2009-01-20_PERMIT FILE - X200923100

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the mine tipple, or by state certified scales; provided that if it is not possible to determine accurately the weight by such means Lessor may, by its duly authorized agent or agents, elect to compute a ton of coal at 27 cubic feet of coal in the solid or by the measurements of the space from which the coal is mined, deducting therefrom all space occupied by slate or other impurities, and in such case the said computation shall . be final and binding. upon,Lessee: 4. ROYALTY'-IN KIND = At-the .option::ofLessor;and with 6:months' notice to-Lessee; Lessor may.tako': ' its:.royaYty coal in• kind, .-in which?'event i:essee: shall *deliven such royalty 'coal to -Lessor on' th 'Leased -pipelines or onto storage piles designated by Lessori:and Lessee'shall'not in such case premises;. into slurry be required to provide free storage or pay slurry charges for any such coal run onto storage piles or into slurry pipelines. = 5. EXTENSION - Lessor is not obligated to issue a new lease or to renew this lease. However, Lessee may have a preferential•'right to renew this Lease or to receive a new lease, under the following conditions: A::- -:Lessee shall furnish to Lessor' satisfactory evidence of plans for mining during the term of the renewed- lease or. during the term df a new lease. ' - Lessee shall furnish adequate geological evidence'to Lessor that the acreage subject to the renewed or new lease is in fact an integral part of and contains reserves in a logical mining unit. Whether the acreage is or is not a part of a logical mining unit will. be determined by Lessor. -this Lease would; as determined by Lessor; be in'the best interest of the State: An extension of ermination of the det' NAt the time of expirat on-of this Lease, *the following -may -be' considered in-th&. conditions of an• extension or a iievw lease. ' ? •'• ' - •' " •'• `4 'B.''° '; •An•advance minimum royalty,'the amount to be'negotiated'at*the•tinie of-this:Rteiisioii, will'Ue due' and payable aiznually •t6mmencing on the -date this•Lease •is'renewedor anew lease'-is'execufed aiid'-'shall': continue until-the expiration of the new or renewed-.l'ease !. This`amb_ unt'inay be 'adjusted by- essor' of the end. of each five-year period of the renewed or new lease.. At 'the end of the lease term or;-at any time during this lease term when a permit issued by the Division of Minerals and Geology for a mining operation on' a specific parcel of these described lands, Lessee may be required to -apply to the Board for- bne or more individual-mineral leases of not more than 640 acres if state mineral '66ts -stand alone; or not moreAhan 1:,280 hares if state mineral rights have a common boundary, but in no. case, not"more than the acreage of this lease: 6. EXTENSION BY PRODUCTION -This. Lease may not.be held in perpetuity; however, this Lease will continue 'in effect subsequent to the Primary.-Term to long as coal, is produced in • paying quantities. Cessation of production for a period in excess of 180 consecutive days subsequent to the Primary Term will automatically remove this Lease from producing status unless otherwise agreed to in writing by Lessor. Lessee:shall notify Lessor of each cessation of production, the reasons therefor, and the time period during -which? production will or did cease. "Paying quantities" means'production sufficient to return royalties to- Lessor equal to the advance 'minimum royalty: 7. PENALTIES - A penalty shall be imposed for, but not limited to, late payments, improper payments, violations of any covenants of this Lease, or any false statements made to Lessor. Penalties shall be determined by.'Lessor and may- be in the form of; but not.limited to, interest, fees; and' fines. ' . 8. OVERRIDING ROYALTY LIMITATIONS -- It -is agreed that this Lease or- any- subsequent assignment hereof shall not be burdened with overriding royalties the aggregate of which exceeds-2 percent of the-gross Page 4 of 10