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THIS LEASE, Made as of January 1, 1997, between POCAHONTAS
DEVELOPMENT CORPORATION, a corporation of Kentucky, Lessor, and SUNNY RIDGE
ENTERPRISES, INC., a corporation of Kentucky, Lessee;
W I T N E S S E T H:
IN consideration of the sum of Ten Dollars ($10.00) cash, receipt of
which acknowledged, and the performance and observance of the terms and
provisions hereinafter set forth to be performed and observed by Lessee, and
reserving as rent the royalties, rentals and all other payments hereinafter
provided for, Lessor hereby leases to Lessee, for the period of ten (10) years
from the date hereof through December 31, 2006, subject to termination or
extension for additional ten (10) year periods until all the coal which can be
economically mined and removed has been mined and removed and the reclamation
thereof has been finally approved by the state and/or federal agency or agencies
which now have or shall hereafter have jurisdiction or control of such mining
operations, and all the bonds therefor have been fully released, all as
hereinafter provided in ARTICLE XX hereof, the sole and exclusive right of
mining and removing various seams of coal within nine (9) parcels of land,
containing in the aggregate 7,693.48 acres, more or less, situated in Pike
County, Kentucky, generally on the waters of Pond Creek and Left and Right Forks
of Blackberry Creek of Tug Fork, and being more fully shown on colored map
attached hereto and made a part hereof and marked in the lower right-hand corner
thereof: "Pocahontas Development Corporation, Bluefield, West Virginia, No.
2194-G, Nov. 6, 1996, GBM."
Said 7,693.48 acres, more or less, are made up of different tracts
or parcels of land in which Pocahontas Development Corporation owns the fee, the
minerals or the coal only,
<PAGE>
and which for convenience of designation are as follows (the areas given being
by estimation only and are not to be construed as a warranty of acreage):
(a) The right to mine the lower bench of the Fireclay (Chilton) Seam
of coal and all seams of coal above the Fireclay within the following described
Parcel No. 1:
PARCEL NO. 1 - A parcel of land shown by red border on said attached
map, being situated in Pike County, Kentucky, on the waters of Pond Creek, and
Left and Right Forks of Blackberry Creek, tributaries of Tug Fork, containing
4,355.78 acres, more or less:
TABLE OF AREA - PARCEL NO. 1
PIKE COUNTY, KENTUCKY
Tract or Parcel Area in Acres
out of which area is taken Fee Min Coal Total
------------------------------------ ------- -------- -------- ---------
Pt. Tract No. 73 - G. Ball - 14.16 - 14.16
Tract No. 74 - I. Runyon - - 30.13 30.13
Pt. Tract No. 75 - John May - 51.05 - 51.05
Pt. Tract No. 76 - William Whitt - 28.42 - 28.42
Pt. Tract No. 77 - James H. May - 15.97 - 15.97
Pt. Tract No. 78 - Hudson Varney - 76.75 - 76.75
Tract No. 79 - W. Ball - 38.80 - 38.80
Pt. Tract No. 80 - M. Ball - - 54.32 54.32
Tract No. 81 - J. Ball - 37.95 - 37.95
Tract No. 82 - James Ball - 298.12 - 298.12
Tract No. 83 - G. Ball - 46.85 - 46.85
Tract No. 84 - John C. Ball - 100.50 - 100.50
Tract No. 85 - James Ball - 43.10 - 43.10
Pt. Tract No. 86 - John Runyon 72.22 1.07 - 73.29
Pt. Tract No. 87 - John Runyon - 69.72 - 69.72
Pt. Tract No. 93 - W. K. Church 22.55 1.38 - 23.93
Pt. Tract No. 94 - W. A. Daugherty 69.10 1.03 - 70.13
Pt. Tract No. 95 - W. A. Daugherty 24.38 1.00 - 25.38
Pt. Tract No. 96 - Asa A. May 7.58 - - 7.58
Pt. Tract No. 97 - G. F. Daugherty 7.20 - - 7.20
Pt. Tract No. 98 - John W. Runyon 137.33 3.89 - 141.22
Pt. Tract No. 100 - Joseph A. Runyon 179.83 16.42 - 196.25
Pt. Tract No. 101 - L. D. Stump - 300.72 - 300.72
Pt. Tract No. 146 - T. Hatfield - 63.18 - 63.18
Pt. Tract No. 147 - Ulysses Hatfield - 25.88 - 25.88
Pt. Tract No. 149 - Ulysses Hatfield - 206.19 - 206.19
Pt. Tract No. 150 - Elias Hatfield - 0.70 - 0.70
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<PAGE>
Pt. Tract No. 151 - William Smith 19.59 6.35 - 25.94
Pt. Tract No. 152 - Absolam Smith - 0.27 - 0.27
Pt. Tract No. 153 - C. Smith 0.52 - 61.70 62.22
Pt. Tract No. 154 - H. Smith - 68.70 - 68.70
Pt. Tract No. 155 - S. Smith - 34.80 - 34.80
Pt. Tract No. 156 - S. Smith - 24.45 - 24.45
Pt. Tract No. 157 - Shade Smith - 142.60 - 142.60
Tract No. 158 - Andy Smith - 106.10 - 106.10
Tract No. 159 - W. Smith - 57.75 - 57.75
Tract No. 160 - W. Smith - 44.25 - 44.25
Tract No. 161 - William Smith - 121.00 - 121.00
Pt. Tract No. 162 - Wallace J. Williamson - 785.85 - 785.85
Pt. Tract No. 169 - Ephriam Hatfield 63.33 1.58 - 64.91
Pt. Tract No. 170 - J. P. Hatfield 14.16 14.73 - 28.89
Pt. Tract No. 171 - Jacob Hatfield 0.15 47.43 - 47.58
Tract No. 172 - Martha Scott - 41.40 - 41.40
Tract No. 173 - J. Hatfield - 26.90 - 26.90
Pt. Tract No. 174 - James Hatfield 184.41 0.10 - 184.51
Pt. Tract No. 174-B - S. Sullivan - 1.24 - 1.24
Pt. Tract No. 175 - Thomas Hatfield 105.80 - - 105.80
Pt. Tract No. 176 - W. J. Williamson 149.56 - - 149.56
Pt. Tract No. 183 - J. Dotson 27.20 - - 27.20
Tract No. 184 - T. M. Dotson 26.35 - - 26.25
Tract No. 185 - T. M. Dotson 25.45 - - 25.45
Tract No. 186 - Ferrel Coleman Heirs 91.64 - - 91.64
Pt. Tract J - Rouge Steel - - 8.47 8.47
Pt. Tract Q - Rouge Steel - - 4.46 4.46
------- -------- ------ --------
TOTAL - PARCEL NO. 1 1228.35 2,968.35 159.08 4,355.78
(b) The right to mine the Lower Alma Seam of coal and all seams
above the Lower Alma Seam within the following described Parcel No. 2:
PARCEL NO. 2 - A parcel of land shown by purple border on said
attached map, being situated in Pike County, Kentucky, on the waters of Left and
Right Forks of Blackberry Creek of Tug Fork, containing 985.74 acres, more or
less:
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<PAGE>
TABLE OF AREA
PIKE COUNTY, KENTUCKY
Tract or Parcel Area in Acres
out of which area is taken Fee Min Total
----------------------------------- ------ ------ ------
Tr. No. 142 - Aly Ferrell 1.73 36.27 38.00
Pt. Tr. No. 145 - Tolbert Hatfield 75.85 203.82 279.67
Pt. Tr. No. 152 - Absolam Smith 22.08 - 22.08
Pt. Tr. No. 153 - Curtis Smith - 7.83* 7.83
Pt. Tr. No. 162 - W. J. Williamson - 158.54 158.54
Pt. Tr. No. 163 - Joseph Hatfield 48.39 10.80 59.19
Tr. No. 165 - J. Hatfield 70.26 - 70.26
Pt. Tr. No. 166 - Thompson Hatfield 64.07 - 64.07
Pt. Tr. No. 169 - Ephriam Hatfield 6.83 18.66 25.49
Pt. Tr. No. 170 - J. P. Hatfield 4.00 11.64 15.64
Pt. Tr. No. 171 - Jacob Hatfield - 10.22 10.22
Pt. Tr. No. 176 - W. J. Williamson 165.36 30.94 196.30
Tr. No. 187 - Leah Coleman 38.45 - 38.45
------ ------ ------
TOTAL - PARCEL NO. 2 497.02 488.72 985.74
* Pocahontas Development Corporation does not own the oil and gas.
(c) The right to mine the Lower Alma Seam of coal and all seams
above the Lower Alma Seam except the Upper Alma Seam in the following described
Parcel No. 3:
PARCEL NO. 3 - A parcel of land shown by blue border on said
attached map, being situated in Pike County, Kentucky, on the waters of Left and
Right Forks of Blackberry Creek, containing 478.01 acres, more or less:
TABLE OF AREA - PARCEL NO. 3
PIKE COUNTY, KENTUCKY
Tract or Parcel Area in Acres
out of which area is taken Fee Min Total
------------------------------------- ------ ------ ------
Pt. Tract No. 145 - Tolbert Hatfield 18.15 - 18.15
Pt. Tract No. 152 - A. Smith 2.41 - 2.41
Pt. Tract No. 162 - W. J. Williamson - 171.67 171.67
Pt. Tract No. 165 - J. Hatfield 18.69 - 18.69
Pt. Tract No. 166 - Thompson Hatfield 1.40 - 1.40
Pt. Tract No. 169 - Ephriam Hatfield 0.76 1.72 2.48
Pt. Tract No. 170 - J. P. Hatfield 9.56 23.94 33.50
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<PAGE>
Pt. Tract No. 171 - Jacob Hatfield 0.15 25.15 25.30
Pt. Tract No. 176 - W. J. Williamson 95.32 15.64 110.96
Pt. Tract No. 187 - Leah Coleman 93.45 - 93.45
------ ------ ------
TOTAL - PARCEL NO. 3 239.74 238.27 478.01
(d) The right to mine the Williamson Seam of coal only within the
following described Parcel No. 4, however, that part of Parcel No. 4 shown
cross-hatched in green is restricted to contour mining method only:
PARCEL NO. 4 - A parcel of land shown by dark green border on said
attached map, being situated in Pike County, Kentucky, on the waters of Left
Fork of Blackberry Creek and Netley Fork, Oldhouse Branch and Seng Camp Branch
of same, containing 988.79 acres, more or less:
TABLE OF AREA - PARCEL NO. 4
PIKE COUNTY, KENTUCKY
Tract or Parcel Area in Acres
out of which area is taken Fee Min Coal Total
----------------------------------------- ------ ------ ------ ------
Pt. Tract No. 163 - J. Hatfield 1.98 - - 1.98
Pt. Tract No. 164 - J. Hatfield 65.32 - - 65.32
Pt. Tract No. 165 - J. Hatfield 0.14 - - 0.14
Pt. Tract No. 166 - Thompson Hatfield 59.52 50.73 - 110.25
Pt. Tract No. 167 - Martha Scott 97.90 31.20 - 129.10
Pt. Tract No. 167 - Martha Scott 9.00* - - 9.00
Pt. Tract No. 168 - Thompson Hatfield 108.07 - - 108.07
Pt. Tract No. 168 - Thompson Hatfield 21.00* - - 21.00
Pt. Tract No. 169 - Ephriam Hatfield 37.09 - - 37.09
Pt. Tract No. 176 - Wallace J. Williamson 386.84 - - 386.84
Pt. Tract No. 176 - Wallace J. Williamson 111.29* - - 111.29
Pt. Tract "K" - Rouge Steel - - 8.71** 8.7l
------ ------ ------ ------
TOTAL - PARCEL NO. 4 898.15 81.93 8.71 988.79
* Pocahontas Development Corporation owns the fee, less the Pond Creek Seam of
coal
** Pocahontas Development Corporation owns the coal, less the Pond Creek Seam of
coal
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<PAGE>
(e) The right to mine the Lower Alma Seam of coal with a 300-foot
maximum depth of penetration by highwall miner and a maximum highwall height of
50 feet; the right to mine the Upper Alma Seam of coal, by contour mining
methods only, with a maximum highwall height of 100 feet; and the right to mine
the Williamson Seam of coal within the following described Parcel No. 5:
PARCEL NO. 5 - A parcel of land being shown by brown border on said
attached map, being situated in Pike County, Kentucky, on the waters of Netley
Fork of Left Fork of Blackberry Creek, containing 64.13 acres, more or less:
TABLE OF AREA - PARCEL NO. 5
IN PIKE COUNTY, KENTUCKY
Tract or Parcel Area in Acres
out of which area is taken Fee Min Total
------------------------------------ ----- --- -----
Pt. Tract No. 164 - J. Hatfield 17.63 - 17.63
Pt. Tract No. 176 - W. J. Williamson 46.50 - 46.50
----- --- -----
TOTAL - PARCEL NO. 5 64.13 - 64.13
(f) The right to mine the Lower Alma, Upper Alma, the Lower Cedar
Grove and the Upper Cedar Grove Seams of coal, and also the right to mine the
Williamson Seam of coal, subject to the following restrictions, within the
following described Parcel No. 6:
(i) The right to mine the Williamson Seam is restricted by no auger
