FindLaw - No. 01-1375: United States v. Navajo Nation

Supreme Court Briefs

No. 01-1375

In the Supreme Court of the United States

UNITED STATES OF AMERICA , PETITIONER

NAVAJO NATION

ON WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE FEDERAL CIRCUIT

JOINT APPENDIX
(VOLUME II)

THEODORE B. OLSON
Solicitor General
Department of Justice
Washington, D.C. 20530-0001
(202) 514-2217

Counsel of Record
for Petitioner

PAUL E. FRYE
Rothstein Donatelli
500 Fourth Street, N.W.
Suite 400
Albuquerque, NM 87102
(505) 243-1443

Counsel of Record
for Respondent

PETITION FOR WRIT OF CERTIORARI FILED: MAR. 15, 2002
CERTIORARI GRANTED: JUNE 3, 2002

MINING LEASE

CONTRACT NO. 14-20-0603-8580

SENTRY ROYALTY COMPANY AND

THE NAVAJO TRIBE

THIS INDENTURE OF LEASE made and entered into sextuplicate effective the 1st day of February, 1964, by and between THE NAVAJO TRIBE, designated herein as "Lessor," and the SENTRY ROYALTY COMPANY, a Nevada corporation with offices at 301 North Memorial Drive, St. Louis, Missouri 63102, herein designated as "Lessee,"

W I T N E S S E T H :

ARTICLE I. CONSIDERATION

That the Lessor, for and in consideration of One ($1.00) Dollar, receipt whereof is here acknowledged, and of the royalties, covenants, stipulations and conditions hereinafter contained, and hereby agreed to be paid and observed by the Lessee, does hereby lease unto said Lessee a tract of land lying and being within the Navajo Indian Reservation, County of Navajo, State of Arizona, more particularly described in Exhibit "C" attached hereto and containing 24,858 acres.

ARTICLE II. TERM AND POSSESSION

This lease is for a term of ten (10) years from the date hereof, and for so long thereafter as the substances produced are being mined by the Lessee in accordance with its terms, in paying quantities, for the purpose and with the exclusive right and license to prospect, mine, and strip such land for coal and kindred products, including other minerals, except oil and gas, as may be found in connection with said operations (by strip, auger, underground, or other generally approved mining methods). Lessee has the right and license, in connection with the operation of coal mining on the leased lands: to construct thereon buildings, pipelines, plants, tanks, and other structures; to make excavations, openings, stock piles, dumps, ditches, drains, roads, spur tracks, transmission lines, and other improvements; to place machinery and other equipment and fixtures upon said land, and do sll other things upon said leased premises that may be necessary in the efficient operation of coal mining thereon; to occupy so much of the surface of the leased lands as may be necessary to carry on the mining operations hereunder, including the right of ingress and egress; to develop and utilize water for use in its mining operations, provided, however, that at conclusion of mining operation all wells will be left properly cased and that any water not utilized in mining operations shall be made readily available for local Navajo use.

Lessee shall report promptly to Lessor the location and nature of any mineral deposits other than coal encountered on the leased land.

Lessor agrees to cooperate in good faith with Lessee in the securing and utilization of any additional surface that may be required or necessary to meet the needs of new industries that might be attracted to the area, and consistent therewith the Tribe will lease to any responsible industry.

It is contemplated that before the expiration of the ten-year term of this lease, Lessee will have such knowledge of the existence, location and workability of the coal reserves in excess of 200 million tons and of the feasibility of additional large-scale mining and plant operation, as to enable it to determine with reasonable certainty whether development of reserves in excess of 200 million tons can be successfully prosecuted. Accordingly, the Lessee is to submit not less than ninety (90) days prior to the expiration of the ten-year term a complete report to the Lessor of its past operations accompanied by declaration of the Lessee's intention regarding the development of reserves in excess of 200 million tons. Lessee shall concurrently inform Lessor of the possible future magnitude of the reserved development. If a reserve in excess of 200 million tons is proven, and application be made by the Lessee, preference shall be given Lessee over other applicants for the execution of separate leases on areas containing such surplus.

ARTICLE III. DEFINITION: "SUPERINTENDENT"

The term "superintendent" as used herein shall mean the "General Superintendent," Navajo Agency, Window Rock, Arizona.

ARTICLE IV. ROYALTY PAYMENTS

In consideration of the foregoing, Lessee hereby agrees to pay or cause to be paid to the General Superintendent for the use and benefit of the Navajo Tribe as royalties, the sums of money as follows:

A. Twenty-five ($.25) Cents per ton for all coal sold and utilized off the Navajo Reservation, Twenty ($.20) Cents per ton for all coal sold and utilized on the Navajo Reservation, whenever the average monthly gross realization therefrom is less that Four ($4.00) Dollars per ton.

B. Thirty ($.30) Cents per ton for all coal sold and utilized off the Navajo Reservation, Twenty-four ($.24) Cents per ton for all coal sold and utilized on the Navajo Reservation, whenever the average monthly gross realization therefrom is less that Four ($4.00) Dollars per ton but less that Five ($5.00) Dollars per ton.

C. Thirty-seven and one-half ($.371/2) Cents per ton for all coal sold and utilized off the Navajo Reservation, and Thirty ($.30) Cents per ton for all coal sold and utilized on the Navajo Reservation, whenever the average monthly gross realization therefrom is Five ($5.00) Dollars or more per ton.

D. Whenever uranium ores are mind and sold by Lessee, royalty shall be paid at the rate provided for in the "Percentage Royalty Schedule" set out in Resolution of the Advisory Committee of the Navajo Tribal Council (ACS-37-55) dated September 27, 1955, as amended.

E. Whenever other valuable minerals are recovered and sold by Lessee, royalty shall be paid at the rate of Ten (10%) Per Cent of the sales price, f.o.b. Lessee's mine, when value can be determined at the mine. If the mine value cannot be determined, then the value shall be based on net smelter or processing plant returns which shall be the net smelter returns less transportation costs incurred by Lessee after ores have been mined.

For the purpose of this agreement, the term "Average Monthly Gross Realization" shall mean the average price of coal produced under the terms of this lease, f.o.b. Lessee's mine, and shall be determined by dividing the total monies received for the coal sold during a month by the total number of tons sold during such month, but no coal mined hereunder shall be sold to any affiliate or subsidiary of Lessee for the purpose of reducing the monthly Gross Realization.

All royalties accruing for any month shall be due and payable on or before the twenty-fifth of the succeeding month.

ARTICLE V. ANNUAL RENTAL

To pay or cause to be paid to the Navajo Tribe, in advance beginning with the date of approval of this lease as annual rental, One ($1.00) Dollar per acre per annum for each and every year during the initial five years of this lease, it being understood and agreed that said sum so paid shall be a credit on the royalties accruing during the year for which the payment of annual rental is made, and that said annual rental shall not be refunded to Lessee because of any subsequent surrender or cancellation hereof.

If at the termination of the initial five years of this lease, actual mining operations have not commenced, Lessee will pay or cause to be paid to the Navajo Tribe each year in advance for the next five years' remainder of the lease term, Two ($2.00) Dollars per acre per annum in advance for each and every year. Such advance rentals during the second five years of the lease term may be carried forward for a maximum of two additional years and credited against royalties earned during those two years when earned royalties exceed this minimum.

If at the termination of the first ten-year period, actual mining operations have not commenced, Lessor shall have the option of terminating this lease. However, if lease continues beyond the first ten- year period Lessee shall pay Two ($2.00) Dollars per acre per annum in advance for each and every year during the term of the lease, which may be carried forward for two (2) years and be credited against the earned royalties during those two years when earned royalties exceed this minimum.

It is understood by the parties hereto that if the Lessee can prove to the satisfaction of Navajo Tribe and the Secretary of the Interior bonafide contracts for the sale of substantial quantities of said coal, the maximum carry forward period may, at the discretion of the Lessor and the Secretary of the Interior, be increased from two years to five years, and advance rental paid at the same rate from the date of such proof until mining actually is commenced may also be credited against earned royalties in subsequent years.

ARTICLE VI. TERMINATION OF FEDERAL
JURISDICTION

During the period that the land so leased is under Federal jurisdiction, the royalty provisions of this lease are subject to reasonable adjustment by the Secretary of the Interior or his authorized representative at the end of twenty years from the effective date of this lease, and at the end of each successive ten-year period thereafter. In the event of termination of Federal jurisdiction, the royalty provisions shall, in lieu of Secretarial adjustment, be subject to renegotiation between Lessor and Lessee at the times aforesaid, provided that if the parties are unable to agree, such royalty shall be submitted to arbitration.

In the event Federal jurisdiction shall have been terminated and the royalty provisions are subject to negotiation as provided in this section, within ten days after the request of either Lessor or Lessee for submission to arbitration, Lessee shall name one arbitrator and Lessor shall name one arbitrator, and the two named shall select within ten days next ensuing a third arbitrator. In the event the two arbitrators named by the parties cannot agree upon a third arbitrator, then any Judge of a United States District Court for the District of Arizona may select the third arbitrator. In determining the royalty provisions, the arbitrators shall consider all pertinent evidence to establish the value of coal and shall fix a royalty fair to both Lessor and Lessee under the circumstances existing at the time of such arbitration.

ARTICLE VII. DILIGENCE AND PREVENTION
OF WASTE

Lessee shall (1) exercise diligence in the conduct of prospecting and mining operations, (2) carry on development and operations in a workmanlike manner and to the fullest possible extent, (3) commit no waste on the said land and suffer none to be committed upon the portion in its occupancy or use, (4) comply with all applicable laws, (5) take appropriate steps for the preservation of the property and the health and safety of workmen, and (6) surrender and return promptly the premises upon the termination of this lease to the Navajo Tribe or the [illegible], in as good condition as received, except for the ordinary wear, tear and depletion incident to mining operations and unavoidable accidents in the proper use of the premises, buildings, or permanent improvements erected thereon during the said term by the said Lessee. All Butler, Quonset, Armco and other buildings of like nature and office fixtures and records, personal property, tools, pumping and drilling outfits, boilers, engines, and mining machinery, and all other personal property and equipment of Lessee shall remain the property of the Lessee and may be removed at any time prior to two years after the termination of the lease by forfeiture or otherwise, provided the payments agreed upon by this lease have been made and the lease terms and regulations applicable thereto have been fully complied with, but not otherwise. Upon the expiration of this lease, Lessee's title to all permanent structural improvements, including the standard gauge railroad track from the leased premises to the nearest railroad if constructed under the provisions of Article XXI of this lease, shall vest in the Lessor.

ARTICLE VIII. SUSPENSION OF MINING
OPERATIONS

Whenever permitted by law, if the Secretary of the Interior or his authorized representative considers the marketing facilities inadequate or the economic conditions unsatisfactory, he may, with the concurrence of the Advisory Committee of the Navajo Tribal Council, authorize the suspension of mining operations for such time as he considers advisable, but this shall not release the Lessee from paying the advance annual rental. Lessee shall not be in default hereunder, if in its discretion it temporarily discontinues mining operations because of unsatisfactory economic conditions, for periods of not to exceed six (6) consecutive months at any one time.

ARTICLE IX. MONTHLY STATEMENTS

Lessee shall keep an accurate account of all mining operations, showing the sales, price, dates, purchasers, and the whole amount of minerals mined, the amount removed, and the gross receipts derived therefrom, and to furnish the Superintendent, and the Treasurer of said Tribe, sworn monthly reports thereon not later than the twenty-fifth of the succeeding month; and all sums due as royalty and advance rental shall be a lien on all property of the Lessee upon the site, including implements, tools, movable machinery, and upon all other personal chattels used in operation upon said property, and upon all of the unsold minerals obtained from the land herein leased, as security for payment of said sums.

An audit of the Lessee's applicable accounts and books shall be made annually or at such times as may be directed by the Superintendent by certified public accountants approved by the Secretary of the Interior and at the expense of the Lessee.

The Lessee shall furnish free of cost a copy of such audits to the Secretary of the Interior through the Superintendent and to the Navajo Tribe within thirty (30) days after the completion of each auditing.

