10-Q/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 _______________________________________________________________________________________________________________________________________________________________________________________________________

Amendment No. 2 TO

FORM 10-Q

(Mark One)
þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended September 30, 2012

OR

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from  to

Commission file number 1-9172

	NACCO INDUSTRIES, INC.
	(Exact name of registrant as specified in its charter)
DELAWARE		34-1505819
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
5875 LANDERBROOK DRIVE, SUITE 220, CLEVELAND, OHIO		44124-4069
(Address of principal executive offices)		(Zip code)
	(440) 229-5151
	(Registrant's telephone number, including area code)
	N/A
	(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES þ NO o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YES þ NO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Accelerated filerþ	Non-accelerated filer o	Smaller reporting company o
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES oNO þ

Number of shares of Class A Common Stock outstanding at October 26, 2012: 6,811,999

Number of shares of Class B Common Stock outstanding at October 26, 2012: 1,582,311

EXPLANATORY NOTE

The Company is filing this Amendment No. 2 (this “Amendment No. 2”) to its Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2012 (the “Initial Report”) to replace the copies of the agreements filed as Exhibits 10.11, 10.12, 10.13, 10.16, 10.18 and 10.21 to the Initial Report with the copies of such agreements filed herewith. The Company has withdrawn its request for confidential treatment with respect to portions of the agreement filed as Exhibit 10.21 to the Initial Report, and an unredacted copy of such agreement is filed as Exhibit 10.21 hereto. The Company is refiling Exhibits 10.11, 10.12, 10.13, 10.16 and 10.18 to the Initial Report in connection with the Company's request for confidential treatment with respect to portions of such exhibits.

This Amendment No. 2 also includes an updated exhibit list and currently dated certifications required by the Sarbanes-Oxley Act of 2002 filed as Exhibits 31(i)(1), 31(i)(2) and 32 hereto. This Amendment No. 2 does not change the Company's previously reported consolidated financial statements or make any other changes to the Initial Report and should be read in conjunction with the Initial Report and Amendment No. 1 thereto. The Company has not updated the disclosures contained in the Initial Report to reflect any events that have occurred after the filing date of the Initial Report.

Item 6 - Exhibits

Incorporated by reference to theExhibit Index following the signature page to this Amendment No. 2 which is incorporated herein by reference.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		NACCO Industries, Inc. (Registrant)
Date:	March 20, 2013	/s/ J.C. Butler, Jr.
		J.C. Butler, Jr.
		Senior Vice President - Finance, Treasurer and Chief Administrative Officer (Principal Financial Officer)

Exhibit Index

Exhibit
Number*	Description of Exhibits
10.1	Share and Membership Interest Purchase Agreement by and among TRU Energy Services, LLC, as Buyer, the sellers party thereto, and the trustees and beneficiaries party thereto dated as of August 31, 2012 is incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed by the Company on September 5, 2012, Commission File Number 1-9172.**
10.2	NACCO Industries, Inc. Executive Excess Retirement Plan (Effective as of September 28, 2012) is incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K, filed by the Company on September 17, 2012, Commission File Number 1-9172.**
10.3	Amendment No. 1 to The North American Coal Corporation Excess Retirement Plan (Effective January 1, 2008) is incorporated by reference to Exhibit 10.4 to the Company's Current Report on Form 8-K, filed by the Company on September 17, 2012, Commission File Number 1-9172.**
10.4	The NACCO Industries, Inc. Annual Incentive Compensation Plan (Effective as of September 28, 2012), sponsored by NACCO Industries, Inc. is incorporated by reference to Exhibit 10.6 to the Company's Current Report on Form 8-K, filed by the Company on September 17, 2012, Commission File Number 1-9172.**
10.5	Amendment No. 1 to the NACCO Industries, Inc. Executive Long-Term Incentive Compensation Plan (Amended and Restated Effective March 1, 2012) is incorporated by reference to Exhibit 10.7 to the Company's Current Report on Form 8-K, filed by the Company on September 17, 2012, Commission File Number 1-9172.**
10.6	Form Award Agreement for the NACCO Industries, Inc. Supplemental Executive Long-Term Incentive Bonus Plan (Amended and Restated Effective March 1, 2012) is incorporated by reference to Exhibit 10.8 to the Company's Current Report on Form 8-K, filed by the Company on September 17, 2012, Commission File Number 1-9172.**
10.7	Separation Agreement, dated as of September 28, 2012, by and between NACCO Industries, Inc. and Hyster-Yale Materials Handling, Inc.**
10.8	Transition Services Agreement, dated as of September 28, 2012, by and among NACCO Industries, Inc. and Hyster-Yale Materials Handling, Inc.**
10.9	Tax Allocation Agreement, dated as of September 28, 2012, by and between NACCO Industries, Inc. and Hyster-Yale Materials Handling, Inc.**
10.10	Amended and Restated Stockholders' Agreement, dated as of September 28, 2012, among the signatories thereto, NACCO Industries, Inc., as depository, and NACCO Industries, Inc. is incorporated by reference to Exhibit 10.4 to the Company's Current Report on Form 8-K, filed by the Company on October 4, 2012, Commission File Number 1-9172.**
10.11	Coteau Lignite Sales Agreement by and between The Coteau Properties Company and Dakota Coal Company, dated as of January 1, 1990.+
10.12	First Amendment to Coteau Lignite Sales Agreement by and between The Coteau Properties Company and Dakota Coal Company, dated as of June 1, 1994.+
10.13	Second Amendment to Coteau Lignite Sales Agreement by and between The Coteau Properties Company and Dakota Coal Company, dated as of January 1, 1997.+
10.14	Option and Put Agreement by and among The North American Coal Corporation, Dakota Coal Company and the State of North Dakota, dated as of January 1, 1990.**
10.15	First Amendment to the Option and Put Agreement by and among The North American Coal Corporation, Dakota Coal Company and the State of North Dakota, dated as of June 1, 1994.**
10.16	Lignite Sales Agreement by and between Mississippi Lignite Mining Company and Choctaw Generation Limited Partnership, dated as of April 1, 1998.+
10.17	Pay Scale Agreement by and between Mississippi Lignite Mining Company and Choctaw Generation Limited Partnership, dated as of September 29, 2005.**
10.18	Second Restatement of Coal Sales Agreement by and between The Falkirk Mining Company and Great River Energy, dated January 1, 2007.+
10.19	Amendment No. 1 to Second Restatement of Coal Sales Agreement, by and between The Falkirk Mining Company and Great River Energy, dated as of January 21, 2011.**
10.20	Restatement of Option Agreement by and among The Falkirk Mining Company, Cooperative Power Association, United Power Association, and the State of North Dakota, dated as of January 1, 1997.**
10.21	Third Restatement of Lignite Mining Agreement by and between The Sabine Mining Company and Southwestern Electric Power Company, dated January 1, 2008.
10.22	Option Agreement by and among The North American Coal Corporation, Southwestern Electric Power Company and Longview National Bank, dated as of January 15, 1981.**
10.23	Addendum to Option Agreement, by and among The North American Coal Corporation, Southwestern Electric Power Company and Longview National Bank, dated as of January 15, 1981.**
10.24	Amendment to Option Agreement, by and among The North American Coal Corporation, Southwestern Electric Power Company and Longview National Bank, dated as of December 2, 1996.**

