Maryland-Allegany County Lease - Allegany Coal & Land Co. and Patriot Mining Co. Inc.
LEASE AGREEMENT
This LEASE AGREEMENT, effective the 1st day of January, 1995, by and
between ALLEGANY COAL & LAND COMPANY ("Owner"), and PATRIOT MINING COMPANY, INC.
("the Company"), constitutes the final, complete, and integrated agreement to
which Owner and the Company intend to be legally bound as follows:
SECTION 1
DEFINITIONS
1.01 "AFFILIATE OF THE COMPANY" shall mean any person (including an individual,
partnership, joint venture, or corporation) who directly or indirectly
through one or more intermediaries controls or is controlled by or is
under common control with the Company, or any of the partners who
constitute the Company, "control" in this context meaning possession,
direct or indirect, of the power to vote respecting the management or
operations of the Company, of such person, or both, or the power to direct
the management policies of the Company, of such person, or both, by
contract or otherwise.
1.02 "APPROVED MINING METHODS" shall mean only the strip mining method in
compliance with good mining practices and applicable law, and shall not
mean or include any other mining method.
1.03 "GROSS SALES PRICE" shall mean the gross sales price paid by the first
purchaser who is not an Affiliate of the Company less the reasonable costs
of transportation.
1.04 "LAND" shall mean those tracts of land in Allegany County, Maryland which
are more particularly described and delineated in Exhibit "A".
1.05 "LEASEHOLD ESTATE" shall mean all of the seams of Mineable and
Merchantable Coal in, upon, and underlying the Land, together with all
Mining Rights, and shall not mean or include any of Owner's Retained
Interests.
1.06 "MINEABLE AND MERCHANTABLE COAL" shall mean all of the coal that can be
reached and economically recovered by mining to a highwall height of sixty
(60) feet of overburden over the uppermost seam then being mined, and
shall include all the coal that can be reached and economically recovered
from the Pittsburgh and Morantown seams when the Company is mining in the
Redstone seam.
1.07 "MINING RIGHTS" shall mean all of the rights and privileges described in
Section 2.02.
1.08 "OPERATIONS" shall mean the mining and removing by Approved Mining Methods
of all Mineable and Merchantable Coal that can be produced from the
Leasehold Estate by the Company.
1.09 "RETAINED INTERESTS" shall mean and include all of Owner's right, title,
interest, and estate in and to the surface and minerals in, upon, and
underlying the Land other than the Leasehold Estate.
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1.10 "THIRD PARTY" shall mean any person (including an individual, partnership,
joint venture, or corporation) who is not the Company or an Affiliate of
the Company.
1.11 "TON" shall mean 2,000 pounds.
SECTION 2
LEASE/RESERVATION
2.01 In consideration of the royalty payments to be made by the Company, Owner
leases the Leasehold Estate to the Company in accordance with the terms
and provisions of this Agreement.
2.02 Owner, to the extent its title permits, and subject to the provisions of
Section 2.04, grants to the Company for and during the term set forth in
Section 3 and any extensions thereof, the following Mining Rights: the
exclusive right to mine, remove, transport and process coal and all other
minerals commingled therein, in, on or under the Land by Approved Mining
Methods together with all necessary or convenient rights and privileges
with respect thereto, including, but not limited to the free and
uninterrupted right and right-of-way into, upon, over, under and through
the Land at such points and in such manner as may be convenient or
necessary for the purpose of all Operations in connection therewith and in
the horizons of coal seams and in the strata above or below the same and
other coal, including but not limited to, the transportation of personnel,
supplies and equipment, and the right to explore, test drill, dig, mine,
drain, transport and carry away the coal and other coals and materials now
owned or leased or which may be hereafter acquired by Company, and to
erect and maintain on the Land such structures and improvements necessary
or convenient to the Operations; and in connection with Approved Mining
Methods, the right and privilege to excavate, drill, remove and displace
any or all of the earth, rock and other strata or materials in, upon, or
about the coal and the horizons thereof and to dump or deposit the same on
or off the Land, all without any liability to the surface or other mineral
deposits and strata thereof; and without being required to leave or
provide subjacent or lateral support for the overlying strata or surface
or anything therein, thereon, or thereunder, including structures or
improvements now or hereafter erected thereon.
2.03 At any time and from time to time Owner, in its sole discretion, may
develop, exploit, remove, sell, lease, or convey any part or parts or all
of Owner's Retained Interests.
2.04 The Company shall conduct the Operations and exercise its Mining Rights in
such manner as not to interfere unreasonably with Owner's Retained
Interests. Owner shall exercise its rights to the Retained Interests in
such manner as not to interfere unreasonably with the Leasehold Estate and
the Company's Operations. To the extent feasible, the parties shall
coordinate the utilization and disposition of their respective interests
in, on, and underlying the Land in such manner as to promote their mutual
economic interests in the same.
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SECTION 3
TERM
3.01 The term of this lease shall begin on the effective date of this Agreement
and shall end twenty (20) years from the date the AES Warrior Run Power
Plant begins accepting coal shipments, unless extended or earlier
terminated as hereinafter provided.
3.02 The provisions of Section 3.01 notwithstanding, the Company without cause
may terminate this lease at any time by giving Owner no less than thirty
(30) days' notice of cancellation and upon payment to Owner of all sums
due and payable under this lease to the date of such termination.
3.03 The provisions of Section 3.01 notwithstanding, Owner without cause may
terminate this lease upon cancellation or closing of the AES Warrior Run
Power Plant or at any time on or after January 1, 2001 if the AES Warrior
Run Power Plant is not then in commercial operation.
4.01 Upon expiration of the original term, this lease shall continue from year
to year upon written agreement of the parties.
