, respectively, the Company will make pro rata payments to each Holder, as liquidated damages and not as a penalty, in an aggregate amount equal to the Liquidated Damages Amount for each 30-day period or pro rata for any portion thereof following such date for which no Registration Statement or Additional Registration Statement, as the case may be, is filed with respect to the Registrable Securities. If a Registration Statement or Additional Registration Statement covering the Registrable Securities is not declared effective by the SEC prior to within 150 (one-hundred fifty) days after the date of filing such Registration Statement or Additional Registration Statement, the Company will make pro rata payments to each Holder, as liquidated damages and not as a penalty, in an aggregate amount equal to the Liquidated Damages Amount for each 30-day period or pro rata for any portion thereof following the such date for which no Registration Statement is declared effective with respect to the Registrable Securities; provided, however, that no such damages shall apply to the extent the delay is caused by any act or omission of the Holder in furnishing information needed to register the shares. Notwithstanding the preceding, in no event shall the aggregate amount of liquidated damages pursuant to this Section 2.10 exceed five times the Liquidated Damages Amount (for purposes of this cap, such Liquidated Damages Amount shall equal the first full 30-day period of liquidated damages paid and/or owed to Holders).

3.            Changes in Capital Stock .
 
If, and as often as, there is any change in the capital stock of the Company by way of a stock split, stock dividend, combination or reclassification, or through a merger, consolidation, reorganization or recapitalization, or by any other means, appropriate adjustment shall be made in the provisions hereof so that the rights and privileges granted hereby shall continue as so changed.
 

 
 
 

 
4.            Representations and Warranties of the Company .
 
The Company represents and warrants to the Holders as follows:

(a)          The execution, delivery and performance of this Agreement by the Company have been duly authorized by all requisite corporate action and will not violate any provision of law, any order of any court or other agency of government, the Articles of Incorporation or By-laws of the Company or any provision of any indenture, agreement or other instrument to which it or any or its properties or assets is bound, conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any such indenture, agreement or other instrument or result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of the Company or its subsidiaries.

(b)         This Agreement has been duly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company, enforceable in accordance with its terms, subject to any applicable bankruptcy, insolvency or other laws affecting the rights of creditors generally and to general equitable principles and the availability of specific performance.

(c)          From and after the date of this Agreement and until a Registration Statement or Additional Registration Statement covering all of the Registrable Securities is declared effective by the SEC, the Company shall not, without the prior written consent of the Holder, enter into any agreement with any holder or prospective holder of any securities of the Company that would grant such holder registration rights senior to those granted to the Holders hereunder.

5.            Miscellaneous .
 
(a)          Remedies . In the event of a breach by the Company of any of its obligations under this Agreement, each Holder, in addition to being entitled to exercise all rights provided herein, or granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Agreement.  Subject to Section 2.6, the Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall waive the defense that a remedy at law would be adequate.

(b)           Notices .  Any notice required or permitted by any provision of this Agreement shall be given in writing, and shall be delivered either personally or by registered or certified mail, postage prepaid, addressed (i) in the case of the Company, to Texas Rare Earth Resources Corp., 3 Riverway, Ste. 1800, Houston, Texas 77056, Attention: Marc LeVier, Chief Executive Officer; (ii) in the case of any Holder which or who is an original party to this Agreement at the address of such Holder as set forth in the records of the Company or such other address for such Holder(s) as shall be designated in writing from time to time by such Holder(s); and (iii) in the case of any permitted transferee of a party to this Agreement or its transferee, to such transferee at its address as designated in writing by such transferee to the Company from time to time.

 
 

 
(b)          Binding Effect . This Agreement and each and every term, covenant and condition thereof, including all restrictions herein contained upon the sale, transfer, assignment or other disposition or encumbrance of stock, shall be binding upon and inure to the benefit of the transferees, legatees, donees, heirs, executors, administrators, personal representatives, successors and assigns of each of the parties.

(c)          Entire Agreement . This instrument contains the entire understanding of the parties with respect to the subject matter hereof and supersedes any prior agreements with respect to such subject matter.

(d)          Governing Law . This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Texas.

(e)          Severability .  The invalidity or unenforceability of any provision hereof shall not in any way affect the validity or enforceability of any other provision.

(f)           Successors .  Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefits of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto.

(g)          Execution in Counterparts . This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart.  In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

(h)          Headings . The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

(i)           Attorneys’ Fees . In any action or proceeding brought to enforce any provision of this Agreement, or where any provision hereof is validly asserted as a defense, the prevailing party, as determined by the court or arbitrator(s), as the case may be, shall be entitled to recover its reasonable attorneys’ fees in addition to any other available remedy.

(j)            Interpretation . Article and Section references in this Agreement are references to the corresponding Article and Section to this Agreement, unless otherwise specified.  All references to instruments, documents, contracts and agreements are references to such instruments, documents, contracts and agreements as the same may be amended, supplemented and otherwise modified from time to time, unless otherwise specified. The word “including” shall mean “including but not limited to.”

[Remainder of Page Intentionally Left Blank]
 
 
 
 

 
IN WITNESS WHEREOF, the parties hereto have executed this Registration Rights Agreement effective as of the last date set forth below.
 
 
COMPANY:
   
 
Texas Rare Earth Resources Corp.
   
 
______________________________
 
Name:  Marc LeVier
 
Title:  CEO
 
Date:  _____________, 2011
   
   
 
PURCHASER:
   
 
_______________________________
   
 
_______________________________
   
 
Name: _________________________
   
 
Title: __________________________
   
 
Date: _____________, 2011

 
 
 
 

 
Exhibit 10.13

 

LEASE AGREEMENT
(Office)


304 INVERNESS WAY LLC,
a Delaware limited liability company
(as Landlord)


and


TEXAS RARE EARTH RESOURCES CORP,
a Nevada corporation
(as Tenant)






304 Inverness Way South, Suite 365
Englewood, Colorado 80112


May 5, 2011
 

 
 
 

 
1.
LEASE OF PREMISES; BASIC LEASE PROVISIONS 
 
 
2.
RENT 
 
 
3.
CONDITION OF THE PREMISES; TENANT FINISH WORK 
 
 
4.
OPERATING EXPENSES 
 
 
5.
SERVICES 
 
 
6.
SECURITY DEPOSIT 
 
 
7.
CHARACTER OF OCCUPANCY 
 
 
8.
ALTERATIONS AND REENTRY BY LANDLORD 
 
 
9.
ALTERATIONS AND REPAIRS BY TENANT 
 
 
10.
MECHANICS’ LIENS; TENANT- AND LEASE-SPECIFIC TAXES 
 
 
11.
SUBLETTING AND ASSIGNMENT 
 
 
12.
DAMAGE TO PROPERTY 
 
 
13.
INSURANCE AND WAIVER OF SUBROGATION 
 
 
14.
CASUALTY AND RESTORATION OF PREMISES 
 
 
15.
CONDEMNATION 
 
 
16.
DEFAULT 
 
 
17.
SURRENDER; HOLDOVER 
 
 
18.
SUBORDINATION AND ATTORNMENT 
 
 
19.
ESTOPPEL 
 
 
20.
SUBSTITUTED PREMISES 
 
 
21.
AUTHORITIES; NOTICES 
 
 
22.
RULES AND REGULATIONS 
 
 
23.
LIMITATION OF LANDLORD’S LIABILITY 
 
 
24.
PARKING 
 
 
25.
BROKERAGE 
 
 
26.
GENERAL PROVISIONS 
 
 
27.
RIDER 1 
RIDER 1 – PAGE 1
 
28.
ABATED RENT PERIOD 
RIDER 1 – PAGE 1
 
29.
LANDLORD'S WORK 
RIDER 1 – PAGE 1
 
30.
PERMITTED TRANSFER 
RIDER 1 – PAGE 2
 
31.
DIRECTORY BOARD AND SUITE-ENTRY SIGNAGERIDER 1 – PAGE 3
 
32.
STORAGE SPACE 
RIDER 1 – PAGE 3
 
 
 

 
LEASE AGREEMENT
(Office)

THIS LEASE AGREEMENT (this “ Lease ”), made as of May 5, 2011 (the “ Effective Date ”),  is between 304 INVERNESS WAY LLC, a Delaware limited liability company, having an office at c/o Equity West Investment Partners, 1999 Broadway St., Suite 1450, Denver, CO 80202 (“ Landlord ”), and TEXAS RARE EARTH RESOURCES CORP, a Nevada corporation having an office at 3 Riverway, Suite 1800, Houston, Texas 77056 (“ Tenant ”).

This Lease is made on the terms and provisions set forth below, and each of the terms, covenants, provisions, and agreements in this Lease shall be a condition.  The parties, for themselves, their legal representatives, successors, and assigns, agree as follows:

1.   LEASE OF PREMISES; BASIC LEASE PROVISIONS .
 
1.1   Lease of Premises .  Landlord leases to Tenant, and Tenant leases from Landlord, the premises shown on Exhibit “A” attached hereto (the “ Premises ”), containing approximately 2,936 rentable square feet, commonly known as Suite 365, and being a part of that building (the “ Building ”) the address of which is 304 South Inverness Way, Englewood, Colorado 80112, together with a non-exclusive right, subject to the provisions hereof, to use all appurtenances thereto, including, but not limited to, the surface parking area, walkways and other common areas on the Real Property (as defined below) designated by Landlord for use by tenants of the Building.  The Real Property, including common corridors, lobby areas, parking areas, landscaped areas, walkways and other areas designated by Landlord for use by all tenants of the Building are collectively referred to as the “ Common Areas ”.  The Building is part of a 1-building business park commonly known as 304 Inverness Way (the “ Business Park ”).  The land and real property upon which the Business Park is located is sometimes referred to herein as the “ Real Property ”).
 
1.2   Term .  The term of this Lease (the “ Lease Term ”) shall be thirty-six (36) months, to commence on June 1, 2011, (the “ Lease Commencement Date ”), and to end on May 31, 2014.
 
1.3   Base Rent .  Tenant shall pay to Landlord, as base annual rent for the Lease Term (“ Base Rent ”), as follows:
 
Period of the Lease Term
Annual Rate per Rentable Square Foot
Annual Base Rent
Monthly Installment of Base Rent
June 1, 2011 – August 30, 2011
$-0-
$-0-
$-0-
September 1, 2011 – November 30, 2011
$14.00
$41,103.96
$3,425.33
December 1, 2011 – May 31, 2013
$19.00
$55,784.04
$4,648.67
June 1, 2013 – May 31, 2014
$19.25
$56,517.96
$4,709.83

Base Rent is calculated on the basis that the Premises shall contain approximately the rentable square feet specified above.  Tenant shall pay the first monthly installment of Base Rent on the Effective Date.  Base Rent includes Base Operating Expenses, but does not include Tenant's Pro Rata Share of the amount of the increases in the Operating Expenses for the calendar year just completed over Base Operating Expenses, as set forth in Section 4.2 below.

1.4   Lease Commencement Date .  The Lease Commencement Date shall be June 1, 2011.
 
1.5   Permitted Use .  The Premises are to be used for general and executive offices, or both, and for no other purpose without the prior written consent of Landlord.
 
1.6   Operating Expenses .  As referred to in Section 4.1 , Base Operating Expenses shall be the Operating Expenses for calendar year 2011.  Tenant’s Pro Rata Share shall be 2.18%.
 
 
 

 
1.7   Security Deposit .  The security deposit referred to in Section 6 shall be $5,000.00.
 
1.8   Parking .  During the Lease Term, Tenant shall be entitled to utilize the following parking spaces (collectively, the “ Parking Spaces ”), in the Business Park’s parking garage (the “ Parking Garage ”), in accordance with and subject to the provisions of this Lease (including, without limitation, Section 24 ):
 
(a)   nine (9) unassigned, unreserved parking spaces (the “ Free Parking Spaces ”), free of charge; and
 
(b)   one (1) reserved parking space (the “ Reserved Parking Space ”), for parking at the Prevailing Rates.
 
The “ Prevailing Rates ” mean base rates being charged from time to time by Landlord or its parking operator to other tenants for similar parking rights without consideration of any discounts.  As of the Effective Date, the Prevailing Rates are $60.00 per month per Reserved Parking Space.
 
2.   RENT .  Tenant agrees to pay to Landlord at Landlord’s Rent Address specified in this Section 2 , or to such other persons, or at such other places designated by Landlord, without any prior demand therefor in immediately available funds and without any deduction or offset whatsoever, Base Rent, Tenant’s Pro Rata Share and all other amounts due to Landlord hereunder (collectively, “ Rent ”), during the Lease Term.  Base Rent shall be paid monthly in advance on the first day of each month of the Lease Term, except that the first installment of Base Rent shall be paid by Tenant to Landlord on the Effective Date.  Base Rent shall be prorated for partial months within the Lease Term.  Unpaid Rent shall bear interest at the Default Rate (as defined below) from the date due until paid.  Tenant’s covenant to pay Rent shall be independent of every other covenant in this Lease.  “ Landlord’s Rent Address ” shall mean 304 Inverness Way LLC, c/o Inverness Properties, LLC, 2 Inverness Drive East, Suite 200, Englewood, CO  80112, or such other place as Landlord may, from time to time, designate in writing.  “ Lease Year ,” as used in this Lease, means a calendar year, except that the first Lease Year and the last Lease Year of the Lease Term may be a partial calendar year.
 
3.   CONDITION OF THE PREMISES; TENANT FINISH WORK .
 
3.1   Condition of Premises .
 
(a)   Tenant acknowledges that except as may be expressly provided herein, if at all, neither Landlord nor any agent of Landlord has made any representation or warranty with respect to the Premises, the Building, the Common Areas, or the Business Park, or with respect to the suitability of any part of the same for the conduct of Tenant’s business.  Except as expressly set forth in Section 3.1(b) below, the taking of possession of the Premises by Tenant shall conclusively establish that the Premises, the Building, the Common Areas and the Business Park were at such time in a good and sanitary order, condition and repair acceptable to Tenant.
 
(b)   Tenant shall notify Landlord in writing within thirty (30) days after the date Tenant takes possession of the Premises of any defects, if any, in the Premises.  Except for defects stated in such notice, Tenant shall be conclusively deemed to have accepted the Premises “AS IS” in the condition existing on the date Tenant first takes possession, and to have waived all claims relating to the condition of the Premises.  Landlord shall proceed diligently to correct the defects stated in such notice unless (i) Landlord disputes the existence of any such defects or (ii) the defect results from or was aggravated by damage which occurs during Tenant’s move into the Premises.  In the event of any dispute as to the existence of any such defects, the decision of Landlord’s architect shall be final and binding on the parties.  No agreement of Landlord to alter, remodel, decorate, clean or improve the Premises, the Building, the Common Areas or any other portion of the Business Park and no representation regarding the condition of the Premises, the Building, the Common Areas, or the Business Park has been made by or on behalf of Landlord to Tenant, except as may be specifically stated in this Lease (if at all).
 
3.2   Tenant Finish Work .  Except as expressly set forth in Section 29 of Rider 1 attached hereto, Landlord shall not have any obligation to construct or install any improvements or alterations or to pay for any such construction or installation in or on the Premises.
 
 
 

 
4.   OPERATING EXPENSES .
 
4.1   Definitions .  The following terms shall have the meanings respectively given them below:
 
(a)   Base Operating Expenses ” means the Operating Expenses for the calendar year set forth in Section 1.6 .
 
(b)   Rentable Area ” means 134,696 square feet of space, which is all rentable space available for lease in the Business Park.  If there is a significant change in the aggregate Rentable Area as the result of an addition to the Business Park, partial destruction, modification to design or other cause which causes a reduction or increase on a permanent basis, Landlord’s Accountants shall make such adjustments in the computations as shall be necessary to reflect any such change.
 
