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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 sworn, verified, written report to Lessor, in which report shall be
<br />entered and set down the exact amount in weight of all products and the assay thereof mined and removed from said
<br />leased premises during the preceding calendar month. Lessee agrees to keep and to have in possession complete and
<br />accurate books and records showing the production and disposition of any and all substances produced on the leased
<br />land and to permit Lessor at all reasonable hours, to examine the same or to furnish copies of same to Lessor within
<br />60 days 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 />and the assay thereof of all ores, minerals and other materials mined from the premises during the preceding year.
<br />Lessee shall also furnish in said report geologic interpretations and recoverable reserve calculations, and maps and
<br />cross sections showing location of any mineral-bearing outcrops, drill holes, trenches, ore bodies and other
<br />prospecting and exploration activities, along with assays showing the amount of mineral contained in the ore. The
<br />records required to be maintained by Lessee and provided to Lessor upon request include logs of all strata penetrated
<br />and all geologic and hydrologic conditions encountered, and copies of in-hole surveys--this information to be
<br />collected and prepared under the supervision of a qualified geologist, geological engineer or mining engineer. Other
<br />qualified persons may collect and prepare this data, if agreed to in writing between Lessee and Lessor. Any request
<br />to keep certain information confidential should be in writing to Lessor at the time such information is submitted to
<br />Lessor, and such data may be kept confidential as consistent with State law. Lessee shall submit, if requested by
<br />Lessor, such additional reports, records or documents regarding Lessee's operation on the Leased Premises as
<br />necessary for the compliance with lease provisions.
<br />OVERRIDING ROYALTY LIMITATIONS -- It is agreed that this lease or any subsequent assignment hereof shall
<br />not be burdened with overriding royalties the aggregate of which exceeds two percent (2%) of the gross value of the
<br />minerals or ore at the first point of sale. Lessor must be notified of all overriding royalties accruing to this lease.
<br />DEVELOPMENT - This paragraph is deleted.
<br />PENALTIES -- A penalty shall be imposed for, but not limited to, late payments, improper payments, operational
<br />deficiencies of any kind whatsoever, violations of any covenants of this lease, or any false statements made to
<br />Lessor. Penalties shall be determined by Lessor unless otherwise provided for by law and may be in the form of, but
<br />not limited to, interest, fees, fines, and/or lease cancellation. A penalty schedule shall be prepared by Lessor and
<br />shall become effective immediately after public notice. Said schedule may be changed from time to time after such
<br />notice.
<br />10. ASSIGNMENT -- Lessee, only with written consent of Lessor, may assign this lease as to the leasehold interest of
<br />such Lessee in all or part of the lands covered hereby; not less, however, than tracts of approximately forty (40)
<br />acres or governmental lots corresponding to a quarter-quarter section for any partial assignment.
<br />No assignment of undivided interests or retention or reservation of overriding royalties will be recognized or
<br />approved by Lessor, and the effect, if any, of any such assignments or reservations will be strictly and only as
<br />between the parties thereto and outside the terms of this lease. No dispute between parties to any assignment or
<br />reservation shall operate to relieve Lessee from performance of any terms or conditions hereof or to postpone the
<br />time therefor. Lessor will at all times be entitled to look solely to Lessee or his assignee shown on Lessor's books as
<br />being sole owner hereof, and for the sending of all notices required by this lease, for the performance of all terms
<br />and conditions hereof.
<br />If an assignment of a part of this lease is approved, a new lease designated as an assignment will be issued
<br />to the assignee covering the lands assigned for the balance of the term of the base lease on the mining lease form in
<br />use at the time of assignment and limited as to tern as said lease is limited. The assignor will be released and
<br />discharged from all further obligations for such lands assigned, as if the same had never been a part of this lease.
<br />11. ASSIGNMENT CONSIDERATION -- The consideration for approval of assignment by Lessor shall be 10% of the
<br />value of any consideration tendered to Assignor by Assignee for the assignment. Divulgence of the value of these
<br />considerations shall be mandatory, in affidavit form, which form shall be presented to Lessor along with the other
<br />assignment instruments in order to obtain Lessor's approval for the assignment. An assignment does not constitute a
<br />new lease but is a continuation of the base lease. Any attempt to withhold this information shall be construed as an
<br />attempt to defraud the State of Colorado and shall render this lease null, void and nonexistent, and all moneys paid
<br />to Lessor shall be forfeited to Lessor. In addition, the current statutory fees will be paid at the time the assignment
<br />record form is submitted.
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