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EXHIBIT 10(p)
AMENDMENT AND RESTATEMENT
OF
VIRGINIA LEASE
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TABLE OF CONTENTS
Article Page
1. PREMISES LEASED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. LESSEE'S RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3. LESSOR'S RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(a) Minerals, Oil and Gas Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(b) Water Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(c) Timber Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(d) Railroad Rights-of-Way Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(e) Coal Bed Methane Extraction Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(f) Other Lessees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4. TERM OF LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5. QUIET ENJOYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
6. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(a) Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(b) Ton . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(c) Workable and Merchantable Coal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(d) Auger Method of Mining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(e) Highwall Method of Mining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
7. ROYALTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(a) Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(b) Royalty Computation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(c) Terms for Royalty Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(d) Coal Excepted from Royalty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(e) Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
8. MINIMUM MONTHLY RENTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
9. REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
10. MINING OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(a) Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(b) Coal Left Standing for Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(c) Coal Left Standing Upon Abandonment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
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Table of Contents (cont'd)
Article Page
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(d) Settlement of Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(e) Maps of Existing Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(f) Proposed Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(g) Maintenance of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
11. DISPUTE SETTLEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
12. INSPECTIONS AND TRESPASS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
13. TERMINATION OF LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(a) Date of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(b) Condition of the Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(c) Valuation of Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
14. COKE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
15. TRANSPORTATION RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(a) Lessee's Rights Without Charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(b) Lessor's Rights Without Charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(c) Lessee's Rights Subject to Charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(d) Lessor's Rights Subject to Charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(e) Reports and Payments by Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(f) Reports and Payments by Lessor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
16. TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
17. BLACK LUNG BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
18. ASSIGNMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
19. FORFEITURE CLAUSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
20. RIGHTS OF SUCCESSORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
21. ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
22. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
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Table of Contents (cont'd)
Article Page
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23. COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
24. FIRE DAMAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
25. DAMAGE TO OTHER COAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
26. PRE-1924 AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
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AMENDMENT AND RESTATEMENT OF
VIRGINIA LEASE
THIS IS AN AMENDMENT AND RESTATEMENT OF VIRGINIA LEASE (the "Lease")
dated May __, 1996, between PENN VIRGINIA COAL COMPANY, a Virginia corporation
("Lessor"), and WESTMORELAND COAL COMPANY, a Delaware corporation ("Lessee").
BACKGROUND
A. Lessee and Lessor (as successor-in-interest to Penn Virginia
Resources Corporation, a Virginia corporation) are parties to a certain
Amendment and Restatement of Lease, effective as of July 1, 1988, as amended
(collectively, the "Original Lease"), pursuant to which Lessee leased, for coal
mining purposes, certain parcels of land situated in Lee and Wise Counties,
Virginia and Harlan and Letcher Counties, Kentucky, as more particularly
described in the Original Lease.
B. Lessee and Lessor now wish to amend and restate the Original
Lease pursuant to the terms and conditions hereunder.
For good and valuable consideration and intending to be legally bound,
Lessor and Lessee hereby agree that the Original Lease is amended and restated
in its entirety to read as follows:
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A2. PREMISES LEASED.
Lessor, in consideration of the rent to be paid and the other promises
of Lessee, as set forth below, agrees to lease to Lessee, commencing January 1,
1924, the tracts or parcels of land situated in Lee County and Wise County,
Virginia and in Harlan County and Letcher County, Kentucky as cross-hatched in
red on seven (7) maps set forth as Exhibit F 1 through and including F 7
attached hereto and shaded in magenta on Exhibit F-7, all bearing the legend
"Agreement Among Penn Virginia Coal Company, Penn Virginia Equities Corporation
and Westmoreland Coal Company, dated May ___, 1996" (collectively, the "Lease
Map"), which tracts or parcels of land are identified on the Lease Map as "Area
Leased by Westmoreland Coal Company pursuant to the 1996 Amended Restated
Lease" (sometimes hereinafter referred to as "premises" or "leased premises").
Lessor also leases to Lessee all structures on the leased premises,
not specifically excepted in this Lease, including coke ovens, tipples,
buildings and other improvements. Should Lessor subsequently acquire any other
interest in the premises, those interests will also come under this Lease and
be transferred to Lessee.
A1. LESSEE'S RIGHTS.
This Lease is for coal mining purposes. Lessee shall have the
exclusive right to mine, prepare and take away the coal from the seams
identified within the leased premises shown on the Lease Map, by any deep
method of mining, surface method of mining, auger method of mining, highwall
method of mining or any other method of mining. Lessee agrees that it will
always exhibit due regard for the value of the remaining and adjacent areas as
mineral bearing properties.
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The Lessee is granted the right to use the surface of the leased
premises necessary for mining or processing including the right to deposit
refuse, mud, slack, dirt, coke, sawdust and other such materials in such
locations as Lessee and Lessor may agree upon; together with the necessary or
convenient ingress and egress to the leased premises and to other property and
reserves owned or controlled by Lessee as of the date hereof over and through
Lessor's property including underground reserves at locations mutually
acceptable to both Lessor and Lessee.
The Lessee is granted the right to cut, clear and dispose of all
timber, brush, vegetation, etc. on the leased premises necessary or convenient
for Lessee's coal mining purposes hereunder (and not for commercial timbering
purposes) but only after having given Lessor reasonable notice of the areas to
be cut or cleared;
The Lessee is granted the right to use stone, sand and loam from the
leased premises and the right to use any water for mining or processing
purposes originating on or flowing over, through or under the leased premises,
except as reserved to Lessor hereinafter so long as Lessee's use does not
unreasonably interfere with the Lessor's operations. Lessee and Lessor shall
conduct their operations and use of the surface to the mutual benefit of both
Lessee and Lessor, and shall endeavor to cooperate in a manner so as to
minimize, to the extent possible, the effects of mining and surface use upon
the operations above, below and adjacent to the leased premises.
Lessee and Lessor recognize there will be multiple coal lessees
operating on Lessor's property, as well as timber, oil and gas operations.
Recognizing there will be increased demand for surface areas and roads on the
Lessor's property, Lessee and Lessor agree to cooperate with each
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other and their permitted assigns to coordinate and plan the development and
use of the coal, surface and roads, and oil and gas pipelines so the
interference to the operations of each is minimized. Nothing in this Lease
shall be deemed or interpreted to abrogate or diminish Lessee's rights under
State or Federal law with respect to oil and gas regulations, to consent to or
approval of any use of the premises.
