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4. EXTENSION BY PRODUCTION may not be held in perpetuity; however, a lease~minue in effect for so long as opal is produced
<br />N paying quantities. Cessation of p on for a period in excess of 180 cortsectrtive days ummatica0y remove the lean from producing
<br />status unless otherwise agreed to in writing by Lessor Lessee shall notify Lessor of each cessation of production, de reasons therefor, and the rinx
<br />period during which production will or did cease. "Paying quantities" rrcans production sufficient IO rcmm royalties ro the State equal to the advance
<br />minimum royalty but not less dun ten dollars pu acre per year.
<br />5. PRODUCTLON ROYALTY -Lessor hereby reserves aed Lessee agrees to pay to Lessor ss production royalty the following:
<br />For coal removed by tttdergroued mining methods a sum equal to eight percent (8 %) of the gross sale price at the fast point of sale; for coal
<br />removed by snip mining mehods a sum equal ro twelve and ore-half percent (12'h %) of the gross axle price u the first point of sale; and for lignite
<br />removed by snip mining methods a sum equal to six and orcyuarter percent (6 Sf %) of the gross sale price at the lust point of sale, for each and
<br />every ton (20001bs.) of coal or lignite mined fiom the leased prertrises, or, in the evem the coal or lignite rttirnd by eider undergroued or s[rip
<br />mining methods is sold on a eaptive market, a wm equal w the same rupective percents of the reasoruble market value of coal or lignite of dre
<br />same quality from the same general area aed muted order the same general corditiom, whichever is greaser. All sums paid u production royalty
<br />shall be subject m review upon tkrturd nude by either party. to ro case shall the production royalty ro the State be less than forty cenu (40c) per
<br />ton. "Lignite" erteans coal having an average calorific value of 7,300 bhr's or Tess per powd. This value nay 6e rcgotiated between Lessor and Lessor.
<br />If requested by Lessor, Lessee shall famish proof of price received for all coal sold. Such royalty shall be due and payable on or before the
<br />twenty-fifth (25th) day of earl calendar month during the term of this lease for mal mined, removed, and sold by Lessee during the prtxx+ding calen-
<br />dar rtaatit.
<br />Lessor reserves the right to reasonably adjust the production royalty rate at the end of each ten-year period of the lease provided the leased
<br />premivc are held by production.
<br />6. ROYALTY W ImVD - At the option of lessor and with six months' nctice W Lessor, Lessor may take its royalty coal in kind, in which event
<br />Lessee shall deliver such royalty coal m Lessor on the leased premises, inm slurry pipelircs or onto storage pile desigruted by lessor, and Lessee
<br />shall not N wch case be required to provide free storage or pay slurry pipeline charges for any such coal run onto storage piles or into slurry pipelines.
<br />7. OVERRIDagG ROYALTY LQ~IITATIONS - It is agreed that this lease or any wbsequent assignment hereof shall rot be bordered with over-
<br />riding royalties the aggregate of which exceeds 2% of the gross value of the opal at the first point of sale. Lessor must be naified of all ovemding
<br />royalties accruing ro this lean. Violation of the above may subject [his lease to cancellation by Lessor. The limited overriding royalties shall be
<br />excluded from the assignmem comiderations as sU forth in the following Article headed ASSIGNMENT order paragraph headed Assignment
<br />Consideration.
<br />8. ASSIGNMENT -Lessee, with written wrtsem of Lessor, nay assign this lease as to the leaseholduuerest of such lessee in all or pan of the lards
<br />covered hereby; not less, however, than trace of approximately forty (40) acres or Coverturcnul lots cortrsponding [o a quanertryaner section
<br />for any partial assignment.
<br />U sn assignnretrt of a pan of this lease is approved, a new lease will be issued to the assigeee covering the lands assigned for the tv,r°M' of
<br />the term of the base lease on the coal mining lease form in use at the time of assigturcnt and limited at to term as said lease is limited, and assigror
<br />will be released and discharged from all further obligations, and shall be held ro have « leased all righu and benefits thereafter accruing with respect
<br />to the assigned lard, as if the same had rcver been a pan of the subject motto of thin lease.
<br />No assigrurcm o(urdivided inrercsu or retention or reservation otovertiding royalties will be recognized ar approved by Lessor, and the effect,
<br />if any, of any wch assignments or reservations will be strictly and only as between the patch thereto, and outside the terms of this Rase. No dispute
<br />between ponies to any assigrurcm or reservation shall operate to relieve Lessee from performance of any terms or conditions hereof or to posrporc
<br />the time therefor. Lessor will et all times be entitled to look solely to Lessee or his assignee shown on its books as being sole owner hereof, aed
<br />for the seeding of all notices required by this lease, for the performance of all terms and conditions hereof.
