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'following the calendar month in which the excess tonnage is removed. If in
<br />any year the material removed is less than 100,000 tons, the difference
<br />between the minimum annual royalty based on 100,000 tons and the royalty
<br />which would otherwise be payable on the tonnage actually removed may be
<br />carried forward as a credit on royalties payable during succeeding years
<br />when the tonnage removed exceeds 100,000 tons; provided, however, that a
<br />credit for royalties paid when the tonnage in any year is less than 100,000
<br />tons may not be carried forward after the fifth year of this lease and any
<br />unused credits existing at the end of the fifth year of this lease shall be
<br />forfeited by the Lessee. The right to credits on royalties payable when
<br />the annual tonnage exceeds 100,000 tons shall not reduce any minimum annual
<br />royalty payable in advance.
<br />Royalties due the Lessor shall be paid in one check to Four Mile Ranch
<br />at the address stated above, or in one Check to a trustee or escrow agent
<br />as instructed in a written notice from Lessor to Lessee and Lessee shall
<br />have no obligation to see to the distribution of said amounts to each of
<br />Lessors individually, in their respective proportionate amounts.
<br />3. Cost of Livi„pg A$justment on Royalty. At the end of the second
<br />year of this lease, and at the end of each two-year period thereafter, the
<br />.Lessor shall have the option to increase the royalty payable based on the
<br />'increase in the cost of living price index during the previous two-year
<br />period. The calculation for determining the increase, if any, in the price
<br />shall be based on the Consumer Price Index (CPI) for All Urban Consumers
<br />Denver-Boulder adjusted by the Fremont County percentage for the Average
<br />•Annual Wage-Quarry Mining for the entire State of Colorado. This
<br />adjustment shall be made every two years - 1998, 2000, 2002, 2004, 2006
<br />based on the above figures for the previous years, 1997, 1999, 2001, 2003
<br />and 2005. The percentage increase in the price index, based on the index
<br />at the beginning and ending of each two-year period, shall be multiplied by
<br />the royalty then payable by Lessee to determine the increase in the amount
<br />of the royalty. In the event of an upward adjustment in the royalty
<br />payable, the annual advance royalty entitling the Lessee to remove 100,000
<br />tons shall be adjusted accordingly.
<br />4. Taxes and Utilities. Lessee agrees to pay, as the same become
<br />due, all charges for electricity, gas, water, telephone and other utility
<br />services used by Lessee on the Property, and any inarease in taxes or
<br />assessments on the Property attributable to a reclassification of the
<br />Property from its current status as grazing land, with taxes and
<br />assessments to be pro-rated to the first and last days of the term.
<br />5, Tnriamni i.ation and •iabili~y Insurance. Lessee agrees to
<br />indemnify Lessor and save Lessor harmless from any and all liability,
<br />damage, expense, causes of action, suits, claims or judgments arising from
<br />injury to perspns or property, except those caused by the willful or
<br />negligent act of the Lessor, or Lessor's agents or employees. Lessee shall
<br />also maintain public liability and property damage insurance upon the
<br />Property consisting of $500,000.00 combined single limit bodily injury and
<br />property damage coverage. Lessee shall pay the premiums for such policy or
<br />policies, which shall name the Lessor as a party insured.
<br />6. Protection of Property. Lessee agrees to provide and install
<br />adequate fencing surrounding all areas on which it conducts its mining
<br />operations and also to install gates or cattle guards at all entrances into
<br />areas whose operations are conducted, the Lessee being aware that adjacent
<br />areas are currently leased to third parties for the grazing of livestock.
<br />7. Water Wells. Lessee shall have the right to drill water wells on
<br />the Property for use in connection with its; operations, and in the event of
<br />.any valid assignment of lease by the Lessee, such assignee shall have the
<br />right to use any such well as long as this lease remains in good standing.
<br />However, upon termination or surrender of this lease, the Lessee shall
<br />leave each such well and the casing therein for the use of the Lessor,
<br />subject to the right of the Lessee to remove any pumps or motors connected
<br />thereto.
<br />8. SZpg;'ations. Lessee shall be responsible for securing all
<br />necessary permits
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