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7. Compensation. <br /> (a) The Minerals shall be mined by the Lessee for purposes of sale or making <br /> Aggregate Products by Lessee. Royalties will be accrued and paid on all Minerals <br /> that are extracted and sold or that are extracted and used by Lessee to make <br /> Aggregate Product from the Property. Lessee shall make diligent and <br /> commercially reasonable efforts to sell the aggregate Minerals from the Property <br /> at fair market value or to produce Aggregate Products from the Minerals. The <br /> royalty rate will be 7% of the average gross selling price of all aggregate Mineral <br /> materials sold from this source and 7% of this average fair market value of all <br /> aggregate Minerals from the Property used by Lessee to produce Aggregate <br /> Product. The average selling price is calculated by dividing the total gross <br /> revenue of the aggregate Minerals, net of freight, produced and sold from the <br /> Property by the total tons of aggregate Minerals sold. The average fair market <br /> value shall be determined in the same manner by dividing the total gross fair <br /> market value of the aggregate Minerals produced from the Property (and used in <br /> Aggregate Products) by the total tons of aggregate Minerals used to produce <br /> Aggregate Products. For purposes of clarification, the 7 percent royalty related to <br /> the Aggregate Product is 7 percent of the fair market value of the aggregate <br /> Minerals used to produce Aggregate Product and not 7% of the value of the <br /> Aggregate Product. Tons of aggregate Minerals extracted and that are sold or <br /> used by Lessee will be measured as designated in 9b. Lessee will pay Lessor the <br /> Royalty within 30 days following the date that the minerals are sold or used. <br /> In the event that Minerals which have been extracted pursuant to this Lease <br /> remain unsold at the end of the term of this Lease, Royalties shall continue to be <br /> paid until such Minerals are sold or used. <br /> (b) Lease Advance. Lessee shall pay Lessor a lease advance of $100,000 upon <br /> execution of this Lease, which advance shall be fully earned and nonrefundable <br /> upon payment and shall be credited towards future royalties due. <br /> (c) Minimum Annual Royalty. Beginning with the year 2005, the Lessee shall pay <br /> Lessor a Minimum Annual Royalty of$104,420.75 throughout the term of this <br /> Lease. Such payments will be due at the end of each year only if the minimum <br /> payment amount is not earned and paid pursuant to the compensation provisions <br /> of Paragraph 7(a). In the event that the Minimum Annual Royalty exceeds the <br /> actual Royalty for a Lease Year, then credit for such excess will be given in the <br /> following Lease Year(s) to the extent that the actual Royalty for the subsequent <br /> Lease Year(s) exceeds such Minimum Annual Royalty for such subsequent Lease <br /> Year(s). To the extent that the cumulative actual Royalty paid exceeds the <br /> cumulative amount of the Minimum Annual Royalty at the end of any Lease <br /> 4 <br />