ARTICLE X. REGULATIONS

Lessee shall abide by and conform to any and all regulations of the Secretary of the Interior now or hereafter in force relative to such leases, including but not limited to applicable provisions of 30 CFR 211 and 25 CFR 171; provided that no regulations hereafter approved shall effect a change in rate of royalty, the annual rental herein specified, or the term of this lease without the written consent of the parties to this lease; provided further, that the payments to be made by Lessee pursuant to Article V above shall be deemed to fulfill all requirements of said regulations with respect to annual development work and expenditures therefor, and shall be deemed to be in lieu thereof.

ARTICLE XI. ASSIGNMENT OF LEASE

Lessee shall not assign this lease or any interest therein by an operating agreement or otherwise, or sublet any portion of the leased premises, except with the prior approval of the Secretary of the Interior and the Advisory Committee of the Navajo Tribal Council. If this lease is divided by the assignment of an entire interest or any part of it, each part shall be considered a separate lease incorporating all the terms and conditions of the original lease. Lessee, however, shall have the right to assign or transfer its interest hereunder to Peabody Coal Company or a subsidiary or affiliate in which Peabody Coal Company has a greater than Fifty (50%) Per Cent interest.

ARTICLE XII. BOND

Lessee agrees to furnish such bond as may be required by the regulations of the Secretary of the Interior conditioned upon compliance with the terms of this lease.

ARTICLE XIII. INSPECTION

The leased premises and producing operations, improvements, machinery and fixtures thereon and connected therewith and all pertinent books and accounts of Lessee shall be open at all times for inspection by agents of the Lessor or any duly authorized representative of the Secretary of the Interior.

ARTICLE XIV. DISPOSITION OF SURFACE

Subject to the provisions of Article XXVII, the Lessor expressly reserves the right to lease, sell, or otherwise dispose of the surface of the lands embraced within this lease under existing law or laws hereafter enacted, such disposition to be subject at all times to the reasonable right of Lessee to such surface area necessary for mining; there is further reserved to the Navajo Tribe and the United States after consultation with Lessee the right to construct, use and maintain roads, pipelines, power lines, and telephone lines on and across said lands.

ARTICLE XV. SURRENDER AND
TERMINATION

The Lessee shall have the right at any time during the term hereof to surrender and terminate this lease as to all or any compact and contiguous block of the leased lands covered hereby upon the payment of all rentals, royalties and other obligations due and payable to that date to the Lessor, and the further sum of One ($1.00) Dollar, provided Lessee has complied with Article XXX with respect to reseeding. If this lease has been recorded, Lessee shall file a recorded release with his application to the Superintendent for termination of this lease.

ARTICLE XVI. CANCELLATION AND
FORFEITURE

When, in the opinion of the Mining Engineer of the Navajo Tribe and the Secretary of the Interior, before restrictions are removed, there has been a violation of any of the terms and conditions of this lease, the Secretary of the Interior and the Navajo Tribe shall have the right at any time after thirty (30) days' notice to Lessee, specifying the terms and conditions violated, and after a hearing, if Lessee shall so request, if such violation is not cured within thirty (30) days of receipt of notice, to declare this lease null and void, Lessor shall then be entitled and authorized to take immediate possession of the land.

ARTICLE XVII. SUCCESSORS IN INTEREST
OR ASSIGNS

It is further covenanted and agreed that each obligation hereunder shall extend to and be binding upon, and every benefit hereof shall inure to the successors or assigns of the respective parties hereto.

ARTICLE XVIII. ACQUISITION BY GOVERNMENT EMPLOYEES

No lease, assignment thereof, or interest therein will be approved to any employee or employees of the United States Government whether connected with the Indian Service or otherwise, and no employee of the Interior Department shall be permitted to acquire any interest in such leases by ownership of stock in corporations having leases or in any other manner.

ARTICLES XIX. NAVAJO EMPLOYMENT
PREFERENCE

Lessee agrees to employ Navajo Indians when available in all positions for which, in the judgment of Lessee, they are qualified, and to pay prevailing wages to such Navajo employees and to utilize services of Navajo contractors whenever feasible.

Lessee shall make a special effort to work Navajo Indians into skilled, technical and other higher jobs in connection with Lessee's operations under this release.

ARTICLE XX. COVENANT TO HOLD HARMLESS

Lessee will hold the Navajo Tribe and the United States harmless from any suit or claim for personal injuries or property damage arising out of acts or omissions of Lessee or its agents.

ARTICLE XXI. RAILROAD CONSTRUCTION

Provided there is discovered on the premises described in Exhibit "C" attached, 200 million tons of merchantable and economically minable coal, and if Lessee has, or can secure, suitable contracts for the sale of 35 million tons of coal involving rail delivery off the Reservation during a maximum period of twenty years to justify the investment, then Lessee agrees to commence or cause to be commenced and completed with dispatch during the first ten (10) years after the expiration of Lessee's Drilling and Exploration Permit, the construction of a standard gauge railroad track from the leased premises to the nearest railroad approximately 130 miles distant. Lessor agrees to furnish to Lessee or the builder of the railroad, without cost, the necessary rights of way and permits across Navajo Tribal lands.

Lessee agrees that when and if such railroad connection is built, the Navajo Tribe shall have the right, subordinate to the uses necessary and incident to the Lessee's business, to make nonexclusive use thereof for the Tribe's businesses and purposes, excluding the shipment of coal and organic fuels originating on the Reservation, without compensating the Lessee for any part of the cost it may bear of the construction and operation of the railroad connection; provided, however, the Tribe shall pay the lawful tariffs applicable to such uses and shipments as it make thereon; and Lessees or designees of the Tribe shall have an option for the nonexclusive use of such railroad connection upon the condition that said Lessees or designees so using said railroad connection will first pay to the Lessee a reasonable charge therefor, based on the distributive share, borne by Lessee, of the cost of construction, maintenance and operation of the railroad, and also based on the proportionate use thereof by the respective parties, and provided further that such use does not interfere with the necessary and convenient use by Lessee.

ARTICLE XXII. OBSERVANCE OF TRIBAL RESOLUTIONS

"Lessee agrees to comply with all lawful resolutions adopted by the Navajo Tribal Council."

ARTICLE XXIII. TERMINATION OF FEDERAL
TRUST RESPONSIBILITY

Nothing contained in this lease shall operate to delay or prevent the termination of Federal trust responsibility with respect to the land during the term of this lease; however, such termination shall not serve to abrogate this lease. In the event of such termination, all powers, duties or other functions of the Secretary of the Interior or his authorized representative shall terminate, and the responsibility for enforcing compliance with the covenants of this lease shall be assumed by Lessor, his successors or assigns.

ARTICLE XXIV. USE OF PREMISES FOR UNLAWFUL CONDUCT

The Lessee further agrees that he will not use or permit to be used any part of said premises for any unlawful conduct or purpose whatsoever; that he will not use or permit to be used any part of said premises for the manufacture, sale, gift, transportation, drinking or storage of intoxicating liquors or beverages in violation of existing laws relating thereto, and that any violation of this clause by Lessee, or with his knowledge, shall render this lease voidable at the option of the Secretary of the Interior and with the concurrence of the Navajo Tribe, provided that if the sale of liquor become legal this covenant shall be voided.

ARTICLE XXV. REDUCTION OF ANNUAL RENTAL PAYMENTS

To the extent that after mining has started, operations of the Lessee after the initial five-year term, hereunder are, in the opinion of the Secretary of the Interior and the Navajo Tribe, interrupted for more than thirty (30) consecutive days by labor disputes, acts of God, acts of the public enemy, fire or other casualties beyond the control of the Lessee, then annual rental shall be reduced in the same proportion that the time the operations of the Lessee are interrupted bears to one (1) year.

ARTICLE XXVI. RESERVATIONS

The Navajo Tribe may hereafter grant to other persons, firms, or corporations, any oil and gas lease, license or permit upon land covered by this lease subject to the following limitations: (a) the provisions of this subsection shall be included in the oil and gas lease, license or permit granted by Lessor on the leased land, (b) oil and gas drilling and producing activities may be carried out on any part of the leased premises concurrent with Lessee's mining operations and related activities, (c) no oil rigs or installations of any kind shall be situated with such density as to unduly interfere with Lessee's rights to carry on its mining operations and related activities, and (d) no well may be drilled for oil or gas at any location which, in the opinion of the Mining Supervisor of the Untied States Geological Survey, or the Mining Engineer of The Navajo Tribe, would result in undue waste of coal deposits or constitute a hazard to or interfere with mine operations being conducted for the extraction of coal and associated mineral from the land covered by this lease.

ARTICLE XXVII. PIPELINE CROSSINGS

A. Notwithstanding any other provision of this lease, The Navajo Tribe and the United States reserve the right without liability of any kind except as provided in this lease to grant to applicants rights of way for pipelines for the transportation of oil, gas, helium or petroleum products, and for telephone, telegraph and water lines incident to the operation of such pipelines, across the lands embraced in this lease, upon the conditions that, prior to the grant of any such right of way, the applicant therefor, as a condition precedent to such grant, shall file with the General Superintendent of the Navajo Agency the following express undertakings in writing for the express benefit of Lessee:

(1) That applicant will either bury the pipeline to a sufficient depth or, at a place to be designated by Lessee, construct and maintain, at applicant's expense, a ramp, so that loaded vehicles, including Lessee's heavy mining equipment, may pass unhindered over said pipe. Whenever said pipeline is relocated pursuant to subsection (2) of this Section, applicant will either bury the relocated pipe or promptly construct and maintain, at its own expense, a suitable ramp in a new place designated by Lessee. Lessee shall not be responsible for damage to said pipe caused by such vehicles and equipment so crossing said pipeline.

(2) That applicant will make adequate provisions in the construction of the pipeline so that, in the event it is determined by Lessee that mining operations should be conducted within the area of the designated pipeline crossing, or that a power or industrial plant or other building should be built in such area, the line can be expeditiously relocated so as not to interfere with Lessee's operations, and applicant shall make such relocation, including any necessary bridging, at its own expense, within ninety (90) days from receipt of notice in writing from Lessee requesting such relocation. If applicant fails to make such relocation within such ninety-day period, Lessee may relocate the line without liability and at the expense of applicant.

(3) Applicant will at all times keep, maintain and repair, at its own expense, the portion of the pipeline crossing the leased premises in good working order and repair, and in such condition as not to injure, endanger or interfere with Lessee or any person or property on or about the premises.

(4) That applicant will promptly pay any lawful taxes, charges or assessments placed upon or levied against the pipeline or improvements or appurtenances in connection therewith; provided, that applicant may contest the validity or amount of any such tax, charge or assessment and shall not be considered in violation of this stipulation until a reasonable time after final determination of such contest by a competent tribunal.

(5) That applicant will be responsible for any damage to or loss of property or injury to or death of any person directly or indirectly caused by the enjoyment of pipeline rights, and shall hold Lessee harmless and indemnify it against any and all claims therefor; and shall further hold Lessee harmless from and indemnify it against damage to or loss of property belonging to applicant or injury to or death of any person on or about the pipeline crossing on behalf of or at the invitation of applicant.

(6) (a) That applicant shall specify in writing the address to which all notices and requests to be given or made by Lessee may be mailed.

(b) Lessor agrees that:

(i) No pipeline right of way granted shall exceed fifty (50) feet in width;

(ii) Timely notice shall be given to Lessee of any application for pipeline rights over the leased premises before the same is granted; and

(iii) Any executed duplicate of the undertakings specified in subparagraph (a) and a true copy of the grant of pipeline rights shall be furnished Lessee upon the granting of any application for pipeline rights over the leased premises.

ARTICLE XXVIII. NOTICES

Any notice, demand or request provided for in this lease, or given or made in connection with it shall be deemed to be properly given if delivered in person, or sent by registered or certified mail, postage prepaid, or by telegram, to the persons specified below:

To or upon the Tribe:

Chairman
Navajo Tribal Council
Window Rock, Arizona

and

General Superintendent
Navajo Agency, Bureau of Indian Affairs
Window Rock, Arizona

To or upon Sentry Royalty Company:

President or Secretary
Sentry Royalty Company
301 North Memorial Drive
St. Louis, Missouri 63102

Either party may at any time, by written notice to the other, change the designation or address of the person so specified as the one to receive notices hereunder.

ARTICLE XXIX. PROTECTION OF NAVAJO IMPROVEMENTS AND EXISTING MINES

Notwithstanding any other provision of this lease, Lessee's operations hereunder shall be subject to the provisions of Navajo Tribal Council Resolution CJA-18-60, adopted January 22, 1960, entitled "To provide for the compensation of Navajo Indian Claimants of improvements and customary use rights in areas adversely disposed of by the Navajo Tribe." Lessee shall promptly comply with the terms and conditions of said resolution in cooperation with the Land Investigations Department of the Navajo Tribe.

