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<br /> <br />(2) Lessee shall furnish adequate geological evidence to Lessor that the acreage subject to the <br />renewed or new lease is in fact an integral part of and contains reserves in a logical mining <br />unit. Whether the acreage is or is not a part of a logical mining unit will be determined by <br />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 <br />of 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 <br />be due and payable annually commencing on the date this lease is renewed or a new lease is <br />executed and shall continue until the expiration of the new or renewed lease. This amount may <br />be adjusted by Lessoc at the end of each five-year period of the renewed or new lease. <br />(2) At the end of the primary lease term or at any time during this primary lease term when a <br />permit is issued by the Mined Land Reclamation Division for a mining operation on a specific <br />pazcel of these described lands, Lessee may be required to apply to Lessor for one or more <br />individual mineral leases of not more than 640 acres if State mineral rights stand alone, or not <br />more than 1,280 acres if State mineral rights have a common boundary, but in no case not mare <br />than the acreage of this lease. Type of lease will be determined by Lessor at that time based <br />on Lessor's mineral classification system. <br />5. EXTENSION BY PRODUCTION -- This pazagraph deleted. <br />6. PENALTIES -- A penalty shall be imposed for, but not limited to, late payments, improper payments, <br />violations of any covenants 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 />7. OVERRIDING 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 two percent (2%) <br />of the gross value of the minerals or ore at the first point of sale. Lessor must be notified of all <br />overriding royalties accruing to this lease. Violation of the above may subject this lease to cancellation <br />by Lessor. <br />8. ASSIGNMENT -- Lessee, with the written consent of Lessor, may assign this lease as to the leasehold <br />interest of Lessee in all or part of the lands covered hereby, not less, however, than tracts of <br />approximately forty (40) acres, or governmental lots corresponding to aquarter-quarter section for <br />partial assignment. For approval of such assignment Lessor may charge an assignment fee in an amount <br />currently in effect at the time of the assignment. <br />If an assignment of a part of this lease is approved, a new lease designated as an assignment <br />will be issued to the assignee covering the lands assigned for the balance of the term of the base lease <br />on the mining lease form in use at the time of assignment and limited as to term as said lease is limited. <br />The assignor will be released and discharged from all further obligations for such lands assigned, as if <br />the same had never been a par[ of this lease. <br />Page 4 of 10 <br />