10.25	Second Amendment to Option Agreement, by and among The North American Coal Corporation, Southwestern Electric Power Company and Regions Bank, dated as of January 1, 2008.**
10.26	Agreement by and among The North American Coal Corporation, Southwestern Electric Power Company, Texas Commerce Bank-Longview, Nortex Mining Company and the Sabine Mining Company, dated as of June 30, 1988.**
10.27	Credit Agreement, dated as of April 29, 2010, among The Kitchen Collection, Inc., the borrowers and guarantors thereto, Wells Fargo Retail Finance, LLC and the other lenders thereto.**
10.28	First Amendment to Credit Agreement, dated as of August 7, 2012, among The Kitchen Collection, LLC, as successor to The Kitchen Collection, Inc., the borrowers and guarantors thereto, Wells Fargo Bank, National Association, as successor to Wells Fargo Retail Finance, LLC, and the other lenders thereto.**
10.29	Consent and Agreement by and among Mississippi Lignite Mining Company, Choctaw Generation Limited Partnership, SE Choctaw L.L.C. and Citibank, N.A., dated December 20, 2002.**
31(i)(1)	Certification of Alfred M. Rankin, Jr. pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange Act
31(i)(2)	Certification of J.C. Butler, Jr. pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange Act
32	Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed and dated by Alfred M. Rankin, Jr. and J.C. Butler, Jr.
95	Mine Safety Disclosure Exhibit**
101.INS	XBRL Instance Document***
101.SCH	XBRL Taxonomy Extension Schema Document***
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document***
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document***
101.LAB	XBRL Taxonomy Extension Label Linkbase Document***
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document***

*    Numbered in accordance with Item 601 of Regulation S-K.

**    Previously filed.

***    Previously furnished.

⁺    Confidential treatment requested for portions of this document. Portions for which confidential treatment is requested have been marked with three asterisks [***] and a footnote indicating "Confidential treatment requested". Material omitted has been filed separately with the Securities and Exchange Commission.

EX-10.11

CONFIDENTIAL TREATMENT REQUESTED FOR PORTIONS OF THIS DOCUMENT.  PORTIONS FOR WHICH CONFIDENTIAL TREATMENT IS REQUESTED HAVE BEEN MARKED WITH THREE ASTERISKS [***] AND A FOOTNOTE INDICATING “CONFIDENTIAL TREATMENT REQUESTED”.  MATERIAL OMITTED HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

Exhibit 10.11

COTEAU LIGNITE SALES AGREEMENT

dated as of January 1, 1990

by and between

THE COTEAU PROPERTIES COMPANY

and

DAKOTA COAL COMPANY

CONTENTS

1

Exhibits

EXHIBIT A

EXHIBIT B

EXHIBIT C

EXHIBIT D

EXHIBIT E

EXHIBIT F

EXHIBIT G

EXHIBIT H

2

COTEAU LIGNITE SALES AGREEMENT

THIS COTEAU LIGNITE SALES AGREEMENT (Agreement) dated as of January 1, 1990, is by and between THE COTEAU PROPERTIES COMPANY, an Ohio corporation authorized to do business in the State of North Dakota (Coteau) and DAKOTA COAL COMPANY, a North Dakota corporation (Dakota).

W I T N E S S E T H :

WHEREAS, Coteau is a party to the Restatement of Coal Sales Agreement dated as of June 1, 1979, as subsequently amended (the Coal Sales Agreement), by and between Coteau and ANG Coal Gasification Company (ANG);

WHEREAS, as of November 1, 1988, ANG assigned, and Dakota assumed, all of ANG's rights, interests and obligations pursuant to and under the Coal Sales Agreement;

WHEREAS, Dakota has entered into an agreement entitled “Coal Sales Agreement” dated as of November 1, 1988 with Basin Electric Power Cooperative (Basin Electric) pursuant to which Dakota is selling lignite to Basin Electric for use by Basin Electric in its Antelope Valley Station, which consists of two 450 MW generating units and is located near Beulah, North Dakota;

WHEREAS, Dakota has also entered into the Coal Supply Agreement dated as of November 1, 1988 with Dakota Gasification Company (DGC) pursuant to which Dakota is selling lignite to DGC for use by DGC in its Great Plains Coal Gasification Plant, the first phase of which consists of a Lurgi lignite gasification facility with the capability of producing approximately 160 MMSCF of pipeline quality synthetic natural gas per day and is located on a site adjacent to Basin Electric's Antelope Valley Station;

WHEREAS, Dakota may enter into another agreement with Basin Electric or an Affiliate (as hereinafter defined) of Basin Electric pursuant to which Dakota will supply to Basin Electric all of the lignite to be used by Basin Electric in any expansion of the electrical generating capability at the Antelope Valley Station;

WHEREAS, Dakota may enter into another agreement with DGC or an Affiliate of DGC pursuant to which Dakota will supply to DGC all of the lignite used by DGC in any expansion of the Great Plains Coal Gasification Plant;

WHEREAS, Dakota intends to enter into another agreement with Basin Electric or an Affiliate of Basin Electric pursuant to which Dakota will supply to Basin Electric or an Affiliate of Basin Electric the portion of the lignite used at Basin Electric's Leland Olds Station, which consists of a 215 MW generating unit and a 440 MW generating unit and is located near Stanton, North Dakota, which is not supplied by the Glenharold Mine;

WHEREAS, Dakota hopes to enter into agreements with other third parties pursuant to which Dakota will provide all or a portion of the lignite used by said third parties' facilities; and

WHEREAS, in light of the foregoing, the Coal Sales Agreement is being terminated by Coteau and Dakota simultaneously in connection with the execution and delivery of this Agreement, and Coteau and Dakota desire that this Agreement supersede and replace the Coal Sales Agreement.

1

NOW, THEREFORE, Coteau and Dakota agree as follows:

ARTICLE I
DEFINITIONS

Section 1.1Definitions. As used in this Agreement, the following terms shall have the following meanings:

Additional Dedicated Lignite shall mean those lignite reserves in the areas outside of the Primary Dedicated Lignite which, pursuant to Section 3.3 hereof, are made part of the Dedicated Lignite pursuant to this Agreement by being hereafter (a) acquired or held by Dakota or an Affiliate of Dakota, which then are acquired by, or transferred or subleased to Coteau or (b) acquired by Coteau at the direction of Dakota.

Affiliate shall mean any other person who, directly or indirectly, through ownership of securities, contract or otherwise, controls, is controlled by or is under common control with another person.

Agreed Profit shall have the meanings ascribed to the term in Sections 5.4, 5.5 and 5.7 hereof.

ANG shall mean ANG Coal Gasification Company, a Delaware corporation authorized to do business in the State of North Dakota and a second tier wholly owned subsidiary of Basin Electric.

Basic Agreement shall mean the Basic Agreement dated March 6, 1973, between North American Coal and Michigan Wisconsin Pipe Line Company. Pursuant to an Assignment Agreement dated July 1, 1975, Michigan Wisconsin Pipe Line Company assigned all of its rights and obligations under said Basic Agreement to American Natural Gas Production Company. Pursuant to an Assignment Agreement dated November 2, 1977, American Natural Gas Production Company assigned all of its rights and obligations under said Basic Agreement to WCDC. The Basic Agreement was subsequently restated pursuant to the Restatement of Basic Agreement dated as of June 1, 1979. Subsequently, the Restatement of Basic Agreement was terminated and replaced by the Coal Reserve Agreement. Pursuant to the Coal Reserve Agreement, WCDC transferred its obligations under the Restatement of Basic Agreement to ANG.

Basin Electric shall mean Basin Electric Power Cooperative, a North Dakota electric cooperative corporation.

Business Day shall mean any day other than a Saturday, Sunday or day on which banks in North Dakota or New York City are required or authorized to be closed.