SECTION 4
MINIMUM ROYALTY
4.01 From and after the effective date of this lease, the Company shall pay to
Owner a minimum royalty of Ten Thousand Dollars ($10,000.00) per year,
payable in consecutive monthly installments of Eight Hundred Thirty-Three
Dollars and Thirty-Three Cents ($833.33) each.
4.02 From and after the date the AES Warrior Run Power Plant begins accepting
coal shipments, or on and after January 1, 2001, whichever first occurs,
the Company shall pay to Owner a minimum royalty of Three Hundred Thousand
Dollars ($300,000.00) per year, payable in consecutive monthly
installments of Twenty-Five Thousand Dollars ($25,000.00) each.
4.03 The first payment of minimum royalty shall be payable on the effective
date of this lease and each subsequent monthly payment of minimum royalty
shall be paid on the same day of each following month.
SECTION 5
PRODUCTION ROYALTY
5.01 The Company shall pay to Owner in respect of each ton of coal produced
from the Leasehold Estate the following production royalty:
5.01.01 Nine percent (9%) of the Gross Sales Price of such coal shipped to
the AES Warrior Run Power Plant;
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5.01.02 Ten percent (10%) of the Gross Sales Price, but not less than One
Dollar and Fifty Cents ($1.50) per ton, of such coal shipped to any
customer other than the AES Warrior Run Power Plant.
5.02 The production royalty shall be paid on the twenty-fifth (25th) day of the
month following the month in which such coal is sold, subject to the
Company's right of recoupment as provided in Section 5.03.
5.03 All payments of the minimum royalty provided for in Section 4.01 shall be
recoupable from the production royalty provided for in Section 5.01.02
until such time as the minimum royalty provided for in Section 4.02
becomes effective.
5.04 All payments of the minimum royalty provided for in Section 4.02 shall be
recoupable from the production royalty provided for in Section 5.01.
5.05 In addition, the minimum royalty payable hereunder shall be reduced by the
amount of all production royalty paid by Winner Bros. Coal Company to
Owner on coal sold to the AES Warrior Run Power Plant.
SECTION 6
ACCOUNTING
6.01 The Company shall keep accurate and correct books of accounting and
records showing all coal mined, processed, marketed, and shipped from the
Leasehold Estate, together with the correct weights thereof, and the Gross
Sales Price received or receivable therefrom.
6.02 The books and records shall be available for inspection by Owner and
Owner's duly authorized agents upon fifteen (15) days' advance notice for
the purpose of verification of information contained in the royalty report
provided for herein.
6.03 The Company shall furnish Owner with a written royalty report accompanying
each royalty payment showing the quantity of coal sold and the Gross Sales
Price received or receivable therefrom.
SECTION 7
OPERATIONS
7.01 During mining, the Company shall conduct the Operations in a diligent and
workmanlike manner in order to promote the development, production, and
sale of all Mineable and Merchantable Coal.
7.02 The Company shall use its best efforts and due diligence to comply in all
material respects with every requirement and obligation imposed by every
governmental body having jurisdiction over the Operations and the
Leasehold Estate and shall obtain and maintain all consents, licenses, and
permits required by law. The Company reserves the right to appeal from any
ruling which it believes is not proper, and to carry on the Operations if
permitted in accordance with its interpretation of the same pending final
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determination. The Company shall be responsible for acquisition of all
permits and for all reclamation required by law.
7.03 The Company shall employ a competent engineer or surveyor to make surveys,
plans, and maps of the Operations within the Leasehold Estate, and shall
furnish Owner, upon request, with copies of all maps required to be
maintained by state law or regulations.
7.04 Owner waives all duties, statutory or otherwise, on the part of the
Company to maintain a barrier pillar in the coal in each or either side of
the outside boundary line of the Leasehold Estate, where the Company has
the right to mine the adjacent coal.
7.05 The Company shall provide Owner with at least ninety (90) days' prior
written notice of the commencement of Operations in any area where timber
could be removed in commercial quantities. If such timber has not been
removed within the lime provided, it may be removed or destroyed by the
Company without liability therefor.
7.06 Upon the surrender of this lease, the Company shall have a period of six
(6) months within which to remove any improvements, structures, fixtures,
machinery, equipment, supplies, or other property from the Leasehold
Estate, and on demand from Owner shall be required to remove the same
within such six (6) month period, providing that the Company may re-enter
the Leasehold Estate thereafter in the event such entry is necessary to
complete reclamation or obtain final release of all mining permits.
SECTION 8
POWER PLANT ASH
8.01 The Company has advised Owner that the coal reserves underlying the Land
when mined may be dedicated to electric utility customers owning and/or
operating electric power generating plants located within reasonable
proximity to the Leasehold Estate, and that the residue from the burning
of such coal ("Power Plant Ash") may be economically trucked to and
disposed of in spoil areas of the Leasehold Estate. Accordingly, should
the Company contract with its utility customer or customers for the
disposal of Power Plant Ash on the Leasehold Estate, the Company shall
have the following disposal rights and duties:
8.01.01 The Company shall have the right to dispose of Power Plant Ash, free
of charge, in quantities proportionate to the percentage which
obtains when the total burn of coal originating from the Leasehold
Estate is divided by the total burn of coal produced by such utility
customer or customers; and
8.01.02 The Company shall have the right to dispose of Power Plant Ash in
quantities exceeding those provided for in Section 8.01.01 upon
payment to Owner of five percent (5%) of the Company's contract
price per ton for such disposal. Such compensation shall be paid to
Owner on the twenty-fifth (25th) day of the month following the
month such Power Plant Ash is deposited on the Leasehold Estate.
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8.03 The Power Plant Ash disposed of on the Leasehold Estate shall not
constitute or contain any Hazardous Materials as defined in Section
9.01.02.
8.04 Owner reserves the right to designate or approve in writing those areas of
the Leasehold Estate available for deposit of Power Plant Ash.