Lessee shall have the right to use the surface of certain property of
Lessor identified below (which property has not heretofore been identified as
the "leased premises" in this Lease), and the right of ingress and egress in
connection with such property for the purposes described below:
1. for the purposes of reclamation and maintenance in
connection with work required to be performed by Lessee under the
permits listed on Exhibit A attached hereto, the property subject to
such permits for the respective time periods set forth thereon;
2. for the purpose of transportation of coal in
connection with Lessee's operations on the leased premises, each
existing rail line of Lessee on Lessor's properties adjacent to the
leased premises until such time as Lessee no longer reasonably
requires such rail lines for its operations on the leased premises;
3. for the purpose of obtaining power in connection with
Lessee's operations on the leased premises and in connection with
Lessee's obligations to maintain certain power lines, such power lines
of Lessee as presently exist on Lessor's properties adjacent to the
leased premises until termination of the Lease; and
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4. for the purpose of continuing Lessee's use of certain
facilities in connection with Lessee's operations on the leased
premises, such buildings and improvements as set forth on Exhibit B
attached hereto for the respective time periods set forth thereon.
All of the above-described surface areas shall be deemed to be
part of the "premises" or "leased premises" for purposes of Articles 3, 5,
10(g), 11, 12, 13, 16, 17, 18, 19, 20, 21, 22, 23 and 24 of this Lease.
Subject to the provisions of Article 18 hereunder, including
without limitation the provisions requiring Lessor's reasonable consent, Lessee
may assign its rights under this Lease independently from its other rights
under this Lease, insofar as this Lease relates to the following two portions
of the leased premises: (1) that portion shaded in magenta on Exhibit F-7
attached hereto and identified thereon as "Addition to 1996 Amended Restated
Lease"; and (2) that portion cross-hatched in red on Exhibit F-7 attached
hereto and identified thereon as "Upper Parsons Seam - 16.0 Acres."
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A1. LESSOR'S RIGHTS.
(a) MINERALS, OIL AND GAS RIGHTS. Lessor reserves the exclusive
right to all minerals (except the coal leased hereunder), oil and gas in, under
or upon the leased premises. This includes the full right of ingress and
egress and all other rights necessary for the efficient discovery, production,
removal, processing, preparation and transportation of such minerals, oil and
gas. Lessor may use as much of the surface of the premises as is necessary to
carry out its operations involving such minerals, oil and gas. Lessor may
assign all or any part of these mineral, oil and gas rights, or any interest
therein, to any other person or entity. Lessor reserves, for itself or for
anyone to whom it assigns its rights, the right-of-way for power lines and
telephone lines and the right to set up or install buildings or machinery on
the premises for its mineral, oil and gas operations. Lessor agrees to consult
with Lessee before placing or locating any such right-of-way and/or buildings
or machinery on the premises.
(b) WATER RIGHTS. Lessor reserves the right to use as much of the
water originating on or flowing through or under the leased premises as may be
required for Lessor's timber, mineral, oil or gas operations on the premises.
However, Lessee shall have the exclusive right to use water from any wells that
it drills on the premises.
(c) TIMBER RIGHTS. Lessor reserves the right to go onto the
premises and to use as much thereof as is necessary for the cutting, processing
and transportation of the timber on the leased premises. This shall include
the right to erect sawmills and other buildings and to store timber and logs on
the premises for the purpose of exercising such rights. Lessor also reserves
the right to construct and operate roads and railways of any kind on the
premises for the purpose of
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exercising such rights. Lessor may assign to any person or entity these rights
relating to the surface of the premises. Lessor agrees to give Lessee
reasonable notice of its or any assignee's intentions to exercise any right
reserved under this Article and agrees to cooperate in good faith with Lessee
in the exercise of any such rights to the mutual benefit of both Lessor and
Lessee.
(d) RAILROAD RIGHTS-OF-WAY RIGHTS. Lessor reserves the right to
grant to any railroad rights-of-way to as much of the surface of the premises
as may be required for the railroad to reach points on or beyond the premises.
Lessor may also grant rights-of-way to such railroad for yards, stations,
sidings and similar purposes. These rights, however, may only be exercised
after consultation with Lessee.
(e) COAL BED METHANE EXTRACTION RIGHTS. Lessor reserves the right
to extract methane for commercial purposes from the leased premises; however,
such right shall not in any manner limit or restrict Lessee from venting and
releasing methane as a part of its mining operations and activities.
(f) OTHER LESSEES. Lessee and Lessor have acknowledged the
probability that multiple lessees will have leasehold rights on Lessor's
property above, below and adjacent to the leased premises. Lessor agrees that
in connection with such other current or future leasehold estates, Lessor shall
not grant to any other lessee a dominant estate in connection with such other
lessee's leasehold interest. Lessee acknowledges and agrees that its leasehold
interest and estate created hereby is neither dominant nor subservient to the
interest or estate of any such other current or future lessee of Lessor's
property above, below and adjacent to the leased premises and shall be subject
to and benefit from the cooperation provisions of Article 2 above.
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A2. TERM OF LEASE.
Lessee's rights to the leased premises, as set forth in this Lease,
shall continue until all the workable and merchantable coal (as defined in
Article 6) on or under the premises has been exhausted, unless either party's
failure to comply with any of the terms and conditions of this Lease leads to
an earlier termination.
A3. QUIET ENJOYMENT.
Lessor promises that as long as the rental is paid and the other terms
of this Lease are fulfilled, Lessee, or anyone who lawfully succeeds to
Lessee's interest, shall be able peacefully to enjoy, possess and use the
premises without interruption or disturbance from any other persons.
A4. DEFINITIONS.
(a) YEAR. A year, as used in this Lease, will begin on the 1st
day of January and end on the 31st day of December, unless the context
indicates otherwise.
(b) TON. A ton of coal or coke, as referred to in this Lease,
contains two thousand pounds, avoirdupois weight.
(c) WORKABLE AND MERCHANTABLE COAL. Workable and merchantable
coal means coal which, when reached in the prosecution of Lessee's operations
hereunder, can be ordinarily mined and sold at a profit by the use of such then
current modern mining methods and cleaning machinery and equipment as are
reasonably adapted to practical, efficient and economical mining under the
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conditions found and in conformity with prudent mining practices and diligent
and skillful management.
(d) AUGER METHOD OF MINING. A method of mining used in
conjunction with strip mining which utilizes a machine on the surface which
mechanically powers a fixed cutter head which bores into the exposed coal seam
and conveys the coal to the surface by means of spiraled steel (auger). A
Salem auger with single, double or triple heads is an example (as of July 1,
1988) of a machine utilized in the auger method of mining.
(e) HIGHWALL METHOD OF MINING. A method of mining which utilizes
a machine placed on and operated from the surface with an independent cutting
device (generally similar to a continuous miner head) which is electrically or
hydraulically powered from the surface. The machine is used to excavate into a
coal seam which has been exposed (usually by strip mining) and to recover coal
without further removal of overburden. The Thin Seam Miner, Video Miner,
Vacuum Miner and Satellite Miner are examples (as of July 1, 1988) of machines
utilized in the highwall method of mining.
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A5. ROYALTIES.
