Common use of Additional Royalty Clause in Contracts

Additional Royalty. Lessee shall pay, or cause to be paid, an additional royalty to the Superintendent for the use and benefit of Lessor, on or before the twenty-fifth (25th) day of the calendar month following each calendar quarter during the term hereof on all Coal mined and shipped from the Leased Premises during the preceding calendar quarter. The amount of additional royalty shall be determined as follows: a. Lessee shall determine the Sales Price less Minimum Royalty and any production taxes, hereinafter “Base Price.” The Base Price is determined using the formula and methodology set forth in Appendix A attached hereto. The production tax components shown in Appendix A are those currently in effect. If, in the future, taxes levied and payable change, taxes in effect at the time of sales will be included in the formula and methodology used in determining Base Price. The amount of additional royalty shall be equal to one-third (1/3) the increase in the Base Price per ton above $5.157 per ton, hereinafter “Initial Base Price.” The Initial Base Price was determined using the formula and methodology set forth in Appendix A for a Sales Price of $7.38 per ton. b. The Initial Base Price of $5.157 per ton is effective July 1, 2004, and will be adjusted quarterly thereafter on January 1, April 1, July 1, and October 1 during the term hereof, hereinafter the “Adjustment Date.” The Initial Base Price as adjusted shall be used to determine the additional royalty for the quarter preceding the Adjustment Date. The Initial Base Price shall be adjusted to reflect 85% of any increase in the “GDP-IPD” in accordance with the definitions, formula, and methodology set forth in Appendix B attached hereto and effective on the Adjustment Date. c. After April 1, July 1, October 1, and January 1 each year during the term hereof, the Lessee shall determine the Base Price for all Coal mined and shipped on a year-to-date basis during all of the previous quarters for the calendar year. The additional royalty due for all Coal mined and shipped on a year-to-date basis will then be computed. The additional royalty due for the previous quarter will then be equal to the total additional royalty as computed on a year-to-date basis less the additional royalty payments paid for all quarters during the current year prior to the quarter being paid. Appendix C hereto attached shows an example of the formula and methodology for determining the additional royalty payment for a quarter.