Coal Reserve Agreement shall mean the Coal Reserve Agreement made and entered into as of March 2, 1987, by and among Coteau, Dakota (as successor in interest to ANG), North American Coal, The Missouri Valley Properties Company and WCDC.

Coal Sales Agreement shall mean the Restatement of Coal Sales Agreement dated as of June 1, 1979, and as subsequently amended, by and between Coteau and Dakota (as successor in interest to ANG).

Cost of Production shall have the meaning ascribed to the term in Section 5.2 hereof.

Coteau shall mean The Coteau Properties Company, an Ohio corporation authorized to do business in the State of North Dakota and a wholly owned subsidiary of North American Coal.

Coteau's Mine shall mean all mining areas developed by Coteau in the Dedicated Lignite.

Dakota shall mean Dakota Coal Company, a North Dakota corporation and a wholly owned subsidiary of Basin Electric.

2

Dakota's Other Plants shall mean all additional generating units installed by Basin Electric which increase the original generating capacity of the Antelope Valley Station and all additional gasifiers as well as the incremental increased capacity achieved by replacing one or more of the existing gasifiers with a replacement gasifier having a capacity greater than the gasifier being replaced at or near the Great Plains Coal Gasification Plant.

Dakota's Plants shall mean collectively Dakota's Primary Plants, Dakota's Secondary Plant, Dakota's Other Plants and Other Plants.

Dakota's Primary Plants shall mean collectively the Antelope Valley Station, consisting of two 450 MW generating units named Units 1 and 2 and located near Beulah, North Dakota, which is controlled and operated by Basin Electric, and the Great Plains Coal Gasification Plant, the first phase of which consists of a Lurgi lignite gasification facility with the capability of producing approximately 160 MMSCF of pipeline quality synthetic natural gas per day and is located on a site adjacent to the Antelope Valley Station, which is owned and operated by DGC.

Dakota's Requirements shall mean (a) all of the coal requirements of Dakota's Primary Plants and Dakota's Other Plants, (b) except as otherwise provided by Section 2.1 hereof, the portion of the coal used at Dakota's Secondary Plant which is not supplied by the Glenharold Mine and (c) the portion of the coal requirements of Other Plants which Dakota desires Coteau to supply.

Dakota's Secondary Plant shall mean the Leland Olds Station, consisting of a 215 MW generating unit and a 440 MW generating unit, owned by Basin Electric and located near Stanton, North Dakota.

Dedicated Lignite shall mean collectively the Primary Dedicated Lignite and the Additional Dedicated Lignite.

Development Period shall mean, with respect to the development of any mining area of Coteau's Mine for Dakota's Plants, the period from the date of Dakota's written approval of the Mining Plan with respect to such mining area until such date that Dakota shall designate.

DGC shall mean Dakota Gasification Company, a North Dakota corporation and a wholly owned subsidiary of Basin Electric.

Emergency Expenditures shall mean expenditures for Coteau’s Mine which, in the reasonable judgment of Coteau, are necessary as a result of explosion, fire, flood or other emergency and the delay of which, in order to secure Dakota’s prior approval, would either jeopardize life or substantial property of Dakota or Coteau, or result in a material interruption of Couteau’s Mine production.

Escrowed Stock shall mean the one hundred (100) shares of common stock, without par value, issued and outstanding of Coteau.

Glenharold Mine shall mean the lignite reserves delineated in Exhibit A hereto which by this reference is made a part hereof.

Index shall mean the average Producer Price Index- All Commodities on the base 1982 = 100, published by the Bureau of Labor Statistics of the U.S. Department of Labor, for the twelve (12) months of said calendar year. The base for calculating changes in the Index in Subsections 5.5(a), 5.5(b) and 5.5(c) hereof shall be the Producer Price Index - All Commodities for July, 1988.

Loans and Leases shall have the meaning ascribed to the term in Section 10.1 hereof.

3

Mining Plan shall mean the mining plan furnished to and approved by Dakota in accordance with Section 4.1 hereof and updated pursuant to such Section.

North American Coal shall mean The North American Coal Corporation, a Delaware corporation authorized to do business in the State of North Dakota (formerly Nortex Mining Company).

Option Agreement shall mean the Option and Put Agreement dated as of January 1, 1990, by and among Dakota, North American Coal and the State of North Dakota doing business as the Bank of North Dakota.

Other Plants shall mean any other facility owned by a third party for which Dakota shall contract to provide lignite.

Party shall mean either Coteau or Dakota as indicated by the context.

Parties shall mean Coteau and Dakota.

Premature Termination Mine Closing Costs shall have the meaning ascribed to the term in Section 14.2 hereof.

Primary Dedicated Lignite shall mean those lignite reserves within the areas of interest described in Exhibit B hereto which by this reference is made a part hereof which areas may be changed from time to time pursuant to Section 3.3 hereof.

Primary Truck Dump shall mean the facility presently located at Couteau’s Mine where mine-run lignite is dumped and subsequently crushed before delivery to the Secondary Crusher Building.

Production Payment shall have the meaning ascribed to the term in Section 5.7 hereof.

Secondary Crusher Building shall mean the building constructed by Coteau to house the secondary crusher and to accommodate the transfer of lignite from the Primary Truck Dump to Dakota’s Primary Plants.

Sub-Quality Lignite shall mean lignite with an average calorific content of less than six thousand two hundred (6,200) BTUs per pound on an as-received basis.

Such average computations shall be based upon the analyses of representative samples taken in accordance with the provisions of Subsection 5.5(d) and Section 9.1 hereof.

Ton shall mean a net ton of two thousand (2,000) pounds.

WCDC shall mean ANR Western Coal Development Company, a Delaware corporation.

ARTICLE II

SALE OF LIGNITE

Section 2.1General. Dakota agrees to purchase and accept and Coteau agrees to sell and deliver lignite pursuant to the terms and conditions of this Agreement. Dakota shall purchase from Coteau all of Dakota’s Requirements pursuant to this Agreement; provided, however, that lignite purchased by Dakota from an Affiliate of Basin Electric from lignite reserves located in the Glenharold Mine for use at Dakota’s Secondary Plant shall be exempt from this requirement; and further provided that, if federal, state or local laws prohibit or, in the reasonable opinion of Basin Electric or an Affiliate of Basin Electric, render uneconomical the use of North Dakota lignite at Dakota’s Secondary Plant, Dakota shall have the right to purchase and use, outside of the scope of this Agreement, alternative fuels or sub-bituminous or bituminous coal at Dakota’s Secondary Plant.

4

Section 2.2Tonnages. On a time schedule agreed to by the Parties, Dakota shall designate in writing to Coteau Dakota’s Requirements for the following calendar year, including the monthly tonnage requirements from Coteau’s Mine for each of Dakota’s Plants. Dakota shall promptly advise Coteau in writing of any material revisions and modifications to the annual designation of Dakota’s Requirements.

As necessary, Dakota shall consult with Coteau as to projected increases and decreases in Dakota’s Requirements on a long-range basis. If Dakota desires to increase the annual lignite deliveries for any calendar year by more than ten percent (10%) of the preceding year’s lignite requirements, Dakota shall provide Coteau with a written estimated schedule of Dakota’s Requirements on an annual basis for the succeeding five (5) calendar years, including the estimated deliveries from Coteau's Mine for each of Dakota’s Plants. The lignite quantities set forth in such schedule shall be within the limits of Coteau’s productive capability, provided that when any increase in estimated lignite requirements occurs which necessitates the acquisition by Coteau of additional equipment, Coteau shall not be obligated to supply such increased requirements until such time as it is able to acquire and install such additional equipment and do all other things necessary to supply such increased requirements.