(a) SCHEDULES. On or before the 25th day of each calendar month,
Lessee shall pay to Lessor at its office in Duffield, Virginia (or any other
place that Lessor may designate in writing), a royalty on the coal mined from
the leased premises that was either shipped from the premises or sold for
consumption on the premises during the preceding calendar month. The royalty
shall be determined by multiplying the gross sales proceeds, as adjusted under
Section (b) of this Article, by the applicable percentage from the following
schedules:
SCHEDULE 1. On coal mined by strip and auger methods:
July 1, 1988 through 9.0%
June 30, 1998
SCHEDULE 2. On coal mined by the deep method, except from
the seams described in
Schedule 3 below:
July 1, 1988 through 7.0%
June 30, 1998
SCHEDULE 3. On coal mined by the deep method from the
Marker Seam (which involves
high mining costs):
July 1, 1988 through 6.0%
June 30, 1993
SCHEDULE 4. On coal mined by the highwall method:
July 1, 1988 through 8.0%
June 30, 1998
Notwithstanding the foregoing percentages or the royalty computation
calculated pursuant to Article 7, Section (b), the minimum royalty to be paid
to Lessor shall be $1.50 per ton.
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However, this per ton minimum shall not apply to the royalty computation on
coal mined by the deep method from the Marker Seam from July 1, 1988 through
June 30, 1993.
With respect to that portion of the leased premises shown in red on
Exhibit E attached hereto and identified as Drawing Number BULSE-AB.Dwg, dated
August, 1994, in lieu of the royalties set forth in this Article 7(a), Lessee
shall pay to Lessor a flat royalty rate of $1.75 per clean ton of coal sold for
all coal mined from such portion of the leased premises and either shipped from
the premises or sold for consumption on the premises during the preceding
calendar month, and such payments shall otherwise be made in the manner set
forth in this Lease.
(a) ROYALTY COMPUTATION. The royalty payment shall be calculated
monthly on a mine-by-mine basis by applying the applicable percentage royalty
rate for the seam and method of mining to the remainder of the gross sales
proceeds (i.e., amount billed to the purchaser) for the month after deduction
of the following items:
1. The total cost of railroad transportation for the month from
the mines to Lessee's Appalachia Transloader facility. This deduction applies
only to coal shipped from the Transloader and applies whether or not the
selling price of such coal expressly includes such cost. If the selling price
of any other coal from the premises includes any freight or transportation
charges, those charges shall be deducted from the price of that coal.
2. The total fee charged for use of Lessee's Appalachia
Transloader facility. This deduction applies only to coal shipped from the
Transloader and applies whether or not the selling price of such coal expressly
excludes such cost.
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3. The total amount of those federal, state and local taxes paid
by Lessee with respect to the coal, which are either measured directly by such
coal or by the gross proceeds of such coal (such as severance taxes,
reclamation taxes and fees, and black lung assessments) or which are
substantially unique to the energy industry. These deductions shall not
include general, real or personal property taxes; general taxes on income,
earnings or net proceeds; general business or license taxes (except those
license taxes which are in lieu of severance taxes); general sales taxes; or
social security, employment or similar taxes. Deductions for taxes shall be
made under this subsection whether or not the selling price of such coal
expressly includes such taxes.
4. A royalty deduction component calculated by multiplying the
gross sales proceeds by the applicable royalty percentage rate for the seam and
method of mining.
If any at any time during the term in which these royalty rates are in
effect, the structure of taxes applicable to Lessee becomes significantly
different than it was on July 1, 1988, so that the ratio of taxes deductible
from the selling price (Item 3 above) to the taxes not so deductible is
significantly changed, the parties will attempt in good faith to renegotiate
the provisions of that subsection. If they are unable to do so within thirty
(30) days after notice to one party by the other, either party may refer the
matter to arbitration as provided in Article 21. The arbitrators may be asked
to determine whether or not a renegotiation is justified or what the change in
the deduction should be or both.
(b) TERMS FOR ROYALTY RATES. The royalty rate schedules and the
per ton minimum in Section (a) above will be effective for ten (10) years (that
is, until June 30, 1998), with the exception of the rate in Schedule 3 above
("high cost" coal) which will remain effective until
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June 30, 1993. Lessee may request Lessor to extend the term of any of the
schedules in Section (a) above as to a specific tonnage of coal where such
extension is reasonably necessary to effectuate a mutually beneficial,
advantageous long-term sales agreement with a third party for such coal.
Lessee may make such request to Lessor's President in Duffield, Virginia (or
such other representative as Lessor may hereafter designate), and accompany it
with sufficient detail so that it can be properly analyzed. Lessor's President
(or other representative as the case may be) shall approve, disapprove or
modify the request within ten (10) working days. If he disapproves it, or
modifies it in a way that is unacceptable to Lessee, Lessee may refer the
request to the chief executive officers of Lessee and Penn Virginia
Corporation, the parent company of Lessor, who shall consider the request in
good faith for an additional five (5) working days. If they cannot agree, the
request shall be deemed disapproved.
At any time within one (1) year prior to the final dates in the
royalty rate schedules (that is, after June 30, 1997 for all but the high cost
coal and after June 30, 1992 for the high cost coal) either party to this Lease
may call for negotiation to set new rate schedules to take effect at the
conclusion of the present rate schedules.
If the royalty rate schedules in this Lease terminate before the
parties can reach agreement on subsequent rates, the rates in effect at that
time shall continue in effect until the parties can agree on new royalty rates.
If the parties are unable to agree on new royalty provisions within ninety (90)
days after a call for negotiations, the dispute shall be submitted to
arbitrators as provided in Article 21, who shall fix such royalty rates at what
in their judgment would be fair and reasonable
18
provisions in a lease then made of the leased premises, without reference to
the royalty provisions previously in effect. New royalty rates agreed to by
the parties or fixed by the arbitrators shall apply retroactively to all coal
shipped since the termination date of the old rates, and suitable adjustments
in the royalty payments shall be made.
(c) COAL EXCEPTED FROM ROYALTY. Lessee may use a reasonable
quantity of coal on the premises in order to carry out its operations without
paying any royalty on that coal. Also, there shall be no royalty on any coal
disposed of as a waste product of Lessee's operations unless and until it is
later reclaimed and sold. Regular royalties shall be paid on any coal mined
from the premises that is consumed or shipped by anyone other than Lessee.
(d) INTEREST. Lessee shall pay interest to Lessor at the rate of
six percent (6%) per year compounded quarterly on all amounts not paid when
due.
A2. MINIMUM MONTHLY RENTAL.
(a) Lessee shall pay to Lessor at its office in Duffield,
Virginia, or at any other place that Lessor may designate in writing, each
calendar month the sum of FIFTEEN THOUSAND THREE HUNDRED FIFTY DOLLARS
($15,350.00) in cash as a minimum monthly fixed rent for the leased premises.
This sum shall be due each month regardless of whether or not Lessee mines any
coal from the premises during the month, subject to the suspension provisions
in Sections (c) and (d) below. Payment for each calendar month shall be made
on or before the 25th day of the succeeding month. Interest shall accrue at
the rate of six percent (6%) per year compounded quarterly on any sum not paid
when due.
