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1. ADVANCE MINIMUM ROYALTY -- As minimum and advance royalty (AMR), without relation to the amount of <br />minerals mined from the leased premises, Lessee shall pay annually in advance to Lessor the following amounts: <br />LEASE YEAR AMR LEASE YEAR AMR <br />2007 -2012 None 201.2 and thereafter $5,000 <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 Lessor whether <br />or not minerals are mined, but that such advance minimum royalty shall be credited upon the first royalties due as herein <br />provided for minerals actually produced from the Leased Premises. In the absence of production of minerals in continuous <br />paying quantities before the expiration date of the lease, all advance minimum royalties and all rentals shall be forfeited to <br />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, commnencing from the original lease date, Lessor <br />may reasonably change the rate or amount of advance minimum royalty to be paid by Lessee. Failure to comply <br />with any new advance minimum royalty rate set by Lessor may subject this lease to cancellation by thirty day <br />written notice by Lessor. <br />In case of assignment of this lease, all 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 last <br />day of each calendar month following the month of production, $ 0.75 per ton of 2000#, or $ NA per cubic <br />yard, or NA % of the gross sale price at the first point of sale to an independent purchaser, whichever is greater. <br />Further, at the end. of each five-year period, comunencing 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. Failure to comply with any new royalty rate <br />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 be <br />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 end <br />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 lease <br />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 or is <br />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 />4. 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 />180 consecutive days will automatically remove lease from producing status unless otherwise agreed to in writing by <br />Lessor. Lessee shall notify Lessor of each cessation of production, the reasons therefor, and the time period during <br />which production will or did cease. <br />Paving quantities means production sufficient to return royalties to Lessor equal to the advance minimum <br />royalty. <br />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 not <br />specifically mentioned herein will be subject to the approval of Lessor and require a yearly rental payment of no less <br />than $1,000 per acre. Haul roads and/or access roads which do not directly benefit the Leased Premises will be <br />subject to a separate permit and approval of Lessor. <br />Page 2 of 7