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r equested By: s ib 0312812008 <br />Instrument Book Face <br />200800646448 OR 1075 1438 <br />2, ANNUAL ADVANCE MINIMUM ROYALTY �tYan amount equal t o within ��rh'e (Och s of <br />the E ffective Date of this Lease, pa <br />totals $77,764.00) as the first year's Annual Advance Minimum Royalty. Thereafter, <br />except as may be modified below, Lessee shall pay to Lessor an Annual Advance <br />Minimum Royalty of an equal amount ($77,764.00) for so long as the Lease is in effect, <br />including any extension of the Lease by production pursuant to Section 6 below. Said <br />Annual Advance Minimum Royalty shall be due to Lessor on the annual anniversary of <br />the Effective Date of this Lease. At the end of each 5 year period, commencing from the <br />Effective Date, Lessor may reasonably change the rate or amount of the Annual Advance <br />Minimum to be paid by Lessee; provided, however, any increase in the rate or amount of <br />the Annual Advance Minimum Royalty shall not be greater than the increase, if any, <br />between each such 5th year and each preceding year in the Producer Price Index, Table 5, <br />Coal Mining, as first published by U.S. Department of Labor Bureau of Labor Statistics. <br />The Annual Advance Minimum Royalty shall be as minimum and advance royalty, <br />without relation to whether or not coal is mined from the Leased Premises or the amount <br />of coal mined from the Leased Premises. Annual Advance Minimum Royalty paid by <br />Lessee shall be credited against the first Production Royalty due as herein provided for <br />coal mined and sold from the Leased Premises. All Annual Advance Minimum Royalty <br />payments shall be cumulative and carried forward from year to year in regard to crediting <br />against Production Royalty. If this Lease is terminated in accordance with the terms <br />hereof, all Annual Advance Minimum Royalty paid by Lessee to Lessor which has not <br />been credited against Production Royalty shall be retained by Lessor and shall not be <br />repaid to Lessee under any circumstances. In case of assignment of this Lease, all <br />Annual Advance Minimum Royalty paid to Lessor and not credited against Production <br />Royalty shall be carried forward and credited to the assignee. <br />3. PRODUCTION ROYALTY During the term of this Lease, Lessor hereby reserves and <br />Lessee agrees to pay to Lessor as Production Royalty the following: <br />A. For coal removed by underground mining methods a sum equal to the following <br />percentage of the Gross Sale Price (as herein defined) at the first point of sale for <br />the term of this Lease, for each and every ton (2000 lbs.) of coal mined from the <br />Leased Premises: (i) for coal mined from Parcel I of the Leased Premises eight <br />and one -half percent (8.5 %), and (ii) for coal mined from Parcel 2 of the Leased <br />Premises eight percent (8 0 /o); or, in the event the coal mined by underground <br />mining methods is sold on a captive market, a sum equal to the same respective <br />percentages of the reasonable market value of coal of the same quality from the <br />same general area and mined under the same general conditions, whichever is <br />greater. In no case shall the Production Royalty to the Lessor be less than one <br />dollar and thirty cents ($1.30) per ton. <br />B. For the purpose of this Lease, the " Gross Sale Price shall be the " Average Gross <br />Sales Price per ton of coal actually mined, removed, sold and shipped from the <br />Leased Premises during any month which shall be an amount equal to the total <br />gross proceeds from all such sales of such coal during such month divided by the <br />total number of tons of such coal, except that deductions shall be made from the <br />Page 4 of 17. <br />