19
(b) Each month production royalties for that month shall be
credited against this minimum rental so that no minimum rental payment shall be
due in any month where production royalties equal or exceed the minimum rental.
In any month where the production royalties fall short of the minimum rental,
the difference between the minimum rental paid and the production royalties for
that month shall be credited to Lessee's account for subsequent months. Lessee
shall then have the right to produce and ship, without paying any royalty, such
quantities of coal as would produce, at the royalty rates prevailing at that
time, a royalty amount equal to that credit. This right must be exercised in
the same calendar year as the credit accrues or within two (2) calendar years
thereafter. However, this right shall be limited by the termination of this
Lease, by expiration or otherwise.
(c) If Lessee, at any time, claims that the merchantable and
workable coal in the leased premises has been exhausted or that there remains
an insufficient amount of such coal that can be mined, using the methods
contemplated in this Lease, to produce at the prevailing royalty rate the
minimum monthly rental, then, upon verification of that claim, the minimum
monthly rental shall be reduced to an amount which can be produced by the
diligent mining efforts of Lessee, or this Lease shall be terminated. If
Lessor and Lessee cannot agree on these matters, the dispute will be settled by
arbitrators as provided in Article 21, in which event the arbitrators shall
decide what reduction, if any, should be made in the minimum monthly rental, or
whether the Lease should be terminated.
20
(d) If, because of force majeure, Lessee's coal operations on the
leased premises are at any time, for a period exceeding ninety (90) consecutive
days, suspended or reduced to a tonnage insufficient to pay the minimum rental,
the minimum monthly rental provisions described above shall thereafter be
suspended until the force majeure ends. If there is a dispute between Lessee
and Lessor as to whether or not a force majeure has occurred or is continuing,
or as to whether or not Lessee has used all reasonable possible means to avoid,
end or mitigate the force majeure, the dispute shall be referred to arbitration
as provided in Article 21 of this Lease. As used in this Section, "force
majeure" means any act or occurrence, beyond Lessee's control, that reasonably
prevents the mining, processing, transportation or delivery of coal, including,
but not limited to, the following: acts of God, legislation or regulations of
any governmental body, court orders or judgments, fire, flood, explosion or
other casualty, strikes, labor disputes or shortages, sabotage, acts of the
public enemy, riots, civil commotion, acts of any civil or military authority,
wars, major mine, plant, facility or equipment damage or failure, including
such failures caused by negligence of employees, materials shortages, embargoes
or unavailability of transportation facilities, faults in coal seams or acts on
the part of Lessor.
A3. REPORTS.
(a) Lessee shall accompany each payment of royalties or rentals
under Articles 7 and 8 with a detailed report showing all sales of coal,
calculation of selling prices, calculation of deductions to determine the
royalty base, calculation of royalties and such other information as Lessor may
reasonably request to verify the accuracy of the payments.
21
(b) On or before the 25th day of each month, Lessee shall deliver
to Lessor accurate reports showing the total tonnage and source of all coal
shipped from or sold for consumption on the property of Lessee's Virginia
Division during the preceding calendar month. Such reports shall also show the
tonnage of highwall mined coal, the tonnage of surface-mined and auger-mined
coal and the tonnage of deep-mined coal produced from each mine on the leased
premises for which a tonnage royalty is payable to Lessor that has been so
shipped or sold during the preceding calendar month. These reports shall be in
a form satisfactory to the Lessor and shall be delivered to Lessor's office at
Duffield, Virginia (or any other place that Lessor may designate in writing).
(c) Upon Lessor's written request, Lessee shall furnish monthly
railroad certificates which accurately show the quantity of coal and coke
shipped from the leased premises during the preceding calendar month. These
certificates will be signed by the weightmaster, or other appropriate officer
of any railroad company transporting coal or coke from the leased premises, and
will be delivered to Lessor's office on or before the 15th day of each month.
Lessee agrees to conform to any other reasonable requirements of Lessor to
assure the accurate ascertainment of the weight of any coal shipped from or
sold for consumption on the premises.
(d) Lessee's books and records pertaining to the mining and
disposition of coal from the leased premises shall be available for inspection
and copying by Lessor at all reasonable times, and shall be kept in a manner
satisfactory to Lessor.
22
A4. MINING OPERATIONS.
(a) METHODS. Henceforth the parties will communicate and
cooperate in all respects so that the viewpoints and interests of both are
taken into account.
Lessee shall continue to develop the leased premises in an orderly
manner to remove and process the coal as completely and as efficiently as
possible. Lessee will mine the workable and merchantable coal in the leased
premises in the most diligent and workmanlike manner consistent with
established mining practices and methods for conditions encountered, taking
into account available capital; the advisability of utilization of the
particular method, considering access to labor, necessary expertise, and sound
management practices; operating risks and safety and environmental
considerations; and the projected profitability of the particular method.
Lessee will not neglect or abandon any workable and merchantable coal that
could be removed in such a manner.
Lessee shall mine through portions of the coal seams that are faulty
or would yield unmerchantable coal, if the amount and quality of coal lying
beyond the fault appear economically justifiable. Any disputes with regard to
the placement of headings or airways shall be resolved in the manner described
in Article 11. Lessee will leave adequate pillars and supports of coal to
provide full security for all mine openings and workings, but it will not leave
any more workable and merchantable coal in those pillars and supports than is
necessary for such security.
The suitable, approved methods of mining include the deep method of
mining, surface method of mining, auger method of mining and highwall method of
mining. Lessor expressly approves the use of these methods. If Lessee
proposes to mine any area or areas by either the auger
23
method of mining or the highwall method of mining, Lessee must first obtain
Lessor's written consent; however, Lessor shall not unreasonably withhold such
consent. Lessee shall be responsible for all costs, charges or assessments
resulting from the use of these methods, including those imposed by any
existing or future legislation requiring the restoration of the surface.
Lessee shall reimburse and otherwise protect Lessor from any such costs that
might be assessed against Lessor.
(a) COAL LEFT STANDING FOR SUPPORT. Lessee shall have the
privilege of leaving unmined pillars of coal which are necessary to support
existing or planned surface features such as roads, railroads, streams,
pipelines, buildings or other structures on the leased premises. There shall
be no royalty payment on coal left for these support pillars.
(b) COAL LEFT STANDING UPON ABANDONMENT. If Lessee, in abandoning
any portion of a mine, leaves standing any coal which is workable and
merchantable according to those criteria enumerated in Section (a) above which
Lessor believes is not necessary for the security of the mine, Lessor may give
Lessee a written notice requesting Lessee to remove that coal. If Lessee has
not notified Lessor of its intent to remove or has not commenced such removal
within thirty (30) days after having received notice, the question of the
necessity of leaving the coal standing shall be resolved under the procedures
described in Article 11. If it is determined that Lessee could safely remove
any of the coal left standing, then within a period determined by the parties
or the arbitrators, as the case may be, Lessee shall either mine that coal or
pay Lessor the royalty that would have been due had the coal been mined and
shipped.