SECTION 9
ENVIRONMENTAL REQUIREMENTS
9.01 Any Hazardous Materials (as hereinafter defined) to be brought upon, kept
or used in or about the Land by the Company and its agents, employees,
contractors or invitees, will be used, kept and stored in a manner that
complies with all laws regulating any such Hazardous Material brought upon
or used or kept in or about the Land.
9.01.01 If the Company breaches the obligations stated in Section 9.01, or
if the presence of Hazardous Materials on the Land caused or
permitted by the Company results in contamination of the Land, or if
contamination of the Land by Hazardous Materials otherwise occurs
for which the Company is legally liable to Owner for damage
resulting therefrom, then the Company shall indemnify, defend and
hold Owner harmless from any and all claims, judgments, damages,
penalties, response costs, fines, costs, liabilities or losses
(including without limitation, diminution in value of the Land,
damages for the loss or restriction on use of the Land, and sums
paid in settlement of claims, reasonable attorney's fees, consultant
fees and expert fees) which arise during or after the term of this
lease as a result of such contamination. This indemnification of
Owner by the Company includes, without limitation, costs incurred in
connection with any investigation of site conditions or any
clean-up, remedial, removal or restoration work required by any
federal, state or local governmental agency or political subdivision
because of Hazardous Materials present in the soil or ground water
on or under the Land. Without limiting the foregoing, if the
presence of any Hazardous Materials on the Land caused or permitted
by the Company results in any contamination of the Land, the Company
shall promptly take all actions at its sole expense as are necessary
to return the Land to the condition existing prior to the
introduction of any such Hazardous Materials to the Land; provided
that Owner's approval of such actions shall first be obtained, which
approval shall not be unreasonably withheld so long as such actions
would not potentially have any material adverse effect on the Land.
9.01.02 As used herein, the term "Hazardous Materials" means any hazardous
or toxic substance, material or waste, including but not limited to
those substances, materials and wastes listed in the United States
Department of Transportation Hazardous Materials Table (49 CFR
172-101) or by the Environmental Protection Agency as Hazardous
Substances (40 CFR Part 302) and Amendments thereto, or such
substances, materials and wastes that are or become regulated under
any applicable local, state or federal law.
9.01.03 On the effective date of this lease and annually thereafter, the
Company shall disclose to Owner the names and amounts of all
Hazardous Materials, or any
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combination thereof which the Company intends to store, use or
dispose of on the Land.
9.02 Any default under the provisions of this section (other than an
unintentional or unknowing default which causes no harm or potential harm
to Owner or the Land) shall be a material default enabling Owner to
exercise any of the remedies set forth in this lease.
SECTION 10
TITLE/TAXES
10.01 Owner warrants specially Owner's title to the Leasehold Estate and that
the Leasehold Estate is free and clear of all liens and encumbrances,
subject to recorded easements, encroachments which may be revealed from an
inspection of the Leasehold Estate, and all existing ways and servitudes,
howsoever created.
10.02 If a third party asserts any claim or title to any portion of the
Leasehold Estate where the Company is then mining, the Company may pay all
production royalty arising from the disputed area into escrow pending
resolution of the dispute. Such payment shall not be deemed a default
under this Agreement. Owner shall exercise its best efforts and shall take
all reasonably action necessary to resolve any such dispute or quiet title
to such disputed area. On such resolution, if Owner's interest in the
disputed area is less than complete, all production royalty payable to
Owner in respect of such portion shall be reduced proportionately in
relation to Owner's ascertained interest, and Owner shall reimburse the
Company for any production royalty previously paid which properly should
have been paid to others.
10.03 If for any reason it becomes necessary to provide record notice of this
lease, the Company shall record a memorandum of lease in lieu of this
Agreement. All recordation taxes and costs shall be paid by the Company.
If a memorandum of lease shall have been recorded, then upon termination
of this lease for any reason, the Company shall execute, deliver, and
record such documents as may be necessary to release the Leasehold Estate
of record from the operation and effect of this lease and the memorandum
of lease.
10.04 Owner shall pay all real estate taxes assessed or levied against the
Leasehold Estate.
10.05 The Company shall pay all taxes assessed or levied against all
improvements, machinery, equipment, or other property of the Company
installed or placed in or upon the Leasehold Estate by the Company.
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SECTION 11
INSURANCE/INDEMNIFICATION
11.01 The Company shall carry public liability insurance, naming Owner as an
additional insured, providing minimum personal injury coverage of Five
Hundred Thousand Dollars ($500,000.00) per person, One Million Dollars
($1,000,000.00) per occurrence, and minimum property coverage of Five
Hundred Thousand Dollars ($500,000.00) per occurrence, One Million Dollars
($1,000,000.00) aggregate.
11.02 The Company shall indemnify and hold harmless Owner from and against any
and all claims, liabilities, obligations, losses, damages, actions, suits,
proceedings, demands, assessments, judgments, reasonable counsel fees,
costs, and expenses arising out of or resulting from the Operations and
the Company's use and occupation of the Leasehold Estate. In the event any
action or proceeding is brought against Owner by reason of any such claim,
the Company will, at its expense, resist and defend such action or
proceeding and satisfy any order of judgment against Owner resulting
therefrom.
11.03 The Company shall be in default on the occurrence of any one or more of
the following events:
11.03.01 When the Company fails to pay when due any sum of money payable under
this lease and such failure to pay shall continue for more than thirty
(30) days from the due date ("Grace Period");
11.03.02 When the Company has utilized in any twelve (12) month period Grace
Periods amounting to more than sixty (60) days;
11.03.03 When the Company fails to perform any provision of this lease (other
than the payment of money) and a failure to perform shall continue for
more than thirty (30) days after written notice to the Company of such
failure;
11.03.04 When the Company becomes insolvent or generally does not pay its debts
as they come due, or files a petition for bankruptcy or makes an
assignment for the benefit of creditors.