(c)   Tenant’s Pro Rata Share ” means Tenant’s percentage portion of increases in Operating Expenses as such percentage is specified in Section 1.6 .  If at any time during the Lease Term, Tenant leases additional space in the Business Park, Tenant’s Pro Rata Share shall be recomputed by dividing the total rentable square footage of space then being leased by Tenant (including the additional space) by the Rentable Area and the resulting percentage figure shall then become Tenant’s Pro Rata Share.
 
(d)   Landlord’s Accountants ” means the individual or firm employed by Landlord from time to time to keep the books and records for the Business Park and/or to prepare the federal and state income tax returns for Landlord with respect to the Business Park, which shall be certified to by an appropriate representative of Landlord.
 
(e)   Operating Expenses ” means all operating expenses of any kind or nature determined in accordance with sound accounting practice as applied to the operation and maintenance of first class office buildings in the greater metropolitan Denver, Colorado area, including without limitation:
 
(i)   all real property taxes and assessments levied against the Business Park and/or Common Areas by any governmental or quasi-governmental authority, including any taxes, impositions, or assessments of a nature not presently in effect and subsequently levied on the Business Park and/or Common Areas as a result of the use, ownership or operation of the Business Park and/or Common Areas, or for any other reason, whether in lieu of, or in addition to, any current real estate taxes and assessments; provided , however , that (A) any taxes levied on the rentals of the Business Park shall be determined as if the Business Park were Landlord’s only property and, (B) in no event shall “taxes or assessments” include any net federal or state income taxes levied or assessed on Landlord unless such taxes are a specific substitute for real property taxes (such term shall, however, include gross tax on rentals); expenses incurred by Landlord for tax consultants and in contesting the amount or validity of any such taxes or assessments shall be also included in such computations (all of the foregoing are collectively referred to as “ Taxes ”);
 
(ii)   Costs of supplies, including, without limitation, costs of relamping all standard building tenant lighting as required from time to time;
 
(iii)   Costs in connection with obtaining and providing energy for the Business Park, including, without limitation, costs of propane, butane, natural gas, steam, electricity, solar energy and fuel oils, or coal;
 
(iv)   Costs of water and sanitary and storm drainage services;
 
(v)   Costs of janitorial and security services and of managing and operating any computer which controls building energy consumption, life safety equipment, fire alarms, and security access/response, when applicable;
 
(vi)   Costs of maintenance and non-structural repairs to any part of the interior or exterior of the Business Park (and its systems and equipment) or Common Areas, including, without limitation, costs under maintenance contracts and repairs and replacements of equipment used in connection with such maintenance and repair work;
 
 
 

 
(vii)   Costs of maintenance and replacement of landscaping; and costs of maintenance of parking areas, common areas, plazas and other areas used by tenants of the Business Park;
 
(viii)   Insurance premiums, including fire and all-risk coverage, together with loss of rent endorsement, the part of any claim required to be paid under the deductible portion of any insurance policy carried by Landlord in connection with the Business Park or Common Areas or their component parts (where Landlord is unable to obtain insurance without such deductible from a major insurance carrier at reasonable rates), public liability insurance, and any other insurance carried by Landlord on the Business Park or Common Area or their component parts (all such insurance shall be in such amounts as Landlord may reasonably determine);
 
(ix)   Labor costs, including wages and other payments, costs to Landlord of workmen’s compensation and disability insurance, payroll taxes, welfare fringe benefits, and all legal fees and other costs or expenses incurred in resolving any labor dispute;
 
(x)   Professional building management fees;
 
(xi)   Legal, accounting, inspection and other consultation fees incurred in the ordinary course of operating the Business Park and in making the computations required hereunder;
 
(xii)   Costs of capital improvements and structural repairs and replacements made in or to the Business Park and/or Common Areas in order to conform to new, or changes in, existing laws, ordinances, rules, regulations or orders of any governmental or quasi-governmental authority having jurisdiction over the Business Park and/or Common Areas effective after the Effective Date (“ Required Capital Improvements ”); costs of any capital improvements and structural repairs and replacements designed primarily to reduce Operating Expenses (“ Cost Savings Improvements ”); and a reasonable annual reserve for all other capital improvements and structural repairs and replacements reasonably necessary to permit Landlord to maintain the Business Park as a first class office building.  The expenditures for Required Capital Improvements shall be amortized at a market rate of return over their useful life, as reasonably determined by Landlord’s Accountants.  The amortized amount of any Cost Savings Improvement shall be equal to the annual reduction in Operating Expenses as a result thereof; and
 
(xiii)   Costs associated with the generator generally serving the tenants of the Business Park.

(f)   “Operating Expenses” shall not include:  (i) costs of any work, including painting, decorating and tenant-change work, which Landlord performs for any tenant or in any tenant’s space in the Business Park other than work of a kind and scope which Landlord would be obligated to furnish to all tenants whose leases contain a rental adjustment provision and services provision similar to those herein; (ii) costs of repairs or other work occasioned by fire, windstorm or other insured casualty, except for the deductible portion (which shall be included in Operating Expenses), to the extent of insurance proceeds received; (iii) leasing commissions, advertising expenses and other costs incurred in leasing space in the Business Park; (iv) costs of repairs or rebuilding necessitated by condemnation; (v) interest on borrowed money or debt amortization, except as specifically set forth above; or (vi) depreciation on the Business Park.
 
4.2   Adjustment Mechanism .
 
(a)   As provided below, for each calendar year of the Lease Term (including the calendar year in which the Lease Term commences) Tenant shall pay to Landlord Tenant’s Pro Rata Share of the amount of the increase in the Operating Expenses for the calendar year just completed over Base Operating Expenses and shall also pay to Landlord monthly during each calendar year following the year in which the Lease Term commences, an estimate of Tenant’s Pro Rata Share of the amount by which actual Operating Expenses attributable to the calendar year during which such amounts are paid will exceed the Base Operating Expenses.  As soon as practicable after the end of each calendar year during the Lease Term, beginning with the end of the calendar year in which the Lease Term commences, Landlord shall submit to Tenant a statement setting forth:  (a) the amount of the increase, if any, in the amount of Tenant’s Pro Rata Share for the calendar year just completed over Base Operating Expenses; and (b) for each calendar year following the year in which the Lease Term commences, the difference, if any, between the amount of Tenant’s actual Pro Rata Share of the Operating Expenses for the calendar year just completed and the estimated amount of Tenant’s Pro Rata Share of the increases paid for that year.  Each statement shall also set forth the amount of the estimated increases in Operating Expenses over Base Operating Expenses for the new calendar year computed in accordance with the foregoing.  To the extent that the amount of Tenant’s Pro Rata Share of actual increases for the period covered by such statement is higher than Tenant’s payments (if any) of its Pro Rata Share of the estimated increases  for the calendar year just completed, Tenant shall pay to Landlord the difference in cash within 30 days following receipt of the statement from Landlord.  If, however, the amount of Tenant’s Pro Rata Share of the actual increases for the period covered by the statement is less than the amount of Tenant’s Pro Rata Share of the estimated increases paid during the calendar year just completed, Landlord shall credit the difference against the Tenant’s estimated payment for such Operating Expenses for the current year.  Until Tenant receives each such statement, Tenant shall continue to pay the amount required for the prior year, but Tenant shall commence payment to Landlord of the monthly installments of such estimates on the basis of the statement beginning on the first day of the month following the month in which Tenant receives such statement.  Tenant shall also pay to Landlord or deduct from the rent, as the case may be, the difference, if any, between the monthly installments of rent, so adjusted, for the new year and the monthly installments of rent actually paid during the new year.
 
 
 

 
(b)   Tenant’s obligation with respect to payment of its Pro Rata Share of increases shall survive the expiration or early termination of this Lease and Landlord shall have the right to retain the Security Deposit, or so much of it as it deems necessary, to secure such payment attributable to the year in which this Lease terminates.  If this Lease is in effect for less than a full calendar year during the first or last calendar year of the Lease Term, Tenant’s Pro Rata Share for such partial year shall be calculated by proportionately reducing the Base Operating Expenses to reflect the number of months in such year during which this Lease was in effect (the “ Adjusted Base Operating Expenses ”), and the Adjusted Base Operating Expenses shall then be compared with the actual Operating Expenses for that partial year to determine the amount, if any, of any increases in the actual Operating Expenses for such partial year over the Adjusted Base Operating Expenses.
 
(c)   Tenant shall have the right within 30 days after a statement of actual Operating Expenses for a particular calendar year has been rendered by Landlord, upon notice to Landlord, at Tenant’s sole cost, to examine Landlord’s books and records relating to the determination of those Operating Expenses.  Unless Tenant objects to the resulting rental adjustment within the 30-day period, the statement and adjustment shall be deemed conclusive.
 
(d)   In computing increases, any special assessments shall be deemed payable in such number of installments as permitted by law, whether or not actually so paid.  If the Business Park has not been fully assessed as a completed structure, then for the purposes of computing the Operating Expenses for any adjustment herein, Taxes shall be adjusted by Landlord as of the date on which the adjustment is to be made to reflect full completion of the Business Park including installation of tenant finish work for all Rentable Area.  If any lease entered into by Landlord with any tenant in the Business Park is on a so-called “net” basis, or provides for a separate basis of computation for any Operating Expenses, then, to the extent that Landlord’s Accountants determine that an adjustment should be made in making the computations herein, Landlord’s Accountants shall be permitted to modify the computation of Base Operating Expenses, Rentable Area, and Operating Expenses for a particular Lease Year in order to eliminate or otherwise modify any such expenses which are paid for in whole or in part by such tenant.  In making the computations above Landlord’s Accountants shall also be permitted to make such adjustments and modifications to the provisions of this Section as shall be reasonably necessary to achieve the intention of the parties.  If the Rentable Area is not fully occupied during a Lease Year, Landlord’s Accountants shall reasonably adjust those Operating Expenses which are affected by the occupancy rates for that Lease Year, or portion thereof, as the case may be, to reflect 95% occupancy.
 
(e)   The Rentable Area, the Base Rent, and Tenant’s Pro Rata Share may be appropriately recalculated and adjusted in the event that the Business Park and/or Premises are measured upon completion and it is determined that the square footage of the Business Park and/or Premises differs from those figures set forth in Section 1 of this Lease.
 
 
 
 
 

 
5.   SERVICES .
 
5.1   Landlord’s General Services .  Subject to Section 5.4 below, Landlord agrees, without charge except as provided in this Lease, and in accordance with those standards prevailing from time to time for the Building:  (a) to furnish running water at those points of supply for general use of tenants of the Building, heated and cooled air, electrical current, janitorial services and such maintenance as Landlord reasonably deems necessary for all Common Areas; (b) to furnish, during Ordinary Business Hours (as defined below) such heated or cooled air to the Premises as may, in the reasonable judgment of Landlord, be required for the comfortable use and occupancy of the Premises, provided that the recommendations of Landlord’s engineer regarding occupancy and use of the Premises are complied with by Tenant, and cooled air is used only for standard office use; (c) if the Building is equipped with elevators, to provide, during Ordinary Business Hours, non-exclusive use of a passenger elevator for access to and from the Premises (with at least one such elevator being available at all times except in the case of emergencies or repair); (d) to provide janitorial services for the Premises to the extent of the Standard Tenant Finish items contained therein (including such window washing of the outside of exterior windows as may, in the judgment of Landlord, be reasonably required), but unless and until Building standard changes, such janitorial services will be provided after business hours only on Monday through Friday, excluding Legal Holidays; and (e) to cause electric power to be supplied to the Premises for building standard fluorescent lighting and for general purpose 120 volt single-phase plug-in power for ordinary office usage, but in any event, the combination of both are not to exceed 5 watts per useable square foot per National Electric Code connected load requirements (“ Permitted Power ”).  “ Ordinary Business Hours ” shall be 7:00 a.m. to 6:00 p.m. Monday through Friday and 8:00 a.m. to 12:00 p.m. on Saturdays, Legal Holidays excepted.  “ Legal Holidays ” shall mean New Year’s Day, Presidents’ Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, Christmas Day, and such other national holidays as may be established by the federal government.
 
5.2   Excess and After-Hours Usage .  To the extent (a) electric current in excess of Permitted Power is used for any machinery, equipment or otherwise in the operation of the Premises, (b) electric current is used in the Premises at times other than Ordinary Business Hours, or (c) any use of machinery or equipment would overload Building facilities (or would result in an imbalance in the HVAC systems designed for the Building), then, and in each such case, Tenant’s rent may be increased by Landlord in such amounts as Landlord reasonably determines necessary to cover the increased cost resulting from such uses, including additional air conditioning costs and other ancillary costs incurred by Landlord attributable to any such uses (including costs required to make such service available to the Premises).  Such increases shall be paid monthly with the monthly rental installment.  Tenant shall also reimburse Landlord for all costs of modifying the Building HVAC system and/or extending or modifying any electrical service as Landlord may reasonably determine is necessary as a result of Tenant’s excess usage.  Before installation or use by Tenant of any equipment other than that which utilizes only Permitted Power, or operation of the Premises for extended hours on an ongoing basis, Tenant shall notify Landlord of such intended installation or use, and obtain Landlord’s consent.  In addition to the foregoing, Landlord may, at Landlord’s option, then or at any time thereafter, require Tenant, at Tenant’s sole cost and expense, to install a check meter to assist in determining the amount by which Tenant’s rent should be increased.  If Tenant desires electric current or heated or cooled air to the Premises during periods other than Ordinary Business Hours, Landlord will use reasonable efforts to supply such services, but at the expense of Tenant at Landlord’s standard rate as reasonably established by it from time to time for such services.  Not less than 48 hours prior notice shall be given to Landlord of Tenant’s desire for these additional services.  Tenant shall also pay the cost of replacing light bulbs or tubes used in all non-standard Building lighting in the Premises.
 
5.3   Tenant’s Extra Janitorial Services .  If Tenant requests janitorial services other than those standard services provided to other tenants of the Building, Tenant shall separately pay for such service monthly upon billing by Landlord, or, at Landlord’s option, Tenant shall separately contract for such services with the same company furnishing janitorial services to Landlord.  Tenant shall have the right, subject to Landlord’s prior written consent and such rules, regulations and requirements as Landlord may reasonably impose (including, but not limited to, the requirement that such janitors belong to a trade union), to employ janitors other than those employed by Landlord to perform such additional services.
 
 
 

 
5.4   Delays in Furnishing Services .  Landlord shall not be liable for failure to supply heating, air conditioning, elevator, electrical, janitorial, lighting or other services during any period as long as Landlord is using reasonable diligence to supply such services, or during any period Landlord is required to reduce or curtail such services pursuant to any applicable laws, rules or regulations, including utility regulations, it being agreed that such services may be discontinued, reduced or curtailed (either temporarily or permanently) at such times as may be necessary by reason of accident, repairs, alterations, improvements, strikes, lockouts, riots, acts of God, application of applicable laws, rules and regulations, or any other happening beyond the control of Landlord.  In the event of an interruption, reduction, or discontinuance of services (either temporary or permanent) as set forth above, Landlord shall neither be liable for damages to person or property as a result thereof nor shall the occurrence of any such event in any way be construed as an eviction of Tenant, cause or permit an abatement, reduction, or setoff of rent, or operate to release Tenant from any of its obligations under this Lease.
 
5.5   Notice to Landlord .  Tenant shall promptly notify the Landlord (or its representative) of any accidents or defects in the Building of which Tenant becomes aware, including defects in pipes, electric wiring, and HVAC equipment, and provide Landlord with prompt notification of any condition of which it becomes aware which may cause injury or damage to the Building or any person or property therein.
 
