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3. EXTENSION -- Permittee may have a preferential right to renew the lease or to receive a new lease, whichever may <br />be determined by Permitter to he in the best interest of the State, under the following conditions: <br />A. An advance minimum royalty, the amount to be negotiated before expiration of the lease, will be clue and <br />payable annually commencing on the date this lease is renewed or a new lease is executed and shall <br />continue until the expiration of the new or renewed lease. This amount may be adjusted by Permitter at the <br />end of each five -year period of the renewed or new lease. <br />B. Permittee shall furnish to Permitter satisfactory evidence of plans for mining during the term of the renewed <br />lease or during the term of a new lease. <br />C. Permittee shall furnish adequate geological evidence to Permitter that the acreage subject to the renewed or <br />new lease is in fact an integral part of and contains reserves in a logical mining unit. Whether the acreage is <br />or is not a part of a logical mining unit will be determined by Permitter. <br />D. An extension of this Lease as determined by Permitter would be in the best interest of Permitter <br />4. EXTENSION BY PRODUCTION -- This paragraph is not applicable. <br />5. ANCILLARY USE -- Permittee may remove approved minerals, and place on the Leased Premises stock piles of <br />material mined from this lease and such equipment as is approved by Permitter for this removal. All other ancillary <br />uses such as concrete plants, asphalt plants, accessory equipment, offsite aggregate materials and any other uses not <br />specifically mentioned herein will be subject to the approval of Permitter and require a yearly rental payment of no <br />less than N/A per acre. Haul roads and /or access roads which do not directly benefit the Leased Premises will be <br />subject to a separate permit and approval of Permitter. <br />6. 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 Permittee shall submit a sworn, verified, written report to Permitter, in which report <br />shall be entered and set clown the exact amount in weight of all products and the assay thereof mined and removed <br />from said leased premises during the preceding calendar month. Permittee agrees to keep and to have in possession <br />complete and accurate books and records showing the production and disposition of any and all substances produced <br />on the leased land and to permit Permitter at all reasonable hours, to examine the same or to furnish copies of same <br />to Permitter within 60 days following written request along with purchaser's support documentation. All said books <br />and records shall be retained by Permittee and made available in Colorado to Permitter for a period of not less than <br />10 years. If any such examination shall reveal, or if either party shall discover any error or inaccuracy in its own or <br />the other party's statement, payment, calculation, or determination, then proper adjustment or correction thereof <br />shall be made as promptly as practicable thereafter, accept that no adjustment or correction shall be made if more <br />than 10 years have elapsed between the time the error or inaccuracy occurred and the discovery by either party of <br />said error or inaccuracy. <br />Further, Permittee shall furnish annually a complete operations report to Permitter disclosing the number of <br />tons and the assay thereof of all ores, minerals and other materials mined from the premises during the preceding <br />year. Permittee shall also furnish in said report geologic interpretations and recoverable reserve calculations, and <br />maps and 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 Permittee and provided to Permitter upon request include logs of all strata <br />penetrated and all geologic and hydrologic conditions encountered, and copies of in -hole surveys - -this information <br />to be collected and prepared under the supervision of a qualified geologist, geological engineer or mining engineer. <br />Other qualified persons may collect and prepare this data, if agreed to in writing between Permittee and Permitter. <br />Any request to keep certain information confidential should be in writing to Permitter at the time such information is <br />submitted to Permitter, and such data may be kept confidential as consistent with State law. Permittee shall submit, <br />if requested by Permitter, such additional reports, records or documents regarding Permittee's operation on the <br />Leased Premises as necessary for the compliance with lease provisions. <br />7. 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. Permitter oust be notified of all overriding royalties accruing to this lease. <br />8. DEVELOPMENT — This paragraph not applicable. <br />9. PENALTIES -- A penalty shall be imposed for; but not limited to, late payients, improper payments, operational <br />deficiencies of any kind whatsoever, violations of any covenants of this lease, or any false statements made to <br />Permitter. Penalties shall be determined by Permitter unless otherwise provided for by law and may be in the <br />Page 2 of 6 <br />