11.04 On default by the Company Owner may elect to cancel this lease, re-enter
the Leasehold Estate, expel the Company, and repossess the Leasehold
Estate without notice to the Company and without prejudice to any and all
other remedies available to Owner under law.
SECTION 12
ARBITRATION
12.01 Except as provided in Section 12.06, any controversy or claim
arising out of or relating to this lease shall be submitted to arbitration in
the manner hereinafter provided. The party desiring such arbitration shall give
written notice to that effect to the other party to this lease, specifying in
such notice, the matter to be submitted to arbitration and the name, address and
telephone number of the person designated to act as arbitrator on its behalf.
Within fifteen
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(15) days of receipt of such notice by the other party to this lease, said other
party shall give written notice to the party invoking arbitration specifying the
name, address and telephone number of the person designated to act as arbitrator
on behalf of said other party. If the second party fails to so notify the party
invoking arbitration of the appointment of the second party's arbitrator, then
the appointment of the second arbitrator shall be made in the same manner as
hereinafter provided for the appointment of a third arbitrator in a case where
the two arbitrators appointed hereunder or the parties are unable to agree upon
such appointment. The two arbitrators appointed by the parties shall meet within
ten days after the second arbitrator is appointed and shall themselves appoint a
third arbitrator. In the event of their being unable to agree upon such
appointment within said ten days, the third arbitrator shall be selected by the
parties themselves if they can agree thereon within a further period of fifteen
(15) days. If the parties do not so agree on the appointment of the third
arbitrator, then either party, on behalf of both may apply to the Circuit Court
of Allegany County, Maryland, for appointment of such third arbitrator, and the
other party shall not raise any question as to said court's full power and
jurisdiction to entertain the application and make the appointment.
12.02 All arbitrators shall have no financial interest in the parties or the
outcome.
12.03 All arbitration proceedings shall be conducted in accordance with
applicable provisions of the Maryland Uniform Arbitration Act and in
accordance with the laws of the State of Maryland, except as otherwise
provided herein.
12.04 The arbitrators shall conduct a hearing on the merits, and within forty
(40) days thereof, shall make written findings of fact and conclusions of
law. The decision in which any two arbitrators so appointed and acting
hereunder concur shall in all cases be binding and conclusive upon the
parties and shall not be subject to appeal. Each party shall pay the fees
and expenses of the one of the two original arbitrators appointed by such
party or otherwise appointed on behalf of said party, and the fees and
expenses of the third arbitrator shall be borne equally by both parties.
12.05 In the event that any arbitrator appointed pursuant to Section 12.01 shall
thereafter die or become unwilling or unable to act as arbitrator, his
successor shall be appointed within fifteen (15) days by the party who
originally had the right to appoint him or, as regards a successor third
arbitrator, by the two remaining arbitrators. In case of the failure to
appoint a successor by the party entitled to do so (or, as regards the
third arbitrator, the failure of the two remaining arbitrators to choose a
successor) appointment of the successor arbitrator shall be made in the
same manner as provided for in Section 12.01 for the appointment of a
third arbitrator where the two arbitrators appointed hereunder or the
parties are unable to agree upon such appointment.
12.06 The arbitration provision set forth above shall be the exclusive remedy of
the parties to this lease, but, notwithstanding that agreement, said
arbitration provision shall not be construed or applied to limit, preempt
or delay any rights or remedies (i) of either the Owner or Company to
apply to any court for recovery of the possession of the property from, or
for injunctive relief against, the other party hereto or (ii) of the Owner
to apply to any court for the collection of rents.
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SECTION 13
OTHER LEASES
13.01 On the effective date of this Agreement several parcels of the Land are
subject to coal mining leases from Owner to others. These parcels are
described or delineated in Exhibit A. As each such lease is terminated and
such parcel becomes available, Owner by written notice shall offer such
parcel to the Company for the sole purpose of incorporating such parcel
into the Leasehold Estate on the terms and provisions of this lease.
Should the Company fail to accept such offer in the time and manner
required, Owner may dispose of such parcel in any manner whatsoever, free
from the requirements of this section.
13.02 From and after the date the AES Warrior Run Power Plant begins accepting
coal shipments, Owner shall amend each lease then in effect between Owner
and Winner Bros. Coal Company reducing the production royalty payable
thereunder for each ton of coal shipped to the AES Warrior Run Power Plant
to nine percent (9%) of the Gross Sales Price as defined in this
Agreement.
13.03 The parties acknowledge that this lease supersedes and replaces all of the
terms and provisions of the lease from Owner to the Company dated May 18,
1992, as modified by agreement dated July 11, 1994, and that this
Agreement constitutes a novation.
SECTION 14
ASSIGNMENT
14.01 Except as provided in Section 14.02, the Company shall not assign any part
or all of this lease or sublet any part or all of the Leasehold Estate
without the prior written consent of Owner, which shall not be
unreasonably withheld, providing that no such assignment or sublease shall
relieve the Company of its duties and liabilities to Owner hereunder.
14.02 The Company shall have the right to pledge the coal reserves available to
it under this lease to the performance of a long-term contract with
Applied Energy Services involving, in whole or in part, the mining and
sale of the coal reserves underlying the Leasehold Estate. Any such pledge
shall be subject to the royalty and other provisions of this Agreement. If
Owner shall be required to join in such pledge agreement, Owner shall not
be required to subject Owner's reversionary interest in the Leasehold
Estate to the operating or effect of such pledge agreement. Owner agrees
to negotiate in good faith with the Company amendments or modifications to
this Agreement to the extent required by any such pledge so long as such
amendments or modifications do not materially alter the terms and
conditions of this lease.
SECTION 15
GENERAL PROVISIONS
15.01 All payments required to be made or tendered to Owner may be delivered
personally or by mail at the address set forth below or to such other
address as Owner may designate by written notice.
