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<br />SAND AND GRAVEL LEASE
<br />THIS LEASE, is entered into and is effective as of August , 2007 between SerFer Land Ventures,
<br />LLC, a Colorado limited liability company ("Lessor"), and Connell Resources, Inc., a Colorado corporation
<br />("Lessee").
<br />In consideration of the mutual covenants contained in this Lease, and for other valuable consideration,
<br />the receipt and sufficiency of which is acknowledged, the parties agree as follows:
<br />1. Leased Property. Lessor leases to Lessee the real property more fully described in Exhibit "A"
<br />(attached and incorporated by reference) (the "Property") for the purposes of mining, extracting, crushing,
<br />processing, stockpiling, storing, removing and selling sand, gravel and related materials (collectively referred
<br />to as. "Material"), and for conducting any and all related activities including, but not limited to, testing, drilling,
<br />surveying and inspecting the Property; and constructing, using and operating any other improvements,
<br />machinery and equipment in connection with lessee's operation on the Property. All Material extracted from
<br />the Property (including any stockpiled Material located on the Property) shall be considered the sole property
<br />of Lessee.
<br />2. Term of Lease. Unless earlier terminated under Section 8 below, this Lease shall be in effect
<br />as of the date set forth in the introductory paragraph and shall continue until 51 months from the date Lessee
<br />receives all applicable governmental permits ("Permits"} required to mine, extract, crush, process, stockpile,
<br />store, remove and sell the Material (such time period consisting of 39 months to mine, extract, crush, process,
<br />stockpile, store, remove and sell the Material and obtain certification of the mined area for water storage, and
<br />12 months to complete reclamation and removal of stockpiled Material from the Property). If Lessee has not
<br />completed the removal and sale of all commercially saleable Material within 39 months after Lessee receives
<br />all Permits then, as liquidated damages and not as a penalty, Lessee shall pay Lessor $5,000 per month until
<br />the earlier of (a) the removal and sale of all commercially saleable Material or (b) six months after the end of
<br />the 39 month period. If Lessee has not completed reclamation and removal of stockpiled Materia] from the
<br />Property within 51 months after Lessee receives the Permits then, as liquidated damages and not as a penalty,
<br />Lessee shall pay Lessor $500 per month until all stockpiled Material has been removed and reclamation is
<br />completed. The parties acknowledge that the above-liquidated damages provisions are reasonable because
<br />Lessor's actual damages in the situations described would be impossible to ascertain. Lessor acknowledges
<br />that the liquidated damages is its sole remedy in the situations described above.
<br />3. Ro.LX. Lessee shall pay Lessor a royalty of $0.75 per ton for all Material removed and sold
<br />with a minimum amount of 375,000 tons of material removed.
<br />4. Payment Terms. Lessee's royalty payments are due by the 30`h day of each month following
<br />the month in which the Material had been removed and sold. Payments shall be mailed to Lessor at 4315 East
<br />Harmony Road, Fort Collins, CO 80528 or at such other address as Lessor may notify Lessee of in writing.
<br />Records and Reports. Lessee shall keep records and furnish reports to Lessor as follows:
<br />5.1 Lessee agrees to keep a strict and accurate record of all Material removed from the
<br />Property and all sales thereof, and the Lessor shall have the privilege during business hours of examining the
<br />mining procedures and checking the books and records of Lessee for the purpose of verifying the amount of
<br />production and of royalties payable.
<br />5.2 Lessee shall forward to Lessor monthly reports showing the quantity of Material
<br />removed during the preceding month. Such reports shail be forwarded to Lessor by the 30`h day of the month
<br />msc ~ansnoo~~
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