Section 2.3Rate. Scheduled deliveries shall be in approximately equal weekly amounts in each calendar year during the entire term of this Agreement, subject, however, to the right of Dakota to increase or decrease such weekly amounts pursuant to Section 2.2 hereof. The scheduling of such shipments of lignite shall be made by mutual agreement of the Parties. To the extent practicable, Coteau shall coordinate the vacation schedule at Coteau's Mine so as to accommodate the requirements of Dakota's Plants for lignite and other services provided hereunder.

Section 2.4Point(s) of Delivery. Delivery of lignite shall be made at Dakota's Primary Plants or to such other point(s) designated in writing by Dakota to Coteau. Any transportation beyond said point(s) of delivery shall be arranged by and at the cost of Dakota.

ARTICLE III

DESCRIPTION OF LIGNITE

Section 3.1Lignite Quality.

The lignite to be sold and delivered hereunder shall be from Coteau's Mine and shall be mine-run lignite. Coteau shall make all reasonable efforts to avoid shipping extraneous impurities and, upon request of and reasonable written notice from Dakota, shall install lignite cleaning facilities specified by Dakota. Coteau shall not mine lignite from any area estimated by Coteau and Dakota to contain Sub-Quality Lignite unless Dakota shall have given its prior written consent.

Section 3.2Sub-Quality Lignite.

Dakota shall have the right to reject Sub-Quality Lignite, provided that Dakota shall not have the right to reject Sub-Quality Lignite mined with its consent from an area estimated to contain Sub-Quality Lignite pursuant to Section 3.1 hereof. If Coteau delivers Sub-Quality Lignite without receiving Dakota's prior written consent pursuant to Section 3.1 hereof, Dakota shall have the right, on notice to Coteau confirmed in writing, to suspend deliveries of lignite until Coteau establishes that it will meet specifications. Any Sub-Quality Lignite so rejected and not utilized or sold by Dakota shall be excluded from the tonnages upon which Coteau's Agreed Profit is based.

Section 3.3Dedicated Lignite.

The lignite to be sold and delivered hereunder shall be from the Dedicated Lignite. At the written direction of Dakota from time to time the geographic boundaries of the Dedicated Lignite may be modified to reflect the addition of Additional Dedicated Lignite to the Dedicated Lignite. At the written direction of Dakota from time to time the geographic boundaries of Primary Dedicated Lignite may be modified to reflect additions to the Primary Dedicated Lignite. With the mutual written approval of Coteau and Dakota, the geographic boundaries of the Dedicated Lignite may be modified from time to time to reflect deletions from the Dedicated Lignite. With the mutual written approval of Coteau and Dakota, the

5

geographic boundaries of the Primary Dedicated Lignite also may be modified from time to time to reflect deletions from the Primary Dedicated Lignite.

ARTICLE IV

MINING PLAN, FINANCIAL PROTECTION TO DAKOTA

Section 4.1Mining Plan.

From time to time at Dakota's request, Coteau shall provide to Dakota in writing a Mining Plan to furnish Dakota's Requirements from the Dedicated Lignite. The Mining Plan shall be in accordance with sound engineering and design practices and applicable laws, rules and regulations and shall include production schedules, manpower and equipment requirements, estimated costs per Ton, time schedules for mine development, estimated dates of initial production and full production, method of operation, including method of operation of any lignite handling facilities, reclamation and permitting schedules, capital expenditure and operating cost requirements, mine design, mine projection maps, mine progression and reserve studies and such other data as may be reasonably requested by Dakota. The Mining Plan shall be in such detail and format as may be reasonably requested by Dakota. Within seventy-five (75) days after receipt by Dakota of such Mining Plan, Dakota shall give Coteau written notice of Dakota's approval or disapproval of the Mining Plan. If Dakota does not give such notice within such seventy-five (75) days, Dakota shall be deemed to have approved such Mining Plan. If Dakota disapproves the Mining Plan or any portion(s) thereof, Dakota shall state in detail in its notice of disapproval the reason(s) for such disapproval and Coteau and Dakota shall meet promptly and attempt in good faith to settle their differences with respect to the Mining Plan. If Coteau and Dakota are unable to resolve their differences within thirty (30) days after Coteau's receipt from Dakota of such notice of disapproval, Dakota may reasonably direct Coteau, subject to Section 16.4 hereof, as to the revisions to be made in the Mining Plan and Coteau shall make such revisions. The Mining Plan shall be reviewed and revised or expanded annually (or as necessary) with the written approval of Dakota. Such revisions shall be based upon the then current projections developed by Coteau and requirements of applicable law, rules and regulations and shall be subject to approval by Dakota as provided above. No material modification of or deviation from the Mining Plan shall be made without the written approval of Dakota, which approval shall not be unreasonably withheld. It is recognized by the Parties that, subject to the duties imposed upon Coteau pursuant to Section 16.4 hereof, Coteau may make minor modifications of or deviations from the Mining Plan without Dakota's approval. Coteau shall consult with and keep Dakota informed of the progress of the design, development and operation of Coteau's Mine and shall, upon Dakota's request, furnish to Dakota copies of all major and significant drawings and documents relating to such design, development and operation.

Section 4.2Budgets and Cash Flow Projections.

Coteau shall furnish to Dakota, on a time schedule agreed to by the Parties, the following budgets and cash flow for activities pursuant to this Agreement during the following calendar year:

(a)An annual capital budget containing estimates of all commitments in excess of $10,000. Such annual capital budget shall be revised quarterly and submitted to Dakota no later than forty-five (45) days prior to the end of each calendar quarter. Within forty-five (45) days after Dakota’s receipt of the foregoing annual capital budget and within thirty (30) days after Dakota’s receipt of the foregoing revised quarterly budgets, Dakota shall give Coteau written notice of Dakota’s approval or disapproval of such capital budgets. If Dakota shall fail to give such notice within such forty-five (45) day or thirty (30) day period, as the case may be, Dakota shall be deemed to have approved such budgets. Dakota’s approval of such capital budgets may be limited to the immediately following calendar quarter. Upon the approval of any capital budget or portion thereof by Dakota, such budget or portion thereof shall be deemed part of the Mining Plan.

6

(b)An operating budget containing estimates of all operating and production costs. Such operating budget may be modified pursuant to the change order procedure described in Section 4.4 hereof. The annual operating budget shall be presented on a month-by-month basis. Within forty-five (45) days after Dakota’s receipt of the foregoing annual operating budget, Dakota shall give Coteau written notice of Dakota’s approval or disapproval of such operating budget. If Dakota shall fail to give such notice within such forty-five (45) day period, Dakota shall be deemed to have approved such budget. Upon the approval of any operating budget or portion thereof by Dakota, such budget or portion thereof shall be deemed part of the Mining Plan.

(c)A cash flow statement for all capital expenditures and operating and production costs presented on a month-by-month basis for the following four (4) calendar years. Such cash flow statement shall be revised monthly by Coteau and submitted to Dakota.

Such budgets and cash flow statement, as described in this Section 4.2, shall be in such form and detail acceptable to Dakota.

Section 4.3Financial Protection to Dakota.

Coteau shall not make any expenditures unless they are generally reflected in a budget, or portion thereof, approved by Dakota as aforesaid; nor shall Coteau make any single expenditure (except for expenditures made to maintain inventory levels as approved by Dakota from time to time) for materials, supplies, equipment, facilities or services in excess of $10,000, or enter into any contracts, agreements or commitments involving more than $10,000, unless such item has been specifically identified in a budget, or portion thereof, approved by Dakota or unless Dakota has otherwise approved thereof.