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15.02 Any notice to be given to any party to this Agreement shall be in writing
and shall be deemed given when hand delivered with signed receipt or sent
postage prepaid by certified or registered mail, return receipt requested,
to the other party at the address set forth below or to such other address
as a party may designate by written notice given in accordance with this
section.
15.03 This Agreement shall be deemed to be an agreement under this laws of the
State of Maryland and for all purposes shall be governed by and construed
in accordance with the laws of that state.
15.04 In case any provision of this Agreement is for any reason held to be
illegal or invalid, such illegality or invalidity shall not affect the
remainder thereof, which shall be construed and enforced as if such
illegal or invalid portion were not contained herein.
15.05 Time is of the essence of this Agreement.
15.06 This Agreement shall be binding upon and shall inure to the benefit of
Owner, the Company, and their respective successors and assigns.
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IN WITNESS WHEREOF, the parties hereto have executed this Lease Agreement
on the dates shown below intending it to be effective on January 1, 1995.
OWNER:
ATTEST: ALLEGANY COAL & LAND COMPANY
By (SEAL)
----------------------- ------------------------------
Date: Jan 5, 1995 Address: P.O. Box 410, Depot Street
Frostburg, Maryland 21532
THE COMPANY:
ATTEST: PATRIOT MINING COMPANY, INC.
By (SEAL)
----------------------- ------------------------------
Date: December 21, 1994 Address: 2708 Cranberry Square
Morgantown, West Virginia 26505
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AMENDMENT NO. 1 TO LEASE AGREEMENT
THIS AMENDMENT NO. 1 TO LEASE AGREEMENT (the "Amendment"), is made and
entered into as of the 7th day of June, 1999, by and between ALLEGANY COAL &
LAND COMPANY, a Maryland corporation ("Owner"), and PATRIOT MINING COMPANY,
INC., a West Virginia corporation ("Company");
WHEREAS, Owner and Company entered into that certain Lease Agreement dated
January 1, 1995, pursuant to which Owner leased to Company certain coal property
located in Allegany County, Maryland (the "Lease"); and
WHEREAS, Owner and Company desire to amend the Lease to add the property
which was formerly subject to leases with Winner Bros. Coal Co. and which is
more particularly identified and described on Exhibit A and shown on Exhibit B,
which Exhibits are attached hereto and made a part hereof (the "Additional
Property") to the Land and Leasehold Estate under the Lease (as such terms are
hereinafter defined) and to change certain other provision of the Lease as
hereinafter provided.
NOW, THEREFORE, that for and in consideration of the foregoing premises,
the mutual agreements herein contained, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Owner and Company hereby agree as follows:
1. Definitions. Unless otherwise defined herein, capitalized terms used in
this Amendment shall have the meaning given to them in the Lease.
2. Amendments. The Lease is hereby amended as set forth in this Section 2.
2.1 Gross Sales Price. Section 1.03 of the Lease is hereby stricken
and replaced in full by the following:
1.03 "Gross Sales Price" shall mean (i) with respect to coal mined,
removed and sold from the Additional Property, the gross sales price
f.o.b. the Tipple received for such coal or (ii) with respect to coal
mined, removed and sold from the Leasehold Estate (other than from the
Additional Property), the gross sales price paid by the first purchaser
who is not an Affiliate of the Company less the reasonable costs of
transportation. The gross selling price under subsection (i) above shall
be effective for a period of one year from the date of this Amendment,
unless Owner agrees to an extension thereof. In the event Owner does not
agree to extend the expiration date of the gross selling price under
subsection (i) above, this Section 1.03 shall be deemed to be amended by
deleting subsection (i) above.
2.2 Additional Property. Section 1.04 of the Lease is hereby
stricken and replaced in full by the following:
1.04 "Land" shall mean those tracts of land in Allegany County,
Maryland, which are more particularly described and delineated on Exhibit
"B" attached hereto and made a part hereof, including, without limitation,
the Additional Property.
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2.3 Tipple. A new Section 1.11 is hereby added to the Lease as set
forth below and existing Section 1.11 is hereby renumbered as Section 1.12:
1.11 "Tipple" means the coal tipple located near Tysons Corner,
Maryland, and known as the UEC Coal Yard.
2.4 Production Royalty. Section 5.01 of the Lease is hereby stricken
and replaced in full by the following:
5.01 The Company shall pay to Owner in respect of each ton of
coal produced from the Leasehold Estate the following production
royalty:
5.01.01 With respect to coal mined and removed from
the Redstone seam on the Additional Property
and sold separately without commingling with
other coal, $1.35 per ton;
5.01.02 With respect to rations mined and removed
from the Additional Property and sold
separately without commingling with other
coal, $0.80 per ton;
5.01.03 With respect to coal mined and removed from
the Leasehold Estate (other than the coal
from the Redstone seam or rations sold
separately as provided in 5.01.01 and
5.01.02 above) and sold to the AES Warrior
Run Power Plant, nine percent (9%) of the
Gross Sales Price; or
5.01.04 With respect to coal mined and removed from
the Leasehold Estate (other than coal from
the Redstone seam or rations sold separately
as provided in 5.01.01 and 5.01.02 above)
and sold to any customer other than the AES
Warrior Run Plant, ten percent (10%) of the
Gross Sales Price, but not less than One
Dollar and Fifty Cents ($1.50) per ton.
2.5 Recoupment. Sections 5.03 and 5.04 of the Lease are hereby
stricken and replaced in full by a new Section 5.03 as set forth below and
existing Section 5.05 is renumbered as Section 5.04 and all references to
Section 5.05 shall be to Section 5.04:
5.03 All minimum royalties paid under Sections 4.01 and 4.02
shall be fully recoupable from and against production royalties
provided for and paid under Section 5.01.
