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2. PRODUCTION ROYALTY -- Lessor reserves as royalty, and Lessee agrees to pay to Lessor on or before <br /> the la • . • •• • • -i•, u•i h f•l •win• the month of •roduction the foltowin• amounts: <br /> • <br /> For the purpose of this lease, the "Gross Sale Price" shall be the average gross sale price per ton of <br /> minerals actually mined, removed, sold and shipped from the Leased Premises during any month which <br /> shall be an amount equal to the total gross proceeds from all such sales of minerals during such month <br /> divided by the total number of tons of such minerals. The only deduction allowed from the total gross <br /> proceeds shall be for transportation and delivery costs incurred by the Lessee in transporting the <br /> minerals from the mining permit boundary to the point of sale. <br /> Further, at the end of each five-year period, commencing from the original lease date, for so long <br /> as this lease remains in effect, Lessor may increase the rate or amount of production royalty to be paid <br /> by Lessee by a rate not to exceed the rate of increase of the average Producer's Price Index for <br /> Construction Sand, Gravel and Crushed Stone for the previous 5-year period, as published by the U.S. <br /> Department of Labor, Bureau of Labor Statistics. Failure to comply with any new royalty rate set by <br /> Lessor may subject this lease 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 or <br /> before the last day of each calendar month for mining during the preceding calendar month. <br /> 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 the lease, will <br /> be due and payable annually commencing on the date this lease is renewed or a new lease is <br /> executed and shall continue until the expiration of the new or renewed lease. This amount may <br /> be adjusted by Lessor at the end of each five-year period of the renewed or new lease. <br /> B. Lessee shall 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 unit. <br /> Whether the acreage is or is not a part of a logical mining unit will be determined by 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 (as defined <br /> above) of 10 years to the 17th day of July, 2038 as tong as minerals are being produced in paying <br /> quantities from the Leased Premises. Paying quantities is defined as production and sales of a quantity <br /> sufficient to return to Lessor production royalty payments of a minimum of $7,800 per year. <br /> 5. ANCILLARY USE -- Lessee may remove approved minerals, and place on the Leased Premises stock piles <br /> of material mined from the Leased Premises and other such equipment as is approved by Lessor for this <br /> removal and processing. All temporary ancillary uses such as concrete plants, asphalt plants, accessory <br /> equipment not used in the existing quarry operations, offsite aggregate materials not used for onsite <br /> roadway improvements or the enhancement of quarry operations and any other uses not specifically <br /> mentioned herein will be subject to the approval of Lessor and require a yearly rental payment of no <br /> less than $2,000.00. The rental payment shalt be pro-rated on a monthly basis if the duration of the <br /> SM 102453 <br /> Page 3 of 15 <br />