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<br />3, above, on the commencement date and on each annual anniversary date of the extended <br />' lease term (through and including the ninth anniversary date of the extended lease term). <br />' B. The advance royalties payable hereunder shall be offset against royalties <br />which shall accrue and be payable to Lessor for sand and gravel mined and removed from <br />the Property under this lease. If the advance royalty paid for a year exceeds the amount of <br />royalties accnting in that year, the excess shall not be used to reduce the amount of any <br />advance royalties payable in future years, but this excess shall be carried forward to offset <br />royalties actually due in any future years during the term of this lease. If the amount of <br />royalties accruing in a year exceeds the advance royalty paid for that year, the amount ofthe <br />excess shall be used to reduce the amount of advance royalty accruing for the next year. If <br />any excess advance royalties remain at the end of the term (or, if this lease is extended, at the <br />end of the extended term) or other termination of this lease, Lessor shall be entitled to retain <br />such excess royalties, and shall not be required to refund the excess to GJP. <br />' C. If commercial sand and gravel shall be mined out of the Property before all <br />advance royalty payments are due and payable, GJP may give written notice thereof to <br />Lessor, and thereafter GJP shall not be obligated to pay any additional advance royalties. <br />GJP shall then vacate the Property with reasonable dispatch and this lease shall terminate, <br />subject to the obligations for reclamation as set forth in Paragraph 12, below. For the <br />' purposes of this Paragraph, "mined out" means the removal of substantially all of the <br />minable commercial sand and gravel from the Property, with the exception of the area <br />needed for processing of the mined material, which area shall not exceed five (5) acres in <br />size. <br />7. The parties agree as follows with respect to water and water rights: <br />' A. After execution ofthis lease, GJP may file an application with the appropriate <br />water court to adjudicate a water right and, to the extent required bylaw or deemed necessary <br />' or desirable by GJP, for approval of an augmentation or other replacement plan for the water <br />depletions resulting from GJP's operations under this lease (the "Water Rights Application"}. <br />Any such Water Rights Application will be filed in the name of GJP, as lessee, and will <br />' provide that GJP's interest in the water right and augmentation plan will cease upon <br />expiration or termination of this lease. The water right sought in the Water Rights <br />Application will be for industrial purposes, including but not limited to evaporation, dust <br />suppression, aggregate washing, and product moisture losses. If the Water Rights <br />Application seeks approval of an augmentation or replacement plan, Lessor shall not be <br />' obligated to contribute or provide any water rights for such plan. GJP shall bear all other <br />costs of filing and prosecuting the Water Rights Application, and of any engineering work <br />necessary to support the Water Rights Application. GJP shall prosecute the Water Rights <br />' Application to conclusion with diligence, provided, however, that GJP shall not be required <br />to accept any terms and conditions in any decree proposed to be entered with respect to the <br />Water Rights Application which are not acceptable to it. Copies of any engineering work <br />' H~M1SAMG)PIPE\Karp\gras~ lease.wpd <br />-5- <br />