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no/100 dollar ($ j.0~ per ton. "Lignite" means coal having an average calorific value of 7,300 btu's <br />or less per pound. This value may be negotiated between Lessee and Lessor. <br />If requested by Lessor, Lessee shall furnish proof of price received for all coal sold. Such royalty <br />shall be due and payable on or before the last day of each calendaz month during the term of this lease <br />for coal mined, removed,. and sold by Lessee during the preceding calendaz month. <br />Within sixty days prior to the termination of each and every five-year period for so long as this <br />lease remains in effect, Lessor may reappraise the property herein leased and fuc and determine the rate <br />of production royalty to be paid during each yeaz of the succeeding five-yeaz period. Failure to comply <br />with any new royalty rate set by Lessor may subject this lease to cancellation by thirty-day written notice <br />by Lessor. <br />3. WEIGHT OF COAL - It is agreed that all coal mined and taken from the leased premises shall be <br />weighed and the weight thereof shall be entered in due form in weight records kept for such purposes by <br />Lessee. It is agreed that the term "ton" as used herein means a ton of 2000 pounds of merchantable coal <br />as shown by miners' payroll check numbers or official railroad scale tickets, or by weight determined at <br />the mine tipple, or by weightometer; provided that where Lessor determines thaz it is not possible to <br />determine accurately the weight by such means it may, by its duly authorized agent or agents, elect to <br />compute a ton of coal at 27 cubic feet of coal in the solid or by the measurements of the space from which <br />the coal is mined, deducting therefrom all space occupied by slate or other impurities, and in such case <br />the said computation shall be final and binding upon Lessee. <br />4. ROYALTY INKIND - At the option of Lessor and with six months' notice to Lessee, Lessor may take <br />its royalty coal in kind, in which event Lessee shall deliver such royalty coal to Lessor on the leased <br />premises, into slurry pipelines or onto storage piles designated by Lessor, and Lessee shall not in such <br />case be required to provide free storage or pay slurry pipeline charges for any such coal run onto storage <br />piles or into slurry pipelines. <br />5. I~X7'ENSION -- Lessee may have a preferential right to renew the lease or to receive a new lease, under <br />one or more of the following conditions: <br />A. (1) 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 />(2) Lessee shall furnish adequate geological evidence to Lessor that the acreage subject to the renewed <br />or new lease is in fact an integral part of and contains reserves in a logical mining unit. Whether <br />the acreage is or is not a part of a logical mining unit will be determined by Lessor. <br />~(3) An extension of this lease would, as determined by Lessor, be in the best interest of the State. <br />At;,the time of expiration of this primary lease, the following may be considered in the determination of <br />the conditions of an extension or a new lease. <br />B. (1) An advance minimum royalty, the amount to be negotiated at the time of this extension, will be <br />due and payable annually commencing on the date this lease is renewed or a new lease is executed <br />and shall continue until the expiration of the new or renewed lease. This amount may be adjusted <br />by Lessor at the end of each five-year period of the renewed or new lease. <br />Page 4 of 11 <br />