The Department of Land Investigations of the Navajo Tribe has estimated the damages compensable under the foregoing resolution which will probably result from Lessee's proposed operation under this lease at the sum of $ and receipt of double said sum by the General Superintendent of the Navajo Agency hereby is acknowledged, said monies shall be disbursed as provided in the aforementioned Navajo-Tribal Council Resolution CJA-18-60.

Lessee agrees that it will not sell coal to local reservation markets now being served by existing mines as of the date hereof operated by Navajo Indians, so long as these existing mines continue to service the local reservation markets. Lessee shall now, however, be in any manner restricted from developing new markets or uses for coal upon the reservation.

ARTICLE XXX. RESEEDING

Lessee agrees to cooperate fully with the Lessor and the Secretary of the Interior in seeking methods of reseeding areas where strip coal mining activities have been completed and to bear a fair proportionate share of the expense of such reseeding program. Where serious erosion hazards are created by operations of Lessee hereunder, Lessee agrees to take such corrective action as may be necessary, within the scope of normal soil conservation practices.

DOCUMENTS TO WHICH THIS LEASE IS SUBORDINATE

No oil and gas leases, mining permits, school sites or other use areas, or rights of way, under permit or lease within the parcel of land described in Exhibit C.

/s/ REB
SENTRY ROYALTY COMPANY

/s/ [Illegible]
Chairman
NAVAJO TRIBAL COUNCIL

IN WITNESS WHEREOF the parties hereto have caused this lease to be signed by their duly authorized officers the day and year first above written.

THE NAVAJO TRIBE OF INDIANS
Lessor

/s/ By /s/ [Illegible]___________
Chairman
Navajo Tribal Council

SENTRY ROYALTY COMPANY
Lessee

Attest:
/s/ WILLIAM A. SCHNEIDER
Secretary

By /s/ RALPH E. BAILEY
Vice President

APPROVED AUG 28 1964

/s/ JOHN C. DIBBERN____[CONFIDENTIAL]
Assistant AREA DIRECTOR

Per I.O. Letter 1-12-62
(Realty-Minerals)
[7362-61]

PHOTOGRAPHED
INDEXED

#4098

FILED AND RECORDED AT THE REQUEST
Jennings, Strouss, Salmon & Trask
May 26th A.D. 1967 AT 8:00 O'CLOCK A.M.
IN DOCKET 259, Off. Records page 413-443
RECORDS OF NAVAJO COUNTY, ARIZONA Inclusive
/s/ Elda R. Probst_____RECORDER
By ______________________________DEPUTY

ACKNOWLEDGEMENT OF LESSOR

STATE OF ARIZONA )

SS.

COUNTY OF APACHE)

Before me, a notary public on this 31st day of January, 1964, personally appeared Raymond Nakai, to me known to be the identical person who executed the within and foregoing lease, and acknowledged to me that he executed the same in his official capacity as Chairman of the Navajo Tribal Council, for and on behalf of the NAVAJO TRIBE OF INDIANS, as its free and voluntary act and deed for the uses and purposes therein set forth.

/s/ [Illegible]____
Notary Public

[Seal Omitted]
My commission expires:

My Commission Expires June 29, 1965

ACKNOWLEDGEMENT OF LESSEE

STATE OF MISSOURI )

SS.

CITY OF ST. LOUIS )

On this 27th day of January, 1964, before me appeared Ralph E. Bailey and William A. Schneider, to me personally known, who being by me duly sworn, did say that they are _______ President and __________ Secretary of SENTRY ROYALTY COMPANY (and that the seal affixed to said instrument is the corporate seal of said corporation) and that the said instrument was signed and sealed in behalf of said corporation by authority of its Board of Directors and said Ralph E. Bailey and William A. Schneider acknowledges said instrument to be the free act and deed of said corporation.

WITNESS my hand and seal the day and year first above written.

Irma D. Onken
Notary Public

[Seal omitted]
My commission expires:
September 8, 1964

EXHIBIT "C"

Attached to mining lease between Sentry Royalty Company and the Navajo Tribe [eligible] and bounds description of Black Mesa coal mining lease, Kayenta, Arizona

Beginning at a point 6,400.0 ft. North and 11,855.0 ft. East of the Coal Mine
Triangulation station (Lat. 36 32' 44,597" N Long. 110 29' 35.691"W)

thence East 5985.0 ft., thence North 2640.0 ft., thence East 2640.0 ft.,
thence North 2640.0 ft., thence East 1320.0 ft., thence North 2640.0 ft.,
thence East 1320.0 ft., thence North 2640.0 ft., thence East 5280.0 ft.,
thence South 5280.0 ft., thence East 15,840.0 ft., thence North 5280.0 ft.,
thence East 10,550.0 ft., thence South 7920.0 ft., Thence West 5280.0 ft.,
thence South 2640.0 ft., thence West 8765.0 ft., thence South 2640.0 ft.,
thence West 3960.0 ft., thence South 5280.0 ft., thence East 6,600.0 ft.,
thence South 2640.0 ft., thence East 2575.0 ft., thence South 2640.0 ft.,
thence East 18,415.0 ft., thence South 9985.0 ft., thence West 44,750.0 ft.,
thence North 7340.0 ft., thence West 2640.0 ft., thence North 5280.0 ft.,
thence West 5150.0 ft., thence North 10,560.0 ft., to the point of beginning and containing 24,858 acres more or less, all in Navajo County, Arizona.

The above description contains the following sections and partial sections:

T37N R18E:
Sections 28 all, 33 all, 34 all, 35 all, 36 all, S 1/2 32, NE 1/4 32, E 1/2 of SE 1/4 29.

T36N R18E:
All of sections 3, 4, 5, 6, 7, 8, 9, 10, 13, 14, 15, 16, 17, 21, 22, 23, 24, NW 1/4 1, N 1/2 and SW 1/4 and W 1/2 of SE 1/4 2, NW 1/4 and W 1/2 of NE 1/4 and S 1/2 11, S 1/2 2 12, E 1/2 20, N 2063.0 ft. of NE 1/4 29, N 2063.0 ft. 28, N 2063.0 ft. 27, N 2063.0 ft. 26, N 2063.0 ft. 25.

T36N R19E:
Sec 19 all, 209 all, 21 all, 22 all, S 1/2 15, S 1/2 16, S 1/2 17, S 1/2 and NW 1/4 18, N 2063.0 ft of 27, N 2063.0 ft. of 28, N 2063.0 ft. 29, N 2063.0 ft. 30.

T37N R 19E:
Sec. 29, 30, 31 all, N 1/2 32.

IN WITNESS WHEREOF the parties hereto have caused this Amendment No. I to Mining Lease, to be signed by their duly authorized officers as of the day and year first above written.

THE NAVAJO TRIBE OF INDIANS
Lessor

/s/ By /s/_______________
RAYMOND NAKAI
Chairman
Navajo Tribal Council

SENTRY ROYALTY COMPANY
Lessee

Attest:

/s/ WILLIAM A. SCHNEIDER
Assistant Secretary

By /s/ RALPH E. BAILEY
Vice President

ACKNOWLEDGEMENT OF LESSOR

State of Arizona )

ss.

County of Apache )

Before me, a notary public on this 13 day of May, 1964 personally appeared RAYMOND NAKAI, to me known to be the identical person who executed the within and foregoing lease, and acknowledged to me that he executed the same in his official capacity as Chairman of the Navajo Tribal Council, for and on behalf of the NAVAJO TRIBE OF INDIANS, as its free and voluntary act and deed for the uses and purposes therein set forth.

My commission expires: /s/ Walter F. Wolf, Jr.
Jan 6, 1967 Notary Public

ACKNOWLEDGEMENT OF LESSEE

State of Missouri )

ss.

City of St. Louis )

On this 28 day of April, 1960, before me appeared Ralph E. Bailey and William A. Schneider, to me personally known, who being by me duly sworn, did say that they are Vice President and Assistant Secretary of SENTRY ROYALTY COMPANY (and that the seal affixed to said instrument is the corporate seal of said corporation) and that the said instrument was signed and sealed in behalf of said corporation by authority of its Board of Directors, and said Ralph E. Bailey and William A. Schneider acknowledge said instrument to be the free act and deed of said corporation.

WITNESS my hand and seal the day and year first above written.

[Seal Omitted]

My commission expires: /s/ Irma D. Onken
Sept. 3, 1964 Notary Public

GUARANTY

In consideration of the execution of the above lease by the Navajo Tribe, the Peabody Coal Company hereby guarantees the due performance by Sentry Royalty Company of all covenants and agreements on its part therein contained, and the payment of all damages, costs and expenses which by virtue of said contract may become recoverable from said Sentry Royalty Company by the Navajo Tribe.

ATTEST: PEABODY COAL COMPANY

[Seal Omitted] By /s/ [Illegible]__
/s/ [Illegible]__ ___President
Secretary Title

Amendment No. 1 to Mining Lease Between
Sentry Royalty Company and The Navajo Tribe

THIS AMENDATORY AGREEMENT made and entered into, in sextuplicate effective the 1st day of April , 1964, by and between THE NAVAJO TRIBE, designated herein as "Lessor", and the SENTRY ROYALTY COMPANY, a Nevada corporation, with offices at 301 North Memorial Drive, St. Louis, Missouri, 63102, herein designated as "Lessee",

WITNESSETH, That reference is hereby made to that certain Mining Lease between Lessor and Lessee, executed by latter on January 27, 1964, covering 24,858 acres, more or less, in Navajo County, Arizona, and

WHEREAS it is desired by the parties to amend part of Article XXIX of said Mining Lease.

NOW THEREFORE, for and in consideration of One Dollar ($1.00) paid by Lessee to
Lessor, and for other valuable considerations, the parties hereto hereby agree as follows:

1. The second paragraph of ARTICLE XXIX PROTECTION OF NAVAJO IMPROVEMENTS AND EXISTING MINES, of said Mining Lease, which reads as follows:

"The Department of Land Investigations of The Navajo Tribe has estimated the damages compensable under the for going resolution which will probably result from Lessee's proposed operation under this lease at the sum of $ and receipt of double said sum by the General Superintendent of The Navajo Agency hereby is acknowledged, said monies shall be disbursed as provided in the aforementioned Navajo Tribal Council Resolution CJA-18-60."

is hereby deleted, and there is substituted in lieu thereof, a new second paragraph of said Article XXIX, which shall read as follows:

"Because of the continuing nature of the proposed mining operation over many years, and because areas so adversely disposed of will be affected gradually over the years as mining operations progress, Lessee agrees to maintain a minimum balance with the General Superintendent of The Navajo Agency, of Five Thousand Dollars ($5,000), which sum will be replenished from time to time as disbursements are made. Said deposit shall be disbursed as provided in Resolution No. CJA-18-60."

2. Except as herein specifically amended, all the terms, conditions and obligations contained in said Mining Lease shall remain in full force and effect as therein provided.

Contract No. 14-20-0603-9910

______________

UNITED STATES
DEPARTMENT OF THE INTERIOR
BUREAU OF INDIAN AFFAIRS

MINING LEASE

Between

SENTRY ROYALTY COMPANY AND
THE NAVAJO TRIBE

State of Arizona

THIS MINING LEASE, made and entered into this 6th day of June, 1966, by and between THE NAVAJO TRIBE OF INDIANS, hereinafter referred to as "Lessor," and SENTRY ROYALTY COMPANY, a Nevada corporation having offices at 301 North Memorial Drive, St. Louis, Missouri, hereinafter referred to as "Lessee,"

WITNESSETH:

ARTICLE I. CONSIDERATION

That the Lessor, for and in consideration of One ($1.00) Dollar, receipt whereof is hereby acknowledged, and of the royalties, covenants, stipulations and conditions hereinafter contained, and hereby agreed to be paid and observed by the Lessee, does hereby lease unto said Lessee a tract of land, lying and being within the County of Navajo, State of Arizona, more particularly described in Exhibit "D" attached hereto, containing 40,000 acres, more or less.

ARTICLE II. TERM AND POSSESSION

Lessee shall report promptly to Lessor the location and nature of any mineral deposits other than coal encountered on the leased land.