Any expenditures made by Coteau for capital items which are not made in accordance with the immediately preceding paragraph shall be deemed to have been made for the account of Coteau and shall not be recoverable from Dakota under any of the other provisions of this Agreement. Coteau shall have the right in its sole discretion to dispose of any capital items which are deemed to have been made for the account of Coteau.

Notwithstanding anything to the contrary contained in this Agreement, Coteau shall have the right during any calendar year to make Emergency Expenditures without advance approval by Dakota, provided that Coteau shall subsequently and promptly give Dakota written notice thereof.

If, at any time while an operating budget as approved by Dakota is in effect and Dakota, in good faith, believes that Coteau is not in compliance with any of the provisions of such operating budget, Dakota shall have the right to give Coteau notice of such noncompliance. Such notice shall be in writing and identified as a "Notice of Noncompliance Pursuant to Section 4.3 of the Coteau Lignite Sales Agreement dated as of January 1, 1990", shall cite the provision(s) of the operating budget as to which Dakota believes Coteau is not in compliance, shall state in detail the reasons why Dakota so believes Coteau is not in compliance and shall include all other pertinent information.

No later than fifteen (15) Business Days after Couteau’s receipt of such notice of noncompliance, Coteau shall either (a) give Dakota written notice that Coteau denies that such noncompliance has occurred or is occurring or (b) correct such noncompliance; provided, however, that if Coteau within five (5) Business Days after Coteau's receipt of such notice of noncompliance from Dakota gives Dakota notice confirmed in writing that Coteau needs more than fifteen (15) Business Days in order to correct the noncompliance(s) cited in such notice, together with reasons therefor, Dakota shall give Coteau such reasonable extension as may be necessary in order to make such correction(s).

If Coteau gives Dakota notice denying such noncompliance, Coteau and Dakota shall meet promptly and attempt in good faith to settle their differences. Any matter agreed upon by Coteau and Dakota with respect to such operating budget which requires implementation shall be implemented promptly. If

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Coteau and Dakota are unable to resolve their differences within thirty (30) days after Dakota’s receipt of notice from Coteau denying such noncompliance, either Party may submit the matter to arbitration as provided in Section 16.2 hereof. If arbitration is sought, Coteau shall not be deemed to be in noncompliance and shall not be required to correct any noncompliance until the matter shall have been determined finally in accordance with the aforesaid arbitration provisions.

If the noncompliance is not corrected or resolved by Coteau and Dakota as aforesaid and (x) arbitration is not so sought, or (y) Coteau subsequently is found in arbitration proceedings to be in noncompliance, then all costs incurred by Coteau following the expiration of five (5) Business Days after Coteau's receipt of notice of noncompliance from Dakota, including costs incurred during the period prior to the completion of any arbitration proceeding, and which costs result directly from such noncompliance with the operating budget as specified in said notice of noncompliance from Dakota, shall be disallowed up to an amount equal to the Agreed Profit due to Coteau for lignite produced during the period of disallowance and computed in accordance with Section 5.4 hereof. Subject to the provisions of Section 16.4 hereof, such disallowance shall be Dakota’s exclusive remedy for such noncompliance.

Section 4.4Change Orders.

Coteau shall develop a change order procedure acceptable to Dakota. Change orders consistent with such procedures shall be submitted by Coteau to Dakota for Dakota’s approval for (a) any change in the annual operating budget, as approved by Dakota, resulting from changes requested in writing by Dakota in the lignite quantities or design criteria contained in the annual operating budget, (b) any factor which results in a change in the current delivery schedule for lignite and (c) any predicted or actual increase in the annual operating budget, as approved by Dakota.

Section 4.5Meetings.

Coteau and Dakota shall meet periodically to review the progress of the design, development and operation of Coteau's Mine. Coteau and Dakota anticipate these meetings will be held quarterly. Prior to such meetings, Coteau shall submit to Dakota in a format acceptable to Dakota, such reports, schedules and operating and financial data as may be reasonably requested by Dakota.

Section 4.6Reports.

Coteau and Dakota shall cooperate to establish, maintain and use a cost and schedule control system with respect to the development of Coteau's Mine adequate for (a) the preparation of a project schedule which shall facilitate the planning of the development of Coteau's Mine and demonstrate production date impact resulting from schedule slippages, if any, in the development of Coteau's Mine, and (b) a cost control system and a physical progress data reporting system which (i) provide actual cost and scheduling status reports to Dakota for the immediately preceding calendar month by the fifteenth (15th) Business Day of every month in which development of Coteau's Mine is in progress, (ii) report the actual progress of the development of Coteau's Mine relative to the Mining Plan and such other schedules as Dakota shall designate and (iii) provide adequate audit trail information. Such control system may include the preparation by Coteau, as requested by Dakota, of the following documents in a format acceptable to Dakota:

1)     Budget Status Report

2)     Projected Expenditures Report (actual/projected)

3)     Cost and Comparison to Estimate Report

4)     Physical Progress Report

5)     Permit Status Report

6)     Project Status Report (written detail, all areas)

7)     Project Development Schedule (bar chart or time-oriented activity diagram);

or such other documents as requested by Dakota. Coteau shall notify Dakota in writing of any proposed changes in the cost and schedule control system previously approved by Dakota.

Section 4.7Procurement Policies.

All materials, supplies, equipment, facilities and services, and all contracts, agreements and commitments therefor or in connection therewith required to construct, develop and operate Coteau's Mine shall be

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acquired, entered into or made only pursuant to formal procurement policies adopted by Coteau and acceptable to Dakota. Coteau shall notify Dakota in writing of any proposed material changes to formal procurement policies previously approved by Dakota.

Section 4.8Payment of Dividends.

Coteau shall have the right to pay dividends on the Escrowed Stock only from earned surplus.

Section 4.9Accounting Practices.

Coteau shall maintain accurate books and records in accordance with generally accepted accounting principles and as necessary to support such detailed cost analyses, classifications and allocations as may be requested from time to time by Dakota.

Couteau’s accounting systems, policies and procedures shall conform to Dakota’s specifications, which shall be in accordance with generally accepted accounting principles, and shall be subject to Dakota’s approval. Coteau shall notify Dakota in writing of any proposed material changes to Couteau’s accounting systems, policies and procedures previously approved by Dakota. Couteau’s accounting system shall provide for cost classifications (chart of accounts) as requested by Dakota. Coteau shall develop a cash management system acceptable to Dakota which shall include the maintenance of separate cash accounts to the extent requested by Dakota.

Couteau’s accounting operations with respect to matters related to this Agreement shall be at such location as Dakota shall approve; provided, however, that Coteau shall have the right under this Agreement to conduct such other accounting operations and maintain such other accounting records and systems as Coteau deems necessary to be consistent with the accounting system of Affiliates of Coteau, the cost of which shall be included in the Cost of Production defined in Section 5.2 hereof.

Section 4.10Other Policies and Practices.

Coteau shall develop formal written policies with respect to executive compensation plans, which policies shall be subject to approval of Dakota. Such approval shall not be withheld if such policies are consistent with those of North American Coal.

Expenditures by Coteau for memberships in national trade associations and state trade associations which are included in the Cost of Production shall be limited to one and two, respectively, unless expenditures for additional memberships are approved by Dakota. Coteau shall keep Dakota apprised of the activities of the trade associations of which Coteau is a member and shall use its influence as a member to support the causes of Dakota.

