2009-01-20_PERMIT FILE - X200923100

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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 of Lessor and with 6 months' notice to Lessee, Lessor may take its royalty coal in kind, in which event Lessee shall deliver such royalty coal to Lessor on the Leased premises, into slurry pipelines or onto storage piles designated by Lessor, and Lessee shall not in such case 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 of a new lease. Lessee shall famish 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. An extension of this Lease would, as determined by Lessor, be in the best interest of the State. At the time of expiration of this Lease, the following may be considered in the determination of the conditions of an extension or a new lease. B. An advance minimum royalty; the amount to be negotiated at the time of this extension, will be due and payable annually commencing on the date this Lease is renewed or anew lease is executed and shall continue until the expiration of the new or renewed lease. This amount may be adjusted by Lessor at 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 one or more individual mineral leases of not more than 640 acres if state mineral rights stand alone, or not more than 1,280 acres 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 so 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 value of the coal at the first point of sale. Lessor must be notified of all overriding royalties accruing to this Lease. Violation of the above may subject this Lease to cancellation by Lessor. '? Page 4 of 10