<br />ASSIGNMENT CONSIDERATION -The consideration for approval of assigturcm by lessor shall be 10% of the value of any consideration
<br />aedered to the Assignor by the Assignee for the assignment. Divulgence of the value of these considerations shall be mandatory, in affidavit form,
<br />which form shall lz presented to Lessor along with the other assignment inswmems in order to obain Lessor's approval for the assigrurcm. M
<br />assignment does not constitute a new lease bw is a rnntinuation of the base lease. My attempt to withhold this information shall be conswed as
<br />an attempt to defraud the Sure of Colorado and shall render the lease null, void and norcxistem, and all monies paid to I~ssor shall be forfeited
<br />ro Lessor. Ln addition, the curtent sututory feu will be paid ar the lime the assignment record fore is submitted.
<br />9. WEIGHT OFCOAL - It is agreed that all coal mined and taken from the leased premises shall be weighed and the weight thereof shall be entered
<br />in due form N weight records kept for such purposes by Lessee. It is agreed that the tens "ton" as used herein means a ton of 2000 pountds of
<br />merchanuble coal u shown by miters' payroll check numbers or official railroad scale tickets, or by weight detertnired at the mine tippet, or by
<br />weightome[er; provided that where Lessor determines that it is trot possible to determine accurately the weight by such mreaets it may, by its duly
<br />authorized agent or agents, elect to compute a ton of coal at 27 cubic feet of coal in the wlid or by the measuremenu of the space from which the
<br />coal is mired, deducting therefrom all space occupied by slate or other impurities, eed in such case the said rompuution shall be foul and bieding
<br />upon Lessee.
<br />10. REPORTS -After operations arc begun, it u agreed that on or before the 25th day of each and every month during the term of this lease Lessee
<br />will make a swom report to Lessor, in which rcpon shall be entered and set down the exact amount in weight of all coal mined aed removed from
<br />said premises and the price at the firn point of sale for which the coal was sold during the preceding month, which rcpon shall show the amoum
<br />of work per(ortned during the preceding month; lessee shall also. during the term of this lease, make a swom sutement to Lessor disclosing the
<br />number of tons of all coal mined Gom the premises during the preceding year and such annual sutemenLS may coincide with Lessee's fiscal years
<br />or with official calendar years during the term of this lease. Further, Lessee shall famish a trap annually showing all workings, depths and thicknesses
<br />of coal with location of same tied m a coerce established by United Stites survey, certified by a licensed surveyor. Maps furnished ro the Colorado
<br />Division of Mines may satisfy this requirement.
<br />Leases must provide to I.euor, upon tequtst, a rnmplete report on ptcaptzYing std exploration npualioru, ircluding geologic interpreutiotu
<br />and recoverable reserve calculations, aed maps and cross scetiom showing location of.any coal outcrops, drill holes, uerchea, coal bodies std
<br />other prospecting and exploration activitid. The records required to be mainiteirwd by Lessee and provided to Lessor upon request include logs
<br />of all straw penetra[ed and all geologic aed hydrologic wnditions encountered, and'copies of in•hole surveys -this information to be collected
<br />and prepared order the supervision of a qualified geologist, geological engineer or mining engirtxr. Other qualified persons may collect and
<br />prepare this dau if agreed m in writing between Lessee aed Lessor
<br />My request to keep certain infomution rxmfdential should be in writing ro lessor citing the provisioru of the law which require confdentialiry
<br />of the information.
<br />Other documents pertaining ro the lease which may be essential to Lessor in making deeisioru contxming the lease may be requested by Lessor.
<br />OPERATION PLAN -All plans for exploration aed mining shall be submitted to L.usor far approval by lessor before Uese operations begin
<br />12. ENVIRONMENTAL ANALYSES - Submittal of an environmeNal analysis may be required for approval by Lessor before any exploration or
<br />mining begins on leased prcmixa.
<br />13. RECLAMATION -All plans for restoration aed reclamation of leased premises shall be submited m Lessor for Leswr's preliminary approval
<br />before reclamation and restoratim begins. Rules aed regulatioro as set forth by the Mired Lard Reclamation Board of Colorado for recovery std
<br />restoration of mined lad will aPdY where appficable m dos lease and lanrds leased herewith. Variations may be granted only with approvd of Lessor.
<br />14. OTIff:R STATE AGENCIES - I,uwmew and elocurrerus required by other Sure agencies may satisfy certain requircmetus of this lease. Ln
<br />the event that Lessee is required to fde instrumems and documents with other Sute agercin, wch u the Mired lard Ralamation Board, State
<br />Divisim of Mires. etc.. Lessor shall ratify Lessor of said Cding and Lessor rexrves the right to regnest and obtain topics of such irsstrunents and
<br />tlacvments.
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