mining in the area indicated in red cross-hatch on said attached map;
(ii) The right to mine the Williamson Seam of coal is restricted to
contour mining methods only with a maximum highwall height of 100 feet in the
area indicated in green cross-hatch on said attached map:
PARCEL NO. 6 - A parcel of land shown by orange border on said
attached map, being situated in Pike County, Kentucky, on the waters of
Blackberry Creek and Left Fork
-6-
<PAGE>
and Big Blue Spring Branch of same, and on Netley Fork of said Left Fork,
containing 443.56 acres, more or less:
TABLE OF AREA - PARCEL NO. 6
IN PIKE COUNTY, KENTUCKY
Tract or Parcel Area in Acres
out of which area is taken Fee Min Total
------------------------------------ ------ ------ ------
Pt. Tract No. 136 - Floyd Hatfield 47.34 - 47.34
Pt. Tract No. 137 - E. Scott - 59.14 59.14
Pt. Tract No. 139 - Asa McCoy 10.16 77.70 87.86
Pt. Tract No. 164 - J. Hatfield 15.60 - 15.60
Pt. Tract No. 176 - W. J. Williamson 215.44 18.18 233.62
------ ------ ------
TOTAL - PARCEL NO. 6 288.54 155.02 443.56
(g) The right to mine the Lower Alma, Upper Alma, the Lower Cedar
Grove and the Upper Cedar Grove Seams of coal within the following Parcel No. 7:
PARCEL NO. 7 - A parcel of land shown by yellow border on said
attached map, being situated in Pike County, Kentucky, on the waters of Big Blue
Spring Branch of Blackberry Creek and Netley Fork of Left Fork of said
Blackberry Creek, containing 32.24 acres, more or less:
TABLE OF AREA - PARCEL NO. 7
PIKE COUNTY, KENTUCKY
Tract or Parcel Area in Acres
out of which area is taken Fee Min Total
------------------------------------ ----- ----- -----
Pt. Tract No. 139 - Asa McCoy - 14.54 14.54
Pt. Tract No. 176 - W. J. Williamson 17.70 - 17.70
----- ----- -----
TOTAL - PARCEL NO. 7 17.70 14.54 32.24
(h) The right to mine the Lower Alma, Upper Alma, Lower Cedar Grove,
Upper Cedar Grove and Williamson Seams of coal, subject to the following
restrictions, within the following Parcel No. 8:
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<PAGE>
(i) The right to mine the Lower Alma, Upper Alma, Lower Cedar Grove
and the Upper Cedar Grove Seams of coal within that part of Parcel No. 8 shown
cross-hatched in dark blue on said attached map is restricted by contour mining
method only with a maximum highwall height of 100 feet and by auger mining with
a maximum depth of 300 feet; and
(ii) The right to mine the Williamson Seam of coal is restricted by
contour mining method only with a maximum highwall height of 100 feet:
PARCEL NO. 8 - A parcel of land shown by dark blue border on said
attached map, being situated in Pike County, Kentucky, on the waters of Big Blue
Spring Branch and Left Fork of same, containing 291.49 acres, more or less:
TABLE OF AREA - PARCEL NO. 8
PIKE COUNTY, KENTUCKY
Tract or Parcel Area in Acres
out of which area is taken Fee Min Total
---------------------------------- ------ ------ ------
Pt. Tract No. 133 - Elias Hatfield 0.39 - 0.39
Pt. Tract No. 135 - J. B. Slater 0.41 133.15 133.56
Pt. Tract No. 136 - Floyd Hatfield 20.22 - 20.22
Pt. Tract No. 137 - E. Scott 4.79 14.68 19.47
Pt. Tract No. 139 - Asa McCoy 7.20 110.65 117.85
----- ------ ------
TOTAL - PARCEL NO. 8 33.01 258.48 291.49
(i) The right to mine the Lower Alma, Upper Alma, Lower Cedar Grove
and the Upper Cedar Grove Seams of coal within the following Parcel No. 9:
PARCEL NO. 9 - A parcel of land shown by yellow border on said
attached map, being situated in Pike County, Kentucky, on the waters of Big Blue
Spring Branch and Left Fork of same, containing 53.74 acres, more or less:
-8-
<PAGE>
TABLE OF AREA - PARCEL NO. 9
PIKE COUNTY, KENTUCKY
Tract or Parcel Area in Acres
out of which area is taken Fee Min Total
---------------------------------- ----- ----- -----
Pt. Tract No. 135 - J. B. Slater - 20.95 20.95
Pt. Tract No. 136 - Floyd Hatfield 0.74 - 0.74
Pt. Tract No. 137 - E. Scott 1.16 3.64 4.80
Pt. Tract No. 139 - Asa McCoy 7.31 19.94 27.25
---- ----- -----
TOTAL - PARCEL NO. 9 9.21 44.53 53.74
RECAPITULATION
Area in acres
-------------
PARCEL NO. 1 - Lower bench of the Fireclay (Chilton) Seam and all seams
above 4,355.78
PARCEL NO. 2 - Lower Alma Seam and all seams above 985.74
PARCEL NO. 3 - Lower Alma Seam and all seams above except the Upper
Alma Seam 478.01
PARCEL NO. 4 - Williamson Seam only 988.79
PARCEL NO. 5 - * Lower Alma, Upper Alma and the Williamson Seams 64.13
PARCEL NO. 6 - * Lower Alma, Upper Alma, Lower Cedar Grove, Upper
Cedar Grove and the Williamson Seams 443.56
PARCEL NO. 7 - Lower Alma, Upper Alma, Lower Cedar Grove and the
Upper Cedar Grove Seams 32.24
PARCEL NO. 8 - * Lower Alma, Upper Alma, Lower Cedar Grove, Upper
Cedar Grove and the Williamson Seams 291.49
PARCEL NO. 9 - Lower Alma, Upper Alma, Lower Cedar Grove and Upper
Cedar Grove Seams 53.74
--------
GRAND TOTAL 7,693.48
* Parcels in which there are certain restrictive mining rights.
SUBJECT, HOWEVER TO RIGHTS OF:
(a) Colonial Coal Company of the right to mine all seams of coal
above the Williamson Seam of coal within Parcel Nos. 4 and 5 included herein
under lease dated March 1, 1987, from Rouge Steel Company, predecessor in title
of Pocahontas Development Corporation;
-9-
<PAGE>
(b) Tug Valley Land Company, Inc., under lease dated August 1, 1989,
from Pocahontas Development Corporation, of the right to mine: (i) all seams of
coal above the Williamson Seam within Parcel No. 8 included herein; (ii) the
Williamson Seam of coal and all seams of coal above the Williamson Seam within
Parcel No. 9 included herein; and (iii) the Pond Creek Seam of coal within said
Parcel Nos. 8 and 9 included herein;
(c) Lauren Land Company under the following:
(1) Amended and restated lease dated February 22, 1993,
recorded in the County Court Clerk's Office in Pike County,
Kentucky, in Book No. 722, page 558, from Pocahontas Development
Corporation, of the right to mine: (i) the Upper Alma, Lower Cedar
Grove, Upper Cedar Grove and the Williamson Seams of coal within
Parcel No. 1 included herein; (ii) the Upper Alma, the Lower Cedar
Grove and the Upper Cedar Grove Seams within Parcel No. 4 included
herein; (iii) the Lower Cedar Grove and the upper Cedar Grove Seams
within Parcel No. 5 included herein; (iv) the lower bench of the
Fireclay (Chilton) Seam and all seams above the Fireclay Seam of
coal within Parcel No. 6 included herein; and (v) the Williamson
Seam of coal and seams above the Williamson Seam within Parcel No. 7
included herein; and
(2) Supplemental lease and agreement dated April 20, 1995,
from Pocahontas Development Corporation, of the right to mine the
Upper Alma Seam of coal only within Parcel No. 3 included herein.
(d) Stone Mining Company of the right to mine the Lower Alma Seam of
coal only within Parcel Nos. 1 and 4 included herein, under amended and restated
lease dated,
-10-
<PAGE>
February 22, 1993, recorded in aforesaid Clerk's Office in Pike County,
Kentucky, in Book 722, page 546, from Pocahontas Development Corporation;
(e) McAndrews Development, Ltd. of the right to mine certain areas
of the Pond Creek Seam of coal only within part of Parcel Nos. 1 and 2 included
herein, under lease dated August 1, 1995, from Pocahontas Development
Corporation;
(f) Peter Creek Development Company, as owner of a certain area of
Pond Creek Seam only within part of Parcel No. 4 included herein;
(g) Ashland Exploration, Inc., successor in title to Columbian Fuel
Corporation, under oil and gas lease dated December 15, 1941, recorded in
aforesaid Clerk's Office in Book No. 222, page 500, from Ford Motor Company,
remote predecessor in title of Pocahontas Development Corporation;
(h) KV Oil & Gas, Inc. within part of Parcel No. 1 included herein,
under oil and gas lease dated May 3, 1985, recorded in aforesaid Clerk's Office
in Book No. 586, page 263, from said Rouge Steel Company;
(i) Kentucky Power Company for rights-of-way for electric power
transmission lines and appurtenances as now located and in use;
(j) Commonwealth of Kentucky for the use and benefit of the
Transportation Cabinet, and the public for right-of-way for public roads as may
now be located and in use;
(k) Others in any and all transmission lines, pipelines,
rights-of-way, easements or other restrictions as may or may not appear of
record; and
(l) The public, United States of America, Commonwealth of Kentucky,
riparian owners and others, if any, in and to the beds and streams of all
waterways which may be included within the boundaries of the aforesaid 7,693.48
acres, more or less.
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<PAGE>
THE RIGHTS HEREIN LEASED are limited to such as Lessor possesses and
has the lawful right to lease and to such as Lessor owns under the deeds
covering said properties or said coal and appurtenant rights, and it is agreed
that Lessor does not warrant its title to the leased properties or any portion
thereof. However, upon the assertion of an adverse claim to any portion of the
leased properties, Lessor shall render all assistance possible to Lessee in
defense against such adverse claim. It is further agreed that, if a court decree
(after exhaustion of appeals) or by agreement of the parties hereto it is
determined that the adverse claim is valid and such adverse claim is of such
nature that Lessor does not have sufficient title to such portion of said leased
properties to permit Lessee's mining of the coal therein, then, to the extent
the Lessee has paid royalties to Lessor on coal mined in such portion, such
royalties shall be refunded to Lessee.
Lessee shall not cut or remove any timber from the properties above
described and shall notify Lessor at least one hundred twenty (120) days prior
to erecting any improvements or making way for refuse disposal and before
commencing mining operations at any location thereon, in order that merchantable
timber that would otherwise be destroyed in erecting such improvements, may be
cut and removed by Lessor, its agent or designee in advance.
EXCEPTING AND RESERVING, HOWEVER, from this lease, and to the Lessor
all seams of coal other than those herein leased and the entire ownership of the
properties herein described, and all of the oil, gas and other minerals and
mineral substances, timber, and other products of every kind and description
therein and thereon, together with the right to mine, remove and take away the
entire amount and body thereof, for all purposes other than those for which this
lease is made; PROVIDED, HOWEVER, that exercise of the ownership and rights
-12-
<PAGE>
so excepted and reserved shall not unreasonably interfere with the requirements,
convenience and safety of operations of Lessee.