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(c) SETTLEMENT OF DISPUTES. If Lessor at any time believes that
any mine on the leased premises is not being worked in a proper manner, or is
being worked in a manner that would be harmful to the future production from it
or any other seam on the leased premises, or if there are any disputes as to
what coal is workable and merchantable, all such questions shall be resolved in
the manner provided for in Article 11 of this Lease.
(d) MAPS OF EXISTING OPERATIONS. Lessee shall furnish to Lessor
maps and/or drawings which accurately show the workings and extensions of
Lessee's mining operations on the leased premises through June 30 and December
31 of each year. In addition, they shall include any other reasonable
information requested by Lessor. The maps and/or drawings shall be on an
acceptable scale and shall be certified by a registered engineer. The maps
and/or drawings shall be delivered to Lessor at its office in Duffield,
Virginia (or such place as it may designate in writing) at the time such
material is submitted to the Mine Safety and Health Administration of the U.S.
Department of Labor but in no event later than March 15 and September 15 of
each year. Lessor shall also have the right to examine at reasonable times all
other maps of Lessee pertaining to the leased premises and to make copies of
them.
(e) PROPOSED PLANS. Upon request by Lessor at any time, Lessee
shall prepare and make available for inspection and copying by Lessor, at the
appropriate office of Lessee, plans it may have for the projection of its
mining and other operations including reclamation and conservation plans during
the next six (6) months, and such other long-range plans that shall have been
completed, and all similar plans of its contractors and sublessees. These
plans shall show, in the case of mining operations, the proposed methods of
haulage, ventilation, drainage and roof
25
support in the areas proposed to be mined, including entries, haulways, airways
and rooms, with specifications and dimensions. Such plans shall also include
any other reasonable information or explanation requested by Lessor, and they
shall be certified by a registered engineer.
Lessee shall promptly notify Lessor of any proposed material changes
in its mining, reclamation or conservation plans or practices, or those of its
contractors and sublessees, and Lessee shall consult with Lessor before any
plan or change is adopted.
Lessor may at any time request that any plans or changes proposed by
Lessee or any of its contractors or sublessees be modified in order to conform
to any law, regulation or sound principle of mining, to increase coal
production and recovery or otherwise to conform to any provision of this Lease.
Lessee shall consider any such request and shall promptly communicate its
response to Lessor. If the parties are unable to agree on such modifications,
the dispute shall be settled in accordance with the procedures set forth in
Article 11.
Lessee agrees to give Lessor reasonable notice of its or any
contractor or sublessee's intentions to permit (under applicable state law) any
area on or in the leased premises and agrees to cooperate in good faith with
Lessor in this regard to the mutual benefit of both Lessor and Lessee.
(a) MAINTENANCE OF PROPERTY. Lessee will maintain the leased
premises in an orderly and safe condition and will maintain all improvements on
the premises in good working order and condition at all times. Lessee will
make all repairs, renovations, additions and improvements necessary or
desirable to maintain the proper condition of the premises and to assure that
Lessee's coal operations will always be carried out in an efficient, safe and
businesslike manner and in
26
substantial compliance with all applicable laws. Lessee will either remove all
unused structures or maintain them (or any area from which they are removed) in
a safe, orderly condition.
A2. DISPUTE SETTLEMENT.
Any dispute which is to be settled under this Article shall in the
first instance be reviewed by the respective chief mining engineers of the
parties. If the chief mining engineers cannot resolve the dispute within
thirty (30) days after one party notifies the other party of the dispute, the
matter will be referred to Lessee's Senior Vice President- Coal Mining and
Lessor's President (or to the persons succeeding to the responsibilities of
such persons). If those officers cannot agree within a further period of
thirty (30) days, the matter will be referred to a committee consisting of
representatives from the Boards of Directors of Lessee and Lessor for
resolution. If the dispute remains unresolved for sixty (60) days after
referral to that committee, it shall be settled by arbitration as provided in
Article 21 of this Lease.
A3. INSPECTIONS AND TRESPASS.
(a) Lessor, or any persons acting on its behalf, shall have the
right to enter at all reasonable times the leased premises, including the mines
and buildings of Lessee and all areas on or below the surface, for the purpose
of inspecting, surveying or examining any aspect of Lessee's operations on the
premises. Lessee will furnish Lessor with all convenient means of access to
inspect the premises, without cost to Lessor.
27
(b) Lessor, or any person acting on its behalf, shall also have
the right to enter the premises at all reasonable times to inspect for or
prevent any trespass. Lessee will use its best efforts to keep trespassers off
the premises, and will take, when appropriate, legal action to prosecute any
trespassers.
A4. TERMINATION OF LEASE.
(a) DATE OF TERMINATION. Unless terminated at an earlier date
because of forfeiture, breach or other reason, this Lease shall terminate when
all the workable and merchantable coal has been mined from the leased premises.
This fact may be determined either by agreement between Lessor and Lessee, or
if they cannot agree, by arbitration as provided in Article 21 of this Lease.
(b) CONDITION OF THE PREMISES. At the termination of this Lease
for any reason other than the exhaustion of coal, Lessee shall leave the
drifts, shafts, slopes and all other openings, headings and chambers in a
secure and proper state, consistent with good mining practice. However, Lessee
shall have the right, in the course of its mining operations, to rob pillars in
accordance with the methods of mining contemplated by this Lease. Any disputes
as to whether the mines have been left in the proper condition shall be settled
by arbitration as provided by Article 21.
(c) VALUATION OF IMPROVEMENTS. Within thirty (30) days after the
termination of this Lease (except in the case of termination by forfeiture,
when these provisions shall not apply), Lessor may give Lessee written notice
of its desire to have all the improvements on the premises
28
appraised. Lessee shall not remove any improvements from the premises until
Lessor has had the opportunity to exercise its rights of appraisal and
retention, as provided in this Section.
When Lessor gives notice of its desire for appraisal, three competent
appraisers shall be appointed in the manner provided for appointing arbitrators
in Article 21 of this Lease. These appraisers shall, as soon as possible,
furnish Lessor and Lessee with a detailed report showing the appraised value of
each article appraised and the total appraised value of all such articles.
Except as provided in the following paragraph, the valuation by the appraisers,
or by a majority of them, shall be conclusive of the value of the property.
Lessor shall have the right to retain the appraised property, or any
article of it, if within thirty (30) days after the receipt of the appraisers
report, Lessor gives written notice to Lessee of its intention to retain the
items. Lessor shall pay to Lessee the appraised value of any items so
retained, less any rents, royalties or other sums due from Lessee at that time.
However, if Lessee believes that Lessor's retention of certain improvements
would reduce the value of any articles not retained, Lessee may object to
Lessor's selection of improvements to be retained. If the parties cannot
resolve the dispute, it shall be submitted to arbitration, as provided in
Article 21, to determine whether additional compensation is due to Lessee.