It is contemplated that before the expiration of the ten-year term of this lease, Lessee will have such knowledge of the existence, location and workability of coal reserves found in the area covered by this lease in excess of 200 million tons and of the feasibility of additional large-scale mining and plant operation, as to enable it to determine with reasonable certainty whether development of reserves in excess of 200 million tons can be successfully prosecuted. Accordingly, the Lessee is to submit not less than ninety (90) days prior to the expiration of the ten-year term, a complete report to Lessor and to the Regional Mining Supervisor, United States Geological Survey, of its past operations accompanied by declaration of Lessee's intention regarding the development of reserves in excess of 200 million tons. Lessee shall concurrently inform Lessor of the possible future magnitude of the reserved development. If a reserve in excess of 200 million tons is proven within the leased area and application be made by Lessee, preference shall be given Lessee over other applicants for the execution of separate leases on areas containing such surplus, under such terms and conditions as may be agreed upon by Lessor and Lessee and approved by the Secretary of the Interior or his authorized representative.

ARTICLE III. ROYALTY PAYMENTS

In consideration of the foregoing, Lessee hereby agrees, subject to the provisions of Article IV-A, to pay or cause to be paid to the Secretary of the Interior or his authorized representative, for the use and benefit of the Navajo Tribe, royalties as follows:

A. Six and sixty-seven hundredths percent (6.67%) of the monthly gross realization, but in no event less than twenty-five (25) cents per ton, for all coal obtained from the leased premises which is sold and utilized off the Executive Order Area of December 16, 1882.

B. Five and thirty-three hundredths percent (5.33%) of the monthly gross realization, but in no event less than twenty (20) cents per ton, for all coal obtained from the leased premises which is sold and utilized on the Executive Order Area of December 16, 1882.

The term "gross realization," as used herein, means the gross sales price at the mining site without any deduction therefrom of overhead sales costs or any other business expense. No coal mined hereunder shall be sold to any affiliate or subsidiary of Lessee for the purpose of reducing the gross realization.

C. Whenever uranium ores are mined and sold by Lessee, royalty shall be paid at the rate provided in Exhibit "E" attached hereto and by reference made a part hereof.

D. Whenever other valuable minerals are recovered and sold by Lessee, royalty shall be paid at the rate of ten percent (10%) of the sales price f.o.b. Lessee's mine, when value can be determined at the mine. If the mine value cannot be determined, then the value shall be based on net smelter or processing plant returns which shall be the net smelter returns less transportation costs incurred by Lessee after ores have been mined.

E. During any lease year that earned royalties due the Navajo Tribe exceed the rentals due it for that lease year, the Lessee may credit a maximum of $2,000 per year of such excess earned royalties against the $10,000 advance royalty payment heretofore made to said Navajo Tribe until the entire advance, without interest, has been repaid.

All royalties accruing for any month shall be due and payable on or before the twenth-fifth of the succeeding month.

ARTICLE IV. ANNUAL RENTAL

Lessee agrees, subject to the provisions of Article IV-A, to pay or cause to be paid to the Secretary of the Interior or his authorized representative, for the use and benefit of the Navajo Tribe, in advance, beginning with the date of approval of this lease as annual rental, one ($1.00) dollar per acre per annum for each and every year during the initial five years of this lease, it being understood and agreed that said sum so paid shall be a credit on the royalties accruing during the year for which the payment of annual rental is made, and that said annual rental shall not be refunded to Lessee because of any subsequent surrender or cancellation hereof.

At the end of the initial five years of this lease, Lessee, subject to the provisions of Article IV-A, will pay or cause to be paid each year in advance for the balance of the term of the lease, two ($2.00) dollars per acre per annum. Such advance rentals after the first five years of the lease term may be carried forward for a maximum of two additional years and credited against earned royalties during those two years when earned royalties exceed this minimum.

It is understood by the parties hereto that if Lessee can prove to the satisfaction of the Navajo Tribe and the Secretary of the Interior, bona fide contracts for the sale of substantial quantities of said coal, the maximum carry forward period, at the discretion of Lessor and the Secretary of the Interior, may be increased from two years to five years.

ARTICLE IV-A. ESCROW PAYMENTS

During the first seven years of this lease or until such earlier date as the interest of The Navajo Tribe in that portion of the Executive Order Area of December 16, 1882, in controversy between the Navajo Tribe and Hopi Tribe, including the leased premises (hereinafter referred to as "leased premises) shall have been finally determined or established by a final judgment in litigation between The Navajo Tribe and the Hopi Tribe or by a general settlement between The Navajo Tribe and The Hopi Tribe, or by a duly enacted and approved act of Congress, Lessee shall pay one-half of all sums due under Article III ("Royalty Payments") and Article IV ("Annual Rental") into an escrow fund as hereinafter provided. If by the date that Lessee's aforesaid obligation to make payments into said escrow fund ceases, it shall be determined or established by said final judgment or by said general settlement or by said act of Congress that The Navajo Tribe owns or is entitled to an interest greater than a one-half undivided interest in the leased premises, the Secretary of the Interior or his authorized representative shall be promptly paid from said escrow fund for the use and benefit of The Navajo Tribe that portion of said escrow fund that corresponds with and reflects the interest of the Navajo Tribe in said leased area in excess of a one-half undivided interest, and the remaining portion of said escrow fund, if any, shall be promptly paid Lessee.

(For example, if it should be determined by any of the aforesaid methods that the Navajo Tribe owns 100% of the leased area, then the entire escrow fund shall be promptly paid to the Secretary of the Interior or his authorized representative for the use and benefit of The Navajo Tribe. If it should be determined that The Navajo Tribe owns less than 100% of the leased area then that portion of said escrow fund that corresponds with and reflects the interest of The Navajo Tribe in excess of an undivided one-half interest in the leased area, shall be paid as aforesaid.)

If within the seven-year period above specified no such final judgment or general settlement or act of Congress is effected, the entire fund in escrow shall be returned to Lessee at the end of said seven-year period.

Lessor and Lessee shall enter into an escrow agreement with a mutually satisfactory bank containing the foregoing terms and such other terms and conditions as may be appropriate, including authority of the escrow agent to invest the escrow fund. The expenses of the escrow shall first be paid out of any sums earned on said escrow fund and, if such sums are insufficient, said expenses shall be borne equally by Lessor and Lessee.

If within the first seven years of this lease, it shall be determined or established by said final judgment, general settlement or act of Congress that The Navajo Tribe owns or is entitled to an interest greater than an undivided one-half interest in the leased premises, Lessee shall, from and after the effective date of such final judgment, general settlement or act of Congress, pay to the Secretary of the Interior or his duly authorized representative for the use and benefit of The Navajo Tribe, in lieu of the amounts specified in Article III ("Royalty Payments") and Article IV ("Annual Rental"), a percentage of said amounts equal to the percentage of interest of The Navajo Tribe in said Executive Order Area, as determined or established by said litigation, general settlement or act of Congress. If no such final judgment, general settlement or act of Congress is effected within the first seven years of this lease, Lessee shall, commencing with the eighth year of this lease, in lieu of the amounts specified in Article III ("Royalty Payments") and Article IV ("Annual Rental"), pay one-half of said amounts to the Secretary of the Interior or his duly authorized representative for the use and benefit of The Navajo Tribe.

ARTICLE V. DILIGENCE AND PREVENTION
OF WASTE

Lessee shall (1) exercise diligence in the conduct of prospecting and mining operations, (2) carry on development and operations in a workmanlike manner, and to the fullest possible extent, (3) commit no waste on the said land and suffer none to be committed upon the portion in its occupancy or use, (4) comply with all applicable laws, (5) take appropriate steps for the preservation of the property and the health and safety of workmen, and (6) surrender and return promptly to the premises upon the termination of this lease, in as good condition as received, except for the ordinary wear, tear and depletion incident to mining operations and unavoidable accidents in the proper use of the premises, buildings, or permanent improvements erected thereon during the said term by said Lessee. All Butler, Quonset, Armco, and other buildings of like nature, and office fixtures and records, personal property, tools, pumping and drilling outfits, boilers, tracks, engines, and mining machinery, and all other personal property and equipment of Lessee shall remain the property of Lessee and may be removed at any time prior to two years after the termination of the lease by forfeiture or otherwise, provided the payments agreed upon by this lease have been made, and the lease terms and regulations applicable thereto have been fully complied with, but not otherwise. Lessee shall have no right, title or interest in any such improvements that have not been removed by Lessee within the two-year period after the termination of the lease. It is specifically understood, however, that Lessee may be required to remove any of such improvements within said two-year period, or respond in damages for failure to do so.

ARTICLE VI. SUSPENSION OF MINING OPERATIONS

Whenever permitted by law, if the Secretary of the Interior or his authorized representative considers the marketing facilities inadequate or the economic conditions unsatisfactory, he may, with the concurrence of the Lessor, authorize the suspension of mining operations for such time as he considers advisable, but this shall not release Lessee from paying the advance annual rental. Lessee shall not be in default hereunder, if in its discretion it temporarily discontinues mining operations because of unsatisfactory economic conditions, for periods of not to exceed six (6) consecutive months at any one time.

ARTICLE VII. MONTHLY STATEMENTS

Lessee shall keep an accurate account of all mining operations, showing the sales, price, dates, purchasers, and the whole amount of minerals mined, the amount removed, and the gross receipts derived therefrom, and shall furnish the Secretary of the Interior or his authorized representative, and the Treasurer of the Navajo Tribe, sworn monthly reports thereon not later than the twenty-fifth of the succeeding month; and all sums due as royalty and advance rental shall be a lien on all of the unsold minerals obtained from the land herein leased as security for payment of said sums.

If Sentry wishes to claim any credit against royalties pursuant to Article III, Paragraph B, Sentry shall include in such statements an account of the coal tonnage mined from the leased premises which has been consumed or utilized on the Executive Order Area of December 16, 1882, during the month reported.

An audit of Lessee's applicable accounts and books shall be made annually or at such times as may be directed by the Secretary of the Interior or his authorized representative by certified public accountants approved by the Secretary of the Interior and at the expense of Lessee.

The Lessee shall furnish free of cost a copy of such audits to the Secretary of the Interior or his authorized representative and to the Navajo Tribe within thirty (30) days after the completion of each audit.

ARTICLE VIII. REGULATIONS

Lessee shall abide by and conform to any and all regulations of the Secretary of the Interior now or hereafter in force relative to such leases, including but not limited to applicable provisions of 30 CFR 211 and 25 CFR 171; provided that no regulations hereafter approved shall effect a change in rate of royalty, the annual rental herein specified, or the term of this lease, without the written consent of the parties to this lease; provided further, that the payments to be made by Lessee pursuant to Article IV above shall be deemed to fulfill all requirements of said regulations with respect to annual development work and expenditures therefor, and shall be deemed to be in lieu thereof.

ARTICLE IX. ASSIGNMENT OF LEASE

Lessee shall not assign this lease or any interest therein by an operating agreement or otherwise, or sublet any portion of the leased premises, except with the prior approval of the Secretary of the Interior and the Lessor. If this lease is divided by the assignment of an entire interest, or any part of it, each part shall be considered a separate lease incorporating all the terms and conditions of the original lease. Lessee, however, shall have the right to assign, transfer, or sublease its interest hereunder to Peabody Coal Company or a subsidiary or affiliate in which Peabody Coal Company has a greater than fifty (50) percent interest.

ARTICLE X. BOND

Lessee agrees to furnish the amount of such bond as may be required by the regulations of the Secretary of the Interior conditioned upon compliance with the terms of this lease.

ARTICLE XI. INSPECTION

The leased premises and producing operation, improvements, machinery and fixtures thereon and connected therewith and all pertinent books and accounts or Lessee shall be open at all times for inspection by agents of the Lessor or any duly authorized representative of the Secretary of the Interior.

ARTICLE XII. DISPOSITION OF SURFACE

Subject to the provisions of Article XX, the Lessor expressly reserves the right to lease, sell, or otherwise dispose of the surface of the lands embraced within this lease under existing law or laws hereafter enacted, such disposition to be subject at all times to the reasonable right of Lessee to such surface area necessary for mining; there is further reserved to Lessor and the United States after consultation with Lessee the right to construct, use and maintain roads, pipelines, power lines, and telephone lines on and across said lands.

