2009-01-20_PERMIT FILE - X200923100

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Royalty due for coal pro 3 from the Leased Premises shall be cre -d against (i) any advance minhhum royalty payment under tf-b Lease, and (ii) any unrecouped advance. aimum royalty payments under any prior leases to Lessee covering the Leased Premises. 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; provided, however, any increase in the rate or amount of the advance' minimum royalty shall be .increased by the Producer Price Index, Table 5, Coal Mining, as first published by U.S. Department of Labor Bureau of Labor Statistics, such increase as measured over the previous ten year period. In case of assignment of this Lease, all advance minimum royalty paid to the Lessor shall be carried forward and credited to the new assignee. 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: Forcoal removed by underground mining methods a sum equal to ei ht percent ( 8°10 ) 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 first point of sale; and for lignite removed by strip mining methods a sum equal to six and one guarter percent ( 6.25 0 ) 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 of the same quality from the same 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 seventy cents ( $ 0.10 ) per ton. Lignite means coal having an average calorific value of 7,300 btu's or less per pound. This value may be negotiated between Lessee and Lessor. For the purpose of this Lease, the "Gross Sale Price" shall be the "Average Gross Sales Price"• pei ton of coal actually mined, removed, sold and shipped from the Leased Premises Auring any month which shall be an amount equal to the total gross proceeds from 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 from 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 COAL -- It is agreed that all coal mined and taken from 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 shown by miners' payroll check numbers or official railroad scale tickets, or by weight determined at the mine tipple, or by state certified scales; provided that if it is not possible to determine accurately the Page 3 of 10