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<br />60302 <br />Lessors harmless in accordance with the terms of this Lease. <br />4. Production Royalty. Lessors hereby rexrve to themxlves, and Lessee stall <br />pay to Ixssors, a nonparticipating production royalty (or all coal mined and removed, and <br />sold, used or otherwix disposed of, from the Leased Premises in an amount equal to <br />one-eighth (1;S) of the 'Gross Proceeds' attributable to the one-fourth (1/4) un~'i~i~.f.~ <br />coal interest l,;ased herein, whether mining occurs by underground, surface or other <br />mining methods. <br />(a) With respect to bona fide arm's length transactions for the sale of coal, <br />Gross Pmceccls shall mean the aggregate amount of consideration received or receivable <br />by tl,e Lessee, directly or indirectly, for the s.le of coal f.o.b. the tipple or the mouth of <br />the mine, with~,ut deduction for any sales commissions, xlling eipenxs or preparation <br />costs; provided that, if the coal is sold f.o.b. some other delivery point with t)u Lessee <br />bear.ng transportation expcnxs from the mouth of the mine to that delivery point, then <br />Ihox transportation expenxs shall Ix deducted from the Gross Proceeds before <br />computation of the royalty. <br />Ib) If ..gal mined from the Leased Premixs under the terms of this Leax <br />is sold by the Lessee other than by a bona fide arm's length transaction or is used or <br />otherwise disposed of by the Lessee, including by gasification, slurrification or combustion, <br />then Gross Proceeds shall mean the prevailing fair market value of the coal at the tipple <br />or the mouth of the mine. The prevailing fair market value shall be determircd with <br />reference to Itnnn fide arm's length coal sale transactions by others which are most <br />comparable to the prevailing circumstances related to this ;xax, giving consideration to <br />quantity, size and quality of the coal, length of term and delivery of commitment of <br />contracts, availability and c.;~t of transportation, and other pertinent market conditions. <br />(c) Production royalty payments shall be free of any expenx of exploration, <br />mine devcl~pmcnt or operation. <br />(d) Production royalty payments are due and payable on or before the <br />twen!ieth (~Oth) day of each calenC:.r month for the coal mined and removed, and ;old, <br />uxd or otltcrwix disposed of from the Leased Premixs during the preceding calendar <br />month. The Lessee shall furnish to the Lessors a statement of production and sale or <br />3 <br />