Lessor and Lessee recognize the importance of environmental
protection and the necessity of proper ecological balance, and, to further these
objectives, Lessee agrees to conduct all operations hereunder with utmost
caution and in compliance in every respect with all applicable laws of the
Commonwealth of Kentucky and the United States of America now existing or
hereafter enacted, and all rules and regulations promulgated thereunder, to
preserve conditions as nearly as possible as they presently exist by altering
the topography and interfering with or impeding watercourses as little as
possible.
IT IS UNDERSTOOD, however, that the properties included in this
lease are in an area committed to the mining and removal of coal and other
minerals and that coal mining operations and other enterprises have been and are
now being conducted by a lessee or lessees of Lessor in, upon and under the
surface of the properties above described and in the general vicinity thereof,
and, as one of the considerations for this lease, Lessee shall indemnify and
save harmless Lessor, its officers, agents and employees, and its successors and
assigns, and its or their lessees, from all claims and damages or other relief,
caused by or resulting from, directly or indirectly, any unnatural condition
upon or under said properties and/or adjacent lands of Lessor as a result of
such mining or other activities. IT IS A CONDITION HEREOF, that Lessee, its
successors and assigns shall have no claim or right of recovery against Lessor,
its successors and/or assigns, and its or their lessees, for any such damage. It
is the intention hereof that said properties are hereby leased to Lessee, AS IS,
IN THEIR PRESENT CONDITION and subject to the rights of others as hereinabove
set forth.
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<PAGE>
THIS LEASE is subject to the following terms and provisions which
Lessee covenants with Lessor to perform and observe, viz:
ARTICLE I
COVENANT TO DEVELOP; PERMITTING
Section 1.1. Development. Lessee shall at all times diligently and
energetically open, develop and maintain operations within the leased properties
in order that so long as fair prices are obtainable its capacity for mining,
preparing and shipping coal shall be sufficient to meet the demands and
requirements of the market to the extent that the same can reasonably be done
hereunder; and Lessee shall report promptly in writing to Lessor any suspension
of operations, reasons therefor and expected duration thereof.
Section 1.2. Permitting. Lessee agrees that upon execution of this
lease, it will, in its name and at its expense, promptly commence the necessary
procedures with the appropriate state and/or federal agencies having
jurisdiction of such mining operations and obtain and maintain in effect the
requisite permit or permits for the conduct of such mining operations. Lessee
also agrees to continue with subsequent required permitting procedures with said
state and/or federal agencies to the end that the mining operations contemplated
under this lease shall be continuous, insofar as possible under applicable laws,
and the regulations promulgated thereunder, until all the coal herein leased,
which can be mined and removed by such mining methods as Lessor may approve, has
been mined and removed. In the event this lease shall be terminated or canceled
for any reason prior to completion of operations hereunder and Lessee shall have
obtained the requisite permit or permits for the conduct of such mining
operations from such agencies, then Lessee hereby covenants and agrees that it
shall promptly, upon request of Lessor, assign and/or otherwise transfer said
permit or permits, pursuant to K.R.S. 350.010, et seq., to such other party or
parties as Lessor may designate.
-14-
<PAGE>
ARTICLE II
PRODUCTION ROYALTY
Section 2.1. Amount of Royalty. Lessee shall pay to Lessor as rent a
royalty of six percent (6%) of the average gross selling price per net ton of
2,000 pounds, as hereinafter defined, for coal mined hereunder, calculated and
reported on a monthly basis, except as follows:
(a) Lessee shall pay to Lessor as rent a royalty of eight percent
(8%) of the average gross selling price per net ton of 2,000 pounds for coal
mined within Parcel No. 1 herein;
(b) Lessee shall pay to Lessor as rent a royalty of four percent
(4%) of the average gross selling price per net ton of 2,000 pounds for coal
mined from the Lower Alma Seam of coal and all seams of coal above the Lower
Alma Seam, except the Williamson Seam of coal, within Parcel No. 2; and
(c) Lessee shall pay to Lessor as rent a royalty of four percent
(4%) of the average gross selling price per net ton of 2,000 pounds for coal
mined from the Lower Alma Seam of coal and all seams of coal above the Lower
Alma Seam, except the Upper Alma Seam and Williamson Seam, within Parcel No. 3.
Section 2.2. Reporting of Quantity of Coal Mined. Lessee shall, on
or before the twenty-fifth (25th) day of each calendar month, furnish to Lessor
a written report, certified as to correctness by such agent as Lessee may
designate having personal knowledge of the facts, showing the quantity of coal
mined hereunder during the immediately preceding calendar month, with the
specific mines and seams designated, using as a basis railroad weights of all
coal shipped by railroad and ascertaining the quantity of all other coal mined
hereunder in a manner satisfactory to the President of Lessor, or such person or
persons as the President shall designate (hereinafter "President"); and Lessee
shall comply with any further rules and regulations for the
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accurate ascertainment and report of the quantity of coal mined hereunder and
the selling price thereof that may reasonably be prescribed by said President.
In the event Lessee shall mix coal produced hereunder with other
coal prior to shipment, Lessee shall comply with such reasonable rules and
regulations as the President of Lessor shall from time to time prescribe for the
purpose of ascertaining with reasonable accuracy the quantity of coal produced
hereunder.
Section 2.3. Date of Payment of Royalty; Interest. On or before the
twenty-fifth (25th) day of each calendar month, Lessee shall pay Lessor for the
coal mined hereunder during the immediately preceding calendar month at the
higher rate set forth in Section 2.1 above. Lessee will pay interest to Lessor
on any royalty amounts due and not paid by the 25th day of the calendar month at
the effective prime interest rate as then charged by Morgan Guaranty Trust
Company of New York and calculated daily from the date said amounts are due.
Section 2.4. Calculation of Royalty; Gross Selling Price Defined.
For the purpose of calculating the royalty provided for above, the term "average
gross selling price" as used herein shall mean the actual gross sales for the
month applicable to Lessor's tonnage, less any sales tax imposed thereon,
divided by the actual tons sold for the month to a bona fide purchaser,
calculated on a mine by mine basis, if practicable. This average gross selling
price assumes the sale occurs, f.o.b. the initial outbound loading point after
preparation, if any, or, if not first transported to a preparation facility, the
actual price paid for the coal, assuming the sale occurs, f.o.b. the outbound
loading point on the leasehold, less any sales tax imposed thereon, but without
deduction for selling commissions, advertising, credit losses, or other
expenses, but with deduction for discounts or allowances actually allowed to
arms-length wholesalers; provided, however, that if Lessor gives notice to
Lessee in writing that, in Lessor's reasonable
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judgment, a particular purchaser is not a bona fide purchaser, Lessor may elect
to substitute for the gross selling price paid by that purchaser the prevailing
market price of such coal as reasonably determined by Lessor and based upon
recent sales by Lessee and others of coal of comparable quality to bona fide
purchasers; provided further, that for any coal consumed on or off the leased
premises without sale by Lessee the gross selling price for the purpose of
computing the royalty shall be the prevailing market price, as determined above,
of such coal at the time of shipment from the leased premises or, if used on the
leased premises, at the time of use.
The term "bona fide purchaser" as used herein shall mean a purchaser
who pays valuable consideration in good faith without intending to take unfair
advantage of any third parties, including Lessor, but in no case shall that
phrase include persons or parties affiliated with Lessee, either directly or
through any joint ownership.
Section 2.5. Unmined or Lost Coal. Tonnage royalty which may be owed
by Lessee for coal in place left unmined or rendered unmineable or that may be
lost or destroyed on the leased properties as provided in Section 7.1 hereof
shall be based on the prevailing market price, as determined above, of such
coal, if properly sized and cleaned, at the time when such coal should have been
mined or at the time when such coal is lost or destroyed, as may be appropriate
under the terms of this lease.
ARTICLE III
MINIMUM ANNUAL RENTAL
Section 3.1. Amount and Payment; Interest; Lessee shall pay to
Lessor, as minimum annual rental on account of coal mined or to be mined
hereunder, the sum of Seven Hundred Thousand Dollars ($700,000) for the period
from the date of this Lease through and ending December 31, 1997, and for each
calendar year thereafter in which mining operations are
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conducted under this lease or any renewals or extensions thereof. However,
Lessee shall receive a credit against royalties due on coal mined during each
calendar year to the extent of the amount of minimum annual rental owed for that
calendar year in which the coal is mined. If the amount of production royalties
paid by Lessee does not equal the amount of minimum annual rental payable to
Lessor for that calendar year, Lessee shall pay the difference on or before the
twenty-fifth (25th) day of January of the succeeding calendar year.
It is understood and agreed that no royalty payments for any year
shall be credited against minimum annual rental applicable to any subsequent
year.
Lessee will pay interest to Lessor on the amount of any minimum
annual rental due and not paid by the date such rental is due at the effective
prime interest rate as then charged by Morgan Guaranty Trust Company of New York
and calculated daily from the date said amount is due.
Section 3.2. Failure to Perform; Excuse. In the event of unavoidable
interruption of or delay in its operations in any calendar year of this lease,
due to strikes, accidents, inadequate car supply, or causes of like character
not within the control of Lessee, at the end of that calendar year Lessee shall
not be required to pay minimum annual rental which is equal to the percentage of
that year in which Lessee's operations are delayed because of any such causes.
However, the parties hereto recognize and agree that the potential for depressed
markets for the sale of coal or coal products, whether such conditions are
regional in nature or more widespread, and increased production costs are
business risks contemplated by operators and miners and sellers of coal, and,
therefore, neither the existence of a depressed market for the sale of coal or
coal products, nor increased or high costs of mining coal experienced by Lessee,
nor
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any combination thereof shall constitute grounds for or be deemed to be
interpreted as a basis for release from payment of minimum annual rental under
Section 3.1 hereof.
Section 3.3. Modification of Minimum Rental. Whenever, in the
opinion of the President of Lessor and such agent as Lessee may designate, the
quantity of unmined coal remaining which Lessee is or has become obligated to
mine has been reduced or depleted so as to justify a modification, reduction, or
suspension of minimum annual rental, such minimum annual rental may be modified,
reduced, or suspended as the President of Lessor may in his sole discretion
permit, and Lessee shall mine the same at the rate of tonnage royalty provided
for in ARTICLE II above.
ARTICLE IV
LESSEE'S RECORDS; INSPECTION
4.1. Lessee shall keep books of account, at the mine or at such
other place as Lessor may approve in writing, to ascertain: the quantity of coal
mined; the quantity of coal used at the mines; the quantity of coal shipped; and
the selling prices obtained for all coal mined hereunder. Said books shall be
open at all reasonable times for inspection by Lessor or its agents for the
purpose of comparing and verifying the reports rendered by Lessee under ARTICLE
II hereof or for obtaining information as to the quantity of coal mined, the
quantity of coal used at the mines, the quantity of coal shipped and the selling
prices obtained.
4.2. Upon request, supporting documentation pertaining to said books
of account, such as coal sales contracts, purchase contracts, invoices, lessee
work papers and any other supporting documentation considered necessary to
Lessor's inspection hereunder shall be made available to Lessor for review,
copying and reproduction, if considered necessary, in order to document and
confirm the information contained in the books of account described in the
preceding Section 4.1. The contents of such documentation shall be treated as
confidential
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information by Lessor and shall not be disclosed to any person or entity not a
party to this lease, except as provided by relevant state or federal laws.
ARTICLE V
ENVIRONMENTAL LIABILITIES
Section 5.1. Lessee shall be responsible for any pollution of air,
lands or water resulting from coal and coal products, slack, dirt, slate and
other waste materials deposited by it on the properties above described, or
arising or resulting from Lessee's operations hereunder and Lessee shall
indemnify and save harmless Lessor, its officers, agents and employees, from all
claims, demands, prosecutions, fines, and judgments against Lessor, its
officers, agents or employees, by reason of any such pollution and shall pay all
costs and expenses incurred by Lessor, its officers, agents or employees, in
defending any such claims, demands and prosecutions. Upon request of Lessor,
Lessee shall defend Lessor against any and all such claims at Lessee's expense.
ARTICLE VI
LESSEE'S MINING OPERATIONS
Lessee covenants that it will use due care and diligence to protect
the properties and coal reserves included herein from waste, injury or damage
and to that end Lessee shall conduct its operations hereunder in accordance with
the terms of Sections 6.1 and 6.2 hereof.
