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or encumbrance, but agrees to pay all amounts necessary to remove the lien or <br />• encumbrance if Lorencito does not prevail. <br />10. Default <br />It is understood and agreed that in the event Hills believe that Lorencito is in default in the <br />performance of any term or condition described herein, Hills shall give Lorencito. written notice <br />specifying the events of default. If Lorencito shall remain in such default for a period of thirty <br />(30) days after being notified in writing by Hills of such default, then, in that event, Hills may <br />elect to terminate this Lease by giving Lorencito written notice of termination signed by a <br />representative of Hills, provided that Hills may not terminate this Lease if the event ofdefault is <br />other than a default in the payment of an amount of money due Hills and if Lorencito is <br />proceeding expeditiously in good faith to remedy the event of default and fully remedies the <br />default within 180 days of Hills' written notice specifying the event of default. If the default is a <br />default in the payment of an amount of money due Hills, or payments made by Hills for the <br />benefit of Lorencito, Lorencito shall have fifteen (IS) days after receiving Hill's notice to make <br />the past due payment. If not paid within said fifteen (15) day period, subject to paragraph 22 <br />below, this Lease shall terminate. All past due payments will incur a penalty ofd percent <br />(~%) interest, on an annual basis, for such past due payment from the date due until paid. <br />11. Assignment and Sale <br />a. This Lease may not be assigned by Lorencito without the written approval of <br />• Hills, which approval shall not be unreasonably withheld, provided that Lorencito <br />may assign an interest in this Lease to lenders as security for financing the <br />development of coal production on the Leased Lands. <br />b. If, during the term of this Lease, (1) the membership interests in Lorencito Coal <br />Company, LLC aze sold in their entirety, or (2) the assets of Lorencito Coal <br />Company, LLC are sold to a third party (including this Lease), or (3) Lorencito <br />shall enter into any transaction the result of which will be that A. Bruce <br />Addington or members of his immediate family own less than 50% of the <br />membership interests in Lorencito Coal Company, LLC, or (4) Lorencito shall <br />enter into any transaction the result of which will be that Lorencito is no longer <br />the operator of the coal mining operations on the Leased Lands, then Hills shall <br />be paid an amount equal to 46.54 percent (46.54%) ofpercent (#%) of the Net <br />Sales Price ~ % of the Net Sales Price). "Net Sales Price" means the <br />difference between the total amount paid for the sale (in cash, plus the value of <br />non~ash consideration), less the amount of the proportionate shaze of the capital <br />account shown on the latest balance sheet of Lorencito Coal Company, LLC <br />prepazed in the regular course of its business which shall not be greater than the <br />actual capital expenditures attributable to the Lease. <br />12. Continuing Obligations <br />It is mutually understood and agreed that Lorencito may utilize contract miners, independent <br />• contractors, agents, employees, consultants, and other third parties to exercise its rights <br />COAL LEASE FINAL 6-25-0I.doc 10 <br />