6.   SECURITY DEPOSIT .  On or before the Effective Date, Tenant shall deposit with Landlord, and will keep on deposit at all times during the Lease Term, the amount set forth in Section 1.7 , as security for the payment by Tenant of all rent and other amounts agreed to be paid and for the performance of all the terms and conditions of this Lease to be performed by Tenant.  If Tenant shall be in default in the performance of any provision of this Lease, Landlord shall have the right to use the deposit, or so much as is necessary, in payment of any rent or other amounts in default, reimbursement of expenses incurred by Landlord, and payment of damages incurred by Landlord by reason of Tenant’s default.  In such event, Tenant shall, on written demand of Landlord, promptly remit to Landlord a sufficient amount in cash to restore the deposit to its original amount.  If the deposit is not utilized, it (or as much thereof as has not been utilized for such purposes) shall be refunded to Tenant, or to whoever is then the holder of Tenant’s interest in this Lease, without interest, upon full performance of this Lease by Tenant.  Landlord shall have the right to commingle the deposit with other funds of Landlord and need not keep it in a trust account.  Landlord may deliver the deposit to the purchaser of Landlord’s interest in the Premises in the event such interest is sold, and Landlord shall then be discharged from further liability with respect to it.  If claims of Landlord exceed the deposit, Tenant shall remain liable for the balance of such claims.
 
7.   CHARACTER OF OCCUPANCY .
 
7.1   Permitted Use .  Tenant shall occupy the Premises only for the purpose set forth in Section 1.5 and for no other purpose.
 
7.2   Prohibited Uses .  Tenant shall not occupy or use the Premises (or permit the use or occupancy of the Premises) for any purpose or in any manner which: (a) is unlawful or in violation of any Law or Environmental Law (both as defined below); (b) may be dangerous to persons or property or which may increase the cost of, or invalidate, any policy of insurance carried on the Building or covering its operations; (c) is contrary to or prohibited by the terms and conditions of this Lease or the rules of the Building set forth in Section 22 ; or (d) would tend to create or continue a nuisance.  As used herein, “ Law ” or “ Laws ” shall mean all laws, ordinances, rules, regulations, other requirements, orders, rulings or decisions adopted or made by any governmental body, agency, department or judicial authority having jurisdiction over the Building, the Premises or Tenant’s activities at the Premises and any covenants, conditions or restrictions of record which affect the Real Property.
 
7.3   Compliance with Environmental Laws .  Tenant shall comply with all Environmental Laws pertaining to Tenant’s occupancy and use of the Premises and concerning the proper storage, handling and disposal of any Hazardous Material introduced to the Premises, the Building or the Real Property by Tenant or other occupants of the Premises, or their employees, servants, agents, contractors, customers or invitees.  As used herein, “ Environmental Laws ” shall mean all Laws governing the use, storage, disposal or generation of any Hazardous Material, including the Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended, and the Resource Conservation and Recovery Act of 1976, as amended, and “ Hazardous Material ” shall mean such substances, material and wastes which are or become regulated under any Environmental Law; or which are classified as hazardous or toxic under any Environmental Law; and explosives and firearms, radioactive material, asbestos, and polychlorinated biphenyls.  Landlord shall comply with all Environmental Laws applicable to the Building other than those to be complied with by Tenant pursuant to the preceding sentence.  Tenant shall not generate, store, handle or dispose of any Hazardous Material in, on, or about the Real Property without the prior written consent of Landlord, which may be withheld in Landlord’s sole discretion, except that such consent shall not be required to the extent of Hazardous Material packaged and contained in office products for consumer use in general business offices in quantities for ordinary day-to-day use provided such use does not give rise to, or pose a risk of, exposure to or release of Hazardous Material.  In the event that Tenant is notified of any investigation or violation of any Environmental Law arising from Tenant’s activities at the Premises, Tenant shall immediately deliver to Landlord a copy of such notice.  In such event or in the event Landlord reasonably believes that a violation of Environmental Law exists, Landlord may conduct such tests and studies relating to compliance by Tenant with Environmental Laws or the alleged presence of Hazardous Material upon the Premises as Landlord deems desirable, all of which shall be completed at Tenant’s expense.  Landlord’s inspection and testing rights are for Landlord’s own protection only, and Landlord has not, and shall not be deemed to have assumed any responsibility to Tenant or any other party for compliance with Environmental Laws, as a result of the exercise, or non-exercise of such rights.  Tenant hereby indemnifies, and agrees to defend, protect and hold harmless, Landlord, the Building’s property manager, any holder of a mortgage and/or deed of trust affecting all or any portion of the Building (“ Mortgagee ”), and each of their respective officers, directors, members, managers, partners, affiliates, employees, agents and representatives (collectively, together with Landlord, the “ Indemnitees ”) from any and all loss, claim, demand, action, expense, liability and cost (including attorneys’ fees and expenses) arising out of or in any way related to the presence of any Hazardous Material introduced to the Premises or the Business Park during the Lease Term (or any extension thereof) by Tenant or other occupants of the Premises, or their employees, servants, agents, contractors, customers or invitees.  In case of any action or proceeding brought against the Indemnitees by reason of any such claim, upon notice from Landlord, Tenant covenants to defend such action or proceeding by counsel chosen by Landlord, in Landlord’s sole discretion.  Landlord reserves the right to settle, compromise or dispose of any and all actions, claims and demands related to the foregoing indemnity.  If any Hazardous Material is released, discharged or disposed of on or about the Real Property and such release, discharge or disposal is not caused by Tenant or other occupants of the Premises, or their employees, servants, agents, contractors customers or invitees, such release, discharge or disposal shall be deemed casualty damage under Section 12 to the extent that the Premises are affected thereby; in such case, Landlord and Tenant shall have the obligations and rights respecting such casualty damage provided under such Section 12 .
 
 
 

 
7.4   ADA Compliance .  Landlord and Tenant acknowledge that the Americans With Disabilities Act of 1990 (42 U.S.C §12101 et seq.) and regulations and guidelines promulgated thereunder, as all of the same may be amended and supplemented from time to time (collectively referred to herein as the “ ADA ”) establish requirements for business operations, accessibility and barrier removal, and that such requirements may or may not apply to the Premises and the Building depending on, among other things: (a) whether Tenant’s business is deemed a “public accommodation” or “commercial facility”, (b) whether such requirements are “readily achievable”, and (c) whether a given alteration affects a “primary function area” or triggers “path of travel” requirements.  The parties hereby agree that: (1) Landlord shall be responsible for ADA Title III compliance in the Common Areas, except as provided below, (2) Tenant shall be responsible for ADA Title III compliance in the Premises, including any leasehold improvements or other work to be performed in the Premises under or in connection with this Lease, (3) Landlord may perform, or require that Tenant perform, and Tenant shall be responsible for the cost of, ADA Title III “path of travel” requirements triggered by Tenant Alterations in the Premises, and (4) Landlord may perform, or require Tenant to perform, and Tenant shall be responsible for the cost of, ADA Title III compliance in the Common Areas necessitated by the Building being deemed to be a “public accommodation” instead of a “commercial facility” as a result of Tenant’s use of the Premises.  Tenant shall be solely responsible for requirements under Title I of the ADA relating to Tenant’s employees.
 
8.   ALTERATIONS AND REENTRY BY LANDLORD .
 
8.1   No Landlord Obligation .  Unless otherwise expressly provided herein Landlord shall not be required to make any modifications, improvements or repairs of any kind or character to the Premises during the Lease Term, except such repairs to the base, shell and core of the Building, the roof, building standard HVAC, electrical and plumbing facilities and Common Areas as may be deemed necessary by Landlord for normal maintenance operations of the Building and Common Areas (so long as the need for such repairs is not the result of Tenant’s negligence) and provided such obligation shall not include the interior surface of exterior walls, windows, doors, or interior plate glass.   Tenant agrees that for the purposes of completing or making repairs or alterations in any portion of the Building, Landlord may use one or more of the street entrances, the halls, passageways and elevators of the Building.  Landlord shall have no liability to Tenant for any damage, inconvenience or interference with Tenant’s use of the Premises as a result of performing any such work.
 
8.2   Entry by Landlord .  Tenant shall permit Landlord to enter the Premises at any time upon reasonable notice to Tenant to show the Premises for leasing or to examine and inspect the same or, if Landlord so elects, to perform any obligations of Tenant hereunder which Tenant shall fail to perform or to perform such cleaning, maintenance, janitorial services, repairs, additions or alterations as Landlord may deem necessary or proper for the safety, improvement or preservation of the Premises or of other portions of the Building and Common Areas or as may be required by governmental authorities.  Any such reentry shall not constitute an eviction or entitle Tenant to abatement of rent.  Landlord shall have the right at its election to make such alterations or changes in other portions of the Building and Common Areas as Landlord may from time to time deem necessary and desirable as long as such alterations and changes do not unreasonably interfere with Tenant’s use and occupancy of the Premises.
 
9.   ALTERATIONS AND REPAIRS BY TENANT .
 
9.1   Alterations .  Tenant shall not make any alterations in or additions to the Premises (subsequent to the work in the Premises performed by Landlord in accordance with Section 3.2 , if any), including installation of any equipment or machinery which requires modification of or additions to any existing electrical outlet or which would increase Tenant’s usage of electricity beyond Permitted Power (all such alterations being referred to collectively as “ Alterations ”), without in each instance first obtaining the prior written consent of Landlord.  As to any Alterations to which Landlord has consented, Tenant, at its expense, shall pay all engineering and design costs incurred by Landlord attributable to the Alterations and obtain all required governmental permits and certificates, and cause such Alterations to be completed in compliance therewith and all Laws and all applicable requirements of Landlord’s insurance carriers.  All Alterations shall be performed in a good and workmanlike manner, using new materials and equipment equal or better in quality to the original installations in the Premises.  All repair and maintenance work required to be performed by Tenant pursuant to the provisions of Section 9.2 below, and any Alterations permitted by Landlord pursuant hereto, shall be done at Tenant’s expense by Landlord’s employees or, with Landlord’s consent, by persons requested by Tenant and authorized in writing by Landlord; provided , however , if such work is performed by persons who are not employees of Landlord, Tenant shall pay to Landlord, upon receipt of billing therefor, the costs for supervision and control of such persons as Landlord may determine to be necessary.  If Landlord authorizes persons requested by Tenant to perform such work, prior to the commencement of any such work, Tenant shall on request deliver to Landlord certificates issued by insurance companies qualified to do business in Colorado evidencing that workmen’s compensation, public liability insurance and property damage insurance (all in amounts, with companies and on forms satisfactory to Landlord) are in force and effect and maintained by all contractors and subcontractors engaged by Tenant to perform such work.  All such policies shall name Landlord (and any Mortgagee) as an additional insured.  Each such certificate shall provide that the same may not be canceled or modified without 30 days prior written notice to Landlord and such Mortgagee.  Further, Landlord or such Mortgagee shall have the right to post notices in the Premises in locations which will be visible by parties performing any work on the Premises stating that Landlord is not responsible for the payment for such work and setting forth such other information as Landlord may deem necessary.  Alterations, repair and maintenance work shall be performed in a manner which will not unreasonably interfere with, delay, or impose any additional expense upon Landlord in the maintenance or operation of the Building or upon other tenants’ use of their premises.
 
 
 

 
9.2   Repairs and Maintenance .  Tenant shall, at Tenant’s expense, keep the Premises (including, without limitation, the interior surfaces of the ceilings, walls and floors, all doors and interior windows, and all plumbing pipes, electrical fixtures, furnishings and equipment) in good order, condition and repair and in accordance with all Laws and Environmental Laws, and in an orderly state, loss by fire or other casualty or ordinary wear excepted.  Subject to Landlord’s obligation to make repairs in the event of certain casualties as set forth in Section 14 , Landlord shall have no obligation for the repair or replacement of any portion of the interior of the Premises which is damaged or wears-out during the Lease Term regardless of cause, including, without limitation, carpeting, draperies, window coverings, interior plate glass, wallcoverings, painting, or any of Tenant’s property or betterments in the Premises.
 
9.3   Part of Premises .  All Alterations and permanent fixtures installed in the Premises, including all partitions, paneling, carpeting, drapes or other window covering, and light fixtures (but not including movable office furniture not permanently attached to the Building), shall be deemed a part of the real estate and the property of Landlord and shall remain upon and be surrendered with the Premises without disturbance or injury at the end of the Lease Term, unless Landlord gives Tenant notice not later than 15 days before the end of the Lease Term to have Tenant remove all or any of the Alterations, and which event Tenant shall promptly remove at Tenant’s expense the Alterations specified by Landlord and restore the Premises to their prior condition, reasonable wear and tear excepted.
 
10.   MECHANICS’ LIENS; TENANT- AND LEASE-SPECIFIC TAXES .
 
10.1   Mechanic’s Liens .  Tenant shall cause to be paid all costs for work done or caused to be done by Tenant on the Premises (including work performed by Landlord or its contractor at Tenant’s request following commencement of the Lease Term) of a character which could result in liens on Landlord’s interest.  Tenant will keep the Premises free and clear of all mechanics’ and other liens on account of work done for Tenant or persons claiming under it, excluding tenant finish work performed by Landlord pursuant to this Lease, if any.  Tenant agrees to indemnify and defend Landlord with respect to all liability, loss, damage, cost or expense, including attorneys’ fees, on account of any claims of any nature whatsoever, including claims or liens of laborers or materialmen or others, for work performed for or materials or supplies furnished to Tenant or persons claiming under Tenant.  Should any liens be filed or recorded against the Premises and/or the Building or any action affecting the title thereto be commenced as a result of such work, Tenant shall cause such liens to be removed of record within 5 days after notice from Landlord.  If Tenant desires to contest any claim or lien, Tenant shall furnish to Landlord adequate security of at least 150% of the amount of the claim, plus estimated costs and interest, or, at Landlord’s option, file a bond and obtain a release of the lien pursuant to Law.  If a final judgment establishing the validity or existence of any such lien is entered, Tenant shall pay and satisfy it at once.  If Tenant shall be in default in paying any charge for which a mechanic’s lien or suit to foreclose the lien has been recorded or filed, and shall not have given Landlord security as provided above, Landlord may (but without being required) pay such lien or claim and any costs, and the amount so paid, together with reasonable attorneys’ fees incurred in connection therewith, shall be immediately due from Tenant to Landlord.
 
10.2   Tenant or Lease-Specific Taxes .  Tenant shall pay all sales and use taxes imposed as the result of Tenant’s business conducted on the Premises and all personal property taxes assessed against personal property of Tenant situated thereon during the Lease Term.
 
11.   SUBLETTING AND ASSIGNMENT .
 
11.1   Assignment and Subletting .
 
(a)   Without the prior written consent of Landlord, which may be withheld in Landlord’s sole discretion, Tenant may not sublease, assign, mortgage, pledge, hypothecate or otherwise transfer or permit the transfer of this Lease or the encumbering of Tenant’s interest therein in whole or in part, by operation of Law or otherwise or permit the use or occupancy of the Premises, or any part thereof, by anyone other than Tenant, provided , however , if Landlord chooses not to recapture the space proposed to be subleased or assigned as provided in Section 11.2 , Landlord shall not unreasonably withhold its consent to a subletting or assignment under this Section 11.1 .  Tenant agrees that the provisions governing sublease and assignment set forth in this Section 11 shall be deemed to be reasonable.  If Tenant desires to enter into any sublease of the Premises or assignment of this Lease, Tenant shall deliver written notice thereof to Landlord (“ Tenant’s Notice ”), together with the identity of the proposed subtenant or assignee and the proposed principal terms thereof and financial and other information sufficient for Landlord to make an informed judgment with respect to such proposed subtenant or assignee at least sixty (60) days prior to the commencement date of the term of the proposed sublease or assignment.  If Tenant proposes to sublease less than all of the Rentable Area of the Premises, the space proposed to be sublet and the space retained by Tenant must each be a marketable unit as reasonably determined by Landlord and otherwise in compliance with all Laws.  Landlord shall notify Tenant in writing of its approval or disapproval of the proposed sublease or assignment or its decision to exercise its rights under Section 11.2 within thirty (30) days after receipt of Tenant’s Notice (and all required information).  Tenant shall submit for Landlord’s approval (which approval shall not be unreasonably withheld) any advertising which Tenant or its agents intend to use with respect to the space proposed to be sublet.
 