Section 6.1. Mining Practices and Compliance with Laws. Lessee
shall, in accordance with plans of mining and descriptions thereof approved as
provided for in Section 6.2 below, but subject to the requirements of the
Commonwealth of Kentucky and federal law pertaining to the conduct of the mining
of coal, mine the coal within the leased properties in the most safe, effectual,
workmanlike and proper manner, and so that said mining shall not unreasonably
interfere with the proper exercise of the rights hereinbefore excepted and
reserved
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to Lessor; and, Lessee shall comply in every respect with the laws of the
Commonwealth of Kentucky and the United States of America now existing or
hereafter enacted, and all the rules and regulations promulgated thereunder,
relating to the conduct of operations for the mining of coal.
Section 6.2. Approval of Mining Plans. To protect the properties and
coal reserves included herein from waste, injury or damage, Lessee shall mine
the coal within the leased properties in accordance with plans of mining and
reclamation and descriptions thereof which shall be submitted by Lessee to
Lessor. Such mining and reclamation shall not be initiated until such plans and
descriptions have been approved in writing by the President of Lessor. Upon
Lessor's request, Lessee shall furnish Lessor: (i) a copy of Lessee's
application for the mining permit, including the reclamation plan required by
the Commonwealth of Kentucky, with the maps and drawings attached thereto, and
(ii) a statement of the post mining land use which is proposed to be made of the
leased properties following reclamation obligations, for approval by said
President, prior to its being filed with the governmental agencies responsible
for issuance of such mining permits. Lessor shall use due diligence in reviewing
such application and plans of mining and reclamation and descriptions thereof,
and Lessor shall not withhold notice of approval or disapproval for an
unreasonable length of time. Notwithstanding the foregoing provisions of this
Section 6.2, Lessor shall not require a higher post-mining land use and
condition than the pre-mining land use and condition, unless otherwise agreed
between Lessor and Lessee. No change in any such plans or descriptions so
approved by said President shall be made without such change being approved in
advance by said President, or except as required by such regulatory agencies.
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ARTICLE VII
LESSEE'S LIABILITY FOR NONCOMPLIANCE
Section 7.1. If at any time Lessee shall not conduct operations as
provided in ARTICLE VI hereof and loss of coal which Lessee is obligated to mine
or loss of other coal of Lessor may thereby result or be threatened, the
President of Lessor shall have authority to determine where, and in what
particular, those provisions of said ARTICLE VI are being violated, and Lessor
may, by written notice specifying such violation, demand that Lessee pay to
Lessor the full amount of royalty, at the rate provided in ARTICLE II hereof, on
the estimated tonnage of coal lost which Lessee is obligated to mine or that may
remain unmined by reason of failure of Lessee to conduct operations as required
by said ARTICLE VI, in the same manner as if said coal had been mined and
removed; and Lessee shall compensate Lessor for the full amount of any other
coal of Lessor that is lost by reason of the failure of Lessee to conduct
operations as required by said ARTICLE VI.
ARTICLE VIII
ENGINEERING REQUIREMENTS; AUTHORITY OF PRESIDENT OF
LESSOR; SURVEY DATA; PRESERVATION OF SURVEY CONTROL
(TRIANGULATION) STATIONS
Section 8.1. Engineering Requirements; Authority of President of
Lessor. Lessee shall employ a competent engineer to make surveys, determine
elevations, prepare plans and maps of the mine workings, and Lessee shall
prepare and keep up, on a scale to the approval of the President of Lessor, a
map which shall be posted every three (3) months and shall show accurately and
completely, the boundaries of the lands included herein, the locations of all
railway tracks, rights-of-way, streams, roads, buildings, structures and mine
workings on or under said lands, together with elevations on sea level datum on
the mine workings, and any additional information that can be practically
obtained and that may be necessary to the safe and
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proper conduct of the mining operations, or that may be required by the
President of Lessor. The size of said map shall be in accordance with standards
to be prescribed by said President and a reproducible tracing of said map, which
shall be the property of Lessor, shall be sent to said President on or before
the twentieth (20th) day of January, April, July and October of each year,
properly posted in accordance herewith for the three (3) months ending on the
last day of the calendar month immediately preceding; and said President shall
have the privilege of keeping said tracing a sufficient time to obtain therefrom
such information as he may desire before returning the said tracing to Lessee
for each subsequent posting; and Lessor and its agents shall at all times have
access to the maps, plans and tracings of Lessee, and may take therefrom copies
of such portions as may be desired.
Section 8.2. Survey Data; Preservation of Survey Control
(Triangulation) Stations. Upon Lessor's request, Lessee shall furnish Lessor's
President with a copy of all information, including but not limited to, maps,
survey field books and traverse sheets, resulting from surveying performed on
behalf of the Lessee within the leased premises. Lessee shall use due care to
avoid the destruction of survey control or triangulation stations. However, if
in Lessee's operations hereunder, it becomes necessary to destroy one of said
survey control or triangulation stations, then Lessor shall be notified at least
90 days in advance of such destruction. If such destruction does occur without
said prior notice thereof being given to Lessor, then Lessee shall promptly
reimburse Lessor for the cost of resetting said survey control or triangulation
stations.
ARTICLE IX
FAILURE TO FURNISH PLANS OR MAPS
Section 9.1. If Lessee fails to furnish any plan or map as provided
for in ARTICLE VIII hereof for fifteen (15) days after written demand therefor
by the President of
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Lessor, Lessor may at its option employ a competent engineer to make surveys and
to prepare such plan or map, and Lessee shall pay to Lessor the full amount of
expenses so incurred.
ARTICLE X
PREVENTION OF FIRES; DUTIES OF LESSEE
Section 10.1. Lessee shall use all reasonable care and precaution to
prevent the occurrence of fires in timber or forest growth on the surface
overlying the properties included herein and to cause the prompt extinguishment
of any such fires, and Lessee shall cooperate with Lessor and its other lessees
or agents in extinguishing such fires on said surface and on adjoining lands
that may be liable to spread to or over said surface overlying the properties
included herein. Lessee shall be responsible for all damage caused by fire to
timber or forest growth or in any other respect on the surface overlying the
properties included herein or adjoining lands that may be due to negligence of
Lessee, its employees, agents or contractors.
ARTICLE XI
COAL FROM OTHER LANDS; LAND USE TOLL
Section 11.1. In the event Lessee transports or ships coal from any
property not owned by Lessor into, over, through or under any of the leased
properties, Lessee shall pay to Lessor fifteen cents (15(cent)) per net ton of
that coal, or, one-half of one per cent (1/2%) of the average gross selling
price per net ton of that coal, as gross selling price is defined in Section 2.4
above, whichever is greater, as land use toll for such transportation or
shipment. Lessee shall report and make payment, pursuant to the provisions of
Sections 2.2 and 2.3 above, for coal transported or shipped hereunder. Lessee
will pay interest to Lessor on any land use tolls due and not paid by the 25th
day of the calendar month at the effective prime interest rate as then charged
by Morgan Guaranty Trust Company of New York and calculated daily from the date
said amounts are due. However, Lessee shall not transport or ship coal from any
property not
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owned by Lessor into, over, through or under any of the aforesaid properties if
Lessor serves upon Lessee a written objection to any such transportation or
shipment. Furthermore, Lessee will not deposit refuse derived from any property
not owned by Lessor on the aforesaid premises.
ARTICLE XII
INDEMNIFICATION
Section 12.1. Lessee shall conduct operations hereunder on its own
behalf and not as agent or employee of Lessor and there shall be no privity of
contract between Lessor and employees of Lessee. All employees, agents,
contractors, subcontractors, and materialmen of Lessee, whether on a wage or
profit sharing basis, shall be selected, hired, directed, paid, and discharged
only by Lessee. Lessee shall and hereby agrees to indemnify and save harmless
Lessor, its officers, agents, and employees, from and against any and all
claims, demands, suits, judgments, recoveries and liabilities for injury to or
death of any person or persons whomsoever and for loss of or damage to any
property whatsoever, arising or in any manner growing out of the operations or
activities of Lessee under or in connection with this lease. Lessee hereby
further agrees to indemnify and save harmless Lessor, its officers, agents and
employees, from and against any and all penalties, fines, prosecutions,
statutory recoveries (whether civil or criminal) and governmental actions which
arise from or are occasioned by the operations or activities of Lessee under or
in connection with this lease.
ARTICLE XIII
TAXES AND ASSESSMENTS; COAL APPRAISAL REPORTS
Section 13.1. Taxes and Assessments. During the term of this lease
and any extensions or renewals pursuant to ARTICLE XX hereof, Lessee shall pay
and bear and reimburse Lessor for the expense of all taxes and assessments of
every kind and character that may be levied or assessed by governmental
authority against or upon the properties included
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herein or Lessor's ownership thereof, including, without limitation: (i) excise,
privilege or license taxes based upon the acreage of land owned by Lessor in the
Commonwealth of Kentucky, any exemption of acreage therefrom to be prorated to
the acreage included in this lease; (ii) ad valorem taxes; and (iii) taxes
levied or assessed on the coal mined hereunder, on the privilege of mining said
coal, on the improvements or other property of Lessee in or on properties above
described, on the leasehold rights of Lessee, and on the income accruing to
Lessee therefrom. Within thirty (30) days of Lessee's receipt of a statement for
such taxes and assessments, together with copies of corresponding paid tax
tickets therefor, Lessee shall repay to Lessor the amount of any such taxes and
assessments as shall be paid by Lessor.
Section 13.2. Method of Payment. Lessee shall pay such taxes and
assessments annually to Lessor as Lessor may direct. Adjustments for overpayment
for any tax year shall be credited or billed, as the case may be, by such
reasonable method as Lessor shall determine.
Section 13.3. Coal Appraisal Reports. Lessee shall submit to Lessor,
for its review, a copy of annual coal appraisal reports and returns prepared
pursuant to K.R.S. 132 et seq., or regulations promulgated thereunder, prior to
their filing with the Kentucky Revenue Cabinet. It is understood and agreed that
the assessments and levies arising and calculated from such reports are based,
in part, upon the annual production tonnages of Lessee, and for that reason,
Lessee shall pay to Lessor, in the manner provided in Section 13.2 hereof, an
amount equal to any increase in such assessments and levies resulting from
operations upon the lands herein. Such payments shall continue and survive any
termination or cancellation of this lease until such time as said assessments
and levies have returned to inactive or non-production status. Lessee will pay
interest to Lessor on any amounts due under Section 13.2 hereof and this Section
and not paid within thirty (30) days after demand therefor has been made at the
effective prime
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interest rate as then charged by Morgan Guaranty Trust Company of New York and
calculated daily from the date said amounts are due. Lessor reserves the right
to pay any taxes or assessments due under this ARTICLE XIII without waiving its
rights for collection thereof from Lessee as provided in ARTICLES XXII and XXIII
of this lease.
ARTICLE XIV
PROHIBITION AGAINST ASSIGNMENT
Section 14.1. Lessee shall not mortgage, assign, convey, sublease,
or set over any of its estate, interest or rights hereunder or any part thereof,
or any of its rights or interests in buildings and other improvements placed
upon the leased properties by the Lessee, except with the written consent of
Lessor and the written assumption by the transferee of all the obligations of
Lessee in form satisfactory to Lessor, with the clear understanding that such
written consent may be subject to renegotiation of the royalty rates or other
provisions hereinabove set forth for coal mined from the area, or coal seams
therein, which are assigned, conveyed, subleased, or set over; AND no judicial
or other sale or transfer of any kind, except under order or decree issued by
any court or judicial officer or tribunal, or in compliance with any order or
decree of any court of equity or in any proceedings in bankruptcy, shall have
the effect of transferring this lease or any of the estate, interest or rights
of Lessee for any time or term, except with the written consent of Lessor and
the written assumption by the transferee of all the obligations of Lessee in
form satisfactory to Lessor.
ARTICLE XV
WORKER'S COMPENSATION; LESSEE'S DUTIES
Section 15.1. Lessee shall subscribe to and operate under the
provisions of the Kentucky Workers' Compensation Act, and make all necessary
payments thereto, and such
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coverage shall also include drivers of any trucks which may be hired, rented or
leased, and upon request furnish to Lessor certificate of such compliance,
together with paid premium receipts.
If at any time the subscription to said Workers' Compensation Act
shall cease to be in force and effect, then Lessee shall suspend, and Lessor may
demand that Lessee cease all operations hereunder until such subscription has
been reinstated.
