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such month divided by the total number of tons of such sand a gravel. The only deduction allowed from <br /> the total gross proceeds shall be for transportation and delivery costs incurred by the Lessee in <br /> transporting the sand a gravel from the mining permit boundary to the point of sale. <br /> Further, at the end of each five-year period, commencing from the original lease date,for so long as <br /> this lease remains in effect, Lessor may increase the rate or amount of production royalty to be paid by <br /> Lessee by a rate not to exceed the rate of increase of the average Producer's Price Index for Construction <br /> Sand, Gravel and Crushed Stone for the previous 5-year period, as published by the U.S. Department of <br /> Labor, Bureau of Labor Statistics. Failure to comply with any new royalty rate set by Lessor may subject <br /> this lease to cancellation by thirty-day written notice by Lessor. <br /> Reporting of production royalty that is credited against advanced minimum royalty is also due on or <br /> before the last day of each calendar month for mining during the preceding calendar month. <br /> 3. EXTENSION -- Lessee may have a preferential right to renew the lease or to receive a new lease, <br /> whichever may be determined by Lessor to be in the best interest of the State, under the following <br /> conditions: <br /> a) An advance minimum royalty, the amount to be negotiated before expiration of the lease, will <br /> be due and payable annually commencing on the date this lease is renewed or a new lease is <br /> executed and shall continue until the expiration of the new or renewed lease. This amount may <br /> be adjusted by Lessor at the end of each five-year period of the renewed or new lease. <br /> b) Lessee shall furnish to Lessor satisfactory evidence of plans for mining during the term of the <br /> renewed lease or during the term of a new lease. <br /> c) Lessee shall furnish adequate geological evidence to Lessor that the acreage subject to the <br /> renewed or new lease is in fact an integral part of and contains reserves in a logical mining unit. <br /> Whether the acreage is or is not a part of a logical mining unit will be determined by Lessor. <br /> d) An extension of this Lease as determined by Lessor would be in the best interest of Lessor. <br /> 4. EXTENSION BY PRODUCTION-The Lease may continue in effect for a Secondary Term of 10 years to the <br /> 8th day of January, 2040 as long as sand and gravel are being produced in paying quantities from the <br /> Leased Premises. Paying quantities is defined as production and sales of a quantity sufficient to return <br /> to Lessor production royalty payments of a minimum of$20,000.00 per year. <br /> 5. ANCILLARY USE-- Lessee may remove approved minerals, and place on the Leased Premises stock piles <br /> of material mined from the Leased Premises and other such equipment as is approved by Lessor for this <br /> removal and processing. All temporary ancillary uses such as concrete plants, asphalt plants, accessory <br /> equipment, offsite aggregate materials and any other uses not specifically mentioned herein will be <br /> subject to the approval of Lessor and require a yearly rental payment of no less than $5,000.00. Haul <br /> roads and/or access roads which do not directly benefit the Leased Premises wilt be subject to a separate <br /> road access 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 <br /> month during the term of this lease Lessee shall submit a sworn, verified, written report to Lessor, in <br /> which report shall be entered and set down the exact amount in weight of all products and the assay <br /> thereof mined and removed from said Leased Premises during the preceding calendar month. Lessee <br /> agrees to keep and to have in possession complete and accurate books and records showing the <br /> production and disposition of any and all substances produced on the Leased Premises and to permit <br /> 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 <br /> be retained by Lessee and made available in Colorado to Lessor for a period of not less than 10 years. If <br /> any such examination shall reveal, or if either party shalt discover any error or inaccuracy in its own or <br /> the other party's statement, payment, calculation, or determination, then proper adjustment or <br /> correction thereof shall be made as promptly as practicable thereafter, except that no adjustment or <br /> GL 112927 Revised DOL 11/2018 <br /> Page 3 of 14 <br />