ARTICLE XIII. SURRENDER AND TERMINATION

The Lessee shall have the right at any time during the term hereof to surrender and terminate this lease as to all or any compact and contiguous block of the leased lands covered hereby in not less than ten-acre parcels, upon the payment of all rentals, royalties, and other obligations due and payable to that date to the Lessor, and the further sum of one ($1.00) dollar, provided Lessee has complied with Article XXIV with respect to reseeding.

If this lease has been recorded, Lessee shall file a recorded release with his application to the Secretary of the Interior or his authorized representative for termination of this lease.

ARTICLE XIV. CANCELLATION AND FORFEITURE

When, in the opinion of the Lessor and the Secretary of the Interior, before restrictions are removed, there has been a violation of any of the terms and conditions of this lease, the Secretary of the Interior and Lessor shall have the right at any time after thirty (30) days' notice to Lessee, specifying the terms and conditions violated, and after a hearing, if Lessee shall so request, if such violation is not cured within thirty (30) days of receipt of notice, to declare this lease null and void, and Lessor shall then be entitled and authorized to take immediate possession of the land.

ARTICLE XV. SUCCESSORS IN INTEREST
OR ASSIGNS

ARTICLE XVI. ACQUISITION BY GOVERNMENT
EMPLOYEES

ARTICLE XVII. EMPLOYMENT PREFERENCE

Lessee shall make a special effort to work Navajo Indians into skilled, technical and other higher jobs in connection with Lessee's operations under this lease. Lessee may at its option extend the benefits of this Article to Hopi Indians.

ARTICLE XVIII. COVENANT TO HOLD HARMLESS

Lessee will hold the Navajo Tribe and the United States harmless from any suit or claim for personal injuries or property damage arising out of acts or omissions of Lessee or its agents.

ARTICLE XIX. USE OF PREMISES FOR UNLAWFUL CONDUCT

The Lessee further agrees that it will not use or permit to be used any part of said premises for any unlawful conduct or purpose whatsoever. That it will not use or permit to be used any part of said premises for the manufacture, sale, gift, transportation, drinking, or storage of intoxicating liquors or beverages, and that any violation of this clause by Lessee, or with its knowledge, shall render this lease voidable at the option of the Secretary of the Interior and with the concurrence of the Navajo Tribe.

ARTICLE XX. RESERVATIONS

Lessor may hereafter grant to other persons, firms, or corporations, any oil and gas lease, license or permit upon land covered by this lease subject to the following limitations: (a) the provisions of this Article and Article XXI shall be included in any oil and gas lease, license or permit granted by Lessor on the leased land; (b) oil and gas drilling and producing activities may be carried out on any part of the leased premises concurrent with Lessee's mining operations and related activities; (c) no oil rigs or installations of any kind shall be situated with such density as to unduly interfere with Lessee's rights to carry on its mining operations and related activities; and (d) no well may be drilled for oil or gas at any location which, in the opinion of the Mining Supervisor of the United States Geological Survey, or the Lessor, would result in undue waste of coal deposits or constitute a hazard to or interfere with mine operations being conducted for the extraction of coal and associated minerals from the land covered by this lease.

ARTICLE XXI. PIPELINE CROSSINGS

A. Notwithstanding any other provision of this lease, the Lessor and the United States reserve the right without liability of any kind except as provided in this lease to grant to applicants rights of way for pipelines for the transportation of oil, gas, helium or petroleum products, and for telephone, telegraph and water lines incident to the operation of such pipelines across the lands embraced in this lease, upon the conditions that, prior to the grant of any such right of way, the applicant therefor, as a condition precedent to such grant, shall file with the Secretary of the Interior or his authorized representative the following express undertakings in writing for the express benefit of Lessee:

(1) That applicant will either bury the pipeline to a sufficient depth or, at a place to be designated by Lessee, construct and maintain a ramp, at applicant's expense, so that loaded vehicles, includeing Lessee's heavy mining equipment, may pass unhindered over said pipe. Whenever said pipeline is relocated pursuant to subsection (2) of this Section, applicant will either bury the relocated pipe or promptly construct and maintain, at its own expense, a suitable ramp in a new place designated by Lessee. Lessee shall not be responsible for damage to said pipe caused by such vehicles and equipment so crossing said pipeline.

(2) That applicant will make adequate provisions in the construction of the pipeline so that, in the event it is determined by Lessee that mining operations should be conducted within the area of the designated pipeline crossing, or that a power or industrial plant or other building should be built in such area, the line can be expeditiously relocated so as not to interfere with Lessee's operations, and applicant shall make such relocation, including any necessary bridging, at its own expense, within ninety (90) days from receipt of notice in writing from Lessee requesting such relocation. If applicant fails to make such relocation within such 90 day period, Lessee may relocate the line without liability and at the expense of applicant.

(4) That applicant will promptly pay any lawful taxes, charges, or assessments place upon or levied against the pipeline or improvements or appurtenances in connection therewith; provided, that applicant may contest the validity or amount of any such tax, charge or assessment, and shall not be considered in violation of this stipulation until a reasonable time after final determination of such contest by a competent tribunal.

(5) That applicant will be responsible for any damage to or loss of property, or injury to or death of any person directly or indirectly caused by the enjoyment of pipeline rights, and shall hold Lessee harmless and indemnify it against any and all claims therefor; and shall further hold Lessee harmless from and indemnify it against damage to or loss of property belonging to applicant, or injury to or death of any person on or about the pipeline crossing on behalf of or at the invitation of applicant.

(6) That applicant shall specify in writing the address to which all notices and requests to be given or made by Lessee may be mailed.

B. Lessor agrees that:

(i) No pipeline right of way granted shall exceed fifty (50) feet in width;

(ii) Timely notice shall be given to Lessee of any application for pipeline rights over the leased premises before the same is granted; and

(iii) An executed duplicate of the undertakings specified in Paragraph A, and a true copy of the grant of pipeline rights shall be furnished Lessee upon the granting of any application for pipeline rights over the leased premises.

ARTICLE XXII. LIABILITY FOR DAMAGES

The Lessee shall be liable for any and all damages resulting from operations under this lease, including injury to the Lessor, tenants, licensees and surface owners, and for any and all damages to, or destruction of, all property, including but not limited to crops, vegetation and improvements, caused by Lessee's operations hereunder.

ARTICLE XXIII. EXISTING MINES

Lessee agrees that it will not sell coal to local Reservation markets now being served by existing mines operated by Navajo Indians as of the date hereof, so long as these existing mines continue to service the local Reservation markets. Lessee shall not, however, be in any manner restricted from developing new markets or uses for coal upon the Reservation.

ARTICLE XXIV. RESEEDING

Lessee agrees to cooperate fully with the Lessor and the Secretary of the Interior in reseeding areas where strip coal mining activities have been completed and to bear the full expense of such reseeding program. Where serious erosion hazards are created by operations of Lessee hereunder, Lessee agrees to take such corrective action as may be necessary, within the scope of accepted soil conservation practices.

ARTICLE XXV. COMMENCEMENT OF MINING

Should the Lessee determine to commence its mining operations under its lease from the Navajo Tribe dated February 1, 1964, north of the premises leased herein, it agrees to bona fide commence mining operation on said premises described herein within two years after the commencement of mining operations on the said lease area of February 1, 1964. Should the Lessee determine to commence its mining operations on the premises described in this lease, then and in that event, it agrees to bona fide commence mining operations upon the area described in the said lease of February 1, 1964, within two years after the commencement of such original mining operations. After mining operations have been commenced in both of said areas Lessee agrees to mine coal on an equal basis from both of said areas insofar as the quality and quantity of the available coal from both of said areas and the relative cost of mining will reasonably permit.

Lessee agrees to make, at its own expense, all surveys and descriptions to properly locate and describe all properties designated for leasing or as may otherwise be reasonably required under the terms of said Drilling and Exploration Permit and Mining Lease, the laws of the United States, or the Code of Federal Regulations.

ARTICLE XXVI. CONSTRUCTION OF RAILROAD:
PIPELINE RIGHT OF WAY

If Lessee has, or can secure, suitable contracts for the sale of 36 million tons of coal involving rail delivery off the Reservation during a maximum period of twenty years to justify the investment, then Lessee agrees to commence or cause to be commenced and completed with dispatch during the first ten (10) years after the expiration of Lessee's Drilling and Exploration Permit, the construction of a standard gauge railroad track from the leased premises to the nearest railroad approximately 130 miles distant. Lessor agrees to furnish to Lessee or the builder of the railroad, without cost, the necessary rights of way and permits across Navajo Tribal lands.

Lessee agrees that when and if such railroad connection is built, the Navajo Tribe shall have the right, subordinate to the uses necessary and incident to Lessee's business, to make nonexclusive use thereof for the Tribe's businesses and purposes, excluding the shipment of coal and organic fuels originating on the Reservation, without compensating the Lessee for any part of the cost it may bear of the construction and operation of the railroad connection; provided, however, the Tribe shall pay the lawful tariffs applicable to such uses and shipments as it makes thereon; and Lessees or designees of the Tribe shall have an option for the nonexclusive use of such railroad connection upon the condition that said Lessees or designees so using said railroad connection will first pay to the Lessee a reasonable charge therefor, based on the distributive share, borne by Lessee, of the cost of construction, maintenance and operation of the railroad, and also based on the proportionate use thereof by the respective parties, and provided further that such use does not interfere with the necessary and convenient use by Lessee.

If Lessee shall enter into arrangements whereby coal mined from the leased premises and from the premises covered by the lease between Sentry Royalty Company and the Navajo Tribe, dated February 1, 1964, will be transported by a coal slurry pipeline, Lessor agrees to furnish, without cost, the necessary rights of way and permits across Navajo tribal lands.

ARTICLE XXVII. NOTICES

Any notice, demand, or request provided for in this lease, or given or made in connection with it, shall be deemed to be properly given if delivered in person, or sent by registered or certified mail, postage prepaid, or by telegram, to:

Chairman, Navajo Tribal Council
Window Rock, Arizona

Secretary of the Interior (2 copies)

Sentry Royalty Company
President or Secretary
301 North Memorial Drive
St. Louis, Missouri

Either party may at any time, by written notice to the other, change the designation of the address of the person so specified as the one to receive notices hereunder.

IN WITNESS WHEREOF the parties hereto have caused this lease to be signed by their duly authorized officers the day and year first above written.

THE NAVAJO TRIBE OF INDIANS, Lessor

By [Illegible]
Chairman, Navajo Tribal
Council

[Illegible]
THE SENTRY ROYALTY COMPANY, Lessee

[Seal Omitted]
ATTEST:

/s/ [Illegible] /s/ By CE Stokes
Secretary President

Dated: June 6, 1966

THE NAVAJO TRIBE OF INDIANS, Lessor

By [Illegible]
Chairman, Navajo Tribal
Council

APPROVED Jul 07 1966
[Illegible]
Area Director

FILED AND RECORDED AT THE REQUEST
Jennings, Strouss, Salmon & Trask
May 26th A.D. 1967 AT 8:00 O'CLOCK A.M. IN DOCKET 259, Off.Records PAGE 349-384 Incl. RECORDS OF NAVAJO COUNTY, ARIZONA
/s/ Elda R. Probat RECORDER
By ______________________________DEPUTY

ACKNOWLEDGEMENT OF LESSOR

State of Arizona )

)ss.

County of Apache )

Before me, a notary public on this 28th day of June 1966, personally appeared Raymond Nakai, to me known to be the identical person who executed the within and foregoing lease, and acknowledged to me that he executed the same in his official capacity as Chairman of the Navajo Tribal Council, for and on behalf of the Navajo Tribe of Indians, as his free and voluntary act and deed for the uses and purposes therein set forth.

/s/ Phyllis Nahkai
Notary Public

[Seal Omitted]
My Commission expires
November 25, 1967

ACKNOWLEDGEMENT OF LESSOR

State of Arizona )

)ss.

County of Apache )

Before me, a notary public on this 6th day of June, 1966, personally appeared Ned Hatathli, to me known to be the identical person who executed the within and foregoing lease, and acknowledged to me that he executed the same in his official capacity as Director, Resources Division, for and on behalf of the NAVAJO TRIBE OF INDIANS, as its free and voluntary act and deed for the uses and purposes therein set forth.

