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amount of Advance Armual Payment due to LESSOR shall be prorated to the date of tem~ination. (c) LESSEE shall pay LESSOR, a royalty ("Royalty") of FIFTY CENTS ($0.50) for each TON (2,000 pounds) ofLeased Substances shipped from the Property during the Option Ternr or until such earlier or later time as a crushing permit has been duly issued by Summit County and crushed Leased Materials are actually sold and shipped from the Leased Premises, after which LESSEE shall pay LESSOR, a royalty ("Royalty") of ONE DOLLAR ($1.00) for each TON (2,000 pounds) ofLeased Substazrces shipped from the Property during the Primary Term of this Agreement. During the first and second Renewal Periods, the Royalty shall be renegotiated by the parties hereto to reflect the then-applicable competitive market rates for Leased Substances in the Summit County, Colorado market; provided that such adjustment shall in no event be less that the Royalty rate iu effect at the end of the Primary Term nor more than an amount equal the Royalty in effect as of the Exercise Date increased by the same amount as the increase in the U.S. Department of Labor Producer Price Index for Rocky Mountain Region Constriction Materials from the Exercise Date to a date which is t}u•ee (3) months prior to the date that such adjustment is to be made. (d) The Royalty payments due to LESSOR under paragraph (c) above shall be computed on a calendar quarter basis acid shall be due and payable within Twenty (20) days from the end of each calendar quarter during the Primary Term and any Renewal Periods of this Agreement. (e) The Advance Armual Payment due and paid by LESSEE shall be credited against the quarterly Royalty payments due to LESSOR for the Option Term and any lease year. Any excess Advance Armual Payment remaining after application to all Royalty payments shall be credited toward the Royalty earned during the next lease year, and may be carried forward. At the end of the Lease, whether by termination or otherwise, any part of the Advance Annual Payment that has been received, but is still unearned, shall be retained by LESSOR. (~ Any and all payments made by LESSEE to LESSOR pursuant to this Agreement shall be made to LESSOR at the address first above set forth. Computation of Rovalties -Records: (a) Royalties shall be computed on the basis ofthe quantity ofLeased Substances shipped from the Property during each calendar quarter. (b) The total quantity of Leased Substances shipped shall be determined according to truck or front end loader bucket scale tickets and batch plant weight tickets from scales to be installed by LESSEE. In the event LESSOR disputes as to the accuracy ofscale weights, LESSOR may employ a licensed engineer, at LESSOR'S own expense, to make arty test or inspection deemed necessary to determine the accuracy of the weights. LESSEE will 09/06/2002 L.G. Hverist /Rock Island Land Co. Page 4 Option and Lease Agreement