 
 

 
(b)   With respect to Landlord’s consent to an assignment or sublease, Landlord may take into consideration any factors which Landlord may deem relevant, and the reasons for which Landlord’s denial shall be deemed to be reasonable shall include, without limitation, the following:
 
(i)   the business reputation or creditworthiness of any proposed subtenant or assignee is not acceptable to Landlord; or
 
(ii)   in Landlord’s reasonable judgment the proposed assignee or subtenant would diminish the value or reputation of the Building or Landlord; or
 
(iii)   any proposed assignee’s or subtenant’s use of the Premises would violate Section 7 of the Lease or would violate the provisions of any other leases of tenants in the Business Park;
 
(iv)   the proposed assignee or subtenant is either a governmental agency, a school or similar operation, or a medical related practice; or
 
(v)   the proposed subtenant or assignee is a bona fide prospective tenant of Landlord in the Business Park as demonstrated by a written proposal dated within ninety (90) days prior to the date of Tenant’s request; or
 
(vi)   the proposed subtenant or assignee would materially increase the estimated pedestrian and vehicular traffic to and from the Premises and the Business Park.
 
In no event shall Landlord be obligated to consider a consent to any proposed assignment of the Lease which would assign less than the entire Premises.  In the event Landlord wrongfully withholds its consent to any proposed sublease of the Premises or assignment of the Lease, Tenant’s sole and exclusive remedy therefor shall be to seek specific performance of Landlord’s obligations to consent to such sublease or assignment.

(c)   Any sublease or assignment shall be expressly subject to the terms and conditions of this Lease.  Any subtenant or assignee shall execute such documents as Landlord may reasonably require to evidence such subtenant or assignee’s assumption of the obligations and liabilities of Tenant under this Lease.  Tenant shall deliver to Landlord a copy of all agreements executed by Tenant and the proposed subtenant and assignee with respect to the Premises.  Landlord’s approval of a sublease,  assignment, hypothecation, transfer or third party use or occupancy shall not constitute a waiver of Tenant’s obligation to obtain Landlord’s consent to further assignments or subleases, hypothecations, transfers or third party use or occupancy.
 
(d)   For purposes of this Section 11 , an assignment shall be deemed to include a change in the majority control of Tenant, resulting from any transfer, sale or assignment of shares of stock of Tenant occurring by operation of Law or otherwise if Tenant is a corporation whose shares of stock are not traded publicly.  If Tenant is a partnership, any change in the partners of Tenant shall be deemed to be an assignment.
 
 
 

 
11.2   Recapture .  Landlord shall have the option to exclude from the Premises covered by this Lease (“ recapture ”), the space proposed to be sublet or subject to the assignment, effective as of the proposed commencement date of such sublease or assignment.  If Landlord elects to recapture, Tenant shall surrender possession of the space proposed to be subleased or subject to the assignment to Landlord on the effective date of recapture of such space from the Premises.  Effective as of the date of recapture of any portion of the Premises pursuant to this section, the Base Rent and Tenant’s Pro Rata Share shall be adjusted accordingly.
 
11.3   Excess Rent .  Tenant shall pay Landlord on the first day of each month during the term of the sublease or assignment, fifty percent (50%) of the amount by which the sum of all rent and other consideration (direct or indirect) due from the subtenant or assignee for such month exceeds: (a) that portion of the Rent due under this Lease for said month which is allocable to the space sublet or assigned; and (b) the following costs and expenses for the subletting or assignment of such space: (i) brokerage commissions and attorneys’ fees and expenses, (ii) the actual costs paid in making any improvements or substitutions in the Premises required by any sublease or assignment; and (iii) “free rent” periods, costs of any inducements or concessions given to subtenant or assignee, moving costs, and other amounts in respect of such subtenant’s or assignee’s other leases or occupancy arrangements.  All such costs and expenses shall be amortized over the term of the sublease or assignment pursuant to sound accounting principles.
 
11.4   Tenant Liability .  In the event of any sublease or assignment, whether or not with Landlord’s consent, Tenant shall not be released or discharged from any liability, whether past, present or future, under this Lease, including any liability arising from the exercise of any renewal or expansion option, to the extent such exercise is expressly permitted by Landlord.  Tenant’s liability shall remain primary, and in the event of default by any subtenant, assignee or successor of Tenant in performance or observance of any of the covenants or conditions of this Lease, Landlord may proceed directly against Tenant without the necessity of exhausting remedies against said subtenant, assignee or successor.  After any assignment, Landlord may consent to subsequent assignments or subletting of this Lease, or amendments or modifications of this Lease with assignees of Tenant, without notifying Tenant, or any successor of Tenant, and without obtaining its or their consent thereto, and such action shall not relieve Tenant or any successor of Tenant of liability under this Lease.  Whether or not Landlord grants consent to such sublease or assignment, Tenant shall pay all reasonable attorneys’ fees and expenses incurred by Landlord with respect to such assignment or sublease.  In addition, if Tenant has any options to extend the term of this Lease or to add other space to the Premises, such options shall not be available to any subtenant or assignee, directly or indirectly without Landlord’s express written consent, which may be withheld in Landlord’s sole discretion.
 
11.5   Assumption and Attornment .  If Tenant shall assign this Lease as permitted herein, the assignee shall expressly assume all of the obligations of Tenant hereunder in a written instrument satisfactory to Landlord and furnished to Landlord not later than fifteen (15) days prior to the effective date of the assignment.  If Tenant shall sublease the Premises as permitted herein, Tenant shall, at Landlord’s option, within fifteen (15) days following any request by Landlord, obtain and furnish to Landlord the written agreement of such subtenant to the effect that the subtenant will attorn to Landlord and will pay all subrent directly to Landlord.
 
12.   DAMAGE TO PROPERTY .
 
12.1   Waiver of Claims .  Tenant shall not hold or attempt to hold the Indemnitees liable for any injury or damage, either proximate or remote, occurring through or caused by fire, water, steam, or any repairs, alterations, injury, accident, or any other cause, to any furniture, fixtures, Tenant improvements, or other personal property of Tenant kept or stored in the Premises or in other parts of the Building and/or Common Areas or to Tenant’s business or loss of income from it, whether by reason of the negligence or default of the owners or occupants thereof or any other person or otherwise, and keeping or storing of all property of Tenant in the Building, Common Areas and/or Premises shall be at the sole risk of Tenant.  Tenant waives all claims with respect to damage to property or personal injury, except with respect to personal injury claims arising out of the affirmative negligent acts or intentional misconduct of Landlord or its agents or employees.  Tenant hereby waives any consequential damages, compensation or claims for inconvenience or loss of business, rents, or profits as a result of such injury or damage, whether or not caused by the willful and wrongful act of any of the Indemnitees.
 
 
 

 
12.2   Indemnity .  Subject to provisions of Section 13 below, Tenant agrees to indemnify, defend, and save the Indemnitees harmless of and from all liability, loss, damages, costs, or expenses, including attorneys’ fees, on account of claims of third parties (excluding Tenant, Tenant’s agents or employees) arising from Tenant’s occupancy of the Premises, from the undertaking of any Alterations or repairs to the Premises, from the conduct of Tenant’s business on the Premises, or from any breach or default on the part of Tenant in the performance of any covenant or agreement on the part of Tenant to be performed pursuant to the terms of this Lease, or from any willful act or negligence of Tenant, its agents, contractors, servants, employees, customers or invitees, in or about the Premises or the Building or any part of either.
 
13.   INSURANCE AND WAIVER OF SUBROGATION .
 
13.1   Landlord’s Insurance .  Landlord shall maintain property insurance on the shell and core of the Building and on the Premises, Building and Common Areas to the extent of the tenant finish work therein, in such amounts, from such companies, and on such terms and conditions, including loss of rental insurance, as Landlord deems appropriate.  Landlord will not carry insurance of any kind on Tenant’s furniture and furnishings or on any fixture or equipment removable by Tenant under the provisions of this Lease or any other improvements installed in the Premises by or for Tenant other than the tenant finish work, and Landlord shall not be obligated to replace or repair any damage to them.
 
13.2   Tenant’s Insurance .  Tenant, at its expense, shall maintain throughout the Lease Term:
 
(a)   Special Form causes of loss insurance on all of Tenant’s property, improvements and betterments in the Premises including, without limitation, all furniture, fixtures, personal property, and all tenant finish, on a replacement cost basis;
 
(b)   Special Form causes of loss insurance covering Business Income in an amount equal to six-months rent;
 
(c)   A commercial general liability policy, including coverage for claims arising out of death, bodily injury and property damage, with a combined single limit of not less than $1,000,000 per occurrence and $2,000,000 aggregate. The aggregate shall apply on a “per location” basis. Such policy shall be primary and non-contributing with insurance carried by Landlord and the Indemnitees;
 
(d)   A business auto liability policy for claims arising from owned, hired or non-owed vehicles in an amount not less than $1,000,000 per accident;
 
(e)   Workers’ Compensation with statutory limits in accordance with the Laws of the State of Colorado and Employers’ Liability Insurance with limits of $500,000 for disease each employee/policy limit; and
 
(f)   Such other insurance or coverages as Landlord reasonably requires.
 
13.3   Form of Policies .  Each policy referred to in Section 13.2 shall satisfy the following requirements.  Each policy shall (a) name Landlord and the Indemnitees as additional insureds (except business income, business auto, Workers’ Compensation and Employers’ Liability Insurance), (b) be issued by an insurance company rated “A” or higher by A.M. Best, qualified to do business in Colorado, (c) provide for deductible amounts which, in no event, shall exceed $10,000 (d) shall provide that such insurance may not be canceled or amended without thirty (30) days’ prior written notice to Landlord (ten (10) days for non-payment), and (e) each policy of Special Form property insurance shall provide that the policy shall not be invalidated should the insured waive in writing prior to a loss, any or all rights of recovery against any other party for losses covered by such policies.  Tenant shall deliver to Landlord, certificates of insurance and appropriate endorsements and at Landlord’s request, copies of all policies and renewals thereof to be maintained by Tenant hereunder, not less than ten (10) days prior to the Lease Commencement Date and not less than ten (10) days prior to the expiration date of each policy.  The limits of such insurance shall not, under any circumstances, limit the liability of Tenant hereunder.
 
 
 

 
13.4   Waiver of Subrogation .  Notwithstanding anything to the contrary contained herein, Landlord and Tenant hereby mutually waive and release their respective rights of recovery against each other for (a) any loss to its property capable of being insured against by Special Form insurance coverage whether carried or not; and (b) all loss, cost, damage or expense arising out of or due to any interruption of business (regardless of the cause therefore), increased or additional operating costs or other costs or expenses, whether similar or dissimilar, which could be insured against under business interruption insurance (whether or not carried).    If required by the insurer, each party shall notify their insurers of these mutual waivers, obtain at its cost waivers of subrogation and any other special endorsements required by their insurer to evidence compliance with the aforementioned waiver.
 
14.   CASUALTY AND RESTORATION OF PREMISES .
 
14.1   Substantial Damage .  If the Premises or the Building are damaged by fire or other casualty so as to render the Premises wholly untenantable, and if a licensed architect selected by Landlord shall certify in writing to Landlord and Tenant within 60 days after the casualty that the Premises cannot, with the exercise of reasonable diligence, be made fit for occupancy within 180 days from the date of the casualty, then this Lease shall terminate as of the date of such casualty and Tenant shall thereupon surrender to Landlord the Premises and all interest therein, and Landlord may reenter and take possession of the Premises and remove Tenant therefrom.  Tenant shall pay rent, duly apportioned, up to the time of such termination.  If, however, the damage is such that the architect shall certify within the 60-day period that the Premises can be made tenantable within the 180-day period, then, except as provided in Section 14.3 below, Landlord shall repair such damage to the extent of the tenant finish work with all reasonable promptness.
 
14.2   Insubstantial Damage .  If the Premises, without the fault of Tenant, is slightly damaged by casualty, but not so as to render them wholly untenantable or to require a repair period in excess of 180 days, then Landlord, after receiving notice in writing of the occurrence of the casualty, shall, except as provided in Section 14.3  below, cause them to be repaired to the extent of the tenant finish work with all reasonable promptness.  If the estimated repair period as established in accordance with the provisions of Section 14.1 above exceeds 180 days, then the provisions of Section 14.1 shall control even if the Premises are not wholly untenantable.
 
14.3   Additional Rights .  If the Building is materially damaged by casualty so that the estimated repair period established in accordance with Section 14.1 exceeds 180 days, or if the damage is material and is not covered by Landlord’s casualty insurance (even if in either instance the Premises may not be affected, or if affected, can be repaired within the 180 day period), Landlord may, within 60 days of such casualty, in the exercise of its reasonable business judgment, determine not to reconstruct or rebuild the Building, in which event, upon notice in writing to that effect given by Landlord to Tenant within the 60-day period, Tenant shall pay the rent and other charges, properly apportioned up to the date of notice (or the date of the casualty if the Premises is untenantable by reason of such casualty), and this Lease shall terminate as of such date.
 
14.4   Rent Abatement .  Provided that the casualty is not due to the fault of Tenant, Tenant’s agents, servants or employees, Tenant’s rent shall abate during any such period of repair and restoration in the same proportion that the part of the Premises rendered untenantable bears to the whole.
 
15.   CONDEMNATION .  If all or substantially all of the Premises, or any portion of the Building and Common Areas which shall render the Premises untenantable, shall be taken by condemnation or similar proceeding, or shall be conveyed in lieu thereof, then this Lease, at the option of either Landlord or Tenant exercised by either party giving notice to the other of such termination within 30 days after such taking or conveyance, shall terminate and the rent shall be duly apportioned as of the date of such taking or conveyance.  Upon such termination, Tenant shall surrender to Landlord the Premises and all interest therein under this Lease, and if necessary Landlord may reenter and take possession of the Premises or remove Tenant therefrom.  If less than all of the Premises shall be taken by such proceeding, Landlord shall promptly repair the Premises as nearly as possible to their immediately prior condition unless Landlord elects not to reconstruct or rebuild as described in Section 14.3 .  Landlord shall receive the entire award or consideration for the portion of the Building so taken in the event of any such taking or conveyance, provided, so long as Landlord’s reward is not reduced as a result, Tenant shall be entitled to separately claim for Tenant’s trade fixtures, removable personal property, and any other amounts to which Tenant may be entitled (exclusive of any award for the value of Tenant’s leasehold interest).
 
 
 

 
16.   DEFAULT .
 
16.1   Event of Default .  The happening of any one or more of the following events shall constitute an “ Event of Default ”:
 
(a)   Tenant shall fail to pay when due Rent or any other amounts due hereunder and such default shall continue for five (5) business days after receipt of written notice from Landlord; provided , however , that Tenant shall not be entitled to more than two (2) notices of a delinquency in a monetary obligation during any Lease Year, and if thereafter any rent or other amount owing hereunder is not paid when due, an Event of Default shall be considered to have occurred even though no notice thereof is given;
 
(b)   Tenant shall abandon the Premises;
 
(c)   This Lease or the interest of Tenant shall be transferred to or shall pass to any other person or party except in accordance with Section 11 ;
 
(d)   This Lease or the Premises (or any part) shall be taken by execution or other process directed against Tenant, or shall be taken by any attachment by any creditor of or claimant against Tenant and is not be discharged or disposed of within 15 days after its levy;
 
(e)   The filing of any petition or the commencement of any case or proceeding by the Tenant under any provision or chapter of any federal or state bankruptcy law or any other federal or state law relating to insolvency or reorganization, the adjudication that the Tenant is insolvent or bankrupt, or the entry of an order for relief under any federal or state bankruptcy law with respect to Tenant;
 
(f)   The filing of any petition or the commencement of any case or proceeding described in Section 16.1(e) against the Tenant, unless such petition and all related proceedings are dismissed within 60 days from the filing, the filing of an answer by Tenant admitting the allegations of any such petition, or the appointment of or taking possession by a custodian, trustee or receiver for all or any assets of the Tenant, unless such appointment is vacated or dismissed within 60 days from the date of such appointment;
 
(g)   The insolvency of the Tenant or the execution by the Tenant of an assignment for the benefit of creditors, the convening by Tenant of a meeting of its creditors, or any class thereof, for purposes of effecting a moratorium upon or extension or composition of its debts, or the failure of the Tenant generally to pay its debts as they mature.
 
