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1.07 Default. In the case of default by Peabody in the performance of any of its <br />obligations hereunder, and if such default shall continue for sixty (60) days after written <br />notice to Peabody, sent by certified mail, return-receipt-requested, then Morgan may at <br />its option terminate this sublease. <br />1.08 Termination. Peabody may terminate this sublease at any time upon thirty <br />(30) days written notice to Morgan and upon payment of all royalties then due. Upon <br />termination of this sublease, for any reason, Morgan shall grant to Peabody, subject to <br />the provisions of the State Lease, rights of egress and ingress to the Property, for a <br />reasonable duration and until all reclamation bonds pertaining to the Property have been <br />released by appropriate governmental agencies, in order for Peabody to remove equip- <br />ment and to complete legally required reclamation. + <br />1.09 Indemnity. Peabody agrees to indemnify Morgan and to defend and hold <br />Morgan harmless from any and all actions, causes of action, claims, damages or expenses, <br />of any kind or nature, whatsoever, arising out of any of the operations of Peabody on the <br />Property, except for those caused by the sole negligence of Morgan. <br />1.10 Taxes. Peabody shall pay the real estate taxes levied on the Property, as well <br />as taxes on any buildings, structures, improvements, plant and equipment of Peabody <br />thereon. <br />1.11 Termination of 1964 Lease. The parties hereby terminate and release the <br />1964 Lease as of the date of this Agreement. <br />SECTION'2. OVERRIDING ROYALTY. Peabody grants to Morgan an overriding <br />production royalty ("Overriding Royalty") as follows: <br />2.01. Seneca Leases. The Overriding Royalty shall apply to all coal mined and sold , <br />from the coal lands described on Exhibit B, attached hereto and made a part hereof <br />("Seneca Leases"). This Overriding Royalty is made without any warranties of title. <br />-4-