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WATER LEASE AGREEMENT THIS AGREEMENT is entered into this ~St day of August 2001, by and between Colorado Lime Company, Inc., d/b/a Calco (hereinafter referred to as "Calco"), whose address is c/o Johnny Bowers, P.O. Box 1044, Salida, Colorado, 81201, and the Upper Arkansas Water Conservancy District through its water activity enterprise, known as Upper Arkansas Water Activity Enterprise (hereinafter referred to as "District"), whose address is 122 West 2nd Street, Salida, Colorado, 81201. RECITALS A. Calco owns and operates a mining operation Calco diverts water from an unnamed tributary to the Sout}t Arkansas River located in the SE'/. SE'h, Section 32, Township 50 N, Range 6E of NMPM, Chaffee County, Colorado, for its mining operations located upon the Calco property, and Calco needs a temporary supply of replacement water to meet out-of-priority depletions for commercial purposes. B. The District owns shares of stock in Twin Lakes Reservoir and Canal Company and stores the water therefrom in North Fork Reservoir, which water may serve as replacement water under an Arkansas River Replacement Plan approved by the Division Engineer, Water Division 2. C. Calco desires to lease a portion of such water from the District; and the District is willing to lease such water to Calco under the terms and conditions hereof. NOW, THEREFORE, in consideration of the mutual promises contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree as follows: 1. Lease of Water. Calco hereby agrees to lease from District, and District agrees to lease to Calco, 0.5 acre-feet of water represented by shares of stock of Twin Lakes Reservoir and Canal Company owned by the District and placed into storage by the District in its North Fork Reservoir storage facilities pursuant to the District's decrees. This lease is for the purpose of being utilized in an Arkansas River replacement plan to be submitted to the Division Engineer, Water Division 2, pursuant to the Arkansas River tributary ground water rules. The leased water is for the replacement ofout-of-priority depletions for the period of time from August 2001 to August ~ 2006. 2. Rental. The lease price for the 0.5 acre-feet of water shall be (a) $100.00 original application fee, (b) $100.00 annual administration fee, and (c) $187.50 annual water replacement fee, which shall be paid by Calco to the District upon the approval of the Division Engineer, Water Division 2, of the Arkansas River replacement plan submitted by Calco. Said temporary plan shall be submitted to the Division Engineer within ten days of execution of this agreement and shall be diligently processed by Calco. Calco will notify and pay the District within 10 days of the approval of the replacement plan by the office of the State Engineer.