This Settlement Agreement (the "Agreement") is made, as of the Effective Date as
defined in Paragraph 4 below, between the United States of America ("United States") and Elgin Mining, Inc. (formerly known as Phoenix Coal, Inc.), Phoenix Coal Corporation, Crittenden County Coal, Inc., C&R Coal Company, Inc., R&L Winn, Inc., and Charolais Mining Company, LLC, and their former and current shareholders, officers, directors, agents, and employees (collectively, "Elgin Mining"), collectively referred to as'othe Parties." WHEREAS, the United States Army Corps of Engineers, Louisville District (the "Corps") issued the following permits or authorizations to discharge dredged or filI material into waters of the United States pursuant to Section 404 of the Clean Water Act in connection with mining activities: ID No. LRL-2004-00527-GJD to Charolais Coal No. 1, LLC, issued under Nationwide Permit 2l DAPermit No. LRL-2005-1057-GJD to C&R Coal Company, Inc., issued as an individual permit; ID No. LRL-2007-1314 to C&R Coal Company, Inc., issued under Nationwide Permit 49; and DA Permit No. LRL-2005-131 to Crittenden County Coal, lnc., issued as an after-the-fact individual permit; (collectively, the'oPermits"); WHEREAS, Charolais Coal No. 1, LLC subsequently notified the Corps that Charolais Mining Company, LLC would be assuming the obligations under ID No. LRL-2004-00527-GJD; WHEREAS, each of the Permits required Elgin Mining to provide compensatory mitigation for lost aquatic resource functions resulting from discharges of dredged or fill material into waters of the United States; WHEREAS, the Corps has notified Elgin Mining that it was in noncompliance with the mitigation requirements of each of the Permits and directed Elgin Mining to take immediate steps to correct such noncompliance; Page I of7 WHEREAS, the Parties wish to resolve all claims concerning Elgin Mining's noncompliance with the mitigation requirements of the Permits; WHEREAS, the Parties agree that this Agreement is fair, reasonable and in the public interest; and WHEREAS, except as set forth herein, the United States enters into this Agreement with Elgin Mining as a final settlement of all Covered Matters, as defined below, in connection with the Site; NOW, THEREFORE, IT IS AGREED thAt: 1. The Parties to this Agreement are Elgin Mining and the United States. 2. This Agreement applies to, is binding upon, and inures to the benefit of Elgin Mining (and its successors, assigns, and designees) and the United States. 3. Elgin Mining's obligations under this Agreement are joint and several. 4. Effective Date. The Effective Date of this Agreement shall be the date this Agreement is fully executed by authorized representatives of the United States and Elgin Mining. 5. Covered Matters. "Covered Matters" means any and all civil claims that were, could now be or could hereafter be asserted by the United States against Elgin Mining under Clean Water Act gg 301 and 404,33 U.S.C. $$ 131 I and 1344, concerning the mitigation requirements in the Permits. 6. United States. The "United States" means the United States of America, including all of its departments, agencies, and instrumentalities. 7. This Agreement shall constitute a complete and final settlement of all civil claims for injunctive relief and civil penalties against Elgin Mining under Clean Water Act $$ 301 and 404 concerning the mitigation requirements in the Permits. Page2 of 7 8. Payment to Approved In Lieu Fee Proeram. Elgin Mining shall pay Three Million, Seventy-One Thousand, Two Hundred and Ninety-Two Dollars ($3,071,292.00) to the Kentucky Department of Fish and Wildlife Resources' In Lieu Fee Program, or another In Lieu Fee sponsor approved by the Corps, within five calendar days of the Effective Date. Unless otherwise directed by the Corps, payment shall be in the form of a certified or cashier's check made out to "Kentucky Department of Fish and Wildlife Resources" and mailed to the following address: Kentucky Department of Fish and Wildlife Resources, #l Sportsman's Lane, Frankfort, KY 40601. A copy of the certified or cashier's check shall be sent on the same day to the Corps' Louisville District at the following address: US Army Corps of Engineers, Louisville District, PO Box 59, Room 752, ATTN: CELRL-OP-F, Louisville, KY 4020I-0059. 9. Payment of Civil Penalty. Elgin Mining shall pay a civil penalty to the United States in the total amount of One Hundred Fifty Thousand Dollars ($150,000.00) within five calendar days of the Effective Date. Elgin Mining shall make this payment via electronic funds transfer pursuant to written instructions to be provided by the United States Attorney's Office for the Western District of Kentucky. 10. Interest. In the event that Elgin Mining fails to make timely payment under either Paragraph 8 or 9 of this Agreement, interest will be charged in accordance with the statutory judgment interest rate provided for in 28 U.S.C. $ 1961. The interest shall be computed daily from the time the payment is due until the date the payment is made. The interest also shall be compounded annually. 11. Release by the United States. Conditioned upon Elgin Mining's full payment of the sums identified in Paragraphs 8 and 9 of this Agreement, the United States hereby releases Elgin Mining from civil claims for injunctive relief, In Lieu Fees, and civil penalties against Page 3 of 7 Elgin Mining under Clean Water Act $$ 301 and 404 concerning the mitigation requirements in the Permits. 12. Release by Elein. Elgin Mining fully and finally releases the United States, its agencies, officers, agents, employees, and servants, from any claims (including attorney's fees, costs, and expenses of every kind and however denominated) that Elgin Mining has asserted, could have asserted, or may assert in the future against the United States, its agencies, offtcers, agents, employees, and servants, related to the Covered Matters and the United States' investigation thereof. 13. Effect of Settlement. This Agreement was negotiated and executed by Elgin Mining and the United States in good faith and at arms length and is a fair and equitable compromise of claims. 14. Representative Authoritlz. The individuals signing this Agreement on behalf of the Parties hereby certify that they are authorized to bind their respective party to this Agreement. 15. Counterparts. This Agreement may be executed in counterparts, each of which constitutes an original and all of which constitute one and the same Agreement. [Signature Pages to Follow] Page 4 of7 F'OR ELGIN MINING. INC.: By: Patrick Downey Chief Executive Ottcer #1204 - 700 West Pender St. Vancouver, British Columbia V6C lG8 (604) 682-3366 FOR PHOENIX COAL CORPORAT10N: By: B all Morales President #1204-700 Wcst Pcndcr St Vancouver,Btish Columbia V6C IG8 (604)682] 3366 FOR CRIITENDEN COUMY COAL.INC..: By: B an Morales President #1204-700 Wcst Pcndcr St Vancouvcr,BHdsh Colulnbia V6C l G8 (604)682] 3366
V Brian Morales h R Page 5 of7 E FOR R&L WINN. INC: By, Brian Morales President #l2M - 700 West Pender St. Vancouver, British Columbia V6C lGS (604) 682-3366 FOR CHAROLAISR IININC COMPANY.LLC.: By: BHan Moralcs Presidcnt #1204-700 Wcst pender St. Vancouver,BHtish Commbia v6C lG8 (6C14)682] 3366 R ` Brian Morales Page 6 of 7 Datc BENJAMIN SCHECTER Assistant United States Attomey Westem District of Kentucky 7l 7 West Broadway l.ouisville, Kentucky 4O2O2 (502) 582-6061 (telephone) ben.schecter@usdoj. gov q Page 7 of 7