(h)   The admission in writing by Tenant or if Tenant is a partnership any partner of Tenant that Tenant is unable to pay its debts as they mature or it is generally not paying its debts as they mature;
 
(i)   Tenant shall fail to take possession of the Premises on the date the Lease Term commences;
 
(j)   Tenant shall fail to perform any of the other provision of this Lease on Tenant’s part to be performed, and such failure shall continue for a period of 30 days after written notice to Tenant, or if such failure cannot be reasonably be cured within the 30-day period but can be had within 75 days or less, Tenant shall not in good faith have commenced such cure within such 30-day period and shall not diligently proceed to completion; or
 
(k)   Tenant defaults, after any applicable notice and cure period, on any term or condition to be performed by it pursuant to any other written agreement by and between Landlord and Tenant.
 
 
 

 
16.2   Landlord’s Remedies .  Upon any one or more Events of Default, then Landlord shall at its election have the right, then or at any time thereafter, either:
 
(a)   To reenter and take possession of the Premises (or any part) without demand or notice, and repossess them and expel Tenant and those claiming through or under Tenant and remove the effects of both or either, using such force as may be necessary, without being liable for the prosecution thereof, or being deemed guilty of trespass and without prejudice to any remedies.  Should Landlord elect to reenter as provided herein, or should Landlord take possession pursuant to legal proceedings or pursuant to any notice provided for by law, Landlord may, from time to time, without terminating this Lease, relet the Premises (or any part), either alone or in conjunction with other portions of the Building, in Landlord’s or Tenant’s name, but for the account of Tenant, for such term or terms (which may be greater or less than the period which would otherwise have constituted the balance of the Lease Term) and on such conditions and upon such other terms (which may include such concessions, free rent, alterations and repair of the Premises) as Landlord, in its sole discretion, may determine, and Landlord may collect and receive the rents therefor.  Landlord shall not be responsible or liable for any failure to relet the Premises, or any part thereof, or for any failure to collect any rent due upon such reletting.  No reentry or taking possession of the Premises by Landlord shall be construed as an election on Landlord’s part to terminate this Lease unless written notice of such intention is given to Tenant and no notice from Landlord hereunder or under a forcible entry and detainer statute or similar law shall constitute an election by Landlord to terminate this Lease unless the notice specifically so states.  Landlord reserves the right following any reentry and/or reletting to exercise its right to terminate this Lease by giving Tenant such written notice, in which event the Lease will terminate as specified in the notice.
 
(b)   If Landlord elects to take possession of the Premises as provided herein without terminating the Lease, Tenant shall pay to Landlord (i) the Rent and other sums which would be payable hereunder if such repossession had not occurred, less (ii) the net proceeds, if any, of any reletting of the Premises after deducting all of Landlord’s expenses incurred in connection with such reletting, including, without limitation, all repossession costs, brokerage commissions, legal expenses, attorneys’ fees, alteration, remodeling and repair costs, tenant finish costs, and expenses of preparation for such reletting.  If, in connection with any reletting, the new lease term extends beyond the existing Lease Term, or the premises covered thereby include other premises not part of the Premises, a fair apportionment of the Rent received from such reletting and the expenses incurred in connection therewith, as provided above, will be made in determining the net proceeds received from reletting within such determination, any rent concessions will be apportioned over the term of the new Lease.  Tenant shall pay such amounts to Landlord monthly on the days on which the Rent and other amounts owing hereunder would have been payable if possession had not been retaken and Landlord shall be entitled to receive them from Tenant on each such day;
 
(c)   To give Tenant written notice of intention to terminate this Lease as of the date of such notice or on any later date specified therein, and on such date, Tenant’s right to possession of the Premises shall cease and the Lease shall terminate, except as to Tenant’s liability as provided below, as if the expiration date specified in such notice was the date otherwise fixed as the end of the Lease Term.  If this Lease is terminated pursuant to the provisions of this Section 16.2(c) , Tenant shall remain liable to Landlord for damages in an amount equal to the Rent and other sums which would have been owing by Tenant hereunder for the balance of the Lease Term had it not been terminated, less the net proceeds (if any) of any reletting of the Premises by Landlord subsequent to such termination, after deducting all Landlord’s expenses in connection with such reletting, including, without limitation, the expenses enumerated in Section 16.2(b) .  Landlord shall be entitled to collect these damages from Tenant monthly on the days on which the Rent and other amounts would have been payable hereunder if this Lease had not been terminated, and Landlord shall be entitled to receive these from Tenant on each such day.  Alternatively, at the option of Landlord, in the event this Lease is terminated, Landlord shall be entitled to recover forthwith against Tenant, as damages for loss of bargain and not as a penalty, an amount equal to the worth at the time of termination of the excess, if any, of the amount of Rent reserved and payable under this Lease for the balance of the Lease Term hereof over the amount of rental which Landlord can obtain as rent for the remaining balance of the term (“ Reasonable Rental Value ”), plus all amounts incurred by Landlord in obtaining possession of and reletting the Premises (including but not limited to attorneys’ fees, reletting expenses, alterations and repair costs, and brokerage commissions), plus all amounts for unamortized tenant finish work costs which have not yet been recovered through rental payments.
 
 
 

 
16.3   Mitigation; Cumulative Remedies .  Action(s) to recover Rent, other amounts, and damages set forth above may be brought by Landlord, from time to time, at Landlord’s election, and nothing shall be deemed to require Landlord to await the date on which the Lease Term would have otherwise expired had there been no such default or termination.  Landlord agrees to use reasonable efforts, subject to the exercise of its reasonable business judgment, to relet the premises to a qualified tenant(s) should it retake possession pursuant to Section 16.2 , recognizing, however, that Landlord (or its affiliates) is the owner or operator of other buildings and is not obligated in any way to give any preference to such reletting over leasing in such other buildings.  Each right and remedy provided in this Lease shall be cumulative and in addition to, and not in lieu of, every other right or remedy provided in this Lease or now or hereafter existing by statute or otherwise, including suits for injunctive relief or specific performance.  The exercise by Landlord of any one or more of the rights or remedies provided in this Lease or now or hereafter existing by statute or otherwise shall not preclude the simultaneous or later exercise by Landlord of any or all other rights or remedies provided in this Lease or now or hereafter existing by statute or otherwise.  If any action is commenced arising out of the terms and provisions of this Lease, the prevailing party shall be entitled to recover from the other party all costs and expenses, including without limitation all reasonable attorneys’ fees, incurred in connection with that action.
 
16.4   No Waiver .  No failure by Landlord to insist upon the strict performance of any provision of, or the exercise of any right or remedy upon a breach of this Lease, and no acceptance of full or partial rent during the continuance of any such breach, shall constitute a waiver of any such provision.  No provision to be performed or complied with by Tenant and no breach thereof shall be waived, altered, or modified except by written instrument signed by Landlord.  No waiver of any breach shall affect or alter this Lease.  Notwithstanding any termination of this Lease, any provisions which by their nature require observance or performance by Landlord or Tenant subsequent to such termination shall continue in force and effect.
 
16.5   Bankruptcy .  Nothing contained in this Section 16 shall limit or prejudice the right of Landlord to liquidated damages in any bankruptcy, insolvency, receivership, reorganization, or dissolution proceeding in an amount equal to the maximum allowed by any statute or rule of law governing such proceeding, whether or not such amount be greater, equal to or less than the amounts recoverable, either as damages or rent, under any of the preceding provisions of this Lease.  Any such proceeding or action involving bankruptcy, insolvency, reorganization, arrangement, assignment for the benefit of creditors, or appointment of a receiver or trustee, as set forth above, shall be considered an Event of Default only when it shall be taken or brought by or against the then holder of the leasehold estate under this Lease.  Landlord shall be entitled under the federal bankruptcy law to “adequate assurance” of future performance of the terms and provisions of this Lease in the event of an assumption or assignment in bankruptcy, and the parties agree that the term “ adequate assurance ” shall include at least the following:  (a) The financial condition and resources of Tenant were a material inducement to Landlord in entering into this Lease, and to assure that the proposed assignee will have the resources to pay the rent under this Lease, any proposed assignee must have a net worth (as defined in accordance with generally accepted accounting principles consistently applied) at least as great as the net worth of Tenant on the date this Lease became effective increased by 7%, compounded annually, for each year from the Lease Commencement Date through the date of the proposed assignment;  (b) Any proposed assignee of this Lease must assume and agree to be personally bound by the terms, provisions, and covenants of this Lease.
 
16.6   Late Interest; Late Charge .  Any Rent or other amounts owing hereunder not paid within 5 days after the date they are due or any amounts advanced by Landlord on behalf of Tenant shall thereafter bear interest at an annual rate of three percentage points over the prime rate then being charged by Wells Fargo Bank, N.A., to its most credit-worthy customers on an unsecured basis for short term loans, or the highest rate permitted by applicable usury law, whichever is lower (the “ Default Rate ”), until paid.  Further, in the event any Rent or other amounts owing hereunder are not paid within 5 days after written notice, Landlord will incur additional administrative expenses, the amount of which will be difficult if not impossible to determine; accordingly, Tenant shall pay to Landlord an additional one-time late charge for any such late payment in the amount of 5% of such payment.
 
 
 

 
16.7   Landlord’s Default .  In the event of any alleged default on the part of Landlord, Tenant shall give written notice to Landlord in the manner herein set forth and shall afford Landlord a reasonable opportunity to cure any such default (which shall not be less than 30 days).  Notice to Landlord of any such alleged default shall be ineffective unless such notice is simultaneously delivered to any Mortgagee.  Tenant agrees to give all Mortgagees, by certified mail, return receipt requested, a copy of any notice of default served upon Landlord, provided that prior to such notice Tenant has been notified in writing (by way of notice of assignment of rents and Leases, or otherwise), of the address of such Mortgagees.  Tenant further agrees that if Landlord shall have failed to cure such default within the time provided for in this Lease, then the Mortgagees shall have an additional 30 days within which to cure such default, or if such default cannot be cured within that time, then such additional time as may be necessary if, within such 30 days, any Mortgagee has commenced and is diligently pursuing the remedies necessary to cure such default (including commencement of foreclosure proceedings if necessary to effect such cure), in which event this Lease shall not be terminated while such remedies are being diligently pursued.  In no event will Landlord or any Mortgagee be responsible for any consequential damages incurred by Tenant as a result of any default, including, but not limited to lost profits or interruption of business as a result of any alleged default by Landlord hereunder.
 
17.   SURRENDER; HOLDOVER .
 
17.1   In General .  Upon expiration or other termination of the Lease Term, Tenant shall promptly quit and surrender to Landlord the Premises broom clean, in good order and condition, ordinary wear and tear and loss by fire or other casualty excepted unless due to the negligence of Tenant, and Tenant shall remove all of its movable furniture and other effects (including, without limitation, all telephone cables and communication wiring installed by Tenant for and during Tenant’s occupancy, which Landlord shall request Tenant to remove) and such Alterations as Landlord shall have required Tenant to remove pursuant to Section 9.3 .  If Tenant fails to so vacate the Premises, Tenant shall be responsible to Landlord for all costs incurred by Landlord as a result of such failure, including amounts required to be paid to third parties who were to have occupied the Premises.
 
17.2   Landlord’s Rights .  All movable furniture and personal effects of Tenant not removed from the Premises upon their abandonment or upon termination of this Lease shall conclusively be deemed to have been abandoned and may be appropriated, sold, stored, destroyed, or otherwise disposed of by Landlord without notice to Tenant or any other person, and without obligation to account therefor, and Tenant shall pay Landlord all expenses incurred in connection with the storage and/or disposition of such property.
 
17.3   Holdover .  If Tenant or anyone claiming under Tenant shall remain in possession of the Premises or any part thereof after the expiration or prior termination of the Lease Term without any agreement in writing between Landlord and Tenant with respect thereto, then, prior to the acceptance of any payments for Rent or use and occupancy by Landlord, the person remaining in possession shall be deemed a tenant-at-sufferance.  Landlord and Tenant hereby acknowledge that Landlord may need the Premises after the expiration or prior termination of the Lease Term for other tenants and that the damages which Landlord may suffer as the result of Tenant’s holding-over cannot be determined as of the Effective Date of this Lease.  Therefore, in the event that Tenant so holds over, Tenant shall pay to Landlord in addition to all rental and other charges due and accrued under the Lease prior to the date of termination, the Applicable Holdover Charge (as defined below) for each month or portion thereof that Tenant retains possession of the Premises, or any portion thereof, after the expiration or earlier termination of the Lease Term (without reduction for any partial month that Tenant retains possession).  Without limiting the foregoing, Tenant shall also pay all damages sustained by Landlord by reason of such retention of possession.  The provisions of this Section 17.3 shall not constitute a waiver by Landlord of any re-entry rights of Landlord.  As used herein, “ Applicable Holdover Charge ” shall mean 150% of the monthly Rent payable for the month immediately preceding the holding over (including increases for Operating Expenses which Landlord may reasonably estimate).
 
 
 

 
17.4   Payments After Termination .  No monetary payments by Tenant to Landlord after the termination of this Lease or after giving of any notice (other than a demand for payment of money) by Landlord to Tenant, shall reinstate, continue or extend the Lease Term or affect any notice given to Tenant before the payment of such money, it being agreed that after the service of notice, the commencement of suit, or final judgment granting Landlord possession of the Premises, Landlord may receive and collect any Rent, or any other sums of money due under this Lease, or otherwise exercise Landlord’s rights and remedies, and the payment of such sums, whether as rent or otherwise, shall not waive the notice or affect any pending suit or judgment obtained.
 
18.   SUBORDINATION AND ATTORNMENT .   At Landlord’s option, this Lease shall be subordinate to any present or future mortgage or deed of trust encumbering the Building, including any amendment, modification, or restatement, and to any and all advances made under any such mortgage or deed of trust.  Tenant agrees that with respect to any of the foregoing, no documentation, other than this Lease, shall be required to evidence such subordination.  If any holder of such mortgage or deed of trust shall elect to have this Lease superior to the lien of the holder’s mortgage or deed of trust, and shall give written notice to Tenant, this Lease shall be deemed prior to such mortgage or deed of trust, whether this Lease is dated prior or subsequent to the date of such mortgage or deed of trust, or its recording date.  In confirmation of such subordination or superior position, as the case may be, Tenant shall execute such documents as may be required by Landlord or its mortgagee to evidence the subordination of its interest herein to any of the documents described above, or to make this Lease prior to the lien of any mortgage or deed of trust, and failing to do so within 10 days after written demand, Tenant hereby irrevocably appoints Landlord as Tenant’s attorney-in-fact and in Tenant’s name, place and stead, to execute such documents.  Tenant agrees to attorn to all successor owners of the Building whether or not such ownership is acquired as a result of a sale, foreclosure, or otherwise.
 