Coteau shall develop formal written policies with respect to matters such as travel and entertainment, overtime, labor reporting, attendance at seminars, meetings and schools, use of company aircraft and vehicles, mine-related cost allocation methods and equipment replacement policies, all of which policies shall be subject to approval by Dakota.

Coteau shall develop formal written policies with respect to employee insurance, ·relocation expense, vacation and retirement benefits, all of which policies shall be subject to approval by Dakota. Such approval shall not be withheld if such policies are consistent with those of North American Coal and generally consistent with those of the lignite mining industry.

Coteau shall develop formal written policies with respect to donations to charitable and civic organizations and corporate sponsorships, which policies shall be subject to approval by Dakota. Expenditures by Coteau for donations and sponsorships which are included in the Cost of Production shall be limited to not more than $10,000 per year, unless a higher amount is approved in writing by Dakota. Coteau shall provide Dakota a listing of estimated planned expenditures for donations and sponsorships for the following calendar year by December 1.

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Coteau shall notify Dakota in writing of any proposed material changes to such policies previously approved by Dakota.

Section 4.11Employment Contracts.

Coteau shall consult with Dakota and consider the advice and counsel provided by Dakota before entering into any employment contracts or any contracts for the employment of consultants in its mining business other than contracts for professional services such as accounting services, architectural services and legal services which normally are performed by independent contractors.

ARTICLE V

PRICING

Section 5.1Determination of Price.

Subject to the right of Dakota to determine the price during the Development Period pursuant to Section 5.3 hereof and to adjustment as provided in Sections 5.5 and 5.7 hereof, Dakota shall pay for the lignite sold and delivered hereunder a price which annually equals the Cost of Production, as defined in Section 5.2 hereof, plus the Agreed Profit as determined pursuant to Sections5.4, 5.5 and 5.7 hereof.

Section 5.2Cost of Production.

For the purposes of this Agreement, except as otherwise expressly stated, "Cost of Production" shall mean all the costs actually incurred by Coteau in the design, development, construction and operation of Coteau's Mine and the mining, processing and delivery of lignite under this Agreement. Such costs shall be determined and allocated on an accrual basis in accordance with generally accepted accounting principles (except as otherwise expressly stated herein), consistently applied and shall include but not be limited to the following:

a) All production, transportation and maintenance costs including without limitation the following types of costs:

i) Labor costs, which include wages and the costs of all related payroll taxes, benefits and fringes, including welfare plans; group insurance, vacations and other comparable benefits of employees, wherever located, whose labor cost is properly charged directly to Coteau's Mine,

ii) Materials and supplies,

iii) Tools,

iv) Machinery and equipment not capitalized or leased,

v) With respect to the particular lignite mined, an appropriate allocation of the cost of acquiring interests in lignite reserves and surface lands, whether in fee, by lease or otherwise, prepaid royalties recoverable on mining and other expenses of having kept such interests in effect (not including costs paid by Dakota or its Affiliates pursuant to paragraph 5 of the Coal Reserve Agreement) and current tonnage royalty actually paid, if any,

vi) Rental of machinery and equipment,

vii) Power costs,

viii) Reasonable and necessary services by third parties other than Affiliates of Coteau,

ix) Insurance including Worker’s Compensation either in the state fund or self insurance, whichever in the best judgment of Coteau is more advantageous, ·

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x) Taxes, but not including income taxes or alternative minimum income taxes imposed by any governmental unit,

xi) Cost of reclamation as required by law or at such higher level of reclamation as shall be agreed upon between the Parties,

xii) Costs incurred by Coteau in connection with or as a result of the enactment, modification, interpretation, repeal or enforcement of all applicable federal, state and local governmental laws, rules and regulations,

xiii) Development costs, which shall be amortized ratably after the end of the Development Period as provided in Section 5.3 hereof,

xiv) Amounts payable to WCDC pursuant to paragraph 7 of the Coal Reserve Agreement, and

xv) Amounts payable to WCDC pursuant to paragraph 8 of the Coal Reserve Agreement.

There shall be credited to costs under this Subsection 5.2(a): (y) any investment tax credit or other tax credits based upon new investment taken by Coteau and any net receipts by Coteau from rental of, or other net income derived by Coteau from, property including surface lands overlying the Dedicated Lignite, and (z) all amounts disallowed in accordance with the last paragraph of Section 4.3 hereof. There shall be credited to costs under this Subsection 5.2(a) any gains, and so charged any losses, on the disposal of any property owned by Coteau related to Couteau’s Mine or the Dedicated Lignite.

b) General and administrative costs of Coteau's Mine including services rendered by Affiliates of Coteau.

If any of the foregoing items in Subsections 5.2(a) and 5.2(b) hereof include costs incurred by an Affiliate of Coteau and charged to Coteau, they shall be included only at the cost to such Affiliate without addition for any loading, inter-company profit or service charge and shall be allocated to Coteau on the basis of time spent or (in the case of buildings) space used.

c) Depreciation and amortization on personal property owned by Coteau the rates of which, reflecting salvage, shall be determined by Coteau and Dakota from time to time, and which shall not, except by mutual consent of the Parties, exceed the maximum deduction allowable under applicable federal income tax laws and regulations. Transactions involving capital assets between Coteau and any of its Affiliates shall be reflected in Coteau’s accounts at the higher of the cost of the assets involved, less accrued depreciation, as shown by the accounts of the transferring company or the fair market value of the assets involved.

d) Loan and Lease Expense. Interest on indebtedness and loan and lease commitment fees to the extent not previously paid by Dakota during the Development Period currently due and payable, and amortization of other expenses incurred in connection with Coteau obtaining loans or leases (to the extent not otherwise provided for under Subsection 5.2(c) hereof), accrued by Coteau with respect to such loans and leases, less interest or dividends received by Coteau on its investments.

e) Protective Provisions. If Coteau files consolidated tax returns with an Affiliate or Affiliates of Coteau, it shall collect from such Affiliate or Affiliates any net tax benefit derived by any such Affiliate from such consolidation attributable to Coteau. If Coteau has any surplus cash, it shall invest it in income producing securities or, if requested by Dakota, use such excess to repay indebtedness of Coteau.

Notwithstanding the foregoing, "Cost of Production" shall specifically exclude fines and penalties imposed by any governmental agency, administration, commission or body, with the exception of (i) a fine or penalty imposed by a governmental agency, administration, commission or body regulating the mining of

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lignite or the reclamation of mined lignite lands or (ii) a fine or penalty imposed by any governmental agency, administration, commission or body on activities or conduct specifically directed or otherwise approved by Dakota or one of its Affiliates.

Section 5.3Price During Development Period.

Dakota shall determine the price to be paid during each Development Period for the lignite sold and delivered hereunder from the relevant portion of Coteau's Mine, which price shall not be less per Ton of lignite than the prior calendar year's Cost of Production per Ton of lignite and which shall be deemed to include the Agreed Profit with respect to lignite delivered from such portion of Coteau's Mine. During each Development Period, the excess of the Cost of Production over the price (less Agreed Profit) paid for such lignite shall be capitalized, for purposes of determining subsequent price. The amount so capitalized shall be recovered by inclusion in the Cost of Production pro rata commencing at the end of each Development Period over a period, designated by Dakota, which shall not be longer than the estimated life of the particular mining area.