Lessor shall also have the right, if it notifies Lessee in writing at
least one (1) month before the expiration of this Lease, to use any or all of
the property and improvements on the premises, for a period of up to four (4)
months after the expiration of the Lease, provided Lessor compensates
29
Lessee for the fair value of such use as agreed upon by the parties or as fixed
by the arbitrators as provided in Article 21.
If Lessor declines to retain or use any of Lessee's property, Lessee
may remove that property from the premises at any time within eight (8) months
after the expiration of this Lease, provided that Lessee has paid all
royalties, rents and other sums due Lessor. If Lessor has exercised its rights
to use any of Lessee's property for up to four (4) months, as described above,
Lessee may remove that property from the premises at any time within (8) months
after Lessor has ceased using it, again provided that Lessee has paid all sums
due Lessor under this Lease.
A1. COKE.
Nothing contained in this Lease shall prevent Lessee from engaging in
coking operations on the leased premises, but before engaging in any coking
operations, Lessee shall notify Lessor of its intention to do so. The parties
shall then determine a reasonable royalty to be paid for the coal used in coke
manufacturing on the leased premises. If the parties cannot agree on such a
royalty within ninety (90) days after Lessee's notification to Lessor, the
royalty shall be fixed at such fair and reasonable level as shall be determined
by arbitration as provided in Article 21 of this Lease. Once set, either by
agreement or arbitration, the royalty on coke shall remain in effect until the
termination of the coal royalty rate schedules in Schedules 1, 2, 3 or 4
(depending on the source of the coal coked) of Section (a) of Article 7 are
renegotiated, and it shall then be renegotiated under the same conditions that
apply to the renegotiation of such coal royalties under Section (c) of that
Article.
30
Nothing in this Lease shall prevent Lessee from removing coal mined on
the leased premises to be coked elsewhere. When coal mined on the leased
premises is shipped elsewhere for coking, the coal royalties provided in
Article 7 shall apply to that coal and no coke royalty shall be payable.
Lessee shall conform to the reasonable requirements of Lessor to
assure the accurate ascertainment of the weight of coal used in coke
manufacturing on the leased premises.
A1. TRANSPORTATION RIGHTS.
(a) LESSEE'S RIGHTS WITHOUT CHARGE. Lessor, to the extent it has
the power to do so and subject to the cooperation provisions of Article 2
above, grants to Lessee (i) the right to transport coal and coke mined, removed
or produced from any lands, wherever located, which are owned or controlled by
either Lessor or Lessee (even if such lands may be leased to others) as of the
date hereof, onto, across and/or through the leased premises and (ii) the right
to transport coal and coke from the leased premises onto, across and/or through
any lands, wherever located, owned or controlled by Lessor as of the date
hereof. There shall be no charge for any such transportation of coal and coke.
(b) LESSOR'S RIGHTS WITHOUT CHARGE. Lessee, to the extent it has
the power to do so, grants to Lessor the right to transport coal and coke
mined, removed or produced for any lands, wherever located, which are owned or
controlled by either Lessor or Lessee (even if such lands may be leased to
others) as of the date hereof, onto, across and/or through any lands owned or
controlled
31
by Lessee as of the date hereof. There shall be no charge for any such
transportation of coal and coke.
(c) LESSEE'S RIGHTS SUBJECT TO CHARGE. Lessor, to the extent it
has the power to do so and subject to the cooperation provisions of Article 2
above, grants to Lessee the right to transport coal and coke mined, removed or
produced from any lands, wherever located, which are not owned or controlled by
either Lessor or Lessee onto, across and/or through the leased premises and/or
any lands, wherever located, owned or controlled by Lessor as of the date
hereof. Lessor also grants Lessee the right to prepare this coal and coke on
the leased premises and/or such lands and to ship it from such premises and/or
lands.
There may be a charge for the transportation of coal and coke covered
by this Section (c) effective as of January 1, 1990. This charge shall be one
percent (1%) of the purchase price of such coal or coke or Twenty-Five Cents
($0.25) for each ton of such coal or coke, whichever is higher, unless the
Lessor and Lessee otherwise agree. These provisions notwithstanding, no such
charge shall be imposed on any coal mined or removed by Lessee from lands being
sublet by Lessee from Blue Diamond Coal Company under an agreement dated March
28, 1969.
(d) LESSOR'S RIGHTS SUBJECT TO CHARGE. Lessee, to the extent it
has the power to do so, grants to Lessor the right to transport coal and coke
mined, removed or produced from any lands, wherever located, which are not
owned or controlled by either Lessor or Lessee onto, across and/or through any
lands, wherever located, owned or controlled by Lessee as of the date hereof.
Lessee also grants Lessor the right to prepare this coal and coke on such lands
and to ship it from such lands.
32
There may be a charge for the transportation of coal and coke covered
by this Section (d) effective as of January 1, 1990. This charge shall be one
percent (1%) of the purchase price of such coal or coke or Twenty-Five Cents
($0.25) for each ton of such coal or coke, whichever is higher, unless the
Lessor and Lessee otherwise agree.
(e) REPORTS AND PAYMENTS BY LESSEE. On or before the 25th day of
each calendar month, Lessee shall deliver to Lessor at its office in Duffield,
Virginia (or any other place that Lessor may designate in writing) a statement
of the tonnage of all coal and coke transported onto, across and/or through
either the leased premises or any of the applicable lands specified in Sections
(a) and (c) of this Article during the preceding calendar month, whether or not
subject to charge, indicating the origin and the destination of such coal and
coke. This statement shall be in a form that Lessor finds satisfactory, and
Lessor shall have the right to examine Lessee's books for the purpose of
verifying the statement. Lessee agrees to conform to any other reasonable
requirements of Lessor for assuring the accurate ascertainment of the weight of
this coal and coke.
On or before the 25th day of each calendar month, Lessee shall pay to
Lessor at its office in Duffield, Virginia (or any other place that Lessor may
designate in writing) the appropriate charges, if any, on coal or coke
transported onto, across and/or through either the leased premises or any of
the applicable lands during the preceding calendar month under the provisions
of Section (c) of this Article.
(f) REPORTS AND PAYMENTS BY LESSOR. On or before the 25th day of
each calendar month, Lessor shall deliver to Lessee at its appropriate office a
statement of the tonnage of all coal and coke transported onto, across and/or
through any of the applicable lands specified in Sections
33
(b) and (d) of this Article during the preceding calendar month, whether or not
subject to charge, indicating the origin and the destination of such coal and
coke. This statement shall be in a form that Lessee finds satisfactory, and
Lessee shall have the right to examine Lessor's books for the purpose of
verifying the statement. Lessor agrees to conform to any other reasonable
requirements of Lessee for assuring the accurate ascertainment of the weight of
this coal and coke.
On or before the 25th day of each calendar month, Lessor shall pay to
Lessee at its appropriate office the appropriate charges, if any, on coal or
coke transported onto, across and/or through any of the applicable lands during
the preceding calendar month under the provisions of Section (d) of this
Article.
A2. TAXES.