19.   ESTOPPEL .  Tenant agrees at any time and from time to time, upon not less than 20 days prior written request by Landlord, to execute, acknowledge and deliver to Landlord a statement in writing certifying that this Lease is unmodified and in full force and effect (or if there have been modifications, that the same is in full force and effect as modified, and stating the modifications), that there have been no defaults thereunder by Landlord or Tenant (or if there have been defaults, setting forth the nature thereof), the date to which the rent and other charges have been paid in advance, if any, and such other information as Landlord may request.  It is intended that any such statement may be relied upon by a prospective purchaser of all or any portion of Landlord’s interest herein or a holder of any mortgage or deed of trust encumbering the Building.  Tenant’s failure to deliver such statement within such time shall be conclusive upon Tenant that: (a) this Lease is in full force and effect, without modification except as may be represented by Landlord; (b) there are no uncured defaults in Landlord’s performance; and (c) not more that 1 months rent has been paid in advance.  If such estoppel is not signed by a president or vice-president, Tenant shall also provide a corporate or partnership resolution, as the case may be, certifying that the party signing the statement of Tenant is properly authorized to do so.  In the event that Tenant fails to deliver an Estoppel Certificate as required by this Section 19 , then such failure shall be an Event of Default for which there shall be no cure or grace period.  In addition to any other remedy available to Landlord, Landlord may impose a charge equal to $100.00 for each day that Tenant fails to deliver an Estoppel Certificate and Tenant shall be deemed to have irrevocably appointed Landlord as Tenant’s attorney-in-fact to execute and deliver such Estoppel Certificate.
 
20.   SUBSTITUTED PREMISES .  At any time during the Lease Term, Landlord shall have the right upon 60 days prior written notice to Tenant, to substitute other space within the Building, or within other buildings owned by Landlord or related entities within the Business Park if no substitute space is then available in the Building, for the Premises (the “ Substituted Premises ”).  Tenant shall relocate to the Substituted Premises on the date set forth in Landlord’s notice (to occur no sooner than 60 days after receipt by Tenant of the notice) and Landlord agrees to pay all reasonable moving expenses of Tenant incidental to the Substituted Premises, including the reasonable replacement of Tenant’s improvements incidental to the Substituted Premises.  If Landlord elects to exercise this right, the Substituted Premises shall (A) be located in the same general area as the Premises on another floor and (B) be generally comparable space and contain approximately as much square footage as the originally leased Premises and the rental rate shall remain as set forth in Section 1.3 .  Except for such revisions, the terms and provisions of the Lease shall be applicable to the Substituted Premises and the Substituted Premises shall be deemed to be the Premises under the Lease.  Notwithstanding anything in this Lease to the contrary, Landlord shall not exercise its right under this Section 20 more than once during the Lease Term.
 
 
 

 
21.   AUTHORITIES; NOTICES .
 
21.1   Authorities .  Except as otherwise provided herein, Landlord may act in any manner provided for herein through Landlord’s Building manager or any other person who shall from time to time be so designated in writing.
 
21.2   Notices .
 
(a)   To Landlord .  All notices, demands, statements or communications required or permitted to be given to Landlord hereunder shall be in writing, and shall be deemed duly served when deposited in the United States mail, postage prepaid, certified or registered, return receipt requested, addressed to Landlord at the address on introductory paragraph of this Lease, or at the most recent address of which Landlord has notified Tenant in writing, with required copies to the following:
 
c/o Inverness Properties, LLC
2 Inverness Drive East, Suite 200
Englewood, CO  80112

(b)   To Tenant .  All notices or demands required to be given to Tenant hereunder shall be in writing, and shall be deemed duly served when delivered personally to any officer (or a partner of Tenant if Tenant is a partnership or to Tenant individually if Tenant is a sole proprietor) or manager of Tenant whose office is in the Building, or when deposited in the United States mail, postage prepaid, certified or registered, return receipt requested, addressed to Tenant at the Premises, or, prior to Tenant’s taking possession of the Premises, to the address known to Landlord as Tenant’s principal office address.
 
(c)   In General .  Either party shall have the right to designate in writing served as above provided a different address to which notice is to be mailed.  The foregoing shall in no event prohibit notice from being given as provided in the Colorado Rules of Civil Procedure.
 
22.   RULES AND REGULATIONS .  The rules and regulations attached as Exhibit “B” (“ Rules and Regulations ”) are hereby made a part of this Lease, and Tenant agrees that Tenant’s employees and agents, or any others permitted by Tenant to occupy or enter the Premises, shall at all times abide by them.  Tenant agrees that Landlord may amend, modify, delete, or add to the Rules and Regulations of the use and care of the Premises and the Building and Common Areas, and agrees to comply with all such Rules and Regulations as amended, upon notice to Tenant from Landlord thereof.  If any Rules and Regulations are breached by Tenant or its employees, Landlord shall have all remedies in this Lease provided for in the Event of Default by Tenant.  Nothing in this Lease shall be construed to impose upon Landlord any duty or obligation to enforce Rules and Regulations, or the terms, covenants or conditions of any other lease as against any other tenant, and Landlord shall not be liable to Tenant for violation of the same by any other tenant, its servants, employees, agents, visitors or licensees.
 
23.   LIMITATION OF LANDLORD’S LIABILITY .  Notwithstanding anything to the contrary contained herein, none of the officers, directors, members, managers, shareholders, or partners (including any trustees or beneficiaries of trusts which are partners) of Landlord shall have any individual or personal liability for the performance or observance of Landlord’s responsibilities and covenants hereunder.  Notwithstanding anything to the contrary contained herein, Landlord’s liability under this Lease shall be limited to its interest in the Building and no other real, personal or other property of Landlord or of the partners comprising Landlord, or of the officers, shareholders, directors, partners, or principals of such partners comprising Landlord shall be subject to levy, attachment, or execution, or otherwise sued to satisfy any judgment.  Tenant hereby waives any right to satisfy a judgment against Landlord except from Landlord’s interest in the Building of which the Premises are a part.
 
 
 

 
24.   PARKING .
 
24.1   General .  The locations and type of Parking Spaces shall be designated by Landlord or Landlord’s parking operator from time to time.  Tenant acknowledges and agrees that the Parking Spaces in the Parking Garage may include a mixture of spaces for compact vehicles as well as full-size passenger automobiles, and that Tenant shall not use the Parking Spaces for vehicles larger than the striped size of the Parking Spaces.  All vehicles using Tenant’s Parking Spaces shall prominently display identification stickers or other markers, and/or have passes or keycards for ingress and egress, as may be required and provided by Landlord or its parking operator from time to time.  Tenant shall comply with any and all parking rules and regulations from time to time established by Landlord or Landlord’s parking operator, including a requirement that Tenant pay to Landlord or Landlord’s parking operator a charge for loss and replacement of passes, keycards, identification stickers or markers, and for any and all loss or other damage caused by persons or vehicles related to use of Tenant’s parking privileges.  Landlord’s parking rules and regulations as of the date hereof are set forth on Exhibit “C” attached hereto.  Tenant shall not allow any vehicles using Tenant’s parking privileges to be parked, loaded or unloaded except in accordance with this Section 24 , including in the areas and in the manner designated by Landlord or its parking operator for such activities.  If any vehicle is using the parking or loading areas contrary to any provision of this Section 24 , Landlord or its parking operator shall have the right, in addition to all other rights and remedies of Landlord under this Lease, to remove or tow away the vehicle without prior notice to Tenant, and the cost thereof shall be paid to Landlord within ten (10) days after notice from Landlord to Tenant.  If and only if Landlord determines that additional spaces are available from time to time, Tenant shall have the right to use such spaces at the Prevailing Rates on a month-to-month basis.  If from time to time Tenant requests and Landlord agrees to mark any of the Parking Spaces as reserved for Tenant’s use, Landlord shall have no obligation for unauthorized use of such reserved spaces, nor shall Landlord be required to police or patrol such spaces.  Tenant shall have no right to sublet, assign, or otherwise transfer its right to use the Parking Spaces.  All of the payments and charges provided in Section 1.8 above and this Section 24 shall be collectable as Rent under this Lease.
 
24.2   Failure to Provide Parking Spaces .  If, for any reason, Landlord fails or is unable to provide all or any portion of the Parking Spaces to Tenant or if Tenant is not permitted to utilize all or any portion of such Parking Spaces at any time during the Lease Term or any extension or renewal thereof, such fact shall not be a default by Landlord under this Lease, either in whole or in part, but Tenant’s obligation to pay rent for any Parking Space which is not provided by Landlord shall be abated for so long as Tenant does not have the use of such parking space, and this abatement shall be in full settlement of all claims that Tenant might otherwise have against Landlord by reason of Landlord’s failure or inability to provide Tenant with such Parking Spaces.
 
25.   BROKERAGE .  Tenant represents and warrants to Landlord that it has dealt only with Inverness Properties, LLC (“ Tenant’s Broker ”), as Tenant’s exclusive agent, and Cassidy Turley Fuller Real Estate (“ Landlord’s Broker ,” and together with Tenant’s Broker, collectively, the “ Brokers ”), as Landlord’s exclusive agent, in the negotiation of this Lease.  Landlord shall make payment of the brokerage fee due to the Brokers pursuant to and in accordance with a separate agreement with the Brokers.  Tenant hereby agrees to indemnify and hold the Indemnitees harmless of and from any and all damages, losses, costs or expenses (including without limitation, all attorneys’ fees and disbursements) by reason of any claim of or liability to any other broker or other person claiming through Tenant and arising out of or in connection with the negotiation, execution and delivery of this Lease.
 
26.   GENERAL PROVISIONS .
 
26.1   Landlord’s Obligations on Sale of Building .  “Landlord” as used in this Lease shall mean and include only the owner or owners of the Building at the time in question, and in the event of any transfer or transfers of the title, Landlord herein named (and in the case of any subsequent transfers or conveyances, the then owner of the Building) shall be automatically released from and after the date of such transfer or conveyance of all liability for the performance of any covenants or obligations on the part of Landlord contained in this Lease thereafter to be performed; provided , however , that any funds held by Landlord or the then owner at the time of such transfer in which Tenant has an interest shall be turned over or otherwise credited to the grantee, and any amount then due and payable to Tenant by Landlord or the then  owner under any provisions of this Lease shall be paid to Tenant.
 
 
 

 
26.2   Merger .  The termination or cancellation of this Lease shall, at the option of Landlord, either terminate all subleases and subtenancies or operate as an assignment to Landlord of any or all such subleases or subtenancies.
 
26.3   Independent Covenants .  The covenants in this Lease are independent and not dependent, and Tenant shall not be entitled to any setoff against rent or other amounts owing hereunder if Landlord fails to perform its obligations set forth herein; provided, however, the foregoing shall not impair the right of Tenant to commence a separate action against Landlord for any violation by Landlord of the provisions hereof so long as notice is first given to Landlord and any Mortgagee and an opportunity granted to Landlord and Mortgagee to correct such violation if required by Section 16.7 .
 
26.4   Severability .  If any provision of this Lease is illegal, invalid, or unenforceable under present or future laws effective during the Lease Term, it is the intention of the parties that the remainder of this Lease shall not be affected and that in lieu of each provision of this Lease that is illegal, invalid, or unenforceable, there shall be added as a part of this Lease a provision as similar to such illegal, invalid, or unenforceable provision as may be possible and be legal, valid, and enforceable.
 
26.5   Headings .  The captions to this Lease are added as a convenience and have no legal significance.
 
26.6   Binding Effect .  Except as otherwise specifically set forth in this Lease, all terms, conditions, and covenants to be observed and performed by the parties hereto shall be applicable to and binding upon their respective heirs, administrators, executors, and assigns.  The terms, provisions, conditions, and covenants hereof shall also be considered to be covenants running with the land to the fullest extent permitted by law.
 
26.7   Joint Obligations .  If more than one entity or person comprises the Tenant under this Lease, the obligations imposed upon Tenant under this Lease shall be joint and several.
 
26.8   Tenant Authority .  Tenant and the party executing this Lease on behalf of Tenant represent to Landlord that such party is authorized to do so by requisite action of the board of directors or partners, as the case may be, and agree upon request to deliver to Landlord a resolution or similar document or opinion of counsel to that effect if the person signing is not the president or vice present or if the signature is not attested to by a secretary or assistant secretary of the corporation.
 
26.9   No Accord and Satisfaction .  Nothing done by Landlord or Landlord’s agents during the Lease Term, including without limitation any agreement to accept surrender of the Premises or to amend or modify this Lease, shall be deemed to be binding on Landlord unless agreed to by a partner or officer of Landlord, as the case may be, or a party designated in writing by Landlord as so authorized to act.  The delivery of keys to Landlord or Landlord’s agents, employees, or officers shall not operate as a termination of this Lease or a surrender of the Premises.  No payment by Tenant or receipt by Landlord of a lesser amount than the monthly rent and all other amounts owing as herein stipulated shall be deemed to be other than on account of the earliest stipulated rent or other amounts.  No endorsement or statement on any check or any letter accompanying any check or payment as rent shall be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord’s right to recover the balance of such rent or pursue any other remedy available to Landlord.
 
26.10   Landlord’s Reserved Rights .  Landlord shall have the right at any time to change the name of the Building, to increase the size of the Building and/or Common Areas by adding additional real property thereto, to construct other buildings or improvements on any portion of the Building and/or Common Areas or to change the location and/or character of, or to make alterations of or additions to the Building and/or Common Areas.  In the event any such additional buildings are constructed or Landlord increases the size of the Building and/or Common Areas, Landlord and Tenant shall execute an amendment to the Lease which incorporates such modifications, additions and adjustments to Tenant’s Pro Rata Share, if necessary.  Tenant shall not use the name and/or mark “304 Inverness Way,” or other mark, name or logo belonging to Landlord, alone or in conjunction with any words or symbols as a trade name, corporate name, trade mark, service mark or in another similar manner, without a prior written agreement from Landlord, or its successor-in-interest.
 
 
 

 
26.11   Force Majeure .  Any obligation of the Landlord hereunder which is delayed or not performed due to acts of God, strike, riot, war, weather, failure to obtain labor and materials at a reasonable cost, or any other reason beyond the control of the Landlord (collectively, “Force Majeure”), shall not constitute a default hereunder and shall be performed within a reasonable time after the end of such cause for delay or nonperformance.
 
26.12   No Light or Air Easements .  Tenant agrees that no diminution of light, air or view by any structure that may hereafter be erected (whether or not by Landlord) shall entitle Tenant to any reduction of rent or other charges under this Lease, result in any liability of Landlord to Tenant, or in any other way affect this Lease or Tenant’s obligations.
 
26.13   Quiet Enjoyment .  So long as Tenant complies with the provisions hereof, Landlord agrees to warrant and defend Tenant in the quiet enjoyment and possession of the Premises during the Lease Term without hindrance by Landlord or persons lawfully claiming by, through or under Landlord.
 
26.14   Landlord’s Consent .  Whenever the Lease provides for Landlord to consent or approve any action or documents, it is understood and agreed that such consent or approval shall be in Landlord’s sole and absolute discretion, except where specifically provided that such consent or approval shall not be unreasonably withheld.
 
26.15   Time of Essence .  Time is of the essence hereof.
 
26.16   No Representations or Warranties .  Tenant acknowledges and agrees that it has not relied upon any statements, representations, agreements, or warranties by Landlord, its agents or employees, except as are specifically stated herein, and no amendment or modification of this Lease shall be valid or binding unless in writing and signed by the parties.
 
