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In case of assignment of this lease, all advance minimum royalty paid to the state shall be carried forward and <br /> credited to the new assignee. <br /> 2. PRODUCT SON ROYALTY -- Lessor reserves as royalty,and Lessee agrees to pay to Lessor on or before the last <br /> day of each calendar month following the month of production,S 0.79 per ton of 2000 pounds avoirdupois,or an <br /> amount per ton equal to 8°,/a of the average sales price for the preceding calendar year as discussed below: <br /> 1. At the end of each calendar year after operations begin on the Leased Premises, the average sales price of <br /> material sold from the Leased Premises for such year shall be certified to Lessor by Lessee. The average <br /> sales price is the price Freight on Board(F.O.B.)at the mine. Such certification shall be supplied to Lessor <br /> no later than January 31'of the year following the calendar year for which the certified statement applies. <br /> Il. In any year that the average selling price meets or exceeds$10.00 per ton F.O.B.the mine,Lessee agrees to <br /> adjust the royalty per ton for the next year to equal 8%of the average sales price. In no case will the royalty <br /> be less than$0.79 per ton. Lessee shall make a diligent effort to assure that the price F.O.B.at the mine rises <br /> proportionally with the market price of the material sold away from the lease. <br /> Ill. Average selling price per ton shall be determined by Lessee's independent auditors by dividing the total <br /> income for the sale of product to real customers by the total tons sold F.O.B.at the mine during the calendar <br /> year from such lands. The Lessee and its customers shall keep accurate and complete records of all sales of <br /> product from the Leased Premises to real customers. <br /> 3. EXTENSION—This paragraph deleted <br /> 4_ EXTENSION BY PRQDUCTION—This paragraph deleted <br /> 5. ANCILLARY USE -- Lessee may remove approved minerals, and place on the Leased Premises stockpiles of <br /> material mined from this lease and such equipment as is approved by Lessor for this removal. All other ancillary <br /> uses such as concrete plants, asphalt plants,accessory equipment,offsite aggregate materials,storage of equipment <br /> and any other uses not specifically mentioned herein will be subject to the approval of Lessor and require a yearly <br /> rental payment of no less than $1000.00 per acre. Haul roads and/or access roads which do not directly benefit the <br /> Leased Premises will be subject to a separate permit and approval of Lessor. <br /> 6. REPORTS AND RECORDS — After operations begin, it is agreed that on or before the last day of each month <br /> during the term of this lease,Lessee shall submit a swom,verified,written report to Lessor,in which report shall be <br /> entered and set down the exact amount in weight of all products mined and removed from said Leased Premises <br /> during the preceding calendar month. Lessee agrees to keep and to have in possession complete and accurate books <br /> and records showing the production and disposition of any and all substances produced on the leased land and to <br /> permit Lessor at all reasonable hours, to examine the same or to furnish copies of same to Lessor within 60 days <br /> following written request along with purchaser's support documentation. All said books and records shall be <br /> retained by Lessee and made available in Colorado to Lessor for a period of not less than 10 years. If any such <br /> examination shall reveal, or if either party shall discover any error or inaccuracy in its own or the other party's <br /> statement, payment, calculation, or determination, then proper adjustment or correction thereof shall be made as <br /> promptly as practicable thereafter,except that no adjustment or correction shall be made if more than 10 years have <br /> elapsed between the time the error or inaccuracy occurred and the discovery by either party of said error or <br /> inaccuracy. <br /> Further, Lessee shall furnish annually a complete operations report to Lessor disclosing the number of tons <br /> of materials mined from the premises during the preceding year. The records required to be maintained by Lessee <br /> and provided to Lessor upon request include all geologic and hydrologic conditions encountered. Any request to <br /> Page 3 of 12 <br />