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540196/3C/4 incurred by Lessee in transporting such coal from the Division of Mineral & Geology permit boundary to point of sale; and (ii) any d'uea cosu actually incurred in washing the coal, not to exceed 54.00 per ton (such last deduction hereinafter called "the Washing DeduMion'). The Washing Deduction shall not be applicable to greater than 1591, of the coal mined, removed and sold from the Leased Premises. At any time during the term of this Lease, Lessor shall Lave the right to provide Lessee written notice that Lessor wishes to renegotiate the Wasbing Deduction. As soon az is reasonably practicable. after Lessee's receipt of such notice, the parties in good faith shall renegotiate the W aching DeduMioa to reflect a deduction that is mutually acceptable w Lessor and Lessee. In the event Lessor and Lessee are unable to renegotiate the Washing Deduction, Lessor shall have the right to require the elimination of the Wazhing Deduction in the calculation of the Average Gross Sales Price. If requested by Lessor, Lessee shall furnish proof of price received for alt coal sold. Such royalty shall be due and payable on or before the last day of each calendar month during the term of this Lease for cos) mined, removed, and sold by Lessee during the preceding calendar month. 3. WE]GHT OF COAL - ]t is agreed that all coal mined and taken from the Leased Premises shall be weighed and the weight thereof shall be entered in due form in weight records kept for such purposes by Lessee, It is agreed that the term "ton" az used herein means a ton of 2000 pounds of metcbantable wal as shown by miners' payroll check numbers or official railroad scale tickets, or by weight determined at the mute tipple, or by state certified scales; provided that it it is not possible to determine accurately the weight by such meam Lessor may, by iu duly authorized agent or agents, elect to compute a ton bf coal at 27 cubic feet of coal in the solid or by the measurements of the space from which the coat is mined, deducting therefrom all space occupied by slate or other impurities, and in such case the said computation shall be final and binding upon Lessce. 4. ROYALTY IN KIND - At the option of Lessor and with 6 months' notice to Lessee, Lessor may take its royalty coal in kind, in which event Lessee shall deliver such royalty coal to Lessor on the Leased premises, into slurry pipelines or onto storage piles. designated by Lessor, and Lessee shall not in such case be required to provide free storage or pay slurry charges for any such coal run onto storage piles or into slurry pipelines. S. EXTENSION -Lessor is not obligated w issue a new leaze or to renew this lease. However, Lessce may have a preferential right to renew this Lease or to receive a new lease, undo one or rrwre of the following conditionu: A. Lessee shall furnish io Lessor satisfactory evidence of plans for mining during the term of the renewed lease or during the term of a new lease. Lessee shall furnish adequate geological evidence to Lessor that the acreage subject to the renewed or new lease is in fact an integral part of and contains reserves in a logical mining unit. Whether the acreage is or is not a part of a logical mining unit will be determined by Lessor. An extension of this Lease would, as determined by Lessor, be in the best interest of the State, At the time of expiration of this Lease, the following may be considered in the determination of the conditions of an extension or a new ]ease. B. An advance minimum royalty, the amount to be negotiated at the time of this extension, will be due and payable annually commencing on the date this Lease is renewed or a new lease is executed and shall continue until the expiration of the new or renewed lease. This amount may be adjusted by Lessor at the end of each five-year period of the renewed or new lease, Page ~ of 1,L