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(2) At the end of the primazy lease term or at any time during this primary ]ease term when a permit <br />is issued by the Mined Land Reclamation Division for a mining operation on a specific parcel of <br />these described lands, Lessee may be required to apply to the Board for one or more individual <br />mineral leases of not more than fi40 acres if state mineral rights stand alone, or not more than <br />1,280 acres if state mineral rights have a common boundary, but in no case not more than the <br />_ _ acreage of this lease. -- <br />6. EXTENSION BY PRODUCTION - A lease may not be held in perpetuity; however, a lease will continue <br />in effect for so long as coal is produced in paying quantities. Cessation of production for a period in <br />excess of 180 consecutive days will automatically remove the lease from producing status unless otherwise <br />agreed to in writing by Lessor. Lessee shall notify Lessor of each cessation of production, the reasons <br />therefor, and the time period during which production will or did cease. "Paying quantities" means <br />production sufficient to return royalties to Lessor equal to the advance minimum royalty but not less than <br />ten and na/100 dollazs ($ 10.00) per acre per year. <br />PENALTIES - A penalty shall be imposed for, but not limited to, late payments, improper payments, <br />violations of any wvenants of this lease, or any false statements made to Lessor. Penalties shall be <br />determined by Lessor and may be in the form of, but not limited to, interest, fees, and fines. <br />QVERRIDING ROYALTY LIMITATIONS - It is agreed that this lease or any subsequent assignment <br />hereof shall not be burdened with overriding royalties the aggregate of which exceeds 2 % of the gross <br />value of the coal at the first point of sale. Lessor must be notified of all overriding royalties accruing to <br />this lease. Violation of the above may subject this lease tp cancellation by Lessor. <br />9. ASSIGNMENT -Lessee, with written consent of Lessor, may assign this lease as to the leasehold interest <br />of Lessee in all or part of the lands covered hereby; not less, however, than tracts of approximately forty <br />(40) acres or Governmental lots corresponding to aquarter-quarter section for partial assignment. For <br />approval of such assignment Lessor may charge an assignment fee in an amount currently in effect at the <br />time of the assignment. <br />If an assignment of a part of this lease is approved, a new lease designated as an assignment will <br />be issued to the assignee covering the lands assigned for the balance of the term of the base lease on the <br />mining lease form in use at the time of assignment and limited as to term as said lease is limited. The <br />assignor will be released and dischazged from all further obligations for such lands assigned, as if the same <br />had never been a part of this lease. <br />No assignment or transfer of this lease will be held valid by Lessor unless made with its consent <br />in writing and duly entered in the books or records of Lessor. <br />10. ASSIGNMENT CONSIDERATION -The consideration for approval of assignment by Lessor shall be <br />10% of the value of any consideration tendered to Assignor by Assignee for the assignment. Divulgence <br />of the value of these considerations shall be mandatory, in affidavit form, which form shall be presented <br />to Lessor along with the other assignment instruments in order to obtain Lessor's approval for the <br />assignment. An assignment does not constitute a new lease but is a continuation of the base lease. Any <br />attempt to withhold this information shall be construed as an attempt to defraud the Stale of Colorado and <br />shall render this lease null, void and nonexistent, and all monies paid to Lessor shall be forfeited to <br />Lessor. In addition, the current statutory fees will be paid at the time the assignment record form is <br />submitted. <br />Page 5 of 11 <br />