While this Lease is in force, Lessee shall pay all severance and
personal property taxes and assessments imposed by any governmental body with
respect to improvements or personal property placed or erected on the leased
premises or with respect to the coal mined therefrom. Lessee shall reimburse
Lessor for real property taxes and assessments imposed on the premises, which
taxes shall be payable in the first instance by Lessor. However, Lessor, not
Lessee, shall pay all taxes or assessments on any timber, mineral, oil and gas
rights reserved by Lessor.
If Lessee is delinquent in paying any of the taxes or assessments for
which it is responsible, Lessor may make the required payments. In that event
Lessee shall promptly reimburse Lessor for such payments, including any fines
or extra expenses incurred by Lessor with respect to the payments, together
with interest at the rate of six percent (6%) per year compounded quarterly.
34
A1. BLACK LUNG BENEFITS.
Lessee agrees that it shall comply with all of the valid terms and
provisions of the Black Lung Benefits Act; Title IV of the Federal Mine Safety
and Health Act of 1977; the Internal Revenue Code, 26 U.S.C. 1 et seq.; Black
Lung Benefits Reform Act of 1977; Black Lung Benefits Revenue Act of 1981; and
Black Lung Benefits Amendments of 1981, as now or hereafter amended, and all
valid rules and regulations adopted pursuant thereto.
Upon Lessor's request, Lessee shall provide appropriate but reasonable
certification that it has provided security in compliance with all applicable
laws, rules and regulations for the payment of those benefits for which it is
lawfully obligated to provide under such laws, rules and regulations.
Lessee agrees that it will indemnify and hold Lessor harmless for
liability or expenses, including reasonable attorneys fees and expenses, which
Lessor may suffer as a result of or with respect to any claim for black lung
benefits for which Lessee is liable under the applicable laws, rules and
regulations.
35
A1. ASSIGNMENTS.
(a) Lessee shall not transfer, assign, mortgage or encumber with
any type of lien its rights, or any portion of them, in the leased premises or
any of the improvements on the premises, without the prior written consent of
Lessor. Lessee shall not sublet the premises, or any portion of the premises
(except dwelling houses, stores, farm buildings and farm lands), to anyone
without the prior written consent of Lessor. Lessee shall, however, have the
right to contract for the mining of coal from the leased premises without
obtaining the prior approval of Lessor. No judgment, judicial sale, or other
legal or equitable proceeding or operation of any law shall have the effect of
transferring any interest Lessee has in the premises, or in any portion of it ,
or in any of the improvements on the premises, to another person or entity, for
any period, without the prior written consent of Lessor. In any case where
Lessor's prior written consent is required, such consent will not be
unreasonably withheld.
It is recognized that prior to the effective date of this Lease,
Lessee had subleased or contracted certain portions of the premises with the
oral consent of Lessor. These earlier actions are ratified by this Lease.
(b) Should any of Lessee's rights or interests under this Lease be
transferred, assigned or sublet in any way, without Lessor's prior written
consent, Lessor shall have all remedies available to it for breach of this
Lease by Lessee, and shall have the option to affirm the attempted transfer and
to require the person or entity acquiring those interests or rights to be
subject to all the terms and conditions of this Lease.
36
(c) Any transferee from Lessee with Lessor's prior written consent
shall take and hold its interest subject to all of the terms of this Lease.
A2. FORFEITURE CLAUSE.
(a) The commission of any of the following acts by Lessee shall be
considered an act of forfeiture under this Lease: executing any mortgage or
making any assignments for the benefit of creditors involving or affecting this
Lease, entering a composition with creditors involving or affecting this Lease,
or any other act of bankruptcy without the written consent of Lessor. If any
of these acts of forfeiture takes place, Lessor may give notice to Lessee, by
registered letter addressed to Lessee's office in Big Stone Gap, Virginia (or
to such other address as Lessee may designate in writing), that it forthwith
cancels this Lease.
(b) If Lessee fails to make any rent or royalty payment for sixty
(60) days after it comes due, or if Lessee violates any other term or condition
of this Lease, Lessor may notify Lessee, by registered mail as specified in
Section (a) of this Article that Lessee has breached this Lease (specifying the
breach) and that if the breach is not rectified within thirty (30) days, the
Lease will be cancelled and terminated. If it is determined that more than
thirty (30) days is reasonably necessary to rectify the breach, a reasonable
period for rectifying it shall be set, either by agreement between the parties
or by arbitration. If at the end of thirty (30) days, or whatever longer
period is set, after the mailing of the notice, the breach has not been
remedied, this Lease shall immediately terminate without further notice.
37
(c) In any case where Lessor terminates this Lease because of
Lessee's forfeiture or breach, Lessor may enter the premises covered by this
Lease and seize for its own use the premises and all improvements and other
personal property on the premises, notwithstanding any provisions of this Lease
to the contrary.
(d) It is understood that termination of this Lease or recovery of
possession of the premises will not deprive Lessor of its right to sue Lessee
for any damages for breach of any of the provisions of this Lease or for any
royalties, rent or other sums due Lessor. The remedies in this Article shall
not be construed to be exclusive of any other remedies Lessor may have at law
or equity. Any delay or omission by Lessor in exercising any of its rights
under this Lease shall not be construed to be a waiver of those rights or any
other rights in respect to existing or subsequent defaults by Lessee. However,
in the case of any matter subject to arbitration under the provisions of this
Lease, Lessor's right to give notice of termination of the Lease shall not take
effect until ten (10) days after the time fixed by the Board of Arbitrators for
the performance of its award.
A3. RIGHTS OF SUCCESSORS.
All the rights and obligations given or imposed by this Lease shall
extend to and bind the successors and assigns of either Lessor or Lessee.
However, in the case of any transfer by Lessee, Lessor must have given its
written consent to the assignment pursuant to Article 18.
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A4. ARBITRATION.
If at any time during the continuance of this Lease, a dispute shall
arise between Lessor and Lessee over any matter which cannot be resolved by the
parties, the dispute shall be referred to a Board of Arbitrators (subject to
the provisions in Article 11 for procedures prior to arbitration in certain
cases). This Board shall be composed of a representative of Lessor and a
representative of Lessee, to be selected by them respectively, and a third
person to be chosen by these first two arbitrators. If the two arbitrators are
unable to agree upon a third arbitrator within ten (10) days, the American
Arbitration Association shall designate a disinterested person to act as the
third arbitrator. Should either of the parties fail to select its
representative and to identify its selection in writing to the other party
within ten (10) days after receipt of the first notice calling for arbitration
(as described below), then the American Arbitration Association shall designate
two disinterested persons, who will join the representative of the party which
did select its representative to form the Board.
Either party may at any time deliver to the other a notice setting
forth the point or points on which arbitration is desired. The other party may
then, within ten (10) days after receiving the notice, deliver a counter-
notice specifying any additional point, eligible for arbitration, on which it
desires a decision. Once formed, the Board shall give the parties ten (10)
days' written notice of the time and place of its hearing.