2.6 Permits. A new Section 15.07 is hereby added to the Lease
as follows:
15.07 Assignment of Permits Upon Termination. In the event the
Lease is terminated or surrendered for any reason, Owner shall have the
option for a period of ninety (90) days following the effective date of
such termination or surrender, as the case may be, to require the
Company to use its good faith efforts to transfer or cause to be
transferred to Owner any mining permits relating to the Leasehold
Estate. If Owner
<PAGE>
desires to exercise this option, Owner shall notify the Company within
said 90-day period stating which permits it desires to acquire. The
Company shall use its good faith efforts to transfer or cause to be
transferred to Owner said permits; provided, however, that the Company
shall not be obligated to directly or indirectly incur or assume any
liability in connection with the transfer of any such permit, and Owner
shall reimburse the Company for any cost or expense incurred by it in
connection therewith. Owner shall be solely responsible, at its cost
and expense, for securing any and all bonds required for the transfer
of such permits and shall assume, and shall indemnify the Company
against, any and all liabilities and obligations associated with such
permits, including, without limitation, liabilities and obligations
which arose or were incurred prior to the effective date of the
transfer thereof. In the event said permits are not transferred within
six months of the effective date of the termination or surrender of the
Lease, as the case may be, the Company shall have no further obligation
under this provision.
3. Representations and Warranties. Owner hereby represents and warrants
to Company that, as of the date hereof, the Additional Property is free and
clear of all liens and encumbrances, and, except for the Lease as herein
amended, is not subject to any lease, license, agreement or instrument granting
the right to mine or remove coal from the Additional Property to any Third
Party.
4. Entire Agreement. This Amendment constitutes the entire agreement of
Owner and the Company with respect to the subject matter hereof and supercedes
all prior or contemporaneous agreements or understandings regarding the same.
5. Effect of Amendments. Except as herein amended, the Lease shall
remain in full force and effect in accordance with its terms.
6
<PAGE>
IN WITNESS WHEREOF, Owner and Company have executed and delivered this
Amendment No. 1 to Lease Agreement as of the date first above written.
ALLEGANY COAL & LAND
COMPANY, a Maryland corporation
By: /s/ Will Jenkins
----------------------------------
Name: Will Jenkins
Title: President
PATRIOT MINING COMPANY, INC., a
West Virginia corporation
By: /s/ Gerald Peacock
----------------------------------
Name: Gerald Peacock
Title: President
7
<PAGE>
AMENDMENT NO. 2 TO LEASE AGREEMENT
THIS AMENDMENT NO. 2 TO LEASE AGREEMENT ("Amendment No. 2"), is made and
entered into as of the 31st day of August, 1999, by and between ALLEGANY COAL &
LAND COMPANY, a Maryland corporation ("Owner"), and PATRIOT MINING COMPANY,
INC., a West Virginia corporation ("Company");
WHEREAS, Owner and Company entered into that certain Lease Agreement dated
January 1, 1995, pursuant to which Owner leased to Company certain coal property
located in Allegany County, Maryland (the "Original Lease"); and
WHEREAS, Owner and Company entered into that certain Amendment No. 1 to
Lease dated as of June 7, 1999 ("Amendment No. 1"), pursuant to which Owner and
Company added the Additional Property (as defined in Amendment No. 1) to the
Original Lease; and
WHEREAS, Owner and Company desire to further amend the Lease to include
the property identified and described on Exhibit A and shown on Exhibit B (the
"Amendment No. 2 Property"), which Exhibit is attached hereto and made a part
hereof, to the Land and Leasehold Estate under the Original Lease (as such terms
are hereinafter defined).
NOW, THEREFORE, that for and in consideration of the foregoing premises,
the mutual agreements herein contained, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Owner and Company hereby agree as follows:
1. Definitions. The Original Lease, as amended by Amendment No. 1,
is hereinafter referred to as the Lease. Unless otherwise defined herein,
capitalized terms used in this Amendment No. 2 shall have the meaning given to
them in the Lease.
2. Amendments. The Lease is hereby amended as set forth in this Section 2.
2.1 Property. Section 1.04 of the Lease is hereby stricken and
replaced in full by the following:
1.04 "Land" shall mean those tracts of land in Allegany County,
Maryland, which are more particularly described and delineated on Exhibit
"B" attached hereto and made a part hereof, including, without limitation,
the Additional Property and the Amendment No. 2 Property. Owner
represents, warrants, acknowledges and agrees that (i) the tracts
identified on Exhibit A to the Lease as being leased to others (per
Section 13.01 of the Lease) are no longer subject to any such third party
leases and (ii) that said tracts comprise the Amendment No. 2 Property and
are, by this Amendment No. 2, being added to the property subject to the
Lease.
2.2 Production Royalty. Section 5.01 of the Lease is hereby stricken
and replaced in full by the following:
5.01 The Company shall pay to Owner in respect of each ton of coal
produced from the Leasehold Estate the following production royalty:
<PAGE>
5.01.01 With respect to coal mined and removed from
the Redstone seam on the Additional Property
or the Amendment No. 2 Property and sold
separately without commingling with other
coal, $1.35 per ton;
5.01.02 With respect to rations mined and removed
from the Additional Property or the
Amendment No. 2 Property and sold separately
without commingling with other coal, $0.80
per ton;
5.01.03 With respect to coal mined and removed from
the Leasehold Estate (other than the coal
from the Redstone seam or rations sold
separately as provided in 5.01.01 and
5.01.02 above) and sold to the AES Warrior
Run Power Plant, nine percent (9%) of the
Gross Sales Price; or
5.01.04 With respect to coal mined and removed from
the Leasehold Estate (other than coal from
the Redstone seam or rations sold separately
as provided in 5.01.01 and 5.01.02 above)
and sold to any customer other than the AES
Warrior Run Plant, ten percent (10%) of the
Gross Sales Price, but not less than One
Dollar and Fifty Cents ($1.50) per ton.