/s/ Phyllis Nahkai
Notary Public

[Seal Omitted]

My Commission expires
_____ 11/25/67______

ACKNOWLEDGEMENT OF LESSEE

State of Missouri )

)ss.

City of St. Louis )

On this 6th day of June, 1966, before me appeared C.E. Stokes and C.S. Mulvaney, to me personally known, who being by me duly sworn, did say that they are President and Secretary of SENTRY ROYALTY COMPANY (and that the seal affixed to said instrument is the corporatate seal of said corporation) and that the said instrument was signed and sealed in behalf of said corporation by authority of its Board of Directors, and said C.E. Stokes and C.S. Mulvaney acknowledge said instrument to be the free act and deed of said corporation.

WITNESS my hand and seal the day and year first above written.

/s/ IRMA D. ONKEN
Notary Public

[Seal Omitted]
My commission expires:
Sept. 3, 1968

Contract No. 14-20-0450-5743

UNITED STATES
DEPARTMENT OF THE INTERIOR
BUREAU OF INDIAN AFFAIRS

MINING LEASE

BETWEEN

THE HOPE TRIBE, STATE OF ARIZONA AND SENTRY ROYALTY COMPANY

THIS MINING LEASE, made and entered into this 6th day of June, 1966, by and between THE HOPI TRIBE of Arizona, organized pursuant to the provisions of the Indian Reorganization Act of June 18, 1934 (48 Stat 984) as amended, "Lessor, and SENTRY ROYALTY COMPANY, a Nevada corporation having offices at 301 N. Memorial Drive, St. Louis, Missouri, hereinafter referred to as "Lessee,"

WITNESSETH:

WHEREAS, under date of June 1, 1964, Lessor and The Navajo Tribe of Indians entered into an agreement with Lessee entitled "Drilling and Exploration Permit" authorizing Lessee to drill and explore for coal and obtain a mining lease on the premises covered by said permit, including the premises being leased hereby; and

WHEREAS, said agreement was supplemental agreement dated August 18, 1964 modified and amended; and

WHEREAS, said agreement, as modified and amended, was approved by the Secretary of the Interior and still remains in full force and effect is valid as to all parties, notwithstanding an attempt by the Navajo Tribe to unilaterally rescind the same; and

WHEREAS, the Hopi Tribe is legally bound to lease its one-half undivided interest in accordance with the terms of said agreement;

NOW THEREFORE, Lessor and Lessee agree as follows:

ARTICLE I. CONSIDERATION

That the Lessor, for and in consideration of One ($1.00) Dollar, receipt whereof is hereby acknowledged, and of the royalties, covenants, stipulations and conditions hereinafter contained, and hereby agreed to be paid and observed by the Lessee, does hereby lease unto said Lessee its undivided one-half interest in a tract of land, held by the United States in trust for the Hopi Indian Tribe and the Navajo Indian Tribe, for the common use and benefit of their respective members, lying and being within the County of Navajo, State of Arizona, more particularly described in Exhibit "D" attached hereto, containing 40,000 acres.

ARTICLE II. TERM AND POSSESSION

This lease is for a term of ten (10) years from the date of approval by the Secretary of the Interior or his authorized representative, and for so long thereafter as the substances produced are being mined by the Lessee in accordance with its terms, in paying quantities, for the purpose and with the exclusive right and license to prospect, mine, and strip such lands for coal and kindred products, including other minerals, except oil and gas, as may be found in connection with said operations (by strip, auger, underground, or other generally approved mining methods). Lessee has the right and license, in connection with the operation of coal mining on the leased lands: to construct thereon buildings, pipelines, plants, tanks, and other structures; to make excavations, openings, stock piles, dumps, ditches, drains, roads, spur tracks, transmission lines, and other improvements; to place machinery and other equipment and fixtures upon said land, and do all other things upon said leased premises that may be necessary in the efficient operation of coal mining thereon; to occupy so much of the surface of the leased lands as may be necessary to carry on the mining operations hereunder, including the right of ingress and egress: to develop and utilize water obtained from wells located on the leased premises for use in its mining operations including the transportation by slurry pipelines of coal mined from the leased premises and the premises covered by the lease between Sentry Royalty Company and The Navajo Tribe, dated February 1, 1964; provided, however, that any such water used for such a slurry pipe line shall be obtained from a depth greater than 1,000 feet below the surface and shall be metered and paid for by Lessee at the rate of $1.67 per acre-foot to Lessor annually. Should the Secretary of the Interior determine, at any time, that the operation of wells by Lessee is endangering the supply of underground water in the vicinity or so lowering the water table that other users of such water are being damaged, he may, at his option, either (1) require Lessee or Peabody Coal Company, at its own sole expense, to provide water in quantity and of quality equal to that formerly available from such underground supply to such other users, by deepening the letter's wells or otherwise, or (2) require Lessee or Peabody Coal Company, at its own sole expense, to obtain water for its mining and pipe line operations from another source, that will not significantly affect the supply of underground water in the vicinity. Any water obtained from wells located in the leased premises not utilized in mining operations (including the slurry pipe line) shall be made readily available for local Hopi use, and at the conclusion of mining operations all wells will be left properly cased. Any water obtained from wells located on the leased premises which is not used in mining operations (including the slurry pipe line) may also be made readily available for local Navajo use. Lessee agrees that it will also pay Lessor $1.67 per acre-foot annually for water obtained from wells located on the premises covered by the said lease between Sentry Royalty Company and The Navajo Tribe, dated February 1, 1964, which is used for the transportation by slurry pipe line of coal obtained from the premises covered by said lease and the premises covered by this lease.

Lessee shall report promptly to Lessor the location and nature of any mineral deposits other than coal encountered on the leased land.

It is contemplated that before the expiration of the ten-year term of this lease, Lessee will have such knowledge of the existence, location and workability of coal reserves found in the area covered by this lease in excess of 200 million tons and of the feasibility of additional large-scale mining and plant operation, as to enable it to determine with reasonable certainty whether development of reserves in excess of 200 million tons can be successfully prosecuted. Accordingly, the Lessee is to submit not less than ninety (90) days prior to the expiration of the ten-year term, a complete report to the Lessor and to the Regional Mining Supervisor, United States Geological Survey, of its past operations accompanied by declaration of the Lessee's intention regarding the development of reserves in excess of 200 million tons. Lessee shall concurrently inform Lessor of the possible future magnitude of the reserved development. If a reserve in excess of 200 million tons is proven within the leased area and application be made by the Lessee, preference shall be given Lessee over other applicants for the execution of separate leases on areas containing such surplus, under such terms and conditions as may be agreed upon by the Lessor and Lessee and approved by the Secretary of the Interior or his authorized representative.

ARTICLE III. ROYALTY PAYMENTS

In consideration of the foregoing, Lessee hereby agrees to pay or cause to be paid to the Secretary of the Interior or his authorized representative, for the use and benefit of the Hopi Tribe, royalties as follows:

A. Three and three hundred and thirty-five thousandths per cent (3.335%) of the monthly gross realization, but in no event less than twelve and one-half (121/2) cents per ton, for all coal sold and utilized off the Executive Order Area of December 16, 1882.

B. Two and six hundred and sixty-five thousandths per cent (2.665%) of the monthly gross realization, but in no event less than ten (10) cents per ton, for all coal obtained from the leased premises sold and utilized on the Executive Order Area of December 16, 1882.

C. Whenever uranium ores are mined and sold by Lessee, royalty shall be paid to Lessor at one-half of the rate provided in Exhibit "E", attached hereto, and by reference made a part hereof.

D. Whenever other valuable minerals are recovered and sold by Lessee, royalty shall be paid to Lessor at the rate of five (5%) per cent of the sales price f.o.b. Lessee's mine, when value can be determined at the mine. If the mine value cannot be determined, then the value shall be based on net smelter or processing plant returns which shall be the net smelter returns less transportation costs incurred by Lessee after ores have been mined.

E. During any lease year that earned royalties due the Hopi Tribe exceed the rentals due it for that lease year, the Lessee may credit a maximum of $2,000.00 per year of such excess earned royalties against the $10,000.00 advance royalty payments made under the Drilling and Exploration Permit to said Hopi Tribe until the entire advance, without interest, has been repaid.

All royalties accruing for any month shall be due and payable on or before the twenty-fifth of the succeeding month.

ARTICLE IV. ANNUAL RENTAL

Lessee agrees to pay or cause to be paid to the Secretary of the Interior or his authorized representative, for the use and benefit of the Hopi Tribe, in advance, beginning with the date of approval of this lease as annual rental, fifty cents (50¢) per acre per annum for each and every year during the initial five years of this lease, it being understood and agreed that said sum so paid shall be a credit on the royalties accruing during the year for which the payment of annual rental is made, and that said annual rental shall not be refunded to Lessee because of any subsequent surrender or cancellation hereof.

At the end of the initial five years of this lease, Lessee will pay or cause to be paid to Lessor each year in advance for the balance of the term of the lease One ($1.00) Dollar per acre per annum. Such advance rentals after the first five years of the lease term may be carried forward for a maximum of two additional years and credited against earned royalties during those two years when earned royalties exceed this minimum.

It is understood by the parties hereto that if the Lessee can prove to the satisfaction of the Hopi Tribe and the Secretary of the Interior, bonafide contracts for the sale of substantial quantities of said coal, the maximum carry forward period, at the discretion of the Lessor and the Secretary of the Interior, may be increased from two years to five years.

ARTICLE V. DILIGENCE AND PREVENTION

OF WASTE

Lessee shall (1) exercise diligence in the conduct of prospecting and mining operations, (2) carry on development and operations in a workmanlike manner and to the fullest possible extent, (3) commit no waste on the said land and suffer none to be committed upon the portion in its occupancy or use, (4) comply with all applicable laws, (5) take appropriate steps for the preservation of the property and the health and safety of workmen, and (6) surrender and return promptly the premises upon the termination of this lease, in as good condition as received, except for the ordinary wear, tear and depletion incident to mining operations and unavoidable accidents in the proper use of the premises, buildings, or permanent improvements erected thereon during the said term by the said Lessee. All Butler, Quonset, Armco and other buildings of like nature and office fixtures and records, personal property, tools, pumping and drilling outfits, boilers, tracks, engines, and mining machinery, and all other personal property and equipment of Lessee shall remain the property of the Lessee and may be removed at any time prior to two years after the termination of the lease by forfeiture or otherwise, provided the payments agreed upon by this lease have been made and the lease terms and regulations applicable thereto have been fully complied with, but not otherwise. Lessee shall have no right, title of interest in any of such improvements that have not been removed by Lessee within the two-year period after the termination of the lease. It is specifically understood, however, that Lessee may be required to remove any of such improvements within said two-year period, or respond in damages for failure to do so.

ARTICLE VI. SUSPENSION OF MINING
OPERATIONS

Whenever permitted by law, if the Secretary of the Interior or his authorized representative considers the marketing facilities inadequate or the economic conditions unsatisfactory, he may, with the concurrence of the Lessor authorize the suspension of mining operations for such time as he considers advisable, but this shall not release the Lessee from paying the advance annual rental. Lessee shall not be in default hereunder, if in its discretion it temporarily discontinues mining operations because of unsatisfactory economic conditions, for periods of not to exceed six (6) consecutive months at any one time.

ARTICLE VII. MONTHLY STATEMENTS

Lessee shall keep an accurate account of all mining operations, showing the sales, price, dates, purchasers, and the whole amount of minerals mined, the amount removed, and the gross receipts derived therefrom, and shall furnish the Secretary of the Interior or his authorized representative, and the Treasurer of said Tribe, sworn monthly reports thereon not later than the twenty-fifth of the succeeding month; and all sums due as royalty and advance rental shall be a lien on all of the unsold minerals obtained from the land herein leased, as security for payment of said sums.

If Sentry wishes to claim any credit against royalties pursuant to Article III, paragraph B, Sentry shall include in such statements an account of the coal tonnage mined from the leased premises which has been consumed or utilized on the Executive Order Area of December 16, 1882, during the month reported.

An audit of the Lessee's applicable accounts and books shall be made annually or at such times as may be directed by the Secretary of the Interior or his authorized representative by certified public accountants approved by the Secretary of the Interior and at the expense of the Lessee.

The Lessee shall furnish free of cost a copy of such audits to the Secretary of the Interior or his authorized representative and to the Hopi Tribe within thirty (30) days after the completion of each audit.

