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2. Term. The Term of this Lease shall be an initial period of ten (10) years commencing <br />on the Effective Date ("Term"). The Company may obtain an extension of the Term for five <br />years by written notice to Lessor prior to the end of the initial Term and payment of the Advance <br />Minimum Royalty for the eleventh Lease Year set forth in Paragraph 4, below. The period of <br />any extension of the initial Term pursuant hereto shall likewise be considered to be within the <br />Term of this Lease. <br />3. Production Ro ay lties. <br />A. For all Materials mined or quarried and removed and sold from the <br />Property during each calendar month during the first five Lease Years, the Company shall pay to <br />Lessor a royalty ("Production Royalty") derived from a "Base Royaltv" rate of <br />per Net Sale Ton. The Base Royalty rate shall be increased to per Net Sale <br />Ton in the sixth and each succeeding Lease Year. The Production Royalty rate shall be adjusted <br />from the Base Royalty rate at the start of the first five Lease Years, commencing January 1, 2005 <br />pursuant to Paragraph B below. Subsequent adjustments of the Production Royalty Rate shall be <br />made pursuant to Paragraph C below. <br />B. The Production Royalty rate for the first five Lease Years shall be <br />adjusted annually, commencing on January 1, 2005 and on each January 1 thereafter (the <br />"Adjustment Date"). The basis for this adjustment shall be the Consumer Price Index-All <br />Urban Consumers-Denver-Boulder-Greeley Area, published by the United States Department <br />of Labor, Bureau of Labor Statistics (the "Index"). The adjusted Production Royalty shall be <br />determined by dividing the monthly Index last published before such Adjustment Date by the <br />monthly Index last published as of the Effective Date and then multiplying the quotient by the <br />Base Royalty so as to adjust the Production Royalty rate per ton beginning on the first <br />Adjustment Date and each subsequent Adjustment Date thereafter based on such calculation. <br />The foregoing ratio of Indexes shall be calculated on data with base year 1982 = 100 until the <br />Bureau of Labor Statistics publishes data with a new base period. If the Index just described or <br />one reasonably similar thereto is no longer published, then an index or adjustment accomplishing <br />as nearly as practical the result which would have been obtained by using the stated Index if it <br />had been available shall be selected by agreement of the parties hereto. . <br />C. The Base Royalty for the sixth Lease Year and each succeeding Lease <br />Year shall be fixed at ; per Net Sale Ton. Commencing January 1, 2010 and on each <br />January 1 thereafter, the Production Royalty rate shall be adjusted from this new Base Royalty <br />rate for the remaining initial Lease term, as well as any extension of the initial Term, in the <br />manner described in Paragraph B, above, except that the reference Index to be used in <br />calculating the ratio for adjustment of the Production Royalty from the Base Royalty in the sixth <br />and succeeding Lease Years shall be the monthly Index last published before commencement of <br />the sixth Lease Year (instead of the Index last published as of the original Effective Date). <br />D. Production Royalty for each calendar month, in excess of amounts prepaid <br />pursuant to Paragraph 4, below, shall be paid to Lessor within twenty (20) days after the close of <br />such calendar month. The royalty payments shall be accompanied by a monthly statement with <br />-2-