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tip,,C ~ <br />~QA31n <br />1 essnrs harmless in accordance with the terms of this Lease. <br />4. t'rorftrction Royally. l.cssors hcrehy reserve to themselves, and Lessee shall <br />pay to I essors, a nonparticipating production royalty (or all coal mined and removed, and <br />wild, used or otherwise disposed of, from the Leased Premises in an amount equal to <br />one-eighth (1/R) of the 'Gross Proceccls' attributable to the one-fourth (I/4) undivided <br />coal interest Icasc,t herein, whether mining occurs by underground, surface or other <br />mining methods. <br />(a) With respect to honor fide arm's length transactions for the sale ttf coal, <br />fin,ss Prctccc,ls shall mean the aggregate amount of consideration received or rec-•ivable <br />by the l.cssee, dlrCClly or indirectly, fur the sale of coal f.o.b. the dipple or the mouth of <br />the mine, without deduction for any sales commissions, selling expenses or preparation <br />costs; provided that, if the coal is sold f.o.b, some other delivery point with the Lessee <br />hearing transportation expenses from the mooch of the mine to that delivery point, then <br />those transportation expenses shall be deducted from the Gross Proceeds before <br />cnniputation of the royalty. <br />(tt) If coal mined from the Leased Premises under the terms of this Gorse <br />is sold by the lessee ocher than by a bona fide arm's length transaction or is used or <br />otherwise disposed of by the Lessee, including by gasification, slurtification or combustion, <br />then Gross Proceeds shall ;Wean the prevailing fair market value of the coal at the tipple <br />or the mouth of tltc mine. The prevailing fair market value shall be determined with <br />reference tet hr,nn fide arm's length coal sale transactions by others which are most <br />crn,tpar;title to the prevailing circumstances related to this Lease, giving consideration to <br />quantity, size and quality of the coal, length of term and delivery of commitment of <br />contracts, asailaltility and cost of transportation, and other pertinent market conditions. <br />(cl Production royalty payments shalt be free of any expense of exploration, <br />mine dcselnpmcnt nr operation. <br />(d) 1'rrxluctic,n royalty payments are due and payable on or before the <br />tucntictlt ('_()th) day of each calendar month for the coal mined and removed, and sold, <br />used or otherwise disposed of from the leased Premises during the preceding calendar <br />month. The l.essce shall furnish to the 1_essors a statement of production and sale or <br />3 <br />