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RECEPTION#: 805955, 08/28/2009 at
<br />01:57:03 PM, 1 OF 2, LSE R $11.00
<br />WHEN RECORDED RETURN TO: FRANCINE TIPTON-LONG, MONTROSE
<br />Christopher Kamper COUNTY, CO CLERK AND RECORDER
<br />Carver Schwarz McNab & Bailey, LLC
<br />1600 Stout St., Suite 1700
<br />Denver, Colorado 80202
<br />MEMORANDUM OF
<br />SURFACE LEASE AND PURCHASE AGREEMENT
<br />This MEMORANDUM OF SURFACE LEASE AND PURCHASE AGREEMENT executed August 7,
<br />2009 (the "Effective Date"), is by and between Garvey & Co., a Colorado general partnership, with an
<br />address of P.O. Box 555, 26485 County Rd 25.00 Nucla, Colorado 81424 ("Lessor"), and Western Fuels-
<br />Colorado, a Limited Liability Company, a Colorado limited liability company, with an address of P.O. Box
<br />33424, Denver, Colorado 80233-3424 ("Lessee").
<br />RECITALS
<br />WHEREAS Lessor and Lessee have entered into a Surface Lease and Purchase Agreement effective
<br />August 7, 2009 (the "Agreement"); and
<br />WHEREAS, the parties wish to record a Memorandum of the Agreement in order to reflect their interests
<br />in the land affected by the Agreement.
<br />NOW, THEREFORE, Lessor and Lessee state as follows.
<br />Lessor grants to Lessee a lease of the surface contained within the Property for the purposes of
<br />mining, extracting, and marketing the coal pertaining to such Property (the "Coal"), that Property being
<br />described more particularly as follows:
<br />Southwest 'A of section 25, T47N, R16W, N.M.P.M., constituting about 160 acres of land, more or
<br />less, but not including any rights to minerals tying beneath such property, subject to those (if any)
<br />rights of way, easements, leases, encumbrances, reservations, and exceptions of public record,
<br />unrecorded visible rights of way and easements, and those unrecorded rights of ways, easements
<br />and encumbrances disclosed in writing by Lessor to Lessee.
<br />The lease grants Lessee, subject to certain terms and conditions, the right to enter onto and possess
<br />the leasehold; to conduct baseline environmental and other studies; to explore for, evaluate, and map the
<br />Coal; to remove overburden, mine, extract, remove, market, and otherwise use the Coal; to remove and
<br />market sand and gravel; and to reclaim the leasehold pursuant to State of Colorado requirements. Lessee
<br />may remove surface support or damage other minerals or strata on the leasehold without liability to Lessor.
<br />Lessor shall lease to Lessee all of Lessor's right, title to, and interest in 27 water shares of
<br />Colorado Cooperative Company (CCC) currently owned by Lessor.
<br />The term of the lease shall begin on the date of execution of this agreement and shall continue for
<br />20 years or until Lessee's reclamation bond pertaining to the Property is released by the State of Colorado
<br />in its entirety, whichever is later. When the Lease has terminated, Lessee shall record a statement of such
<br />termination in the office of the Montrose County, Colorado Recorder.
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