26.17   No Recordation .  Tenant shall not record this Lease.
 
26.18   Governing Law; No Jury Trial; Venue; Jurisdiction .  This Lease shall be construed in accordance with the laws of the State of Colorado, without giving effect to conflict of laws principles.  Each party hereto (which includes any assignee, successor, heir or personal representative of a party) shall not seek a jury trial, hereby waives trial by jury, and hereby further waives any objection to venue in the County in which the Building is located, and agrees and consents to personal jurisdiction of the courts of the State of Colorado, in any action or proceeding or counterclaim brought by any party hereto against the other on any matter whatsoever arising out of or in any way connected with this Lease, the relationship of Landlord and Tenant, Tenant’s use or occupancy of the Premises, or any claim of injury or damage, or the enforcement of any remedy under any statute, emergency or otherwise, whether any of the foregoing is based on this Lease or on tort law.  No party will seek to consolidate any such action in which a jury has been waived with any other action in which a jury trial cannot or has not been waived.  It is the intention of the parties that these provisions shall be subject to no exceptions.  By execution of this Lease the parties agree that this provision may be filed by any party hereto with the clerk or judge before whom any action is instituted, which filing shall constitute the written consent to a waiver of jury trial.  No party has in any way agreed with or represented to any other party that the provisions of this Section will not be fully enforced in all instances.
 
 
 

 
26.19   Counterparts .  This Lease may be executed in two or more duplicate originals.  Each duplicate original shall be deemed to be an original hereof, and it shall not be necessary for a party hereto to produce more than one such original as evidence hereof.
 
26.20   Submission; No Option .  Submission of this Lease for examination or signature by Tenant does not constitute a commitment or option for Lease, and it is not effective as a Lease or otherwise until execution and delivery by both Landlord and Tenant.
 
26.21   Survival .  The waivers of the right of jury trial, the other waivers of claims or rights, the releases and the obligations of Tenant under this Lease to indemnify, protect, defend and hold harmless Landlord and/or Indemnitees shall survive the expiration or termination of this Lease, and so shall all other obligations or agreements which by their terms survive expiration or termination of this Lease.
 
26.22   Exhibits, Riders & Addenda .  The exhibits, riders and addenda set forth below shall be deemed to be a part of this Lease and hereby incorporated herein:
 

EXHIBIT “A”
DEPICTION OF THE PREMISES
EXHIBIT “B”
RULES AND REGULATIONS
EXHIBIT “C”
PARKING RULES AND REGULATIONS
RIDER “1”
ADDITIONAL PROVISIONS

 
[signature page follows]
 
 
 
 
 
 

 
 
 

 
IN WITNESS WHEREOF , Landlord and Tenant have executed this Lease as of the Effective Date.
 
LANDLORD:

304 INVERNESS WAY LLC,
a Delaware limited liability company,

By:           304 Investors, LLC,
a Colorado limited liability company,
its Operating Member


By: ______________________
Name:  David H. Naus
Title: Manager
 


TENANT:

TEXAS RARE EARTH RESOURCES CORP,
a Nevada corporation


By:           _______________________________________
Name:      _______________________________________
Title:        _______________________________________
 
 
 

 
 
EXHIBIT “A”
 
DEPICTION OF THE PREMISES
 
[attached]

[NOTE – Any furnishings depicted on this plan are for illustration purposes only and are not included as part of the Premises]

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 

 
EXHIBIT “B”
 
RULES AND REGULATIONS
 

1.   The sidewalks, entries, passages, corridors, stairways, and elevators of the Building and/or Common Areas shall not be obstructed by Tenant, or Tenant’s agents or employees, or used for any purpose other than ingress and egress to and from the Premises, it being understood and agreed that such access above the first floor may be obtained only via the elevators in the lobby of the Building.
 
2.   Furniture, equipment, or supplies will be moved in or out of the Building for premises above the first floor only upon the elevator designated by Landlord and then only during such hours and in such manner as may be reasonably prescribed by Landlord.  The Landlord shall have the right to approve or disapprove the movers or moving company employed by Tenant, and Tenant shall cause the movers to use only the loading facilities and elevator designated by Landlord.  In the event Tenant’s movers damage the elevator or any part of the Building, Tenant shall forthwith pay to Landlord the amount required to repair the damage.
 
3.   No safe or article, the weight of which may, in the reasonable opinion of Landlord, constitute a hazard or damage to the Building or the Building’s equipment, shall be moved into the Premises.  Safes and other equipment, the weight of which is not excessive, shall be moved into, from, or about the Building only during such hours and in such manner as shall be prescribed by Landlord, and Landlord shall have the right to designate the location of such articles in the Premises.
 
4.   Except as expressly set forth in the Lease (if at all), no sign, advertisement, or notice shall be inscribed, painted or affixed on any part of the inside or outside of the Building unless of such color, size and style and in such place upon or in the Building as shall be first designated by Landlord in writing, but there shall be no obligation or duty on Landlord to allow any sign, advertisement or notice to be inscribed, painted or affixed on any part of the inside or outside of the Building.  No furniture shall be placed in front of the Building or in any lobby or corridor of the Building (whether included wholly within the Premises or otherwise), without the prior written consent of Landlord.  Should Tenant fail to remove all non-permitted signs and furniture within 30 days following receipt of notice from Landlord regarding removal thereof, Landlord shall have the right to remove all non-permitted signs and furniture, without further notice to Tenant, at the expense of Tenant.
 
5.   Tenant shall not do or permit anything to be done in the Premises or bring or keep anything therein which would in any way increase the rate of fire insurance on the Building or on personal property kept therein, constitute a nuisance or waste, obstruct or interfere with the rights of other tenants or in any way injure or annoy them, or conflict with the laws relating to fire or with any regulations of the fire department, fire insurance underwriters or with any insurance policy upon the Building or any part thereof, or conflict with any of the rules or ordinances of the Department of Health of the City and County where the Building is located.
 
6.   Tenant shall not employ any person or persons other than the janitor of Landlord for the purpose of cleaning or taking care of the Premises without the prior written consent of Landlord.  Landlord shall be in no way responsible to Tenant for any loss of property from the Premises, however occurring, or for any damage done to Tenant’s furniture or equipment by the janitor or any of the janitor’s staff, or by any other person or persons whomsoever.  The janitor of the Building may at all times keep a passkey and other agents of Landlord shall at all times be allowed admittance to the Premises.
 
7.   Water closets and other water fixtures shall not be used for any purpose other than that for which they are intended, and any damage resulting to them from misuse on the part of Tenant or Tenant’s agents or employees shall be paid for by Tenant.  No person shall waste water by tying back or wedging the faucets or in any other manner.
 
 
 

 
8.   No animals, other than those providing assistance to disabled individuals, shall be allowed in the offices, halls, corridors, and elevators in the Building.  No person shall disturb the tenants of the Building or adjoining buildings or premises by the use of any radio, sound equipment, or musical instrument or by the making of loud or improper noises.
 
9.   Bicycles or other vehicles, other than those providing assistance to disabled individuals, shall not be permitted in the offices, halls, corridors, and elevators in the Building nor shall any obstruction of sidewalks or entrances of the Building be permitted.
 
10.   Tenant shall not allow anything to be placed on the outside of the Building nor shall anything be thrown by Tenant, Tenant’s agents or employees out of the windows or doors, or down the corridors, elevator shafts, or ventilating ducts of shafts of the Building.  Tenant, except in case of fire or other emergency, shall not open any outside window.
 
11.   No additional lock or locks shall be placed by Tenant on any door in the Building unless written consent of Landlord shall first have been obtained.  Two keys to the Premises and the toilet rooms, if locked by Landlord, will be furnished by Landlord, and neither Tenant nor Tenant’s agents or employees shall have any duplicate keys made.  Landlord shall supply Tenant with such additional keys as Tenant may require at Tenant’s sole cost and expense.  At the termination of this tenancy, Tenant shall promptly return to Landlord all keys to offices, toilet rooms or vaults.
 
12.   No window shades, blinds, screens, draperies, or other window coverings will be attached or detached by Tenant without Landlord’s prior written consent.  Tenant agrees to abide by Landlord’s rules with respect to maintaining uniform curtains, draperies, and linings or blinds at all windows and hallways.
 
13.   If Tenant desires telegraphic, telephonic, or other electric connections as part of any Tenant Alterations, Landlord or Landlord’s agents will direct the electricians as to where and how the wires may be introduced.  Without such directions, no boring or cutting for wires will be permitted.  Any such installation and connection shall be made at Tenant’s expense.
 
14.   Tenant shall not install or operate any steam or gas engine or boiler, or carry on any mechanical business in the Premises.  The use of oil, gas, or inflammable liquids for heating, lighting, or any other purpose is expressly prohibited.  Explosives or other articles deemed extra hazardous shall not be brought into the Building.
 
15.   Any painting or decorating as may be agreed to be done by and at the expense of Landlord shall be done during regular weekday working hours; should Tenant desire such work on Saturdays, Sundays, Legal Holidays, or outside of regular working hours, Tenant shall pay for the extra cost thereof.
 
16.   Except for the hanging or installation of customary office décor or as otherwise permitted by Landlord, Tenant shall not mark upon, paint signs upon, cut, drill into, drive nails or screws into, or in any way deface the walls, ceilings, partitions, or floors of the Premises or of the Building, and any defacement, damage, or injury caused by Tenant, Tenant’s agents or employees, shall be paid for by Tenant.
 
17.   No smoking, of any kind, is permitted in any portion of the Premises.
 
 
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EXHIBIT “C”
 
PARKING RULES AND REGULATIONS

1.           Provided Tenant is not in default under the Lease and has not violated the rules and regulations set forth in this Exhibit “C” and any attachment hereto, as amended or supplemented in any fashion by Landlord from time to time in its sole and absolute discretion (the “ Parking Rules ”), then during the Lease Term, Tenant and its employees and business invitees visiting or conducting business at the Premises shall be entitled, on a non-exclusive and non-reserved basis, to the use within the Parking Garage (excluding, however, those areas thereof designated by Landlord from time to time for the exclusive use of certain occupants of the Building or for no parking) of that number of parking spaces which is set forth under Section 1.8 of the Lease.  Without limiting the generality of the foregoing, Landlord reserves the right to designate all surface parking areas and all covered parking areas within the Business Park (excluding only Tenant’s reserved parking stalls) as reserved parking stalls for other occupants of the Building.  Tenant agrees that, except as specifically provided to the contrary in the Lease, Landlord may from time to time and at any time impose charges for parking at or about the Building.  All of the payments and charges provided in this Exhibit “C” shall be collectable as Rent under the Lease.
 
2.           Tenant and its employees and business invitees shall not park any vehicle in any stall designated for the exclusive use of any other person and Tenant further agrees to employ reasonable measures to assure that its employees do not park in any such stall.  Tenant shall furnish Landlord with a list of its and its employees’ vehicle license numbers within fifteen (15) days after the Lease Commencement Date and thereafter notify Landlord of any change in such list within five (5) days after such change occurs.  Tenant agrees to assume responsibility for compliance by its employees with all Parking Rules and for all losses (including the loss of parking entrance key-cards, if any) and other damages caused by Tenant or Tenant’s agents, servants, employees, contractors, visitors or licensees occurring during or relating to any use of the Building’s parking facilities.  In addition to all other remedies available to Landlord under the Lease, at law or in equity, in the event any of Tenant’s employees park in violation of the Parking Rules, Landlord may charge Tenant a “ violation fee ” therefor set by Landlord from time to time.  Landlord’s current violation fee is Thirty Dollars ($30) per automobile for each day or partial day each such vehicle is so parked in violation of the Parking Rules.  Tenant hereby authorizes Landlord to tow away from the Building or attach violation stickers, devices or notices to any vehicle belonging to Tenant or its employees which Landlord in good faith determines is parked in violation of the Parking Rules.  All costs of any such towing or violation device and all applicable violation fees shall be payable by Tenant immediately upon demand by Landlord and, at Landlord’s option, such payment may be required prior to the release of the towed vehicle to its owner.
 
3.           A condition of any parking shall be compliance by the vehicle operator with all Parking Rules, including displaying any sticker or complying with any other identification system from time to time established by Landlord.  Landlord expressly reserves the right to refuse to permit any person or vehicle in violation of the Parking Rules to enter or remain in the parking areas of the Building and to demand return therefrom of all parking stickers or other identification supplied by Landlord and Tenant hereby agrees to assist Landlord in enforcing all Parking Rules.
 
4.           In the event any surcharge, regulatory fee or parking tax is at any time (even at a time when no parking charges are otherwise due under Paragraph 1 above) imposed by any governmental authority, Tenant shall pay all such amounts applicable to Tenant’s parking privileges hereunder to Landlord either in advance on the first day of each calendar month concurrently with its monthly Rent installments or as otherwise billed from time to time by Landlord.
 
5.           All parking privileges hereunder are personal to Tenant and, accordingly, in the event Tenant assigns or sublets all or any portion of the Premises, all of the same shall be reduced proportionately based on the rentable area so assigned or sublet and any assignee or subtenant of Tenant shall receive only then prevailing parking privileges at the full then Prevailing Rates therefor.
 


[current parking rules attached]
 
 
 
 

 
CURRENT PARKING RULES

1.           Cars must be parked entirely within painted stall lines.

2.           All directional signs and arrows must be observed.

3.           All posted speed limits for the parking areas shall be observed.  If no speed limit is posted for an area, the speed limit shall be five (5) miles per hour.

4.           Parking is prohibited:

(a) in areas not striped for parking;
(b) in aisles;
(c) where “no parking” signs are posted;
(d) on ramps;
(e) in cross-hatched areas; and
(f) in such other areas as may be designated by Landlord.

5.            Handicap and visitor stalls shall be used only by handicapped persons or visitors, as applicable.

6.
Parking stickers or any other device or form of identification supplied by Landlord from time to time (if any) shall remain the property of Landlord.  Such parking identification device must be displayed as requested and may not be mutilated in any manner.  The serial number of the parking identification device may not be obliterated.  Devices are not transferable and any device may not be obliterated.  Devices are not transferable and any device in the possession of an unauthorized holder will be void.  There will be a replacement charge payable by the parker and such parker’s appropriate tenant equal to the amount posted from time to time by Landlord for loss of any magnetic parking card or any parking sticker.

7.
Every parker is required to park and lock his or her own car.  All responsibility for damage to cars or persons is assumed by the parker.

8.
Loss or theft of parking identification devices must be reported to Landlord, and a report of such loss or theft must be filed by the parker at that time.  Any parking identification devices reported lost or stolen found on any unauthorized car will be confiscated and the illegal holder will be subject to prosecution.  Lost or stolen devices found by the parker must be reported to Landlord immediately to avoid confusion.

9.
Parking spaces are for the express purpose of parking one automobile per space.  Washing, waxing, cleaning or servicing of any vehicle by the parker and/or such person’s agents is prohibited.  The parking areas shall not be used for overnight or other storage for vehicles of any type, provided however, during the initial Term Tenant may from time to time park one (1) company automobile overnight.

10.
Landlord reserves the right to refuse the issuance of parking identification or access devices to any tenant and/or such tenant’s agents or representatives who willfully refuse to comply with the Parking Rules and/or all applicable governmental ordinances, laws or agreements.

11.
Tenant shall acquaint its employees and visitors with the Parking Rules, as they may be in effect from time to time.

12.
Any monthly rate for rental of a parking space shall be paid one month in advance prior to the first day of such month.  Failure to do so will automatically cancel parking privileges, and a charge of the prevailing daily rate will be due.  No deductions or allowances from the monthly rate will be made for days a parker does not use the parking facilities.

13.
Each parker shall pay a reasonable deposit for any parking card issued to such person.  Such deposit shall be paid at the time the parking card is issued and shall be forfeited if the parking card is lost.  Such deposit shall be returned without interest, at the time such person ceases to utilize the parking facilities, upon surrender of the parking card.  A reasonable replacement charge shall be paid to replace a lost card and an amount in excess of the initial deposit may be charged as the replacement fee.

 
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RIDER 1
 
ADDITIONAL PROVISIONS
 
THIS RIDER 1 TO LEASE (this “ Rider 1 ”) is attached to and made a part of that certain Lease Agreement dated as of May 5, 2011 (the “ Lease ”), by and between 304 INVERNESS WAY LLC, a Delaware limited liability company (“ Landlord ”), and TEXAS RARE EARTH RESOURCES CORP, a Nevada corporation (“ Tenant ”), for the Premises described in the Lease.
 
