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The Lease estate, the right-of-way and the appurtenant rights described in pazagraphs a-c, <br />inclusive, above are collectively referred to herein as the "Leased Premises". Nothing herein <br />shall be construed to be a conveyance of water rights, which in any way maybe conshued to <br />be appurtenant to the real property which is the subject of this Lease. <br />3. Term and Option to Extend. Unless sooner terminated as herein provided, or due to <br />exhaustion of sand- and gravel, the term of this Lease shall be for five (5) years, commencing <br />as of the effective date (the "Initial Term"). At the expiration of the Initial Term, this Lease <br />shall automatically expire unless the term is extended pursuant to the terms hereof Provided <br />Tenant is not in material default hereunder, and provided, further that this Lease has not been <br />otherwise been terminated, the Tenant may extend the term of this Lease for five additional <br />years beyond the Initial Term on the same terms and conditions as during the Initial Term <br />and by giving Lessor notice of its intent to extend at least thirty (30) days prior to end of the <br />Initial Tenn. Nothing contained in the Lease shall preclude or prohibit the parties from <br />negotiating a further or additional lease for Leased premises. (The Initial Term and any <br />extensions obtained pursuant to this Section aze referred to collectively as the "Term" of this <br />Lease). <br />Tenant agrees to proceed with application to LaPlata County, Colorado, for a permit to <br />extract gravel from the leased premises. Also make application to the Slate of Colorado, <br />Division of Reclamation, Mining and Safety for the issuance of gravel mining and <br />reclamation permit relating thereto, and to make application to any other relevant agency for <br />permits for any other operations of Tenant on the premises which may require a permit. If <br />any of such permits aze denied or not fmally granted within two (2) years of the execution <br />date of this Lease, then this Lease shall terminate and be of no further force and effect. <br />Tenant shall be responsible for obtaining and paying for all necessary permits to operate and <br />gravel facilities, i.e.: annual fees, transfer fees, and permits from the US Government, the <br />State of Colorado, and LaPlata County. Lessor agrees to assist in completing the permit <br />applications by providing necessary documentation that may be required by the various <br />governmental agencies. Lessor shall be entitled to review and approve every permit <br />application and permit. Lessor's approval shall not be unreasonably withheld. Lessor shall <br />be deemed to have approved such permit applicafion of germit unless it notifies Tenant in <br />writing of its disapproval via overnight mail and fax within forty-eight (48) hours after <br />receipt thereof. In the event of Lessor's disapproval of a permit application, Lessor and <br />Tenant agree to negotiate in good faith to modify the application to the satisfaction of both <br />parties. <br />4. Possession. Elam shall be enfitled to possession on the first day of the effective term of this <br />Lease, and shall yield possession to Lessor on the last day of the term of this Lease, unless <br />otherwise agreed by both parties in writing. However, Tenant shall have the right to access <br />the leased property prior to the effective term for purposes of performing work to obtain the <br />necessary permits. <br />5. Production Royalty. Tenant shall pay Lessor a royalty (the "Production Royalty")per ton for <br />any Sand and Gravel removed from the Property. During the first year of the Lease, the <br />Production Royalty shall be calculated at the rate of r per <br />2 <br />