PERMFILE52333

• Permit No: C1996084A
• IBM Index Class Name: Permit File
• Doc Date: 12/11/2001
• Section_Exhibit Name: Exhibit 02 Right to Enter/Legal Description
• Media Type: D
• Archive: Yes

specified in the notice other than obligations which have accrued or become
• payable by Lorencito prior to the date of termination.
if Lorencito is producing coal in commercial quantities by June 1, 2005, Hills will
negotiate with Lorrncito for additional lands within the lands described in Exhibit
A hereto under which Hills own coal mineral interests, to be added to this Lease.
Neither party shall have any claim against the other under any legal or equitable
theory if such nego[iations do not result in an agreement to add ]ands to the Lease.
Hills may use the additional lands and the minerals thereunder for any purpose at
any time. However, Hills will not lease the coal under the additional lands to
others without first attempting to negotiate a coal lease on the additional lands
with Lorencito.
3. Payments to Hills
a. As full and complete royalty compensation to Hills for the rights granted
Lorencito Herein, Lorencito shall pay Hills the advance royalty and the production
royalty provided for herein. The advance royalty and production royalty are
intended to and shall be sufficient to eliminate any implied development
obligations.
b Lorencito shall pay Hilts advance royalties of~ annually on or before
January 10 (but not before January 1) during the term of this Lease, beginning on
or before January 1, 2002, unless this Lease has terminated prior to the due date.
• For the first years advance royalty payment for the period January 1, 2001
through December 31, 2001, Lorencito shall pays upon the signing of
this Lease.
c. All annual advance royalty payments, including the first year advance royalty
payment, shall be recoupable from production royalties subsequently payable to
Hills on coal mined from the Leased Lands, up to the total annual advance
royalties paid in the then current Lease yeaz and rho unrecouped advance royalty
payment from the immediately previous Lease year, but not to exceed a total of
Byway of example only, if Lorencito mines coal in 2003 Lorencito
could recoup the advance royalties paid is 2003 and 2002, but could not recoup
the advance royalty paid in 2001; by way offurther example, if Lorencito mines
coal is 2003 and recoups ~ against the advance royalty paid in 2003,
then Lorencito could recoup a total ofd in 2004 against rho remaining
unrccouped advance royalties paid in 2003 and 2004 (if sufficient quantities of
coal were mined), however, any advance royalty paid in 2003 and not recouped in
2004 could not be recouped in Lease years after 2004. This recoupment provisio¢
shall never be interpreted to result in an actual cash refund being due to Lorencito
from Hills, nor to result in Hills ever receiving less than the annual advance
royalty in the sum of -each yeaz as required by this Lease.
d. Lorencito shall pay Hills a production royalty oqual to 46.54 percent (46.54%) of
percent (~'/o) of the net mine realization ('% of net mint realization) for
• COAL LEAF FINAL 675-0l.doc