Preview | Coal Mining Lease and Sublease |


ARTICLE 1

TERM OF LEASE

Section 1.1 Term				3

ARTICLE 2

MINING OPERATIONS

Section 2.1 Mining Operations				3

ARTICLE 3

ROYALTIES

Section 3.1 Minimum Rental Payments				4
Section 3.2 Production Royalty Payments				5

ARTICLE 4

DEFAULT

Section 4.1 Events of Default				7
Section 4.2 Remedies				8
Section 4.3 Arbitration				11

ARTICLE 5

INDEMNIFICATION

Section 5.1 Indemnification of Lessor				12

ARTICLE 6

TAXES AND INSURANCE

Section 6.1 Payment of Taxes				13
Section 6.2 Insurance				14

ARTICLE 7

INSPECTION AND MINE PLANS

Section 7.1 Lessors Right to Inspect				16
Section 7.2 Mine Plans				16

ARTICLE 8

GENERAL

Section 8.1 Remedies Cumulative				17
Section 8.2 Notices				17
Section 8.3 Binding Effect of Lease				18
Section 8.4 Entire Agreement				18
Section 8.5 Governing Law and Section Headings				18
Section 8.6 Memorandum of Lease				18
Section 8.7 Relationship Between the Parties				18
Section 8.8 Separability of Provisions				19
Section 8.9 Force Majeure				19
Section 8.10 State Lease and Other Burdens				20
Section 8.11 Reconveyance				20

THIS COAL MINING LEASE AND SUBLEASE (Lease) is made and entered into as of the 19th day of December, 2002, by and between Fieldcrest Resources LLC, a Delaware limited liability company, having its principal offices at 2550 East Stone Drive, Suite 200, Kingsport, TN 37660 (the Lessor), and Gallo Finance Company, a Delaware corporation, having its principal offices at 701 Market Street, Suite 713, St. Louis, Missouri 63101 (the Lessee).

WHEREAS, Lessor owns the fee interest in all seams of coal in the Cleary Member of the Genesee Formation in certain tracts of land in McKinley County, New Mexico as more fully described in Exhibit A attached hereto and made a part hereof (the Fee Coal Reserves); and

WHEREAS, Lessor owns a leasehold interest in certain coal reserves in the Cleary Member of the Genesee Formation in certain tracts of land in McKinley County, New Mexico pursuant to those two certain New Mexico State Land Office Coal Mining Leases, dated September 22, 1989 and November 14, 1989, respectively, between the State of New Mexico and Lessor (as assignee of Cerrillos Land Company) (together, the State Leases) which reserves are more fully described in Exhibit B hereto (the Leased Coal Reserves and, together with the Fee Coal Reserves, the Coal Reserves); and

WHEREAS, Lessee owns certain rights to use the surface over certain lands (the Surface Lands) located in McKinley County, New Mexico, which lands include, but are not limited to, the lands in which the Coal Reserves are located; and

WHEREAS, such rights were granted to Lessee pursuant to that certain Assignment and Assumption Agreement dated June 25, 1993 (the 1993 Assignment) between Lessee and Santa Fe Pacific Mineral Corporation (SFPM) under which SFPM assigned to Lessee an undivided non-exclusive interest in SFPMs non-exclusive easement granted to SFPM under that certain Agreement dated July 31, 1979, as

amended by Amendment to Agreement dated December 17, 1982 and Second Amendment to Agreement dated March 2, 1987 by and between Santa Fe Pacific Mineral Corporation (successor to Cerrillos Land Company, as successor to Santa Fe Pacific Railroad Company) and the Fernandez Company (the Surface Agreement); and

WHEREAS, Peabody Natural Resources Company (PNRC) has assigned, conveyed and transferred to Lessor an undivided, non-exclusive interest of Lessees rights under the 1993 Assignment pursuant to a Partial Assignment and Assumption dated the date hereof between Lessee and Lessor (the 2002 Assignment); and

WHEREAS, Lessee desires to lease the Fee Coal Reserves and sublease the Leased Coal Reserves from Lessor for the purpose of mining such coal reserves by the surface, highwall and auger mining methods;

NOW, THEREFORE, in consideration of the premises and of the mutual covenants hereinafter contained, the parties hereto agree as follows:

Subject to the terms hereof, Lessor does hereby lease to Lessee the Fee Coal Reserves, sublease unto Lessee the Leased Coal Reserves and assign and transfer to Lessee all of Lessors right, title and interest under the 2002 Assignment for the purpose of mining the Coal Reserves by the surface, highwall and auger mining methods. Lessor also grants to Lessee all such mining rights held by Lessor with respect to the Coal Reserves.

NOTWITHSTANDING ANY PROVISION IN THIS LEASE OR ANY AGREEMENT REFERRED TO HEREIN OR ATTACHED HERETO, LESSOR MAKES NO WARRANTY, EXPRESS OR IMPLIED, WHETHER OF MERCHANTABILITY, QUALITY, QUANTITY, RECOVERABILITY, TITLE OR OTHERWISE AS TO THE COAL RESERVES OR LESSORS INTERESTS THEREIN OR MINING RIGHTS OWNED BY LESSOR, OR AS TO THE CONDITION OF THE COAL RESERVES AND LESSEE SHALL RELY UPON ITS OWN EXAMINATION THEREOF THROUGH