ARTICLE XVI
BLACK LUNG BENEFITS; INDEMNIFICATION; EVIDENCE OF
FINANCIAL RESPONSIBILITY
Section 16.1. Lessee hereby guarantees and agrees to indemnify and
save harmless Lessor, its officers, agents and employees, from the payment of or
any liability for benefits which may be required under the Black Lung Benefits
Act (30 U.S.C. 901, et seq.) and under any laws or regulations of the
Commonwealth of Kentucky, arising from any mining operations hereunder, and
Lessee agrees that during the primary period and renewals, if any, of this
lease, it will furnish annually to Lessor evidence of financial responsibility
for such black lung benefits under applicable federal and state laws, as well as
regulations issued thereunder. Such evidence of financial responsibility shall
consist of the following:
(a) in the event the Workers' Compensation law of the state (State)
in which the leased property is located has been included in the
list published by the Secretary of Labor of the United States of
America under the Black Lung Benefits Act (30 U.S.C. 901, et seq.),
such evidence shall consist of a certification from the officers
administering the Workers' Compensation program for the State
certifying as to Lessee's black lung benefits coverage under those
Workers' Compensation laws;
(b) in the event the Workers' Compensation laws of the State are not
included in the list published by the Secretary of Labor of the
United States of America under the Black Lung Benefits Act (30
U.S.C. 901, et seq.), Lessee shall either:
(1) qualify as a self-insurer in accordance with regulations
prescribed by said Secretary of Labor, or
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(2) insure and keep insured, with any stock company or mutual
company or association, or any other person or fund, including any
State fund, which is authorized under the laws of the State to
insure Workers' compensation, all black lung benefits payable under
applicable federal and state statutes and regulations issued
thereunder, and furnish a satisfactory certificate to Lessor
evidencing such insurance coverage.
ARTICLE XVII
WAGES AND BENEFITS; INDEMNIFICATION AND BOND
Section 17.1. Lessee hereby guarantees and agrees to indemnify
Lessor, its officers, agents and employees, from the payment of or any liability
for, or resulting from, wages and benefits which may be due Lessee's employees
or contractors, and, to that end Lessee shall, at Lessor's sole discretion,
prior to or at any time after commencing operations hereunder, obtain a surety
bond, the amount of which shall be calculated pursuant to K.R.S. 337.200, et
seq., irrespective of the length of time Lessee had been doing business in this
State, securing Lessor from payment of or any liability for, or resulting from,
said wages and benefits.
ARTICLE XVIII
INSURANCE; CESSATION OF OPERATIONS
Section 18.1. Amount of Insurance. As a condition precedent to the
commencement of operations hereunder, Lessee shall arrange for the maintenance
of public liability insurance, including, but not limited to, coverage for
environmental or pollution liability, with a good solvent casualty insurance
company or companies satisfactory to Lessor, which insurance shall indemnify
said Lessor against legal liability for loss by reason of personal injury, death
and property damage or loss sustained as a result, or by reason, of the
operations hereunder, with a minimum combined single limit of $4,000,000.00 for
bodily injury, death and property damage and Lessee shall, upon request of
Lessor, furnish to Lessor certificates of such
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insurance, together with paid premium receipts. This coverage shall also include
any trucks or other equipment hired, rented or leased in operations hereunder.
It is understood and agreed, however, that the minimum limits of
coverage set forth above are not intended and will in no manner limit the
recoveries of Lessor under the indemnity provisions of ARTICLES V, XII, XVI and
XVII above and on page 15 of this lease.
Section 18.2. Cessation or Suspension of Operations. If at any time
any of these insurance coverages shall cease to be in force and effect, then,
upon written demand of Lessor, Lessee shall suspend all operations hereunder
until such insurance coverages shall be reinstated.
ARTICLE XIX
LESSOR'S RIGHT TO INSPECT MINING OPERATIONS
Section 19.1. Lessor, and the Lessor's employees, agents and
engineers, shall at all times have the right and privilege of entering the works
and mines of Lessee in or upon the properties included herein to inspect,
examine, survey or measure the same or any part thereof solely for the purpose
of verifying the reports of Lessee as to the amounts of coal mined or removed
and for that purpose only to use freely the means of access to said works and
mines, without hindrance or molestation.
ARTICLE XX
OBLIGATION TO MINE; EXTENSION;
DUTY TO RECLAIM; TERMINATION
Section 20.1. Obligation to Mine; Extension. Lessee shall mine and
remove all of the coal which can be mined and removed hereunder by modern mining
methods and if, at the expiration of the original period hereof, Lessee has not
mined and removed all of the coal which it is or may become obligated to mine,
then this lease shall be extended for such additional ten (10) year periods as
may be necessary, upon the same terms and provisions, but subject to the
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full payment of all royalties, rentals and other payments due hereunder, until
all of said coal which can be economically mined and removed by approved mining
methods has been mined and removed from the leased properties; and whenever
during said original period or any extension thereof, as herein provided, Lessee
shall have mined and removed all of said coal by such approved mining methods
and shall have paid all royalties, rentals and other payments due or accrued
hereunder then Lessee's obligation to mine coal and make payment of minimum
annual rental hereunder shall terminate.
Section 20.2. Duty to Reclaim; Payment of Amounts Due; Termination.
In the event the lease herein shall not be extended at the end of the original
period hereof or any extended period thereof, or all of said coal has been mined
and removed, then this lease shall continue to be extended for additional one
(1) year periods, at a nominal rental to be determined by Lessor, until all the
reclamation of the lands disturbed by mining operations under this lease has
been completed and finally approved by the state and/or federal agency or
agencies having jurisdiction of such mining operations and all the bonds for
such reclamation have been fully released by such agency or agencies. Upon such
release of all of said bonds this lease shall terminate, without, however,
releasing Lessee from any obligations or liabilities arising prior to said
termination. Further, in the event Lessee has not made payment of all royalties,
rentals and other payments due hereunder at the end of the original period
hereof or any renewal or extended period thereof, then Lessor, at its option,
may extend the term of this lease until all of such payments have been made.
ARTICLE XXI
TERMINATION OF LEASE
Section 21.1. Termination by Lessee. After Lessee's satisfaction of
all mining and reclamation obligations contained in ARTICLE XX hereof, Lessee
may give Lessor thirty
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(30) days' notice of its intention to terminate this lease, and, if Lessor shall
determine that Lessee has fully performed its obligations under this lease,
Lessee's obligations hereunder shall be deemed terminated effective on such
thirtieth (30th) day, without, however, releasing Lessee from any obligations or
liabilities arising prior to said termination of obligations. Upon termination
of this lease, any minimum annual rental paid for the calendar year in which the
termination occurs which has not been credited against production royalties
shall be refunded to Lessee, and Lessee shall not be liable for any further
minimum annual rentals.
Section 21.2. Removal of Property Following Termination or
Expiration. Upon termination or expiration of this lease, Lessee shall have 180
days in which to remove from the properties leased hereby all Lessee's
equipment, buildings and other improvements and personal property, and any of
the same not so removed shall, at Lessor's option, either become the property of
Lessor without charge therefor or be disposed of by Lessor at Lessee's cost and
expense; provided, however, that Lessee shall not remove any equipment,
buildings, improvements or property unless Lessee shall have fully performed all
matters to be performed by it hereunder.
ARTICLE XXII
DEFAULT
Section 22.1. Default; Cancellation by Lessor. If any one or more of
the following events (herein sometimes called Events of Default) shall occur:
(a) If default shall be made in the due and punctual payment
of any rent, royalty or any part thereof, when and as the same may
become due and payable, or in the payment of taxes and insurance
premiums or any other amounts to be borne by Lessee hereunder, or in
the furnishing of receipts and certificates of payment therefor when
due, or in the furnishing of any of the books, records or
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<PAGE>
reports by Lessee to be furnished under this lease, and such default
shall continue for fifteen (15) days after notice by Lessor to
Lessee; or,
(b) If default shall be made by Lessee in the performance of
or compliance with any of the covenants, agreements, terms or
conditions contained in this lease, other than those referred to in
the foregoing subsection (a) of this Section 22.1, and such default
shall continue for a period of sixty (60) days after written notice
thereof from Lessor to Lessee, and Lessee shall not within such
period commence with due diligence the curing of such default, or if
Lessee shall, within such period, commence with due diligence to
cure such default and thereafter shall fail or neglect to prosecute
and complete with due diligence and dispatch the curing of such
default; or,
(c) If Lessee shall file a voluntary petition in bankruptcy or
shall be adjudicated bankrupt or insolvent, or shall file any
petition or answer seeking or acquiescing in any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or
similar relief for itself under any present or future federal, state
or other statute, law or regulation, or shall seek or consent to or
acquiesce in the appointment of any trustee, receiver, or liquidator
of Lessee or of all or any substantial part of the property leased
hereby or of any or all the rents, revenues, issues, earnings,
profits, or income thereof, or shall make any general assignment for
the benefit of creditors, or shall admit in writing its inability to
pay its debts generally as they become due;
then and in any such event, Lessor at any time thereafter while such default or
condition is continuing, may give written notice to Lessee specifying the
occurrence giving rise to such Event
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<PAGE>
of Default, or Events of Default, and stating that the lease shall terminate on
the date specified in such notice, which shall be at least ten (10) days after
the giving of such notice. Upon the date specified in such notice, this lease
and the estate and interest hereby demised shall terminate and all rights of
Lessee under this lease shall cease.
Section 22.2. Repossession, etc. by Lessor. Lessee expressly waives
any right to prior notice or any process of law other than the issuance of the
warrant of distraint, and Lessee further expressly waives any right to hearing
prior to the levy of such warrant and sale thereunder and at any time after such
termination of this lease, Lessor, without further notice may enter and re-enter
the premises for all proper purposes and repossess itself by all legal means,
including summary proceedings, of its prior and former estate and may remove
Lessee and all persons claiming through Lessee from the property leased hereby.
Section 22.3. Survival of Lessee's Obligations; Damages. No
termination of this lease or repossession of the property leased hereby, by
force, summary proceedings, ejectment or otherwise, shall relieve Lessee of its
liability and obligations under this lease, and such liability and obligations,
including, without limitation, the indemnity commitments contained in ARTICLES
V, XII, XVI and XVII above and on page 15 of this lease, shall survive
termination or any repossession. In the event of any such termination or
repossession, Lessee shall pay to Lessor the minimum annual rentals, production
royalties and other charges required to be paid by Lessee up to the time of such
termination or repossession.
Section 22.4. No Waiver, etc. by Lessor. No failure by Lessor to
insist upon the strict performance of any covenant, agreement, term or condition
of this lease or to exercise any right, power or remedy consequent upon a breach
thereof, and no acceptance of full or partial performance or payment of
royalties during the continuance of any such breach, shall constitute
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<PAGE>
a waiver of or consent to any such breach or of such covenant, agreement, term
or condition. No waiver of any breach shall affect or alter this lease, but each
and every covenant, agreement, term and condition of this lease shall continue
in full force and effect with respect to any other then existing or subsequent
breach thereof.
Section 22.5. Injunction Against Breach. In the event of any breach
or threatened breach by Lessee of any of the covenants, agreements, terms or
conditions of this lease, Lessor shall have the right to invoke any rights,
powers and remedies allowed at law, in equity or by statute or otherwise,
whether or not specifically provided in this lease.
Section 22.6. Lessor's Remedies Cumulative, etc. Each right, power
and remedy of Lessor provided for in this lease shall be cumulative and
concurrent and shall be in addition to every other right, power or remedy
provided for in this lease or now or hereafter existing at law or in equity, by
statute or otherwise, and the exercise or beginning of the exercise by Lessor of
any one or more of the rights, powers or remedies provided for in this lease or
now or hereafter existing at law or in equity, by statute or otherwise shall not
preclude the simultaneous or later exercise by Lessor of any or all other
rights, powers or remedies provided for in this lease, or by statute or
otherwise.