ARTICLE VIII. REGULATIONS

Lessee shall abide by and confirm to any and all regulations of the Secretary of the Interior now or hereafter in force relative to such leases, including but not limited to applicable provisions of 30 CFR 211 and 25 CFR 171; provided that no regulations hereafter approved shall effect a change in rate of royalty, the annual rental herein specified, or the term of this lease without the written consent of the parties to this lease; provided further, that the payments to be made by Lessee pursuant to Article IV above shall be deemed to fulfill all requirements of said regulations with respect to annual development work and expenditures therefor, and shall be deemed to be in lieu thereof.

ARTICLE IX. ASSIGNMENT OF LEASE

Lessee shall not assign this lease or any interest therein by an operating agreement or otherwise, or sublet any portion of the leased premises, except with the prior approval of the Secretary of the Interior and the Lessor. If this lease is divided by the assignment of an entire interest or any part of it, each part shall be considered a separate lease incorporating all the terms and conditions of the original lease. Lessee, however, shall have the right to assign, transfer, or sublease its interest hereunder to Peabody Coal Company or a subsidiary or affiliate in which Peabody Coal Company has a greater than Fifty (50%) per cent interest.

ARTICLE X. BOND

Lessee agrees to furnish the amount of such bond as may be required by the regulations of the Secretary of the Interior conditioned upon compliance with the terms of this lease.

ARTICLE XI. INSPECTION

The leased premises and producing operation, improvements, machinery and fixtures thereon and connected therewith and all pertinent books and accounts of Lessee shall be open at all times for inspection by agents of the Lessor or any duly authorized representative of the Secretary of the Interior.

ARTICLE XII. DISPOSITION OF SURFACE

Subject to the provisions of Article XX, the Lessor expressly reserves the right to lease, sell, or otherwise dispose of the surface of the lands embraced within this lease under existing law or laws hereafter enacted, such disposition to be subject at all times to the reasonable right of Lessee to such surface area necessary for mining; there is further reserved to the Lessor and the United States after consultation with Lessee the right to construct, use and maintain roads, pipelines, powerlines, and telephone lines on and across said lands.

ARTICLE XIII. SURRENDER AND TERMINATION

The Lessee shall have the right at any time during the term hereof to surrender and terminate this lease as to all or any compact and contiguous block of the leased lands covered hereby in not less than ten-acre parcels, upon the payment of all rentals, royalties and other obligations due and payable to that date to the Lessor, and the further sum of One ($1.00) Dollar, provided Lessee has complied with Article XXIV with respect to reseeding. If this lease has been recorded, Lessee shall file a recorded release with his application to the Secretary of the Interior or his authorized representative for termination of this lease.

ARTICLE XIV. CANCELLATION AND
FORFEITURE

ARTICLE XV. SUCCESSORS IN INTEREST
OR ASSIGNS

ARTICLE XVI. ACQUISITION BY GOVERNMENT EMPLOYEES

No lease, assignment thereof or interest therein will be approved to any employee or employees of the United States Government whether connected with the Indian Service or otherwise, and no employee of the Interior Department shall be permitted to acquire any interest in such leases by ownership of stock in corporations having leases or in any other manner.

ARTICLE XVII. EMPLOYMENT PREFERENCE

Lessee agrees to employ Hopi Indians when available in all positions for which, in the judgment of Lessee, they are qualified, and to pay prevailing wages to such Hopi employees and to utilize services of Hopi contractors whenever feasible. Lessor may by agreement with the Navajo Indians extend the benefits of this article to the Navajo Indians.

Lessee shall make a special effort to work Hopi and Navajo Indians into skilled, technical and other higher jobs in connection with Lessee's operations under this lease.

ARTICLE XVIII. COVENANT TO HOLD HARMLESS

Lessee will hold the Hopi Tribe and the United States harmless from any suit or claim for personal injuries or property damage arising out of acts or omissions of Lessee or its agents.

ARTICLE XIX. USE OF PREMISES FOR
UNLAWFUL CONDUCT

The Lessee further agrees that it will not use or permit to be used any part of said premises for any unlawful conduct or purpose whatsoever. That it will not use or permit to be used any part of said premises for the manufacture, sale, gift, transportation, drinking or storage of intoxicating liquors or beverages, and that any violation of this clause by Lessee, or with its knowledge, shall render this lease voidable at the option of the Secretary of the Interior and with the concurrence of the Hopi Tribe.

ARTICLE XX. RESERVATIONS

ARTICLE XXI. PIPELINE CROSSINGS

A. Notwithstanding any other provision of this lease, the Lessor and the United States reserve the right without liability of any kind except as provided in this lease to grant to applicants rights of way for pipelines for the transportation of oil, gas, helium or petroleum products, and for telephone, telegraph and water lines incident to the operation of such pipelines, across and lands embraced in this lease, upon the conditions that, prior to the grant of any such right of way, the applicant therefor, as a condition precedent to such grant, shall file with the Secretary of the Interior or his authorized representative the following express undertakings in writing for the express benefit of Lessee:

(1) That applicant will either bury the pipeline to a sufficient depth or, at a place to be designated by Lessee, construct and maintain a ramp, at applicant's expense, so that loaded vehicles, including Lessee's heavy mining equipment, may pass unhindered over said pipe. Whenever said pipeline is relocated pursuant to subsection (2) of this Section, applicant will either bury the relocated pipe or promptly construct and maintain, at its own expense, a suitable ramp in a new place designated by Lessee. Lessee shall not be responsible for damage to said pipe caused by such vehicles and equipment so crossing said pipeline.

(2) That applicant will make adequate provisions in the construction of the pipeline so that, in the event it is determined by Lessee that mining operations should be conducted within the area of the designated pipeline crossing, or that a power or industrial plant or other building should be built in such area, the line can be expeditiously relocated so as not to interfere with Lessee's operations, and applicant shall make such relocation, including any necessary bridging, at its own expense, within ninety (90) days from receipt of notice in writing from Lessee requesting such relocation. If applicant fails to make such relocation within such ninety day period, Lessee may relocate the line without liability and at the expense of applicant.

(6) That applicant shall specify in writing the address to which all notices and requests to be given or made by Lessee may be mailed.

B. Lessor agrees that:

(i) No pipeline right of way granted shall exceed fifty (50) feet in width;

(ii) Timely notice shall be given to Lessee of any application for pipeline rights over the leased premises before the same is granted; and

(iii) An executed duplicate of the undertakings specified in paragraph A and a true copy of the grant of pipeline rights shall be furnished Lessee upon the granting of any application for pipeline rights over the leased premises.

ARTICLE XXII. LIABILITY FOR DAMAGES

The Lessee shall be liable for any and all damages resulting from operations under this lease, including injury to the Lessor, tenants, licensees and surface owners, and for any and all damage to, or destruction of, all property, including but not limited to crops, vegetation and improvements, caused by Lessee's operations hereunder.

ARTICLE XXIII. EXISTING MINES

Lessee agrees that it will not sell coal to local reservation markets now being served by existing mines operated by Hopi Indians as of the date hereof, so long as these existing mines continue to service the local reservation markets. Lessee shall not, however, be in any manner restricted from developing new markets or uses for coal upon the reservations.

ARTICLE XXIV. RESEEDING

ARTICLE XXV. PERMITS

If Lessee shall enter into arrangements whereby coal mined from the leased premises and from the premises covered by the lease between Sentry Royalty Company and the Navajo Tribe, dated February 1, 1964, will be transported by coal slurry pipe line, Lessor agrees to furnish, without cost, the necessary rights of way and permits across Hopi Tribal lands.

ARTICLE XXVI. NOTICES

To or upon the Tribe.

Chairman
Hopi Tribal Council
Keams Canyon, Arizona

To or upon the Secretary of the Interior (2 copies)

Both to Superintendent of Hopi Agency
Keams Canyon, Arizona

To or upon Sentry Royalty Company,

President or Secretary
Sentry Royalty Company
301 N. Memorial Drive
St. Louis, Missouri

Either party may at any time, by written notice to the other, change the designation or address of the person so specified as the one to receive notices hereunder.

IN WITNESS WHEREOF the parties hereto have caused this lease to be signed by their duly authorized officers the day and year first above written.

THE HOPI TRIBE OF INDIANS
Lessor

By DEWEY HEALING
DEWEY HEALING
Chairman, Hopi Tribal
Council

THE SENTRY ROYALTY COMPANY
Lessee

/s [Illegible] Vice-President

FILED AND RECORDED AT THE REQUEST
Jennings, Strouss, Salmon & Trask
May 26th A.D. 1967 AT 8:00 O'CLOCK A.M.
IN DOCKET 259.Off.Records PAGE 385-412
RECORDS OF NAVAJO COUNTY, ARIZONA Inclusive
Ella R. Probst RECORDER
BY DEPUTY

ACKNOWLEDGMENT OF LESSOR

State of Arizona )

)ss.

County of Apache )

Before me, a Notary Public, on this 29th day of June, 1966, personally appeared Dewey Healing, to me known to be the identical person who executed the within and foregoing lease and acknowledged to me that he executed the same in his official capacity as Chairman of the Hopi Tribal Council for and on behalf of the Hopi Tribe of Indians as its free and voluntary act and deed for the uses and purposes therein set forth.

/s/ [Illegible]
Notary Public

My Commission Expires: 7-13-1967

ACKNOWLEDGMENT OF LESSEE

State of Missouri )

)ss.

City of St. Louis )

On this 25th day of June, 1966 before me appeared E. R. Phelps to me personally known, who being by me duly sworn, did say that he is a Vice President of Sentry Royalty Company, and that the seal affixed to the foregoing instrument is the corporation seal of said corporation, and that said instrument was signed and sealed in behalf of said corporation by authority of its Board of Directors and said E. R. Phelps acknowledged said instrument to be the free act and deed of said corporation.

Witness my hand and seal the day and year first above written.

/s/ [Illegible]
Notary Public
In and for the County of
St. Louis which adjoins the
City of St. Louis
My Commission Expires: Dec. 3, 1966

UNITED STATES
DEPARTMENT OF THE INTERIOR
BUREAU OF INDIAN AFFAIRS
Phoenix Area Office
P. O. Box 7007
Phoenix, Arizona

The within Mining Lease is approved pursuant to authority delegated to Commissioner of Indian Affairs by Secretarial Order No. 2508 and by Commissioner to Area Director by Bureau Order No. 551 and Amendments thereto and under authority delegated by Washington Office letter of October 8, 1964 (Real Property Management Minerals 5427-64).

/s/ [Illegible]
ACTING Area Director

Date: June 20, 1966

State of Arizona )

ss.

County of Maricopa )

Before me, a Notary Public, in and for said county and State, on this 20th day of June, 1966, personally appeared George W. Hedden, whose name is subscribed to the foregoing Mining Lease, Contract No. 14-20-0450-5743, dated June 6, 1966, as ACTING Area Director, Phoenix Area Office, Bureau of Indian Affairs, now is and was at the time of signing the same, Acting Area Director of the Phoenix Area Office, Bureau of Indian Affairs; and he personally acknowledged to me that he executed said instrument as his free and voluntary act and deed for the uses and purposes set forth therein.

/s/ MARY M. GILBERT
otary Public

My commission expires July 23, 19XX.

GUARANTY

In consideration of the execution of the above lease by the Hopi Tribe, Peabody Coal Company hereby guarantees the due performance by Sentry Royalty Company of all covenants and agreements on its part therein contained, and the payment of all damages, costs and expenses which by virtue of said lease may become recoverable from said Sentry Royalty Company by the Hopi Tribe.

ATTEST: PEABODY COAL COMPANY

/s/ MULVANEY By H. D. HAGEN
Secretary Vice President

Date: June 6, 1966

TRACT NO. 1

Beginning at the Department of Interior's Bureau of Land Management Mile Post 23.5, a brass plate marked Navajo, EO 1882, 23.5 M, and located on the 36O39' parallel of latitude thence east along said 36O30' parallel distance of 16,092.64'; thence south 3,719.18'; thence west 2,770.00'; thence south 3,650.00'; thence west 2,096.31'; thence south 3,902.08'; thence west 5,803.43'; thence South 24O17' west 7,198.18'; thence east 5,143.65'; thence north 79O27' east 2,013.07'; thence north 56O49' east 3,461.95'; thence south 59O47' east 3,795.59'; thence south 14,220.00'; thence east 1,470.06'; thence south 8,477.66'; thence west 21,351.27'; thence north 8,247.66'; thence east 7,361.27'; thence north 4,560.00'; thence west 4,210.00'; thence north 5,170.00'; thence west 2,920.00'; thence north 10,110.00'; thence east 2,930.00'; thence north 37O49' east, 3,585.99'; thence north 1,889.40'; thence west 10,381.69'; thence north 7,369.18'; thence east 9,137.36' to the point of beginning, containing in all 15,595.81 acres, more or less, and all being located in Navajo County, Arizona.

