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Section 6. ADVANCE MINIMUM ROYALTY The Lessee agrees to pay to UPLRC in cash, upon the delivery of this Lease, an advance minimum royalty of Five Thousand Dollars ($5,000.00). Thereafter, on or before each anniversary date of this Lease, Lessee shall pay to UPLRC as advance minimum royalty the sum of Five Thousand Dollars ($5,000) unless the production of Clay from the Leased Premises during the Twelve month period immdeiately preceeding any such anniversary date exceeds 10,000 tons, in which event the advance minimum royalty shall be Ten Thousand Dollars ($10,000). The advance minimum royalty set forth above shall be deemed advance royalty payment and shall be credited, without interest, against royalties which may accrue to UPLRC in respect of production during the year for which said advance royalty is paid and shall be non-accruing against any other years' production. Section 7. PRODUCTION ROYALTY The Lessee agrees to pay in cash to UPLRC on all Clay mined and removed from the Leased Premises, a production royalty of Two Dollazs ($2.00) per ton of two thousand (2,000) pounds or Three Dollars ($3.00) per cubic yazd, whichever measurement is applicable, which royalty rate shall be increased or decreased annually commencing on the first anniversary date of this Lease according to the following formula: X = Z $2.00* Y * $3.00 in the event the royalty is calculated by yazds In the above formula "X" represents the adjusted royalty rate per ton; "Y" represents a base value taken from the the Mazch 1996 Gross Domestic Product Implicit Price Deflator for all Com- modities (based upon 1987 = 100) published quarterly by the United States Department of Commerce, Bureau of Economic Analysis (hereinafter referred to as the "Index") and "Z" represents the value of the Index on the first day of the month following the first azvuversary date of this Lease and on the first day of the month following each subsequent Lease anniversary date thereafter. For purposes of this calculation, the preliminary index values shall be treated as final. In all such royalty computations, the rate shall be determined to the neazest cent. In the event the Index is no longer published, then the Index to be utilized shall be the Index agreed to by the parties which, after necessary adjustments, if any, provides the most reasonable substitute for said index. Section 8. PAYMENTS All payments to UPLRC under Sections 6 and 7 hereof shall be made by Lessee to the office of UPLRC, P. O. Box 85434, Dallas, Texas 75285-5434. All payments to UPLRC under Section 7 above shall be made by Lessee on or before the twentieth (20th) day of each calendar month for Clay produced during the preceding calendaz month. Each monttily payment shall be accompanied by a statement from Lessee to UPLRC, setting forth the actual tonnages of Clay mined and removed Page 3 of 13