ARTICLE XXIII
CONDEMNATION
Section 23.1. If the coal herein leased, or any portion thereof,
shall be taken in or in any manner affected by, condemnation for any public or
quasi-public use under any statute or by right of eminent domain, or by private
purchase in lieu of condemnation, by a public body vested with the power of
eminent domain, then, and in each and every such event, Lessor shall be free to
conduct all negotiations for compensation or damages, including without
limitation, participation in viewer's proceedings and the institution of
litigation concerning such taking,
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<PAGE>
with the understanding that in the case of each and every condemnation or taking
Lessor shall notify Lessee of same, and Lessor and Lessee shall be paid out of
any such award or compensation in damages as follows:
(a) If the award for the coal in any such condemnation or taking
shall exceed the amount of royalty that would have been due Lessor had the coal
been then mined, based upon recent sales by Lessee or, if no such sales exist,
based upon recent sales by others of coal of comparable quality, all of such
award which is in excess of said royalty amount shall be the property of and be
paid to Lessee and the balance of the award shall be the property of and be
retained by Lessor; or,
(b) If such award for the coal shall be equal to or less than said
royalty amount then all of such award shall be the property of and be retained
by Lessor.
(c) Any specific award for Lessee's buildings, structures or
improvements shall be paid to Lessee and any award for surface lands, or
interests therein or any other buildings, structure or improvements thereon,
shall be the property of Lessor.
Lessee shall cooperate with Lessor in all matters hereunder,
including joining in any litigation or settlement if Lessor determines such to
be necessary; provided, that any such condemnation or taking shall not otherwise
affect Lessee's duties and obligations under this lease, except as provided
herein.
ARTICLE XXIV
ARBITRATION
Section 24.1. If there should arise any matters in dispute hereunder
on which Lessor and Lessee cannot finally agree, such matter or matters shall be
referred to a board of arbitrators consisting of three (3) disinterested,
competent persons, one selected by Lessor and one by Lessee, as hereinafter
provided, and the two thus selected shall select the third, who shall
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<PAGE>
have the power of an umpire and be known as umpire-arbitrator. The decision and
award of such arbitrators, or any two of them, or, in case of disagreement among
all the arbitrators, of the umpire-arbitrator, shall be conclusive and binding
upon Lessor and Lessee and promptly complied with.
The party desiring arbitration shall give written notice to the
other party, definitively stating the point or points in dispute and naming the
person selected as arbitrator; and it shall be the duty of the other party,
within fifteen (15) days after receiving such notice, to name an arbitrator, and
these two shall select the umpire-arbitrator; and in event the party notified
does not name an arbitrator within said period of fifteen (15) days, the party
serving such notice may select a second arbitrator and the two thus selected
shall select the umpire-arbitrator.
In the event of failure of the two arbitrators, selected as
aforesaid, within thirty (30) days from receipt by both of them of notice of
their selection, to agree upon the umpire-arbitrator, then they shall jointly
notify, in writing, the parties of their failure to agree upon such
umpire-arbitrator. The parties shall then, within fifteen (15) days from the
date of such notification, jointly select the umpire-arbitrator. In the event
the parties are unable to so select the umpire-arbitrator within said fifteen
(15) day period, they shall then jointly select the names of three (3) potential
umpire-arbitrators. None of these three (3) potential umpire-arbitrators shall
represent, or have any affiliation with either party. Once the list of said
three (3) potential umpire-arbitrators has been prepared, each party shall then
strike the name of one (1) potential umpire-arbitrator from said list. The
person remaining on such list after the parties have stricken a name from said
list shall be the umpire-arbitrator. Fresher, in the event the parties fail to
select such umpire-arbitrator as aforesaid, either of the parties may apply to
the American Arbitration
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<PAGE>
Association (AAA) for the appointment of an umpire-arbitrator pursuant to the
rules and procedures of the AAA for the appointment of neutral arbitrators, as
revised. The individual then designated will act as such umpire-arbitrator
hereunder.
The umpire-arbitrator thus chosen shall give to Lessor and Lessee
written notice as to the time and place of hearing, which hearing shall be not
less than ten (10) nor more than twenty (20) days after his selection, and, at
the time and place appointed he shall proceed with the hearing unless, for some
good cause of which the arbitrators shall be the judge, it shall be postponed
until some later date within a reasonable time. Both Lessor and Lessee shall
have full opportunity to be heard, orally and in writing, on any question thus
submitted. In arriving at a decision and award, the arbitrators shall be bound
by any relevant state and federal law applicable to the substantive issue or
issues so submitted for arbitration, and they shall make such decision and award
in writing, and deliver a copy to both Lessor and Lessee. The arbitration award
shall specify by whom the costs of arbitration shall be borne and paid and the
amount of such costs, including reasonable compensation for the arbitrators.
ARTICLE XXV
CONTROLLING LAW
Section 25.1. In all coal mining operations and other activities
conducted hereunder Lessee shall comply with all the laws of the United States
of America and the Commonwealth of Kentucky now or hereafter enacted, and all
rules and regulations promulgated thereunder by any governmental agency,
relating to such coal mining operations or other activities. Any disputes as to
the meaning and application of any of the provisions of this lease shall be
determined under the laws of the Commonwealth of Kentucky.
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<PAGE>
ARTICLE XXVI
NOTICE
Section 26.1. The giving of any notice to, or the making of any
demand on Lessee shall be sufficient if in writing, addressed to Lessee and
mailed via certified mail, providing for receipt, to Lessee at One Potter Drive,
P. o. Box 900, Robinson Creek, Kentucky 41560; and likewise the giving of any
notice to, or the making of any demand on, Lessor shall be sufficient if in
writing, addressed to Lessor and similarly mailed via certified mail, providing
for receipt, to Lessor at P. O. Box 1517, Bluefield, West Virginia 24701; and
ten (10) days shall be considered a reasonable notice or demand period except
where a longer notice period is herein prescribed.
ARTICLE XXVII
HEADINGS
Section 27.1. The headings of the ARTICLES in this lease are for
convenience only and shall not be used to construe or interpret the scope or
intent of this lease or in any way affect the same.
ARTICLE XXVIII
SURVIVAL
Section 28.1. No termination or cancellation of this lease shall
relieve either of the parties hereto from any obligations or liabilities
incurred by it under this lease as of the time of such termination or
cancellation.
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<PAGE>
ARTICLE XXIX
SEVERABILITY
Section 29.1. If any term or provision of this lease is held to be
illegal or invalid for any reason whatsoever, such illegality or invalidity
shall not affect the validity or legality of any of the other terms or
provisions of this lease.
ARTICLE XXX
TERMS BINDING UPON SUCCESSORS AND ASSIGNS
Section 30.1. All of the terms and provisions hereof to be performed
and observed by the respective parties hereto shall be binding upon and shall
inure to the benefit of their respective successors, and assigns.
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<PAGE>
WITNESS the following signatures and seals as of the date first
above written. Executed in two (2) counterparts.
POCAHONTAS DEVELOPMENT CORPORATION
By
/s/ Daniel D. Smith
Daniel D. Smith
President
SUNNY RIDGE ENTERPRISES, INC.
By
/s/ John M. Potter
John M. Potter
President
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<PAGE>
STATE OF WEST VIRGINIA )
) To-wit:
COUNTY OF MERCER )
I, Cathy T. Buzzo, a Notary Public of said County, do certify that
Daniel D. Smith, President, who signed the writing above, dated as of January 1,
1996, for said Pocahontas Development Corporation, has this day in my said
County, before me, acknowledged the said writing to be the act and deed of said
Corporation.
Given under my hand and official seal this 27th day of January,
1997.
/s/ Cathy T. Buzzo
----------------------
Notary Public
My commission expires: August 16, 1998.
STATE OF KENTUCKY )
) To-wit:
COUNTY OF PIKE )
I, Glenda Jo Walters, a Notary Public of said County, do certify
that John M. Potter, its President, who signed the writing above, dated as of
January 1, 1997, for said Sunny Ridge Enterprises, Inc., has this day in my said
County, before me, acknowledged the said writing to be the act and deed of said
Corporation.
Given under my hand and official seal this 23rd day of January,
1997.
/s/ Glenda Jo Walters
-----------------------
Notary Public
My commission expires: 4-21-2000.
This instrument prepared by Ernest F. Hays, II, Attorney at Law,
Bluefield, West Virginia 24710-1517.
/s/ Ernest F. Hays, II
------------------------
C:\Lease\Sunny.Ridge
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<PAGE>
THIS SUPPLEMENTAL LEASE AND AGREEMENT, made as of May 26, 1998,
between POCAHONTAS DEVELOPMENT CORPORATION (Pocahontas), a corporation of
Kentucky, with a mailing address of Post Office Box 1517, Bluefield, West
Virginia 24701, Lessor, and SUNNY RIDGE ENTERPRISES, INC. (Sunny Ridge), a
corporation of Kentucky, with a mailing address of Post Office Box 900, Robinson
Creek, Kentucky 41560, Lessee;
W I T N E S S E T H:
WHEREAS:
1. By lease dated January 1, 1997 (hereinafter called "Original
Lease"), Pocahontas leased to Sunny Ridge, for a period of ten (10) years, from
January 1, 1997 through December 31, 2006, subject to renewal for additional ten
(10) year periods, the sole and exclusive right of mining and removing various
seams of coal within nine (9) parcels of land containing in the aggregate
7,693.48 acres, more or less, situated in Pike County, Kentucky, on the waters
of Pond Creek and Left and Right Forks of Blackberry Creek of Tug Fork, as
therein described, subject to exceptions and reservations and upon the terms and
provisions therein contained;
2. Pocahontas, to the extent it has the legal right so to do, has
agreed to lease to Sunny Ridge for the remaining period and upon the same terms
and conditions of the Original Lease, as it may be supplemented, amended or
renewed, the right of mining and removing, by any method of mining, all of the
coal of the Upper Alma Seam of coal only within 478.01 acres, more or less, as
hereinafter identified, and upon the terms and provisions contained herein.
NOW, THEREFORE, in consideration of the premises contained herein,
the mutual benefit to be derived by the parties hereto and the continued
performance and observance by Sunny Ridge of all the terms and conditions of the
Original Lease, as it may be supplemented, amended or renewed, and this
Supplemental Lease and Agreement, Pocahontas, to the extent it has the legal
right so to do, hereby leases to Sunny Ridge for the remaining period of
Original Lease, as herein supplemented and any renewals thereof, the right of
mining and removing, by any method of mining, all of the coal from the Upper
Alma Seam of coal within said 478.01 acres, more or less, situated in Pike
County, Kentucky, on the waters of Right Fork and Left Fork
<PAGE>
of Blackberry Creek, and being shown by red border on colored map attached
hereto and made a part hereof and marked in the lower right-hand corner thereof:
"Pocahontas Development Corporation, Bluefield, West Virginia, No. 1694-C, May
20, 1998, GDF."
Said 478.01 acres, more or less, are made up of different tracts or
parcels of land in which Pocahontas Development Corporation owns the fee or the
minerals and which for convenience of designation are as follows (the areas
given being by estimation only and are not to be construed as a warranty of
acreage):
TABLE OF AREA
PIKE COUNTY, KENTUCKY
Tract or Parcel Area in Acres
out of which area is taken Fee Min Total
------------------------------------- ------ ------ ------
Pt. Tract No. 145 - Tolbert Hatfield 18.15 - 18.15
Pt. Tract No. 152 - A. Smith 2.41 - 2.41
Pt. Tract No. 162 - W. J. Williamson - 171.67 171.67
Pt. Tract No. 165 - J. Hatfield 18.69 - 18.69
Pt. Tract No. 166 - Thompson Hatfield 1.40 - 1.40
Pt. Tract No. 169 - Ephriam Hatfield 0.76 1.72 2.48
Pt. Tract No. 170 - J. P. Hatfield 9.56 23.94 33.50
Pt. Tract No. 171 - Jacob Hatfield 0.15 25.15 25.30
Pt. Tract No. 176 - W. J. Williamson 95.32 15.64 110.96
Pt. Tract No. 187 - Leah Coleman 93.45 - 93.45
------ ------ ------
TOTAL 239.89 238.12 478.01
SUBJECT, HOWEVER, TO RIGHTS OF:
(a) Stone Mining Company under amended and restated lease dated
February 22, 1993, recorded in the Pike County Court Clerk's Office in Deed Book
No. 722, page 546, from Pocahontas Development Corporation;
(b) Ashland Exploration, Inc., successor in title to Columbian Fuel
Corporation, under oil and gas lease dated December 15, 1941, recorded in Pike
County in Deed
-2-
<PAGE>
Book No. 222, page 500, from Ford Motor Company, remote predecessor in title of
said Pocahontas Development Corporation;
(c) Kentucky Power Company for rights-of-way for electric power
transmission lines and appurtenances as now located and in use;
(d) Commonwealth of Kentucky and the public for state, county and
other public roads as may now be located and in use;
(e) Others in any and all transmission lines, pipelines,
rights-of-way, easements or other restrictions as may or may not appear of
record; and
(f) The public, United States of America, Commonwealth of Kentucky,
riparian owners and others, if any, in and to the beds and streams of all
waterways which may be included within the boundaries of the aforesaid 478.01
acres, more or less.
