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I. ADVANCE MINIMUM ROYALTY -- As minimum and advance royalty, without relation to the amount of <br /> minerals mined front the leased premises, Lessee shall pay annually in advance to Lessor the following amounts: <br /> LEASE YEAR AMR <br /> _2003 and each year thereafter <br /> that the lease is in full force and effect $3.00/ac./yr. <br /> If Lessee does not extract minerals from the Leased Premises sufficient to return to the Lessor the minimum <br /> amounts above specified, it is nevertheless understood that the above sums of money are due and payable to <br /> Lessor whether or not minerals are mined, but that such advance minimum royalty shall be credited upon the first <br /> royalties due as herein provided for minerals actually produced from the Leased Premises, In the absence of <br /> production of minerals in continuous paying quantities before the expiration date of the lease, all advance <br /> minimum royalties and all rentals shall be forfeited to Lessor. <br /> Acreage changes resulting from surrender or partial assignment may reduce the advance minimum royalty <br /> proportionately. Further, at the end of each five-year period, commencing from the original lease date, Lessor <br /> may change the rate or amount of advance minimum royalty to be paid by Lessee not to exceed the rate of <br /> increase of the average wholesale price index for structural clay products except refactories,for the previous five- <br /> year period as published by the U.S. Department of Labor, Bureau of Labor Statistics. Failure to comply with <br /> any new advance minimum royalty rate set by Lessor may subject this lease to cancellation by thirty day written <br /> notice by Lessor. <br /> In case of assignment of this lease, al I advance minimum royalty paid to the state shall be carried forward <br /> and credited to the new assignee. <br /> 2. PRODUCTION ROYALTY -- Lessor reserves as royalty, and Lessee agrees to pay to Lessor on or before the <br /> last day of each calendar month following the month of production, $ 0.60 per ton of 2000#, for red <br /> burning clay , $ 0.60-, per ton for buff burning clay, $ 0.60 , per ton for white burning clay, and$ 0.60 per ton <br /> for specialty clay, or N/A % of the gross sale price at the first point of sale to an independent purchaser, <br /> whichever is greater. <br /> Further, at the end of each five-year period,commencing from the original lease date, for so long as this lease <br /> remains in effect, Lessor may reappraise the property herein leased and fix and determine the rate of production <br /> royalty to be paid during each year of the succeeding five-year period not to exceed the rate of increase of the <br /> average wholesale price index for structural clay products except refactories, for the previous five-year period as <br /> published by the U.S. Department of Labor, Bureau of Labor Statistics.. Failure to comply with any new royalty <br /> rate set by Lessor may subject this lease to cancellation by thirty-day written notice by Lessor. <br /> Reporting of production royalty that is credited against advanced minimum royalty is also due on or before the <br /> last day of each calendar month for mining during the preceding calendar month. <br /> 3. EXTENSION -- Lessee may have a preferential right to renew the lease or to receive a new lease, whichever may <br /> be determined by Lessor to be in the best interest of the State, under the following conditions: <br /> A. An advance minimum royalty, the amount to be negotiated before expiration of the lease, will be due and <br /> payable annually commencing on the date this lease is renewed or a new lease is executed and shall <br /> continue until the expiration of the new or renewed lease. This amount may be adjusted by Lessor at the <br /> end of each five-year period of the renewed or new lease. <br /> B. Lessee shall furnish to Lessor satisfactory evidence of plans for mining during the term of the renewed <br /> lease or during the term of a new lease. <br /> C. Lessee shall furnish adequate geological evidence to Lessor that the acreage subject to the renewed or new <br /> lease is in fact an integral part of and contains reserves in a logical mining unit. Whether the acreage is <br /> or is not a part of a logical mining unit will be determined by Lessor. <br /> D. An extension of this Lease as determined by Lessor would be in the best interest of Lessor <br /> d. EXTENSION BY PRODUCTION -- This lease may not be held in perpetuity;however,the lease will continue in <br /> effect for so long as minerals are produced in paying quantities. Cessation of production for a period in excess of <br /> 365 consecutive days will automatically remove lease from producing status unless otherwise agreed to in writing <br /> by Lessor. Lessee shall notify Lessor of each cessation of production, the reasons therefor, and the time period <br /> during which production will or did cease. <br /> Paine guantiguantities means production sufficient to return royalties to Lessor equal to the advance minimum <br /> royalty but in no event less than three and no/100 Dollars(S 3.00 ) per acre per year. <br /> 5. ANCILLARY USE -- Lessee may remove approved minerals, and place on the Leased Premises stock piles of <br /> material mined from this lease and such equipment as is approved by Lessor for this removal. All other ancillary <br /> uses such as concrete plants, asphalt plants, accessory equipment,offsite aggregate materials and any other uses <br /> Page 2 of 7 <br />