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2. PRODUCTION ROYALTY -- Lessor reserves as royalty, and Lessee agrees to pay to Lessor on or <br /> before the last day of each calendar month following the month of production the following <br /> amounts: <br /> • The royalty rate shalt be $0.75 per ton (2000 pounds) of sand Et gravel produced and sold <br /> from the Leased Premises, or a sum equal to eight percent (8%) of the Gross Sale Price (as <br /> herein defined) at the first point of sale, whichever is greater. <br /> For the purpose of this lease, the "Gross Sale Price" shalt be the average gross sale price per ton <br /> of sand Et gravel actually mined, removed, sold and shipped from the Leased Premises during any <br /> month which shall be an amount equal to the total gross proceeds from all such sates of sand Et <br /> gravel during such month divided by the total number of tons of such sand Et gravel. The only <br /> deduction allowed from the total gross proceeds shalt be for transportation and delivery costs <br /> incurred by the Lessee in transporting the sand Ex gravel from the mining permit boundary to the <br /> point of sale. <br /> Further, at the end of each five-year period, commencing from the original tease date, for so <br /> Long as this lease remains in effect, Lessor may increase the rate or amount of production royalty to <br /> be paid by Lessee by a rate not to exceed the rate of increase of the average Producer's Price Index <br /> for Construction Sand, Gravel and Crushed Stone for the previous 5-year period, as published by the <br /> U.S. Department of Labor, Bureau of Labor Statistics. Failure to comply with any new royalty rate <br /> set by Lessor may subject this tease to cancellation by thirty-day written notice by Lessor. <br /> Reporting of production royalty that is credited against advanced minimum royalty is also due on <br /> or before the last day of each calendar month for mining during the preceding calendar month. <br /> 3. EXTENSION -- Lessee may have a preferential right to renew the lease or to receive a new tease, <br /> whichever may be determined by Lessor to be in the best interest of the State, under the following <br /> conditions: <br /> a) An advance minimum royalty, the amount to be negotiated before expiration of tiie lease, <br /> will be due and payable annually commencing on the date this lease is renewed or a new <br /> lease is executed and shall continue until the expiration of the new or renewed tease. This <br /> amount may be adjusted by Lessor at the end of each five-year period of the renewed or new <br /> lease. <br /> b) Lessee shalt furnish to Lessor satisfactory evidence of plans for mining during the term of the <br /> renewed lease or during the term of a new lease. <br /> c) Lessee shall furnish adequate geological evidence to Lessor that the acreage subject to the <br /> renewed or new Lease is in fact an integral part of and contains reserves in a logical mining <br /> unit. Whether the acreage is or is not a part of a logical mining unit will. be determined by <br /> Lessor. <br /> d) An extension of this Lease as determined by Lessor would be in the best interest of Lessor. <br /> 4. EXTENSION BY PRODUCTION - The Lease may continue in effect for a Secondary Term of 10 years to <br /> the 15th day of July, 2039 as tong as sand and gravel are being produced in paying quantities from <br /> the Leased Premises. Paying quantities is defined as production and sates of a quantity sufficient to <br /> return to Lessor production royalty payments of a minimum of $35,000 per year. <br /> 5. ANCILLARY USE -- Lessee may remove approved minerals, and place on the Leased Premises stock <br /> piles of material mined from the Leased Premises and other, such equipment as is approved by Lessor <br /> for this removal and processing. All temporary ancillary uses such as concrete plants, asphalt <br /> GL 1121629 Revised DOL 1112018 <br /> Page 3 of 17 <br />