THIS SUPPLEMENTAL LEASE AND AGREEMENT is subject to and shall be
governed by all the terms and provisions of Original Lease, as fully as if the
properties herein leased were originally included therein, and shall be subject
to all the exceptions, reservations and limitations therein described; IT BEING
AGREED that rights included herein do hereby become part of the Original Lease
as fully and with the same effect as if said rights had been included in
Original Lease at the time of execution thereof.
THIS SUPPLEMENTAL LEASE AND AGREEMENT is upon further terms and
provisions as follows:
FIRST: Lessee shall pay to Lessor as rent a royalty of Four Percent
(4%) of the average gross selling price per net ton of 2,000 pounds of coal
mined from the Upper Alma Seam of coal within said 478.01 acres, calculated and
reported on a monthly basis.
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<PAGE>
SECOND: There shall be no increase in the advance minimum annual
rental payable by Lessee to Lessor provided for in Section 3.1 of Original Lease
by virtue of this Supplemental Lease and Agreement, and, production royalties
paid by Lessee to Lessor for coal mined from the seam of coal included herein
shall apply toward recoupment of the advance minimum annual rentals provided for
in Section 3.2 of Original Lease.
THIRD: Original Lease, as herein supplemented, shall remain in full
force and effect.
WITNESS the following signatures and seals as of the date first
above written. Executed in two (2) counterparts.
POCAHONTAS DEVELOPMENT CORPORATION
Attest: By
/s/ Robert N. Stephens /s/ Daniel D. Smith
Assistant Corporate Secretary Daniel D. Smith
President
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<PAGE>
SUNNY RIDGE ENTERPRISES, INC.
Attest: By
/s/ John M. Potter
----------------------
/s/ Thomas J. Peters Its President
Secretary
STATE OF WEST VIRGINIA )
) To-wit:
COUNTY OF MERCER )
I, Cathy T. Buzzo, a Notary Public of said County, do certify that
Daniel D. Smith, President, who signed the writing above, dated as of May 26,
1998, for said Pocahontas Development Corporation, has this day in my said
County, before me, acknowledged the said writing to be the act and deed of said
Corporation.
Given under my hand and official seal this 30th day of July, 1998.
/s/ Cathy T. Buzzo
--------------------
Notary Public
My commission expires: August 16, 1998.
-5-
<PAGE>
STATE OF KENTUCKY )
) To-wit:
COUNTY OF PIKE )
I, Glenda Jo Walters, a Notary Public of said County, do certify
that John M. Potter, its President, who signed the writing above, dated as of
May 26, 1998, for said Sunny Ridge Enterprises, Inc., has this day in my said
County, before me, acknowledged the said writing to be the act and deed of said
Corporation.
Given under my hand and official seal this 21st day of July, 1998.
/s/ Glenda Jo Walters
-----------------------
Notary Public
My commission expires: 4-21-2000.
This instrument prepared by Stephen M. Hopta, Attorney at Law,
Bluefield, West Virginia 24701.
/s/ Stephen M. Hopta
-----------------------
C:\Lease\SunnyRid.Sup
-6-
<PAGE>
THIS SUPPLEMENTAL LEASE AND AGREEMENT, made as of October 27, 1998,
between POCAHONTAS DEVELOPMENT CORPORATION (Pocahontas), a corporation of
Kentucky, with a mailing address of Post Office Box 1517, Bluefield, West
Virginia 24701, Lessor, and SUNNY RIDGE ENTERPRISES, INC. (Sunny Ridge), a
corporation of Kentucky, with a mailing address of Post Office Box 900, Robinson
Creek, Kentucky 41560, Lessee;
W I T N E S S E T H:
WHEREAS:
1. By lease dated January 1, 1997 (hereinafter called "Original
Lease"), Pocahontas leased to Sunny Ridge, for a period of ten (10) years, from
January 1, 1997 through December 31, 2006, subject to renewal for additional ten
(10) year periods, the sole and exclusive right of mining and removing seams of
coal within nine (9) parcels of land, containing in the aggregate, 7,693.48
acres, more or less, situated in Pike County, Kentucky, on the waters of Pond
Creek and Left and Right Forks of Blackberry Creek of Tug Fork, as therein
described, subject to exceptions and reservations and upon the terms and
provisions therein contained;
2. By supplemental lease dated May 26, 1998 (hereinafter called
"Supplemental Lease"), Pocahontas leased to Sunny Ridge, for the remaining
period of Original Lease, the right of mining and removing, by any method of
mining, all of the coal of the Upper Alma Seam of coal only within a parcel of
land containing 478.01 acres, more or less, as therein identified, and upon the
terms and provisions contained therein; and
(Said Original Lease and Supplemental Lease are hereinafter
collectively referred to as "Sunny Ridge Papers" and the properties
covered thereby are hereinafter referred to as the "Sunny Ridge
Leasehold"); and
3. Pocahontas, to the extent it has the legal right so to do, has
agreed to lease to Sunny Ridge for the remaining period and upon the same terms
and conditions of Sunny Ridge Papers, the right of mining and removing, by any
method of mining, all of the coal of the Middle Whitesburg Seam of coal and
seams above the Middle Whitesburg up to but not including the lower bench of the
Fireclay (a/k/a Chilton) Seam of coal within a parcel of land containing
1,730.74 acres, more or less, as hereinafter identified, and upon the terms and
provisions contained herein.
NOW, THEREFORE, in consideration of the premises contained herein,
the mutual benefit to be derived by the parties hereto and the continued
performance and observance
<PAGE>
by Sunny Ridge of all the terms and conditions of the Sunny Ridge Papers and
this Supplemental Lease and Agreement, Pocahontas, to the extent it has the
legal right so to do, hereby leases to Sunny Ridge for the remaining period of
Sunny Ridge Papers, the right of mining and removing, by any method of mining,
all of the coal from the Middle Whitesburg Seam of coal and seams above the
Middle Whitesburg up to but not including the lower bench of the Fireclay (a/k/a
Chilton) Seam of coal within a parcel of land containing 1,730.74 acres, more or
less, situated in Pike County, Kentucky, generally on the waters of Pond Creek
and Left and Right Forks of Blackberry Creek, tributaries of Tug Fork, and being
more fully shown on colored map attached hereto and made a part hereof and
marked in the lower right-hand corner thereof: "Pocahontas Development
Corporation, Bluefield, West Virginia, No. 1707-C, October 21, 1998, BLM."
Said 1,730.74 acres, more or less, are made up of different tracts
or parcels of land in which Pocahontas Development Corporation owns the fee, the
minerals or the coal only, and which for convenience of designation are as
follows (the areas given being by estimation only and are not to be construed as
a warranty of acreage):
TABLE OF AREA
Tract or Parcel Area in Acres
out of which area is taken Fee Min Coal Total
-------------------------- ------ ------ ----- ------
Pt. Tract No. 100 - Joseph A. Runyon 60.24 2.18 - 62.42
Pt. Tract No. 101 - L. D. Stump - 300.72* - 300.72
Pt. Tract No. 162 - Wallace J. Williamson - 533.24 - 533.24
Pt. Tract No. 169 - Ephriam Hatfield 63.33 1.58 - 64.91
Pt. Tract No. 170 - J. P. Hatfield 14.16 14.73 - 28.89
Pt. Tract No. 171 - Jacob Hatfield 0.15 47.43 - 47.58
Tract No. 172 - Martha Scott - 41.40 - 41.40
Tract No. 173 - J. Hatfield - 26.90 - 26.90
Pt. Tract No. 174 - James Hatfield 184.41 0.10 - 184.51
Pt. Tract No. 174-B - S. Sullivan - 1.24 - 1.24
Pt. Tract No. 175 - Thomas Hatfield 105.80 - - 105.80
Pt. Tract No. 176 - W. J. Williamson 149.56 - - 149.56
Tract No. 183 - J. Dotson 27.20 - - 27.20
Tract No. 184 - T. M. Dotson 26.35 - - 26.35
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<PAGE>
Tract No. 185 - T. M. Dotson 25.45 - - 25.45
Tract No. 186 - Ferrel Coleman Heirs 91.64 - - 91.64
Pt. Tract J - Rouge Steel - - 8.47 8.47
Pt. Tract Q - Rouge Steel - - 4.46 4.46
------ ------ ----- --------
TOTAL 748.29 969.52 12.93 1,730.74
* POCAHONTAS DEVELOPMENT CORPORATION DOES NOT OWN THE OIL AND GAS.
SUBJECT, HOWEVER TO RIGHTS OF:
(a) Lauren Land Company of the right to mine the Upper Alma, Lower
Cedar Grove, Upper Cedar Grove and Williamson Seams of coal and seams above up
to but not including the Middle Whitesburg Seam under amended and restated lease
dated February 22, 1993, recorded in the County Court Clerk's Office in Pike
County, Kentucky, in Book No. 722, page 558, from Pocahontas Development
Corporation,
(b) Stone Mining Company of the right to mine the Lower Alma Seam of
coal only under amended and restated lease dated February 22, 1993, recorded in
aforesaid Clerk's Office in Pike County, Kentucky, in Book 722, page 546, from
Pocahontas Development Corporation;
(c) Belfry Coal Corporation, successor to McAndrews Development,
Ltd., or the right to mine certain areas of the Pond Creek Seam of coal only,
under lease dated August 1, 1995, from Pocahontas Development Corporation;
(d) Ashland Exploration, Inc., successor in title to Columbian Fuel
Corporation, under oil and gas lease dated December 15, 1941, recorded in
aforesaid Clerk's Office in Book No. 222, page 500, from Ford Motor Company,
remote predecessor in title of Pocahontas Development Corporation;
(e) Kentucky Power Company for rights-of-way for electric power
transmission lines and appurtenances as now located and in use;
-3-
<PAGE>
(f) Commonwealth of Kentucky for the use and benefit of the
Transportation Cabinet, and the public for right-of-way for public roads as may
now be located and in use;
(g) Others in any and all transmission lines, pipelines,
rights-of-way, easements or other restrictions as may or may not appear of
record; and
(h) The public, United States of America, Commonwealth of Kentucky,
riparian owners and others, if any, in and to the beds and streams of all
waterways which may be included within the boundaries of the aforesaid 1,730.74
acres, more or less.
THIS SUPPLEMENTAL LEASE AND AGREEMENT is subject to and shall be
governed by all the terms and provisions of Sunny Ridge Papers, as fully as if
the properties herein leased were originally included in the Sunny Ridge
Leasehold, and shall be subject to all the exceptions, reservations and
limitations therein described; IT BEING AGREED that rights included herein do
hereby become part of the Sunny Ridge Papers as fully and with the same effect
as if said rights had been included in the Sunny Ridge Papers at the time of
execution thereof.
THIS SUPPLEMENTAL LEASE AND AGREEMENT is upon further terms and
provisions as follows:
FIRST: Lessee shall pay to Lessor as rent a royalty of (i) Eight
Percent (8%) of the average gross selling price per net ton of 2,000 pounds of
coal mined by surface mining method; and (ii) Six Percent (6%) of the average
gross selling price per net ton of 2,000 pounds of coal mined by deep mining
method, from the aforesaid seams of coal within said 1,730.74 acres, calculated
and reported on a monthly basis.
SECOND: There shall be no increase in the advance minimum annual
rental payable by Lessee to Lessor provided for in Section 3.1 of Original Lease
by virtue of this
-4-
<PAGE>
Supplemental Lease and Agreement, and, production royalties paid by Lessee to
Lessor for coal mined from the seam of coal included herein shall apply toward
recoupment of the advance minimum annual rentals provided for in Section 3.2 of
Original Lease.
THIRD: Original Lease, as herein supplemented, shall remain in full
force and effect.
WITNESS the following signatures and seals as of the date first
above written.
Executed in two (2) counterparts.