27.   RIDER 1 .  Capitalized terms used in this Rider 1 shall have the meanings set forth in the Lease, except as otherwise specified herein and except for terms capitalized in the ordinary course of punctuation.  This Rider 1 forms a part of the Lease.  Should any inconsistency arise between this Rider 1 and any other provision of the Lease as to the specific matters which are the subject of this Rider 1 , the terms and conditions of this Rider 1 shall control.  All of the rights, options and concessions set forth in this Rider 1 , if any, are personal to the Tenant first named above (“ Original Tenant ”), and may only be exercised and/or utilized by Original Tenant (and not any assignee, sublessee or other transferee of Original Tenant’s interest in the Lease).  All references to “Tenant” in this Rider 1 shall mean Original Tenant only.  Time is of the essence of this Rider 1 .
 
28.   ABATED RENT PERIOD .  Tenant’s obligation to pay Base Rent and Operating Expenses for the Premises shall be abated during the first three (3) months of the Lease Term, commencing as of June 1, 2011 and ending on and including August 30, 2011 (the “ Abated Rent Period ”).  Such abatement shall apply to Base Rent and Operating Expenses (including Base Operating Expenses and increases thereto) payable under the Lease during the Abated Rent Period.  Base Rent and Operating Expenses for any calendar month in which the Abated Rent Period expires shall be prorated based upon a thirty (30) day month, and all such Base Rent and Operating Expenses shall be due and payable for the actual days that elapse during the remainder of the month in which the Abated Rent Period expires.  The abatement of Base Rent and Operating Expenses set forth in this Rider 1 is expressly conditioned on Tenant’s performance of all of its obligations and responsibilities under the Lease throughout the Lease Term, and the amount of the abated Base Rent and Operating Expenses is based in part on the amount of Base Rent due under the Lease for the Lease Term.  Accordingly, if Tenant breaches the Lease at any time during the Lease Term and such breach is not cured within the applicable cure period, then the amount of Rent which would otherwise have been due and payable during the Abated Rent Period (based upon the monthly Rent due during the month immediately following the Abated Rent Period) shall immediately become due and payable by Tenant as additional rent.  The payment by Tenant of all abated Rent shall not limit or affect any of Landlord’s other rights and remedies under the Lease, or at law or in equity.
 
29.   LANDLORD'S WORK .
 
29.1   Landlord’s Work .  Subject to the terms and conditions of this Section 29 , Landlord shall, at Landlord’s sole cost and expense, complete the following work in the Premises (collectively, “ Landlord’s Work ”):
 
(a)   Re-carpet the Premises; and
 
(b)   Paint the Premises.
 
29.2   Building Standard .  Landlord’s Work shall be done with such minor variations as Landlord may deem advisable, so long as such variations will not materially interfere with the permitted use of the Premises.  In order to insure the consistent quality and appearance of the Building, the style, color and items to be used in the construction and installation of Landlord’s Work shall be made in Landlord’s sole discretion; provided , however , Tenant shall have the right to select the paint color from building standard selections.
 
29.3   Landlord’s Entry Rights .  To the extent that preparation for and performance of Landlord’s Work requires access, work or construction within or through the Premises, Landlord and Landlord’s representative and contractors shall have the right to enter the Premises at all times to perform such work, and Tenant agrees that such entry and work shall not constitute an eviction of Tenant in whole or in part and that all Rent due and payable by Tenant under the Lease shall in no way be abated or reduced by reason of inconvenience, annoyance, disturbance or injury to business of Tenant due to such access, work, construction or otherwise.  Tenant shall cooperate with Landlord and Landlord’s contractors to allow such work and shall move Tenant’s trade fixtures, furnishings and equipment as requested by Landlord or Landlord’s contractors.
 
 
 

 
29.4   Limitations .  Notwithstanding anything in the Lease to the contrary, Landlord shall have no obligation to perform or complete all or any portion of Landlord’s Work so long as an Event of Default is continuing under the Lease.
 
30.   PERMITTED TRANSFER .
 
30.1   Permitted Transfer .  Notwithstanding anything in Section 11 of the Lease to the contrary, and provided there is no uncured Event of Default under the Lease, Tenant shall have the right, without the prior written consent of Landlord, to (a) assign the Lease to an Affiliate (as defined below), to an entity created by merger, reorganization or recapitalization of or with Tenant, or to a purchaser of all or substantially all of Tenant’s assets or (b) sublease the Premises or any part thereof to an Affiliate (each, a “ Permitted Transfer ”); provided , however , that (i) such Permitted Transfer is for a valid business purpose and not to avoid any obligations under the Lease, (ii) the assignee is a reputable entity of good character and shall have, immediately after giving effect to such assignment, an aggregate net worth (computed in accordance with GAAP) at least equal to the aggregate net worth (as so computed) of Tenant immediately prior to such assignment or on the Effective Date, whichever is greater, (iii) no later than fifteen (15) days prior to the effective date of the Permitted Transfer, Tenant shall give notice to Landlord which notice shall include the full name and address of the assignee or subtenant, and a copy of all agreements executed between Tenant and the assignee or subtenant with respect to the Premises or part thereof, as may be the case, (iv) no later than fifteen (15) days after the effective date of the Permitted Transfer, the assignee or sublessee shall provide the documentation required pursuant to Section 11.5 of the Lease, and (v) within ten (10) days after Landlord’s written request, provide such reasonable documents or information which Landlord reasonably requests for the purpose of substantiating whether or not the Permitted Transfer is to an Affiliate or is otherwise in accordance with the terms and conditions of this Rider 1 .  Tenant shall not have the right to perform a Permitted Transfer, if, as of the date of the effective date of the Permitted Transfer, an Event of Default is then continuing.
 
30.2   Definitions .  In addition to the terms elsewhere defined in the Lease, the following terms shall have the following meanings with respect to the provisions of the Lease:
 
(a)   Affiliate ” shall mean any Person (as defined below) which is currently owned or controlled by, owns or controls, or is under common ownership or control with Tenant.
 
(b)   control ” means, with respect to a Person that is a corporation, the right to exercise, directly or indirectly, more than fifty percent (50%) of the voting rights attributable to the shares of the controlled corporation and, with respect to a Person that is not a corporation, the possession, directly or indirectly, of the power at all times to direct or cause the direction of the management and policies of the controlled Person.
 
(c)   Person ” means an individual, partnership, trust, corporation, firm or other entity.
 
30.3   No Recapture or Excess Rent Rights .  Landlord acknowledges and agrees that the terms and conditions of Sections 11.2 and 11.3 shall not apply to any Permitted Transfer.
 
31.   DIRECTORY BOARD AND SUITE-ENTRY SIGNAGE .
 
31.1   Directory Board Signage .  Landlord shall provide directory board signage on the Building directory board (the “ Directory Board ”) located in the lobby of the Building.  Tenant shall be entitled to have its name located on the Directory Board (“ Tenant’s Directory Board Signage ”).  The Directory Board may be static or electronic.
 
31.2   Suite-Entry Signage .  Landlord shall install suite-entry signage at or around the entrance to the Premises, or in the common area elevator lobby of the floor on which the Premises are located (“ Tenant’s Suite-Entry Signage ”).
 
 
 

 
31.3   Building Standard .  In order to insure the consistent quality and appearance of the Building, the style, color and items to be used in the construction and installation of Tenant’s Directory Board Signage and Tenant’s Suite-Entry Signage shall be made in Landlord’s sole discretion.
 
31.4   Revisions .  Any necessary revision to Tenant’s Directory Board Signage or Tenant’s Suite-Entry Signage will be made by Landlord, at Tenant’s sole cost and expense, within a reasonable time after written notice from Tenant of the change making the revision necessary.
 
32.   STORAGE SPACE .
 
32.1   Option .  Tenant shall, subject to the terms and conditions of this Rider 1 , have the right to license certain storage space, consisting of approximately 120 rentable square feet of space on the terrace level of the Building (the “ Storage Space ”).
 
32.2   Term .  The term of Tenant’s license (the “ Storage Space Term ”) shall commence on the date the Storage Space becomes available to Tenant (the “ Storage Commencement Date ”) and shall continue for so long as Tenant uses the Storage Space.
 
32.3   Storage Fee .  Beginning on the Storage Commencement Date, and continuing throughout the Storage Space Term, Tenant shall pay a storage fee (the “ Storage Fee ”) for the Storage Space, accruing on and after the Storage Commencement Date and monthly thereafter, as the Storage Fee for the Storage Space Term, as follows:
 
Months of the Storage Space Term
 
Annual Rate per Rentable Square Foot
Annual Storage Fee
Monthly Installment of Storage Fee
1 – 36
$10.00
$1,200.00
$100.00

 
32.4   Covenant to Pay the Storage Fee .  The Storage Fee shall be payable as and when Base Rent is payable.  Notwithstanding anything in this Rider 1 to the contrary, the Storage Space shall not be included in the rentable area of the Premises for purposes of calculating Tenant’s Pro Rata Share of Operating Expenses.
 
32.5   Use .  Tenant shall use the Storage Space only for purposes of storing equipment, inventory or other items normally used in Tenant’s business.  Tenant’s use of the Storage Space shall comply with all of the terms and conditions of the Lease.
 
32.6   Maintenance and Surrender of the Storage Space .  Upon the expiration or earlier termination of the Storage Space Term, Tenant shall surrender possession and vacate the Storage Space to Landlord in good condition and repair, ordinary wear and tear excepted.  During the Storage Space Term, Tenant shall be responsible, at Tenant’s sole cost and expense, for the performance of all maintenance, repairs and replacements necessary for surrender of the Storage Space in the condition set forth in this Rider 1 .
 
32.7   Relocation .  At any time during the Storage Space Term, Landlord shall have the right, upon 30 days prior written notice to Tenant, to substitute other space within the Building for the Storage Space (the “ Substituted Storage Space ”).  Landlord shall pay the actual and reasonable expenses of physically moving Tenant’s property to the Substituted Storage Space.
 
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Exhibit 14.1
 
TEXAS RARE EARTH RESOURCES CORP.
CODE OF ETHICS

This Code of Ethics for Texas Rare Earth Resources Corp. (the “Company”) has been adopted by the Company’s Board of Directors to maintain the Company’s reputation for integrity and ethical standards in all areas of conduct, disclosure, and regulatory compliance.

APPLICABILITY OF THE CODE

This Code of Ethics (the “Code”) applies in the United States and in every other country in which the Company and its subsidiaries do business.  Compliance with the Code is required of every employee, officer and director of the Company, collectively referred to as the “Covered Persons.”  This Code outlines the broad principles of legal and ethical conduct embraced by the Company.  It is not a complete list of legal of legal or ethical issues faced in the course of business, and, therefore, this Code must be applied using common sense and good judgment.   This Code supplements and does not replace or modify the Company’s other policies or procedures, including provisions in any employee handbooks, workplace rules, insider trading policies and other statements of policy or procedure issued from time to time.  This document is not an employment contract between the Company and any Covered Person and does not change any person’s status as an at-will employee.

HONEST AND ETHICAL CONDUCT

In performing his or her duties, each of the Covered Persons will act in accordance with high standards of honest and ethical conduct including taking appropriate actions to permit and facilitate the ethical handling and resolution of actual or apparent conflicts of interest between personal and professional relationships.

In addition, each of the Covered Persons will promote high standards of honest and ethical conduct among employees who have responsibilities in the areas of accounting, audit, tax, and financial reporting and other employees throughout the Company.

FULL, FAIR, ACCURATE, TIMELY, AND UNDERSTANDABLE DISCLOSURE

In performing his or her duties, each of the Covered Persons will endeavor to promote, and will take appropriate action within his or her areas of responsibility to cause the Company to provide, full, fair, accurate, timely, and understandable disclosure in reports and documents that the Company files with or submits to the Securities and Exchange Commission and in other public communications.

In performing his or her duties, each of the Covered Persons will, within his or her areas of responsibility, engage in, and seek to promote, full, fair and accurate disclosure of financial and other information to, and open and honest discussions with, the Company’s outside auditors.

 
 

 
COMPLIANCE WITH APPLICABLE GOVERNMENTAL LAWS, RULES AND REGULATIONS

In performing his or her duties, each of the Covered Persons will endeavor to comply, and take appropriate action within his or her areas of responsibility to cause the Company to comply, with applicable governmental laws, rules, and regulations and applicable rules and regulations of self-regulatory organizations.

REPORTING VIOLATIONS OF THE CODE

Each of the Covered Persons will promptly provide the Company’s chief executive officer, chief operating officer, chief financial officer or the Company’s Audit Committee with information concerning conduct the Covered Person reasonably believes to constitute a material violation by the Company, or its directors or officers, of this Code, securities laws, rules or regulations or other laws, rules, or regulations applicable to the Company.  The Company requires that every reported violation will be investigated.

WAIVER AND AMENDMENT OF THE CODE

The Company’s audit committee, as well as the Company’s board of directors, will have the authority to approve a waiver from any provision of this Code.  The Company will publicly disclose information concerning any waiver or an implicit waiver of this Code as required by applicable law.  A waiver means the approval of a material departure from a provision of this Code.  The Company reserves the right to amend, alter or terminate this Code at any time for any reason.  The most current version of the Code can be obtained on the Company’s website at www.texasrareearth.com .  The Company will publicly disclose any substantive amendment of this Code as required by applicable law.

ACCOUNTABILITY FOR ADHERENCE TO THE CODE

The Company’s audit committee will assess compliance with this Code, report violations of this Code to the Board of Directors, and, based upon the relevant facts and circumstances, recommend to the Board appropriate action.  A violation of this Code may result in disciplinary action including termination of employment or other relationship(s) with the Company.

This Code is for the benefit of the Company, and no other person is entitled to enforce this Code.  This Code does not, and should not be construed to, create any private cause of action or remedy in any other person for a violation of the Code.  Moreover, violations of this code will not be presumed to create a violation of law, rule or regulation on the part of the Company.

 
 

 

This Code of Ethics has been adopted by the Board of Directors of the Company as of the 12 th day of July, 2011:

DIRECTORS :
   
/S/ Marc Levier
/S/ Graham A. Karlin
Marc LeVier
Graham A. Karklin
   
   
/S/ Anthony Marchese
/S/ General Martin
Anthony Marchese
General Martin
   
   
/S/ James J. Graham
/S/ Daniel E. Gorski
James J. Graham
Daniel E. Gorski

 
 
 
 
 
 
 
 
 

 
Exhibit 31.1.   Certification by Chief Executive Officer

I, K. Marc LeVier, certify that:

1.
I have reviewed this quarterly report on Form 10-Q of Texas Rare Earth Resources Corp.;
 
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
 
 
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
 
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
 
c.
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
 
d.
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
 
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
 
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  July 15, 2011


/s/ K. Marc LeVier
K. Marc LeVier, Chief Executive Officer

 
 

 
Exhibit 31.2.   Certification by Chief Financial Officer

I, Wm. Chris Mathers, certify that:

1.
I have reviewed this quarterly report on Form 10-Q of Texas Rare Earth Resources Corp.;
 
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
 
 
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
 
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
 
c.
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
 
d.
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
 
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
 
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  July 15, 2011


/s/ Wm. Chris Mathers
Wm. Chris Mathers, Chief Financial Officer

 
 

 
Exhibit 32.1.   Section 1350 Certification by Chief Executive Officer


CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Texas Rare Earth Resources Corp. (the “Company”) on Form 10-Q for the quarter ending May 31, 2011, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, K. Marc LeVier, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ K. Marc LeVier
K. Marc LeVier, Chief Executive Officer
 
July 15, 2011