3. Representations and Warranties. Owner hereby represents and warrants to
Company that, as of the date hereof, the Amendment No. 2 Property is free and
clear of all liens and encumbrances, and, except for the Lease as herein
amended, is not subject to any lease, license, agreement or instrument granting
the right to mine or remove coal from the Additional Property to any Third
Party.
4. Entire Agreement. This Amendment constitutes the entire agreement of
Owner and the Company with respect to the subject matter hereof and supercedes
all prior or contemporaneous agreements or understandings regarding the same.
5. Effect of Amendments. Except as herein amended, the Lease shall remain
in full force and effect in accordance with its terms.
2
<PAGE>
IN WITNESS WHEREOF, Owner and Company have executed and delivered this
Amendment No. 2 to Lease Agreement as of the date first above written.
ALLEGANY COAL & LAND
COMPANY, a Maryland corporation
By: /s/ Will Jenkins
-----------------------------------
Name: Will Jenkins
Title: President
PATRIOT MINING COMPANY, INC., a
West Virginia corporation
By: /s/ Gerald Peacock
-----------------------------------
Name: Gerald Peacock
Title: President
3
<PAGE>
AMENDMENT NO. 3 TO LEASE AGREEMENT
THIS AMENDMENT NO. 3 TO LEASE AGREEMENT (the "Amendment"), is made and
entered into as of the 1 day of June, 2000, by and between ALLEGANY COAL & LAND
COMPANY, a Maryland corporation ("Owner"), and PATRIOT MINING COMPANY, INC., a
West Virginia corporation ("Company");
WHEREAS, Owner and Company entered into that certain Lease Agreement dated
January 1, 1995, pursuant to which Owner leased to Company certain coal property
located in Allegany County, Maryland (the "Lease"); and
WHEREAS, Owner and Company amended the Lease pursuant to Amendment No. 1
to Lease Agreement dated June 7, 1999 ("Amendment No. 1"), and pursuant to
Amendment No. 2 to Lease Agreement dated August 31, 2000 ("Amendment No. 2");
and
WHEREAS, Owner and Company desire to further amend the Lease as herein
provided.
NOW, THEREFORE, that for and in consideration of the foregoing premises,
the mutual agreements herein contained, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Owner and Company hereby agree as follows:
1. Definitions. The term "Lease" shall refer to that certain Lease
Agreement dated January 1, 1995, between Owner and Company as amended by
Amendment No. 1 and Amendment No. 2. Unless otherwise defined herein,
capitalized terms used in this Amendment shall have the meaning given to them in
the Lease.
2. Amendment. Section 1.03 of the Lease is hereby stricken and replaced in
full by the following:
1.03 "Gross Sales Price" shall mean (i) with respect to coal mined,
removed and sold from the Additional Property or the Amendment No. 2
Property, the gross sales price f.o.b. the Tipple received for such coal
or (ii) with respect to coal mined, removed and sold from the Leasehold
Estate (other than from the Additional Property or the Amendment No. 2
Property), the gross sales price paid by the first purchaser who is not an
Affiliate of the Company less the reasonable costs of transportation. The
gross sales price under subsection (i) above shall be effective until June
1, 2001, unless Owner agrees to an extension thereof. In the event Owner
does not agree to extend the expiration date of the gross selling price
under subsection (i) above, this Section 1.03 shall be deemed to be
amended by deleting subsection (i) above.
3. Entire Agreement. This Amendment constitutes the entire agreement of
Owner and the Company with respect to the subject matter hereof and supercedes
all prior or contemporaneous agreements or understandings regarding the same.
4. Effect of Amendments. Except as herein amended, the Lease shall remain
in full force and effect in accordance with its terms.
<PAGE>
IN WITNESS WHEREOF, Owner and Company have executed and delivered this
Amendment No. 3 to Lease Agreement as of the date first above written.
ALLEGANY COAL & LAND
COMPANY, a Maryland corporation
By: Allegany Coal and Land Co.
----------------------------------
Name: /s/ Will Jenkins
--------------------------------
Title: President
PATRIOT MINING COMPANY, INC., a
West Virginia corporation
By: /s/ B. Judd Hartman
----------------------------------
Name: B. Judd Hartman
--------------------------------
Title: Secretary
2
<PAGE>
AMENDMENT NO. 4 TO LEASE AGREEMENT
THIS AMENDMENT NO. 4 TO LEASE AGREEMENT (the "Amendment"), is made and
entered into as of the 1 day of June, 2001, by and between ALLEGANY COAL & LAND
COMPANY, a Maryland corporation ("Owner"), and PATRIOT MINING COMPANY, INC., a
West Virginia corporation ("Company");
WHEREAS, Owner and Company entered into that certain Lease Agreement dated
January 1, 1995, pursuant to which Owner leased to Company certain coal property
located in Allegany County, Maryland (the "Lease"); and
WHEREAS, Owner and Company amended the Lease pursuant to Amendment No. 1
to Lease Agreement dated June 7, 1999 ("Amendment No. 1"), pursuant to Amendment
No. 2 to Lease Agreement dated August 31, 2000 ("Amendment No. 2"), and pursuant
to Amendment No. 3 to Lease Agreement dated June 1, 2000 ("Amendment No. 3");
and
WHEREAS, Owner and Company desire to further amend the Lease as herein
provided.
NOW, THEREFORE, that for and in consideration of the foregoing premises,
the mutual agreements herein contained, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Owner and Company hereby agree as follows:
1. Definitions. The term "Lease" shall refer to that certain Lease
Agreement dated January 1, 1995, between Owner and Company as amended by
Amendment No. 1, Amendment No. 2, and Amendment No. 3. Unless otherwise defined
herein, capitalized terms used in this Amendment shall have the meaning given to
them in the Lease.
