2018-10-24_PERMIT FILE - M2018055 (6)

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terminated earlier than the Initial Term if the Tenant has produced 1,500,000 tons of Materials and the Leased Premises has been reclaimed to the satisfaction of the Landlord,the Division and any other regulatory agencies. 5. Lease Payments to Landlord 5.1. Tenant covenants and agrees to pay to Landlord as rent during the term of the Lease the following amounts for use of the Leased Premises. 5.2. Sales Royalty: For all Materials sold from the Property during each Lease Year, Tenant shall pay to Landlord a royalty ("Sales Royalty") at the rate specified in Paragraph 5.2.1 per sales ton (2,000 pounds) on all Materials sold from the Leased Premises. 5.2.1.Sales Royalty Payment: With the exception of the first year of production and sales, Tenant will pay Landlord the Sales Royalty payment due within thirty (30) days following the close of each fiscal quarter during the Lease Year. However, for all Material sold from the Property during calendar year 2019,Tenant will make a one- time annual Sales Royalty payment pursuant to the Royalty Rate per ton for calendar year 2019 as specified in section 5.2.2, to Landlord within thirty (30) days following the end of 2019 (payment due February 28, 2020). Commencing in calendar year 2020, subsequent Sales Royalty payments due will be made within thirty (30) days after the end of each fiscal quarter. 5.2.2.Sales Royalty Minimum: Tenant is obligated, on an annual basis, to pay landlord a sales royalty on a minimum of 40,000 tons of material, as rent, based upon the applicable fiscal year royalty rate. Upon signing of the Lease, Tenant will be obligated to pay the minimum royalty for fiscal year 2019 at the rate of 14W per ton ($40mor based on tonnage sold, whichever is higher (payment due in full by February 28,2020) If by March 1,2020,Tenant has been unable to begin production and sale of materials for any reason,Tenant may either continue the Lease in force and effect or may terminate the Lease with written notice to the landlord. If the Lease is terminated, Eagle Rocks shall transfer the mining permits from the State of Colorado and the SUP from Eagle County at no cost to VVR LLC. within 30 days of Lease termination. 5.2.3.Sales Royalty Schedule: LEASE YEAR ROYALTY RATE PER TON 2019 $to 2020 $M 2021 $=r 2022 $af 2023-2029 $1 . 5.2.3.1.Adjustment: subject to Paragraph 5.2.3 the royalty rate shall be fixed the first 5 years of operations. A Royalty Rate adjustment will start in fiscal year 6.