The Board shall consider the questions submitted to it for
arbitration, and shall make its decision and award in writing. The decision of
a majority of the arbitrators shall be final and
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binding on the parties and their successors and assigns, and there shall be no
appeal. Lessor and Lessee hereby agree to abide by and promptly comply with
each decision and award.
If the arbitrators' award declares that there has been a violation or
default under this Lease, it shall also state the time within which the
defaulting party must perform the award and rectify the default.
The costs of arbitration proceedings shall initially be paid by the
party requesting the arbitration, but if that party substantially prevails in
the proceeding, it shall be reimbursed by the other party. Any question of
costs shall be determined by the arbitrators in the course of their decision
and award. Notwithstanding these provisions, the cost of arbitration with
regard to the setting of royalties, minimum rentals and valuation upon
termination shall be shared equally by the parties.
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A1. INDEMNIFICATION.
Lessee agrees to indemnify and protect Lessor against all claims
arising from operation of the leased premises or otherwise related to the
leased premises. This shall include, but not be limited to, indemnification
against claims arising from any of the following: the working or management of
the premises; any condition of the land or the improvements on it; any breach
or default by Lessee under this Lease; any act of negligence by Lessee,
Lessee's subtenant, contractor or other occupant, or any of their agents,
contractors or the like; and any accident, injury or damages from any cause
(except where caused by Lessor's negligence). This indemnification shall also
cover all costs and other liabilities incurred in connection with any of these
claims. Lessee agrees that upon request from Lessor it will defend any claim
or action and will employ counsel which is reasonably satisfactory to Lessor.
This indemnification shall apply only to claims asserted during the
term of this Lease or within two (2) years after the termination of this Lease,
except for claims arising from the condition of the premises or improvements on
it. In the case of claims arising from the condition of the premises or
improvements, the indemnification shall apply to claims asserted within five
(5) years after termination if such claims are asserted within two (2) years of
the time Lessor became aware, or reasonably should have become aware, of such
condition.
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A1. COMPLIANCE WITH LAWS.
Lessee promises that throughout the term of this Lease it will
substantially comply with all laws, regulations, ordinances, orders or other
requirements (including those relating to mine safety and environmental
quality) of all branches of federal, state and local governments which may be
applicable to the leased premises or any of the operations carried out on the
premises. This compliance will be solely at Lessee's expense. Lessee may
contest by appropriate means, in its own name or in Lessor's name or both, the
validity or application of any of these governmental requirements, but such
contesting action shall be solely at Lessee's expense. If Lessee challenges a
governmental requirement, and if compliance with the requirement may be legally
postponed while the challenge is pending without incurring a lien or charge on
the leased premises or any other injury or expense to Lessor, Lessee may
postpone its compliance until the final determination of the disputed issues.
Lessor agrees to furnish any papers which may be necessary or proper to permit
Lessee to contest the government requirement. If Lessee fails to comply in a
timely fashion with any law, regulation or other requirement, as required under
this Article, Lessor shall have the option to perform such compliance itself
and to collect from Lessee the cost of the compliance.
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A2. FIRE DAMAGE.
If any of the buildings or structures on the leased premises is
damaged by fire or other casualty, and if Lessor decides that it is necessary
or desirable for continued operations that the damage should be repaired, it
will be repaired by Lessee at its own expense. If a building repaired by
Lessee was covered by fire insurance, Lessee shall receive the proceeds of the
insurance to apply to the repairs. If Lessee disputes the necessity or
desirability of rebuilding any damaged structure, and Lessor and Lessee cannot
resolve the matter, it shall be settled by arbitration as provided by Article
21 of this Lease.
A3. DAMAGE TO OTHER COAL.
If Lessee mines any coal from directly underneath any workable and
merchantable portion of the Imboden or Taggart Seams and, by doing so, damages
or renders unworkable the coal in those overlying Seams, Lessee shall
compensate Lessor for any such damage. Notwithstanding the previous sentence,
Lessee shall not have to compensate Lessor and shall not be liable for damages
to either of the following: (1) the portions of the Imboden or Taggart Seams
above the areas in which Lessee mines coal if those portions of the Imboden or
Taggart Seams are being or have already been mined or (2) that portion of the
Taggart Seam above the Imboden Seam leased by Lessor to Blue Diamond Coal
Company. If Lessee mines any coal from underneath any other overlying seam or
seams and such other seam or seams are damaged or rendered unworkable by
Lessee's mining operations, carried out in the usual and proper manner, Lessee
shall not be required to pay any compensation to Lessor.
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A4. PRE-1924 AGREEMENTS.
(a) This Lease supersedes the following agreements concerning the
leasing by Lessor to Lessee of certain lands in Lee County and Wise County,
Virginia, and Harlan County and Letcher County, Kentucky:
1. Agreement dated June 10, 1910, leasing what are known as the
Callahan Block, the Imboden Block and the Keokee Block;
2. Agreement dated October 5, 1912, leasing various small parcels
of land lying in Harlan County, Kentucky;
3. Agreement dated June 1, 1917, leasing what is known as the
Exeter Block;
4. Agreement dated September 2, 1919, by which two tracts of
land, known as Parcel A and Parcel B, were added to the Stonega Reservation,
and leased to the Lessee;
5. Agreement dated September 2, 1919, leasing what is known as
the Dunbar Reservation;
6. Agreement dated September 20, 1923, leasing what is known as
the Two Hundred Eighteen (218) Acre Tract.
Those agreements have been cancelled as of January 1, 1924. However,
all obligations incurred by either party under any of those agreements have
continued and shall continue in force and shall be discharged according to
their terms.
(b) This Lease does not affect any previous agreements between the
parties by which Lessor sold to Lessee timber from lands in Wise County or Lee
County, Virginia. It does not affect
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any contracts between the parties to this Lease or between the parties and any
third party relating to railroad rights- of-way or railroad operations. It
also does not affect any other contracts involving third parties.
(c) This Lease does not affect a certain agreement between its
parties, dated October 1, 1910, by which it was agreed, among other things,
that Lessee in certain cases might sue trespassers in its own name, in Lessor's
name or both. That agreement remains in full force and effect and its terms
shall apply to the lands covered by this Lease, as well as the lands referred
to in that agreement.
(d) Except as described in the following sentence, this Lease does
not affect an agreement between the parties dated January 2, 1923, by which
Lessor, among other things, sold Lessee all the improvements connected with the
mining, coking and manufacturing operations on the Stonega Reservation and all
the personal property on the Stonega and Dunbar Reservations. Lessee's holding
of the Stonega and Dunbar Reservations will no longer be governed by the terms
and conditions set out in paragraph seventh of that January 2, 1923 agreement,
but instead will be governed by the terms and conditions of this Lease.
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IN THE PRESENCE of the persons whose signatures appear below, this
Amendment and Restatement of Lease has been properly executed by the respective
parties on the date first above written.
PENN VIRGINIA COAL COMPANY
By:
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President
WESTMORELAND COAL COMPANY
By:
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President
Virginia Division