2. Amendment. Section 1.03 of the Lease is hereby stricken and replaced in
full by the following:
1.03 "Gross Sales Price" shall mean (i) with respect to coal mined,
removed and sold from the Additional Property or the Amendment No. 2
Property, the gross sales price f.o.b. the Tipple received for such coal
or (ii) with respect to coal mined, removed and sold from the Leasehold
Estate (other than from the Additional Property or the Amendment No. 2
Property), the gross sales price paid by the first purchaser who is not an
Affiliate of the Company less the reasonable costs of transportation. The
gross sales price under subsection (i) above shall be effective until
December 31, 2002, unless Owner agrees to an extension thereof. In the
event Owner does not agree to extend the expiration date of the gross
selling price under subsection (i) above, this Section 1.03 shall be
deemed to be amended by deleting subsection (i) above.
3. Entire Agreement. This Amendment constitutes the entire agreement of
Owner and the Company with respect to the subject matter hereof and supercedes
all prior or contemporaneous agreements or understandings regarding the same.
4. Effect of Amendments. Except as herein amended, the Lease shall remain
in full force and effect in accordance with its terms.
<PAGE>
IN WITNESS WHEREOF, Owner and Company have executed and delivered this
Amendment No. 4 to Lease Agreement as of the date first above written.
ALLEGANY COAL & LAND
COMPANY, a Maryland corporation
By: /s/ Will Jenkins
----------------------------------
Name: Will Jenkins
Title: President
PATRIOT MINING COMPANY, INC., a
West Virginia corporation
By: /s/ Gerald Peacock
----------------------------------
Name: Gerald Peacock
Title: President
2
<PAGE>
ALLEGANY COAL AND LAND COMPANY
PO Box 410 - Depot Road
FROSTBURG, MARYLAND 21532
Telephone: (301) 689-8895
Facsimile: (301) 689-0113
May 6, 2002
Anker Energy Corporation
2708 Cranberry Square
Morgantown, WV 26505
To Whom It Concerns:
Due to your default under the Lease Agreement effective January 1, 1995, by and
between Allegany Coal and Land Company and Patriot Mining Company, Inc. and the
Lease Agreement effective July 1, 1999, by and between Allegany Coal and Land
Company and Patriot Mining Company, Inc., we are hereby terminating said leases
immediately.
Sincerely,
ALLEGANY COAL AND LAND COMPANY
/s/ Will Jenkins
Will Jenkins
President
CC: W. Stevens Hidey, Esq.
CC: United Energy Corporation
CERTIFIED / COURIER / PRIORITY / FAX
Exhibit B
<PAGE>
ANKER ENERGY CORPORATION
2708 CRANBERRY SQUARE - MORGANTOWN, WV 26508-9286 - 304-594-1616
May 8, 2002
Mr. Will Jenkins
Allegany Coal & Land Company
P.O. Box 410
Frostburg, MD 21532
RE: Lease from Allegany Coal and Land Company to Patriot Mining Company, Inc.
Dated January 1, 1995, as amended
Dear Will:
This letter is intended to serve as a memorandum of our verbal agreement of this
date.
(1) Patriot ("PMC") shall pay unto Allegany Coal and Land Company ("ACLC") via
wire transfer all amounts which are past due of this date under the
captioned lease and that certain lease dated July 1, 2002, which amounts
are set forth on Exhibit 1, attached to and made a party of this letter
agreement.
(2) ACLC does hereby rescind the termination notice submitted to PMC by letter
dated May 6, 2002, a copy of which is designated Exhibit B, attached to
and made a part of this letter agreement.
(3) ACLC and PMC hereby agree that although the captioned lease may be in
default, ACLC waives termination for PMC's alleged use of Grace Period
days exceeding sixty (60) prior to this date.
(4) ACLC shall not terminate the captioned lease for late payment thereunder,
unless any such payment hereafter due from PMC to ACLC is made more than
five (5) days after it is due. However, effective as of this date, PMC
will be in default if cumulative default days exceed thirty (30) days in
any six (6) month period.
(5) PMC shall continue to pay minimum royalty payments directly to ACLC. PMC
shall instruct United Energy Company, for the remainder of the sublease
term or any extension thereof, to (i) make tonnage or production royalty
payment directly to ACLC, and (ii) withhold from production royalties due
ACLC and to pay PMC any minimum royalty previously paid by PMC for the
reporting period.
ADMINISTRATION / SALES FAX 304-594-3695
ACCOUNTING / ENGINEERING / HUMAN RESOURCES FAX 304-594-3708
<PAGE>
Allegany Coal & Land
Letter Agreement
May 8, 2002
Page 2
(6) Except as herein amended, the captioned lease shall remain in full force
and effect in accordance with its terms.
If this letter correctly reflects our verbal agreement, please so indicate by
signing in the space provided below.
Sincerely,
/s/ Fred C. Kunzelman
Fred C. Kunzelman
FCK: nrh
Allegany Coal and Land Company
By: /s/ Will Jenkins
----------------------------------
Its: President
<PAGE>
Coal Yard Rental Payment History
Rental Check Check Date
Month Number Date Mailed
January 23368 12/20/2001 12/31/2001
February 23651 1/25/2002 1/29/2002
March 23912 3/8/2002 3/8/2002
April Rental Included in the wire
May Rental Still Due
Payments made as part of wire transfer of 5/3/02
April Coat Yard Rental $ 500.00
Additional Royalties for Feb. Error 3,888.80
March Tonnage Royalties 21,765.83
-------------
$ 26,154.63
Amount wired $ 24,154.63
Money due caused by addition error $ 2,000.00
Monies currently due to Allegany
Addition Error in Wire $ 2,000.00
April Advance Minimum 25,000.00
May Advance Minimum 25,000.00
May Coal Yard Rental 500.00
-------------
$ 52,500.00
Exhibit A