Section 5.4Computation of Agreed Profit.

a) For lignite sold and delivered hereunder in any calendar year for use at Dakota's Primary Plants, the Agreed Profit, expressed in July 1, 1988 dollars, shall be [* * *] per Ton for all Tons of lignite up to and including ten million (10,000,000) Tons and shall be [* * *] per Ton for all Tons of lignite which exceed ten million (10,000,000) Tons, which such amounts of Agreed Profit shall be subject to adjustment as provided in Subsection 5.5(a) hereof.

For the first one hundred seventy-six million six hundred one thousand nine hundred forty-nine (176,601,949) Tons of lignite sold and delivered from the Dedicated Lignite for use at Dakota's Primary Plants following the date of this Agreement, the Agreed Profit per Ton, after adjustment pursuant to Subsection 5.5(a) hereof, shall be reduced by an amount equal to [* * *] adjusted in the manner as provided in paragraph 7 of the Coal Reserve Agreement. An example of the aforesaid calculation is attached hereto as Exhibit C and made a part hereof.

b) For lignite sold and delivered hereunder for use at Dakota's Other Plants, the Agreed Profit, expressed in July 1, 1988 dollars, shall be [* * *] per Ton, which such amount shall be subject to adjustment as provided in Subsection 5.5(b) hereof, until the quantity of lignite sold and delivered to Dakota's Secondary Plant, Dakota's Other Plants and Other Plants equals the total quantity of economically recoverable lignite reserves contained within the Additional Dedicated Lignite then owned, leased or subleased by Coteau pursuant to this Agreement. Once the aggregate lignite deliveries to Dakota's Secondary Plant, Dakota's Other Plants and Other Plants equal such quantity, the Agreed Profit for all lignite delivered to Dakota for use at Dakota's Other Plants shall be at the rate(s) specified in Subsection 5.4(a) hereof and the adjustment of such Agreed Profit shall be as provided in Subsection 5.5(a) hereof.

c) For lignite sold and delivered hereunder in any calendar year for use at Dakota's Secondary Plant and at Other Plants, the Agreed Profit, expressed in July 1, 1988 dollars, shall be [* * *] per Ton for all Tons up to and including one million two hundred fifty thousand (1,250,000) Tons, [* * *] per Ton for all Tons in excess of one million two hundred fifty thousand (1,250,000) and less than two million five hundred thousand (2,500,000) Tons, and [* * *] per Ton for all Tons including and in excess of two million five hundred thousand (2,500,000) Tons, which such amounts of Agreed Profit shall be subject to adjustment as provided in Subsection 5.5(c) hereof, until the quantity of lignite sold and delivered to Dakota's Secondary Plant, Dakota's Other Plants and Other Plants equals the total quantity of economically recoverable lignite reserves contained within the Additional Dedicated Lignite then owned, leased or subleased by Coteau pursuant to this Agreement. Once the aggregate lignite deliveries to Dakota's Secondary Plant, Dakota's Other Plants and Other Plants equal such total quantity, the Agreed Profit for all lignite delivered to Dakota for use at Dakota's Secondary Plant and at Other Plants shall be at the rate(s) specified in Subsection 5.4(a) hereof and the adjustment of such Agreed Profit shall be as provided in Subsection 5.5(a) hereof.

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Section 5.5Modification of Agreed Profit.

a) The Agreed Profit per Ton for each Ton of lignite sold and delivered hereunder for use at Dakota's Primary Plants shall be adjusted for each calendar year, as of December 31 of such calendar year, by one hundred percent (100%) of the percentage difference between the Index for the year under consideration and the base Index figure. An example of the aforesaid calculation is attached hereto as Exhibit D and made a part hereof.

b) Subject to Subsection 5.4(b) hereof, the Agreed Profit per Ton for each Ton of lignite sold and delivered hereunder for use at Dakota's Other Plants shall be adjusted for each calendar year, as of December 31 of such calendar year, by:

i)    Seventy-five percent (75%) of the first four percent (4%) of the change in the Index for the year under consideration relative to the previous year's Index and

ii) A prorated percentage of that portion of the percentage change in the Index for the year under consideration relative to the previous year's Index which is greater than four percent (4%) but less than eight percent (8%), which proration shall be made linearly, with the prorated percentage being seventy-five percent (75%) for a four and one one-hundredth percent (4.01%) increase or decrease in the Index and with the prorated percentage being one hundred percent (100%) for the eight percent (8%) change in the Index and

iii) One hundred percent (100%) of that portion of the percentage increase or decrease in the Index relative to the previous year's Index which is equal to or greater than eight percent (8%).

Examples of the aforesaid calculation are attached hereto as Exhibit E and made a part hereof.

c) Subject to Subsection 5.4(c) hereof, the Agreed Profit per Ton for each Ton of lignite sold and delivered hereunder for use at Dakota's Secondary Plant and Other Plants shall be adjusted for each calendar year, as of December 31 of such calendar year, by seventy-five percent (75%) of the percentage difference between the Index for the year under consideration and the base Index figure. An example of the aforesaid calculation is attached hereto as Exhibit F and made a part hereof.

d) The Agreed Profit for all Sub-Quality Lignite that is sold and delivered hereunder shall be reduced by multiplying the applicable Agreed Profit by a fraction, the numerator of which shall be the actual BTU content of said Sub-Quality Lignite and the denominator of which shall be six thousand seven hundred fifty (6,750) BTUs per pound. The Agreed Profit rate to which such reductions shall be made shall be the average Agreed Profit rate, before said adjustment, paid by Dakota to Coteau during the month in which the Sub-Quality Lignite is severed by Coteau and sold and delivered to Dakota hereunder. An example of the aforesaid calculation is attached hereto as Exhibit G and made a part hereof. Specific mining areas in which Sub-Quality Lignite is available shall be determined by Coteau and agreed to by Dakota prior to the delivery of such lignite. The actual quantities of Sub-Quality Lignite taken from these specific areas to which the adjustment in this Subsection 5.5(d) shall apply shall be determined by pit survey, and the BTU rating shall be determined from pit samples, utilizing procedures mutually agreed to by Coteau and Dakota.

Section 5.6Further Modifications.

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If at any time during the term of this Agreement it is reasonably believed by either Party that the Producer Price Index - All Commodities or any index substituted therefor in accordance with the following provisions reflects the true change in

purchasing power of the United States dollar, then upon the written request of either Party a substituted index or method whereby such change in purchasing power of the United States dollar can be determined shall be substituted by mutual agreement. In the event that the Producer Price Index - All Commodities or any substituted index is changed in the future to use some

base other than the base of 1982 = 100, then, for the purposes hereof, the Producer Price Index - All Commodities or any substitute index, as the case may be, shall be adjusted so as to be in correct relationship to the base of 1982 = 100, or some other alternative base which is mutually agreeable to Coteau and Dakota. In the event publication of the Producer Price Index - All Commodities or any substituted index is no longer made by any federal agency, the index to be used as aforesaid shall be that index agreed to by the Parties which, after necessary adjustment, if any, provides the most reasonable substitute for said index.