POCAHONTAS DEVELOPMENT CORPORATION
Attest: By
/s/ Robert N. Stephens /s/ Daniel D. Smith
Assistant Corporate Secretary Daniel D. Smith
President
-5-
<PAGE>
SUNNY RIDGE ENTERPRISES, INC.
By
Attest:
/s/ John M. Potter /s/ John M. Potter
Secretary -----------------------------
Its President
STATE OF WEST VIRGINIA )
) To-wit:
COUNTY OF MERCER )
I, Cathy T. Buzzo, a Notary Public of said County, do certify that
Daniel D. Smith, President, who signed the writing above, dated as of October
27, 1998, for said Pocahontas Development Corporation, has this day in my said
County, before me, acknowledged the said writing to be the act and deed of said
Corporation.
Given under my hand and official seal this 27th day of October,
1998.
/s/ Cathy T. Buzzo
-------------------------
Notary Public
My commission expires: August 16, 1998.
-6-
<PAGE>
STATE OF KENTUCKY )
) To-wit:
COUNTY OF PIKE )
I, Debra L. Smith, a Notary Public of said County, do certify that
John M. Potter, its President, who signed the writing above, dated as of October
27, 1998, for said Sunny Ridge Enterprises, Inc., has this day in my said
County, before me, acknowledged the said writing to be the act and deed of said
Corporation.
Given under my hand and official seal this 28th day of October,
1998.
/s/ Debra L. Smith
-------------------------
Notary Public
My commission expires: 10-6-2002.
This instrument prepared by Ernest F. Hays, II, Attorney at Law,
Bluefield, West Virginia 24701.
/s/ Ernest F. Hays, II
-------------------------
C:\Lease\SunnyRidge.2-Sup
-7-
<PAGE>
THIS SUPPLEMENTAL LEASE AND AGREEMENT, made as of November 22nd,
1999, between POCAHONTAS DEVELOPMENT CORPORATION (Pocahontas), a corporation of
Kentucky, with a mailing address of Post Office Box 1517, Bluefield, West
Virginia 24701, Lessor, and SUNNY RIDGE ENTERPRISES, INC. (Sunny Ridge), a
corporation of Kentucky, with a mailing address of 2000 Ashland Drive, Ashland,
Kentucky 41101, Lessee;
WITNESSETH:
WHEREAS:
1. By lease dated January 1, 1997 (hereinafter called "Original
Lease") Pocahontas leased to Sunny Ridge, for a period of ten (10) years, from
January 1, 1997 through December 31, 2006, subject to renewal for additional ten
(10) year periods, the sole and exclusive right of mining and removing various
seams of coal within nine (9) parcels of land, containing in the aggregate
7,693.48 acres, more or less, situated in Pike County, Kentucky, on the waters
of Pond Creek and Left and Right Forks of Blackberry Creek of Tug Fork, as
therein described, subject to exceptions and reservations and upon the terms and
provisions therein contained;
2. By supplemental lease dated May 26, 1998 (hereinafter called
"First Supplemental Lease"), Pocahontas leased to Sunny Ridge, for the remaining
period of Original Lease, the right of mining and removing, by any method of
mining, all of the coal of the Upper Alma Seam of coal only within a parcel of
land containing 478.01 acres, more or less, as therein identified, and upon the
terms and provisions contained therein;
3. By supplemental lease dated October 27, 1998 (hereinafter called
"Second Supplemental Lease"), Pocahontas leased to Sunny Ridge, for the
remaining period of Original Lease, the right of mining and removing, by any
method of mining, all of the coal of the Middle Whitesburg Seam of coal and
seams above the Middle Whitesburg up to but not including the lower bench of the
Fireclay (a/k/a Chilton) Seam of coal within a parcel of land containing
1,730.74 acres, more or less, as therein identified, and upon the terms and
provisions contained herein;
(Said Original Lease, First Supplemental Lease, and Second
Supplemental Lease are hereinafter collectively referred to as
"Sunny Ridge Papers" and the properties covered thereby are
hereinafter referred to as the "Sunny Ridge Leasehold"); and
4. Pocahontas, to the extent it has the legal right so to do, has
agreed to lease to Sunny Ridge for the remaining period and upon the same terms
and conditions of Sunny Ridge Papers, the right of mining and removing, by
surface mining method only, all of the coal
<PAGE>
of the Lower Alma Seam only within ten parcels of land containing in the
aggregate 224.24 acres, more or less, as hereinafter identified, and upon the
terms and provisions contained herein.
NOW, THEREFORE, in consideration of the premises contained
herein, the mutual benefit to be derived by the parties hereto and the continued
performance and observance by Sunny Ridge of all the terms and conditions of the
Sunny Ridge Papers and this Supplemental Lease and Agreement, Pocahontas, to the
extent it has the legal right so to do, hereby leases to Sunny Ridge for the
remaining period of Sunny Ridge Papers, the right of mining and removing, by
surface mining method only, all of the coal from the Lower Alma Seam only within
ten (10) parcels of land containing in the aggregate 224.24 acres, more or less,
situated near McVeigh in Pike County, Kentucky, on the waters of Pond Creek and
Ball Fork of same; and partly on Right Fork of Blackberry Creek and Middle,
Smith and Rockhouse Branches of same and being more fully shown on colored map
attached hereto and made a part hereof and marked in the lower right-hand corner
thereof: "Pocahontas Development Corporation, Bluefield, West Virginia, No.
1748-C, October 26, 1999, TDD."
Said 224.24 acres, more or less, are made up of different
tracts or parcels of land in which Pocahontas Development Corporation owns the
fee, or the minerals and for taxation purposes are as follows (the areas given
being by estimation only and are not to be construed as a warranty of acreage):
Parcel Nos. 1 thru 4 aggregating 41.17 acres, more or less, of
fee land are part of the lands generally charged to Pocahontas Development
Corporation on the Land Book of said Pike County, Kentucky, for the tax year
2000, as Tract No. 32-PK-14; 1,352.75 acres fee, Belfry, KY. and Matewan,
W.Va.-KY. Quadrangles.
-2-
<PAGE>
Parcel Nos. 5 thru 10 aggregating 183.07 acres, more or less, of
minerals are generally charged as Tract No. 32-PK-01; 11,208.82 acres mineral,
Belfry, KY. and Matewan, W.Va.-KY. Quadrangles.
SUBJECT, HOWEVER, TO RIGHTS OF;
(a) Lauren Land Company, under lease dated February 22, 1993,
recorded in the County Court Clerk's Office in Pike County, Kentucky, in Book
No. 722, page 558, from Pocahontas Development Corporation, of the right to mine
the Upper Alma Seam of coal and seams above up to, but not including, the Peach
Orchard Seam and seams above within all parcels included herein;
(b) Ashland Exploration, Inc., successor in title to Columbian Fuel
Corporation, under oil and gas lease dated December 15, 1941, recorded in
aforesaid Clerk's Office in Book No. 222, page 500, from Ford Motor Company,
remote predecessor in title of Pocahontas Development Corporation;
(c) KV Oil & Gas, Inc., under oil and gas lease dated May 3, 1985,
recorded in Pike County in Deed Book No. 586, page 263, from Rouge Steel
Company;
(d) Others in the surface and any minerals not owned by Pocahontas
Development Corporation as may be located within the boundaries herein;
(e) Kentucky Power Company for the rights-of-way for electric power
transmission lines and appurtenances as now located and in use;
(f) Commonwealth of Kentucky, for state, county and other roads, and
others for pipelines or other rights-of-way or easements and restrictions as may
or may not appear of record; and
-3-
<PAGE>
(g) The public, United States of America, Commonwealth of Kentucky,
riparian owners and others, if any, in and to the beds and streams of all
waterways which may be included within the boundaries herein.
THIS SUPPLEMENTAL LEASE AND AGREEMENT is subject to and shall be
governed by all the terms and provisions of Sunny Ridge Papers, as fully as if
the properties herein leased were originally included in the Sunny Ridge
Leasehold, and shall be subject to all the exceptions, reservations and
limitations therein described; IT BEING AGREED that rights included herein do
hereby become part of the Sunny Ridge Papers as fully and with the same effect
as if said rights had been included in the Sunny Ridge Papers at the time of
execution thereof.
THIS SUPPLEMENTAL LEASE AND AGREEMENT is upon further terms and
provisions as follows:
FIRST: Lessee shall pay to Lessor as rent a royalty of Eight Percent
(8%) of the average gross selling price per net ton of 2,000 pounds of coal
mined by surface mining method from the Lower Alma Seam of coal only within said
224.24 acres, calculated and reported on a monthly basis.
SECOND: There shall be no increase in the advance minimum annual
rental payable by Lessee to Lessor provided for in Section 3.1 of Original Lease
by virtue of this Supplemental Lease and Agreement, and, production royalties
paid by Lessee to Lessor for coal mined from the seam of coal included herein
shall apply toward recoupment of the advance minimum annual rentals provided for
in Section 3.2 of Original Lease.
THIRD: Original Lease, as herein supplemented, shall remain in full
force and effect.
-4-
<PAGE>
WITNESS the following signatures and seals as of the date first
above written.
Executed in two (2) counterparts.
POCAHONTAS DEVELOPMENT CORPORATION
Attest: By
/s/ Robert N. Stephens /s/ Daniel D. Smith
Assistant Corporate Secretary Daniel D. Smith
President
SUNNY RIDGE ENTERPRISES, INC.
Attest: By
/s/ John Lynch /s/ Bernie Mason
Secretary -------------------------------
Its Vice President
-5-
<PAGE>
STATE OF WEST VIRGINIA )
) To-wit:
COUNTY OF MERCER )
I, Cathy T. Buzzo,a Notary Public of said County, do certify that
Daniel D. Smith, President, who signed the writing above, dated as of November
22nd, 1999, for said Pocahontas Development Corporation, has this day in my said
County, before me, acknowledged the said writing to be the act and deed of said
Corporation.
Given under my hand and official seal this 25th day of February,
2000.
/s/ Cathy T. Buzzo
------------------
Notary Public
My commission expires: August 16, 2008.
STATE OF KENTUCKY )
) To-wit:
COUNTY OF GREENUP )
I, Lavina K. Conley, a Notary Public of said County, do certify that
Bernie Mason, its Vice-President, who signed the writing above, dated as of
November 22nd, 1999, for said Sunny Ridge Enterprises, Inc., has this day in my
said County, before me, acknowledged the said writing to be the act and deed of
said Corporation.
Given under my hand and official seal this 26 day of January, 2000.
/s/ Lavina K. Conley
-------------------------
Notary Public
My commission expires: June 13, 2002.
This instrument prepared by Stephen M. Hopta, Attorney at Law,
Bluefield, West Virginia 24701.
/s/ Stephen M. Hopta
---------------------------
C:\Lease\SunnyRidge.3-Sup
-6-
<PAGE>
THIS SUPPLEMENTAL LEASE AND AGREEMENT, made as of May 30, 2001,
between POCAHONTAS DEVELOPMENT CORPORATION (Pocahontas), a corporation of
Kentucky, with a mailing address of Post Office Box 1517, Bluefield, West
Virginia 24701, Lessor, and SUNNY RIDGE ENTERPRISES, INC. (Sunny Ridge),
corporation of Kentucky, with a mailing address of 2000 Ashland Drive, Ashland,
Kentucky 41101, Lessee;
WITNESSETH:
WHEREAS:
1. By lease dated January 1, 1997 (hereinafter called "Original
Lease"), Pocahontas leased to Sunny Ridge, for a period of ten (10) years, from
January 1, 1997 through December 31, 2006, subject to renewal for additional ten
(10) year periods, the sole and exclusive right of mining and removing various
seams of coal within nine (9) parcels of land, containing in the aggregate
7,693.48 acres, more or less, situated in Pike County, Kentucky, on the waters
of Pond Creek and Left and Right Forks of Blackberry Creek of Tug Fork, as
therein described, subject to exceptions and reservations and upon the terms and
provisions therein contained;
2. By supplemental lease dated May 26, 1998 (hereinafter called
"First Supplemental Lease"), Pocahontas leased to Sunny Ridge, for the remaining
period of Original Lease, the right of mining and removing, by any method of
mining, all of the coal of the Upper Alma Seam of coal only within a parcel of
land containing 478.01 acres, more or less, as therein identified, and upon the
terms and provisions contained therein;
3. B |
