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NOW, THEREFORE, the parties agree: <br />AtTACi . <br />WATER LEASE AGREEMENT <br />F: \Clients \T\trinc \New Elk Coal Company Lease\20110203- Lease -New Elk- LGHH.docx <br />RECEIVED <br />NOV 2 8 2011 <br />WATER RESOURCES <br />STATE ENGINEER <br />COLO. <br />1. PARTIES. The parties to this Water Lease Agreement ( "Agreement ") are the <br />CITY OF TRINIDAD, a Colorado municipal corporation ( "City "), and NEW ELK COAL <br />COMPANY, LLC, a Kansas limited liability company ( "Lessee "). <br />2. RECITALS. Lessee is planning to operate the New Elk Metallurgical Coking <br />Coal Mine ( "Mine ") located near Weston, Colorado. The Mine needs water for its <br />operations. The City has certain water in storage in Trinidad Reservoir ( "City's <br />Water ") that may be utilized by exchange at the Mine. Thus, Lessee would like to <br />lease a certain amount of the City's Water and have the ability to request the lease <br />of additional amounts of the City's Water on an annual basis. The City is willing to <br />enter into such a lease with the Lessee. <br />3. TERM. The term of this Agreement shall begin upon the mutual execution of <br />the Agreement by the parties and shall automatically expire on December 31, <br />2014, unless renewed pursuant to paragraph 10 below. <br />4. WATER LEASE. The City will lease and consider leasing the following <br />amounts of the City's Water to Lessee: <br />A. TIER 1 WATER. The City will lease fifty (50) acre -feet of the City's <br />Water to Lessee on an annual basis ( "Tier 1 Water "). Lessee shall make <br />payments for Tier 1 Water leased in 2011 upon its execution of this <br />Agreement. On or before January 31 of 2012, 2013 and 2014, Lessee shall <br />pay to the City Twenty Five Thousand Dollars ($25,000) per year for the lease <br />of the Tier 1 Water. No invoice or statement shall be provided by the City for <br />this payment. <br />B. TIER 2 WATER. In addition to the Tier 1 Water specified in paragraph <br />4.A., Lessee may request to lease on an annual basis an additional amount <br />of the City's Water up to one hundred (100) acre -feet ( "Tier 2 Water "). On or <br />before the date for payment of the Tier 1 Water in 2011, if applicable, and <br />for 2012, 2013 and 2014 on or before November 1 of the previous year, <br />Lessee shall give notice to the City of its desire to lease up to one hundred <br />(100) acre -feet of Tier 2 Water. For 2011, the City shall confirm it can deliver <br />Tier 2 Water within 30 days of notice of the request. For delivery of Tier 2 <br />Water in 2012, 2013 and 2014, the City shall confirm the availability of Tier <br />2 Water by November 30 of the previous year, provided the Lessee has <br />provided notice of its request by November 1. The price for Tier 2 Water <br />shall be Five Hundred Dollars ($500) per acre -foot. If Lessee requests Tier 2 <br />Water in 2011, payment shall be due within 30 days of the City's <br />confirmation of availability. For Tier 2 water to be delivered in 2012, 2013 <br />and 2014, payment shall be made on or before January 31 of that year. The <br />City is not guaranteeing or providing any priority for any Tier 2 Water and <br />