2009-01-20_PERMIT FILE - X200923100

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prior leases to Lessee covering the Leased Premises (Lessor's records indicate unrecouped AMR to be . $295,400 as of November 26, 1996). In the event Lessee does not extract coal from the Leased Premises during the Primary Term, Extended Term or any additional term so agreed to by Lessor, the minimum amounts above paid to the Lessor will' be'forfeited. Acreage changes resulting -from partial. surrender or partial:. assignment -shall ,'reduce the rental : proportionately. -Further, at the end of each 10-year period, commencing from. the: date hereof, Lessor may 'reasonably' change the rate or amount of advance minimum royalty to be paid by Lessee piovided,' however;:: any:-..increase in the rate or amount of the advance minimum royalty shall be increased:by:the Producerri?rice Index, Table 5, Coal Minix g; as'first publishM' -V.'S. Department of Labor 13ureau'of Labor Stafistics; -suc "mi crease as measured over the previous ten*year period. In case -of assignment. Of this Lease, all advance miiiimuin royalty paid to the Lessor shall be carried forward. and credited to the°new assignee. 2. PRODUCTION ROYALTY -- During the Primary. Term and Extended Term of this Lease, Lessor hereby reserves and Lessee agrees to pay to Lessor as production royalty the following: For coal removed by underground mining' methods a sum equal to _eight percent ( 8 % ) of the Gross Sale Price (as herein defined) at the first point'of sale for the term of this Lease; for coal removed by strip mining methods a sum equal, to twelve and one-half.: percent ( 12.5 % ..) of-the Gross Sale Price at the firstpoint of sale; and for lignite removed by strip mining methods a sum equal to six and one ug arter percent ( 6.25 %-) of the Gross Sale Price-at.the first point of sale, for each and every ton ( 2000`lbs.) of coal or lignite mined:from the Leased Premises, or; in the event the coal or lignite mined by either underground or strip-mining methods. is sold on a'captive market, a :'sum equal to the same respective percents "of the reasonable market value of coal or lignite bf the same quality from the swine general area and mined under the same general conditions, whichever is greater. In no case shall the production royalty -to the Lessor be less 'than :seyenty'cents $ 0.70' -) per ton. "Lignite" means coal-having: an average calorific value of -7;300 btu's or less perpound:` This;value maybe "negotiated between Lessee -and Lessor. -purpose of this Lease, the .'Gr"' s.Sale Price"•shall 'be'the "•Average'Gioss Sales Price" :_per- For the ton of coal actually mined, :removed; sold snd:shipped from alie Leased' Premises during any month which sliall'be anairiount :equal. to. the iotal' gross proceeds r6in all such -sales- of such coal during such month divided by the total number of tons of such coal, except that deductions shall be made from the total gross proceeds for the: following items to the extent included in such total gross proceeds (i) transportation or delivery costs'incurred by'Lessee in transporting such coal-froin the Division of Mineral & Geology permit. boundary to point of sale- and (ii) any-direct costs actually incurred in washing the':coal, -not. to exceed $4.00 per ton (such last deduction hereinafter called "the Washing Deduction"). The Washing Deduction shall not- be applicable to greater than 15 % of the coal mined, removed and sold from the Leased Premises. At any time during the term of this Lease; Lessor shall have the right to provide Lessee written notice that Lessor wishes to renegotiate the Washing Deduction. As soon as is reasonably practicable after Lessee's receipt of such notice;' the parties in good faith shall renegotiate the Washing Deduction to reflect a deduction that is mutually acceptable to Lessor and Lessee. In the event Lessor and Lessee are unable to renegotiate the Washing Deduction, Lessor shall have the right. to require the elimination of the Washing Deduction -in the calculation of the Average Gross Sales Price'. . If requested by Lessor, Lessee -shall furnish proof of price received for all coal sold. Such royalty shall be due and payable on or before the last day of each calendar month during the term of this Lease for coal mined,-'removed, and sold by Lessee'during the preceding calendar month. 3. WEIGHT OF -COAU - It- is agreed that All coal : mined -and taken"••froni the'. Leased 'Premises: shall-be weighed and the weight thereof shall be entered in due form in weight records kept for such purposes by Lessee:'' It is agreed that-the. term "ton" as used herein means a ton of 2000 pounds of merchantable coal as showh'-by•miners' -payroll check numbers or..official :railroad' scale tickets, orty weight-determined at Page 3 of 1_0