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There is no implied covenant or obligation of the Company to develop or mine the Property or to <br />sell Materials. The Company may maintain this Lease in effect for the term of the Lease by <br />making the annual Advance Minimum Royalty payments. <br />If for whatever reason, Advance Minimum Royalties exceed the Production Royalties at <br />termination of this Lease (or at any other time during the Lease Term), Lessor shall have no <br />obligation to return any Advance Minimum Royalties paid by the Company, except as otherwise <br />provided in Paragraph 12B. <br />5. Cornminglin21. When Materials are excavated from the Property, they may be <br />transported to the offsite processing plant by a series of conveyors and/or trucks, and <br />commingled with Materials from lands other than the Property. Prior to commingling Materials <br />from the Property with Materials from lands other than the Property the Company shall first <br />measure and determine the quantity of Materials in the stockpile in accordance with its standard <br />engineering methods, and shall also measure and record the amount added to and commingled in <br />the same stockpile from Property. The quantity of Material so determined to be in the stockpile <br />immediately before commingling shall be deemed sold and removed, on a first-in first-out basis, <br />prior to the sale of any Materials subsequently commingled therewith. The Company's <br />measurement and determination shall be subject to verification by the Lessor. <br />6. Water Augmentation and Dewatggjng. The Company shall be responsible for <br />supplying all water needs during its mining and processing operation, including without <br />limitation, evaporation losses occurring from groundwater exposed by mining during the <br />operations. Upon completion of mining operations, Lessor shall be responsible for supplying <br />Five (5) shares of the capital stock of the Whitney Irrigating Ditch Company owned by Lessor <br />(the "Water Stock") for augmentation or- replacement of evaporative losses on exposed water <br />surfaces of the Property. The Company shall be responsible for adjudicating the augmentation <br />plan as to the Lessor's Property. In this regard, Lessor expressly agrees to dedicate in perpetuity <br />the Water Stock evidenced by five (5) shares of the capital stock of the Whitney Irrigating Ditch <br />Company owned by Lessor for such augmentation purposes and agrees to consent to or enter into <br />such consent decrees, restrictive legends on stock certificates, restrictive covenants or other <br />evidence of such dedication and encumbrance as may reasonably be necessary to preserve such <br />Water Stock for augmentation purposes, evidence the obligation to use them for augmentation <br />and obtain approval of an augmentation plan related to the Property from the Water Court or <br />State Engineer, as applicable. Lessor's augmentation related obligations shall be limited to <br />supplying the Water Stock. <br />7. Operations. <br />A. The Company shall conduct its operations on the Property in a prudent and <br />workmanlike manner and in accordance with good and accepted mining and business practices <br />and in compliance with all applicable federal, state and local laws, rules and regulations. The <br />timing, nature, manner and extent of mining operations, processing and sales shall be within the <br />sole discretion of the Company, and the Company shall not be required to mine, preserve or <br />protect in its operations any Materials which, under good mining practices, caimot be mined or <br />sold at a reasonable profit to the Company at the time they are extracted. The Company will not <br />-4-