The above description contains all or a part of the following sections as shown on the "Arizona Protraction Diagram No. 35, Bureau of Land Management Area 2, Cadastral Engineering" map dated February 11, 1960:

T. 36 N., R. 18 E.
26, 27, 28, 29, 30, 31, 32, 33, 34, 35

T. 35 N., R. 18 E.
3, 4, 5, 6, 7, 8, 9, 10, 11, 14, 15, 16, 17, 18,
20, 21, 22, 23, 26, 27, 28, 29, 30, 31, 32, 33,
34, 35

TRACT NO. 2

Beginning at a point, said point being 29,092.64' east of Mile Post 23.5, being the same mile post as described in Tract No. 1, and on the 36O30' north parallel of latitude; thence east along said parallel 24,769.40'; thence south 40,176.84'; thence west 4,769.40'; thence north 4,807.66'; thence west 4,000.00'; thence north 1,754.65'; thence west 6,448.91'; thence south 6,562.31'; thence west 13,551.09'; thence north 4,807.66'; thence west 4,00000'; thence north 4,000.00'; thence east 3,000.00'; thence north 4,000.00'; thence west 3,000.00'; thence north 4,000.00'; thence east 5,200.00'; thence north 4,000.00'; thence north 26O01' west 2,040.21'; thence north 2,350.00'; thence east 4,000.00'; thence north 15, 369.18' to the point of beginning, containing in all 24,404.19 acres more or less, and all being located in Navajo County, Arizona.

The above description contains all or a part of the following sections on the "Arizona Protraction Diagram No. 35, Bureau of Land Management Area 2, Cadastral Engineering" map dated February 11, 1960:

T. 36 N., R. 19 E.
25, 26, 27, 28, 29, 32, 33, 34, 35, 36

T. 35 N., R. 19 E.
1, 2, 3, 4, 5, 7, 8, 9, 10, 11, 12, 13, 14, 15,
16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27,
28, 29, 30, 31, 32, 33, 34, 35, 36

T. 35 N., R. 18 E.
13, 24, 25, 36

THE HOPI TRIBE
Resolution No. H-12-66

BE IT RESOLVED that Dewey Healing, Chairman of the Hopi Tribal Council, is hereby authorized to enter into a mining lease with Sentry Royalty Company, a Nevada corporation, in accordance with the Drilling and Exploration Permit by and between the Hopi Tribe, the Navajo Tribe and Sentry Royalty Company, dated June 1, 1964, as amended by supplemental agreement dated August 18, 1964; subject to the approval of the tribal attorney as to form of lease and subject also to the approval of the Secretary of the Interior or his authorized agent.

C E R T I F I C A T I O N

I hereby certify that the foregoing Resolution was regularly adopted by the Hopi Tribal Council on the 16th day of May, 1966, by a vote of 10 in favor and 0 opposed, the Chairman not voting, after full and free discussion on the merits.

/s/ DEWEY HEALING
DEWEY HEALING, Chairman Hopi Tribal Council

ATTEST:

/s/ DORIS NASEYOWMA
Doris Naseyowma, Acting Secretary
Hopi Tribal Council

APPROVED:

/s/ CLYDE W. PENSONEAU MAY 24, 1966
Clyde W. Pensoneau, Superintendent
Hopi Indian Agency

PERCENTAGE ROYALTY SCHEDULE FOR URANIUM AND OTHER MINERALS
ASSOCIATED THEREWITH

Mine Value Per Dry Ton Royalty Percentage of
Mine Value Per Dry Ton

$ 0.01 to $ 10.00 inclusive 12%
10.01 to 20.00 " 13.3%
20.01 to 30.00 " 14.6%
30.01 to 40.00 " 15.9%
40.01 to 50.00 " 17.2%
50.01 to 60.00 " 18.5%
60.01 to 70.00 " 19.8%
70.01 to 80.00 " 21.1%
80.01 to 90.00 " 22.4%
90.01 to 100.00 " 23.7%
100.01 to more 25%

"MINE VALUE PER DRY TON", wherever used herein is hereby defined as the dollar value per dry ton of crude ores at the mine as paid for by the Atomic Energy Commission or other government authorized agency before allowance for transportation and development; however, if the government at any time hereafter does not establish and pay for said ores on a fixed or scheduled dollar value per dry ton of crude ores at the mine, or said ores contain saleable minerals, some, or all, of which are disposed of to a custom treatment plant or smelter for treatment, and sale, then mine value per dry ton shall be the gross value per dry ton of said crude ore as paid for by the Atomic Energy Commission or other government authorized agency mill or other buyer, less any allowances or reimbursements for the following specific items: (1) transportation of ores (2) allowances for exploration for, or development of ores and (3) treatment or beneficiation of ores; which specific items shall in such event be deducted from the gross sales price received from the metal content of said ores by the seller before said percentage royalty is calculated and paid.

AMENDMENTS TO COAL MINING LEASE
No. 14-20-0603-8580
BETWEEN THE NAVAJO TRIBE AND PEABODY COAL COMPANY

WHEREAS, a mining Lease designated No. 14-20-0603-8580 was made and entered into on February 1, 1964, between the Navajo Tribe and Sentry Royalty Company; and

WHEREAS, this Lease was approved by the designated representative of the Secretary of the Interior on August 28, 1964; and

WHEREAS, Peabody Coal Company, a Delaware corporation, has been assigned all of Sentry Royalty Company's right, title and interest in and to the Lease; and

WHEREAS, Peabody Coal Company has entered into and is currently performing under a long term coal supply agreement with the Participants in the Mohave Project who are Southern California Edison Company, Department of Water and Power of the City of Los Angeles, Nevada Power Company, and Salt River Project Agricultural Improvement and Power District (hereinafter referred to as "Mohave Participants"), for the sale and purchase of certain coal from the leased premises to the Mohave Project; and

WHEREAS, Peabody Coal Company has also entered into and is currently performing under a long term coal supply agreement with the Co-Owners in the Navajo Generating Station who are Arizona Public Service Company, Department of Water and Power of the City of Los Angeles, Nevada Power Company, Salt River Project Agricultural Improvement and Power District, and Tucson Electric Power Company, and along with the Bureau of Reclamation of the United States Department of the Interior, are hereinafter referred to as "Navajo Participants", for the sale and purchase of certain coal from the leased premises to the Navajo Generating Station; and

WHEREAS, Peabody Coal Company has, pursuant to a package of amendments to Lease Nos. 14-20-0603-8580 and 14-20-0603-9910, both between Peabody and the Navajo Tribe, proposed to the Navajo Tribe to lease 90 million additional tons of surface mineable coal within the boundaries of the leasehold under Lease No. 14-20-0603-8580, and lease the Navajo Tribe's undivided one-half interest in 180 million additional tons of surface mineable coal within the boundaries of the leasehold under Lease No. 14-20-0603-9910; and

WHEREAS, these amendments to Lease No. 14-20-0603-8580 are a part of such package; and

WHEREAS, Peabody Coal Company, pursuant to amendments to Lease No. 14-20-0450-5743 between Peabody Coal Company and the Hopi Tribe of Indians has proposed to the Hopi Tribe to lease that Tribe's undivided one-half interest in the same 180 million tons of surface mineable coal as are proposed for lease under the amendments to Lease No. 14-20-603-9910; and

WHEREAS, Peabody Coal Company and the Navajo and Mohave Participants expressly acknowledge the importance to members of the Navajo Tribe of the preservation of Navajo lands and the minimization of disruption to the ways of life of Navajos living on or near the areas leased hereunder; and

WHEREAS, the Navajo Tribe expressly acknowledges the importance for members of the Navajo Tribe of the benefits accruing to the Tribe under this Lease as herein amended and acknowledges further that some disruption to Navajo lands and Navajo tribal members living on or near the areas leased hereunder will be necessary if such benefits are to be realized; and

WHEREAS, in consideration for various additional undertakings of Peabody Coal Company commencing on the effective date of these amendments rather than at the end of the current lease, the Navajo Tribe does hereby agree to amend Lease No. 14-20-0603-8580 to authorize Peabody Coal Company to mine this additional coal rather than executing a separate lease or leases to cover the areas containing this coal, it being understood that the additional 90 million tons will all be mined within the surface area covered by Lease No. 14-29-0603-8580;

NOW, THEREFORE, it is agreed between the Navajo Tribe (hereafter referred to as "Lessor") and Peabody Coal Company (hereafter referred to as "Lessee") that Coal Mining Lease No. 14-20-0604-8580 is hereby amended as follows:

1. Term and Possession. At the end of the first paragraph of Article II, p. 2, the following is added:

In the event the production of coal in paying quantities by Lessee from the premises leased hereunder ceases prior to the cessation of production of coal in paying quantities by Lessee from the premises covered by Lease No. 14-20-0603-9910, Lessor will consent to such applications by Lessee for such surface leases as may be reasonably necessary to ensure that Lessee retains the right for the duration of the term of Lease No. 14-20-0603-9910 to use and occupy as much of the surface of the premises leased hereunder as may be needed for the operation of mining facilities including, without limitation, roads, power lines, communication lines, overland conveyors, buildings, equipment, and other facilities, in support of Lease No. 14-20-0603-9910. Such surface leases shall be for a total area not to exceed 2,000 acres and shall provide that Lessee shall pay to Lessor for any land under those surface leases at the rate of Fifty Dollars ($50.00) per acre per year, which payment shall be in lieu of any rentals or advance royalties provided under this Coal Mining Lease as herein amended. Application(s) for such surface leases shall be submitted to Lessor by Lessee no later than nine (9) months prior to the projected cessation of production under this Lease and shall identify with specificity the areas for which surface leases are required. Lessee agrees to complete promptly the reclamation of the remainder of the premises leased hereunder in accordance with applicable law. After completion of such reclamation, this Lease shall be deemed terminated with respect to those portions of the premises leased hereunder which are not subject to executory surface leases.

2. Additional Coal. The fourth paragraph of Article II of the Lease is deleted and the following paragraph is put in its place:

Lessor does hereby lease to Lessee 290 million tons of surface mineable coal in the leased premises comprising the 200 million tons originally leased plus an additional 90 million tons as of the effective date hereof. Such coal shall be mineable by strip, auger, or other generally approved surface mining methods to the extent economically feasible as determined by appropriate federal agencies using standards applicable to federal coal. Lessor and Lessee agree that, for purposes of Navajo taxes, if applicable on any of the premises leased hereunder, the value of and expenses attributable to such additional 90 million tons of coal shall not be considered part of the active mining activities of Lessee until the earlier of (a) issuance of any mining permit(s) (conditional, temporary or otherwise) by applicable governmental authority authorizing commencement of mining of any coal in excess of 200 million tons from the leased premises; or (b) January 1, 2005. Until such inclusion in active mining activities, such additional coal and associated expenses shall be deemed, for such tax purposes, as an inactive, non-productive leasehold interest and shall be assessed on the per acre basis established by Lessor for such reserves for the areas of additional coal shown on Exhibit A-1. Lessee agrees that, to the extent possible, Lessee will mine the additional coal granted hereunder in proportion to the amount of additional coal granted under the amendments to Lease No. 14-20-0603-9910, so that with 90 million tons of additional coal on Lease No. 14-20-0603-8580 and 180 million tons of additional coal on Lease 14-20-0603-9910, Lessee would attempt to mine one ton of additional coal from the premises covered by this Lease No. 14-20-0603-8580 for every two tons of additional coal mined from the premises covered by Lease No. 14-20-0603-9910. This mining would be monitored on an annual basis. It is understood that Lessee can adhere to this method of operation so long as it does not have a material and adverse effect on Lessee's ability to meet the coal quality required by the Mohave and Navajo Participants for those Projects. Lessee shall provide Lessor reasonable access to the records maintained under Article IX hereof for the purpose of monitoring Lessee's com