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2. Term. The Term of this Lease shall be an initial period of 10 years <br />commencing on the 1 st day of May, 2012 ( "Term "). So long as the Company <br />is not in default hereunder, the Company may obtain a ten (10) year extension <br />of the Term after the end of the initial Term by written notice to Lessor at <br />least thirty (30) days prior to the end of the initial Term and payment of the <br />sum of $0. The period of the extension of the initial Term pursuant hereto <br />shall be subject to the terms and conditions of this Lease. In the event the <br />parties cannot agree, the matter shall be submitted to mediation/arbitration <br />pursuant to paragraph 20 of the lease. <br />3. Sales Royalties. <br />a. Subject to Paragraph 3.B. and 4, for all Materials sold from the <br />Property during each calendar month, the Company shall pay to Lessor <br />a "Sales Royalty" calculated from a "Base Royalty" at the rate of fifty <br />cents ($.50) per Net Sales Ton, adjusted as set forth below, within <br />twenty (20) days after the close of each calendar month. <br />b. The Company shall keep and maintain adequate and accurate records <br />of the quantities of Materials mined and sold. The Sales Royalty <br />payments shall be accompanied by a monthly statement with the <br />royalty calculation that includes an accounting of the tons of Materials <br />mined from the Property and sold or deemed sold pursuant to <br />Paragraph 5.C. for the month. Lessor shall have the right at all <br />reasonable times during business hours and upon reasonable prior <br />notice to examine such records of the Company at the offices of the <br />Company and to verify the quantities of Material removed and sold, <br />and the accuracy of the scales used to weigh the Materials. <br />C. The Company reserves the right to import inert materials (broken <br />concrete, and asphalt) into the pit for recrushing and sale. No royalty <br />will be charged for concrete or asphalt resold from the pit. The <br />Company will sell no more than 2500 tons /year of this material. <br />4. Weiahina of Materials, Commingling. For purpose of calculation of Sales <br />Royalty, quantities of Materials removed from the Property on which Sales <br />Royalty is due will be measured as follows: <br />a. Use of Scales: All materials shall be weighed on a certified scale upon <br />sale and removal from the Property. If materials on which sales <br />royalty is due are mixed with non - excavated materials (for example, in <br />case of mixing sand and gravel with water and Portland Cement in the <br />concrete batch plant), then for purpose of calculating the sales royalty, <br />the weight of the Subject material used in the mixture will be <br />determined using the certified scales at the Property to measure the <br />2 <br />