Section 5.7Post-Expiration/Termination Payments.

a) In the event that, following an expiration of this Agreement pursuant to Section 14.1 hereof, Dakota exercises its right, pursuant to the Option Agreement, to cause the transfer of the Escrowed Stock to Dakota, or in the event that, following a premature termination of this Agreement pursuant to Subsection 14.2(a) hereof, North American Coal exercises its put option under the Option Agreement, Dakota shall then pay to North American Coal or its designee as part of the purchase price for the Escrowed Stock a production payment (Production Payment) in the following amounts under the following circumstances:

i) Until such time as Dakota shall have paid Agreed Profit as calculated pursuant to Subsection 5.4(a) hereof as adjusted pursuant to Subsection 5.5(a) hereof and/or Production Payments pursuant to the terms of this Agreement for three hundred ninety million (390,000,000) Tons of coal and/or lignite sold and delivered following the date of this Agreement, a Production Payment equal to the Agreed Profit as calculated pursuant to Subsection 5.4(a) hereof as adjusted pursuant to Subsection 5.7(b) hereof for x) coal and/or lignite sold and delivered to Dakota's Primary Plants, regardless of the source of such coal and/or lignite, and/or y) lignite sold and delivered to Dakota's Plants from Primary Dedicated Lignite;

ii) After the conditions of Subsection 5.7(a)(i) hereof have been satisfied and Dakota shall have paid the specified Agreed Profit and/or Production Payments for three hundred ninety million (390,000,000) Tons, a Production Payment, expressed in January 1, 1990 dollars, equal to [* * *] per Ton for all Tons mined from the Primary Dedicated Lignite and sold to Dakota's Plants, until such time as Dakota shall have paid Agreed Profit pursuant to Subsection 5.4(a) hereof as adjusted pursuant to Subsection 5.5(a) and/or Production Payments pursuant to Subsection 5.7(a)(i) hereof and this Subsection 5.7(a)(ii) as adjusted pursuant to Subsection 5.7(b) hereof for all Tons in excess of three hundred ninety million (390,000,000) Tons of coal and/or lignite but less than four hundred forty million (440,000,000) Tons of coal and/or lignite; and

iii) Thereafter, a Production Payment, expressed in January 1, 1990 dollars, equal to [* * *] per Ton for all Tons mined from the Primary Dedicated Lignite and sold and delivered to Dakota's Plants, until such time as Dakota shall have paid Agreed Profit pursuant to Subsection 5.4(a) hereof as adjusted pursuant to Subsection 5.5(a) hereof and/or Production Payments pursuant to Subsection 5.7(a)(i) and Subsection 5.7(a)(ii) hereof and this Subsection 5.7(a)(iii) as adjusted pursuant to Subsection 5.7(b) hereof for all

* * * Confidential Treatment Requested

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Tons in excess of four hundred forty million (440,000,000) but less than five hundred fifty million (550,000,000) Tons of coal and/or lignite;

at which point Dakota’s obligation to pay the Production Payment shall cease.

b) The Production Payment per Ton of lignite referenced in Subsection 5.7(a)(i) hereof shall be adjusted for each calendar year, as of December 31 of such calendar year, by one hundred percent (100%) of the percentage difference between the Index for the year under consideration and the Index as of July 1, 1988. The Production Payment per Ton of lignite referenced in Subsections 5.7(a)(ii) and 5.7(a)(iii) hereof shall be adjusted for each calendar year, as of December 31 of such calendar year, by one hundred percent (100%) of the percentage difference between the Index for the year under consideration and the Index as of January 1, 1990.

c) There shall be included in and counted toward the tonnage figures in Subsection 5.7(a) hereof all Tons of lignite sold by Coteau to third parties as provided in Section 13.1 hereof.

d) In the event Dakota or North American Coal exercises its right, pursuant to the Option Agreement, to cause the transfer of the Escrowed Stock to Dakota, (i) the obligations of Dakota under this Section 5.7 shall survive any termination or expiration of this Agreement, (ii) Dakota shall not, and shall cause Coteau to not, dissolve or liquidate and (iii) Dakota shall not, and shall cause Coteau to not, merge or consolidate with, or sell all or substantially all of its assets to, any third party unless such third party shall have agreed in writing to be bound by the terms of this Section 5.7 and shall be financially capable of performing Dakota’s obligation under this Section 5.7 and shall otherwise be solvent.

Section 5.8Mine Closing Costs.

Dakota recognizes that mine closing costs will be incurred by Coteau from time to time. Dakota shall reimburse Coteau for all such mine closing costs. Such costs when determined shall be included within budgets and operating plans submitted to Dakota for its approval and shall be paid as part of the Cost of Production or otherwise be reimbursed to Coteau by Dakota as incurred, which obligation of Dakota shall survive any termination or expiration of this Agreement.

ARTICLE VI
AUDITS AND FINANCIAL REPORTS

Section 6.1Audits.

Coteau shall annually have an audit of its accounts performed by a firm of independent certified public accountants and shall provide Dakota with a copy of such audit. Dakota shall have the right at any time on reasonable notice in writing to Coteau to examine by its certified public accountants (which may include representatives of Basin Electric or its Affiliate) the records and books of account of Coteau and any Affiliate of Coteau, relating to the items and allocations of cost and production entering into the computation of the Cost of Production. Payment or payments under Article VII of this Agreement shall not be deemed a waiver of any rights of Dakota to have the price hereunder corrected.

Section 6.2Financial Reports.

On or before the twentieth (20th) day of each month, Coteau shall furnish to Dakota financial statements reflecting Coteau's financial position as of the end of the preceding calendar month and the results of operations of Coteau for the period then ending and a detailed statement of the Cost of Production for the preceding calendar month at Coteau's Mine, including the quantity of lignite delivered and the aggregate man-hours by classification and shifts required for its production. Coteau shall furnish to Dakota detailed

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cost analyses and other financial reports with respect to Coteau as Dakota may reasonably request. Said statements, analyses and reports shall be in such form and detail as may reasonably be requested by Dakota.

ACTICLE VII

BILLING AND ADJUSTMENTS

Section 7.1Billing.

The monthly invoice for lignite sold and delivered hereunder in a calendar month shall be issued by Coteau no earlier than the sixth (6th) day of the next calendar month. Any such invoice received by Dakota after 12:00 Noon, Bismarck time, on any Business Day shall be deemed to have been received by Dakota on the following Business Day. Dakota shall pay such invoice within ten (10) days after its receipt thereof. If such tenth (10th) day is not a Business Day, Dakota shall pay such invoice no later than the next following Business Day.

Section 7.2Adjustments.

After the end of each Development Period, the monthly billing of lignite sold and delivered from Coteau's Mine to which such Development Period related in each calendar month shall be based upon the estimated Cost of Production applicable to Coteau's Mine during such month, plus the Agreed Profit on lignite mined from Coteau's Mine for such month. Any differences between the estimated Cost of Production, upon which the billing is based, and actual Cost of Production for each calendar month shall be included as an adjustment to the monthly billing of lignite in each subsequent calendar month. Billings for lignite sold and delivered from Coteau's Mine for each calendar month shall be based upon the Agreed Profit for the previous calendar year as recomputed pursuant.to Section 5.5 hereof. As soon as possible after the expiration of each calendar year, the Agreed Profit shall be recomputed on an annual basis for such calendar year and additional payment or refund shall be made accordingly. An example of such recomputation is attached hereto as Exhibit H and made a part hereof.

ARTICLE VIII

RATE OF SHIPMENT, PERFORMANCE

Section 8.1Rate of Shipment.

If by reason of failure to receive shipping instructions or releases from Dakota under this Agreement, Coteau does not ship the required amount for any particular month, Coteau shall have the option, but shall not be required, to waive the actual delivery of the undelivered tonnage for such month, but any such waiver shall not relieve Dakota from liability to respond in damages for the failure to perform its obligations; provided, however, that Dakota shall not incur any liability to respond in damages if the failure to perform its obligations pursuant to this Agreement is due to an event described in Section 11.2 hereof. If Coteau fails to make deliveries required of it hereunder, Dakota shall have the option, but shall not be required, to waive the actual delivery of the undelivered tonnage, but such waiver shall not relieve Coteau from the liability to respond in damages for the failure to perform its obligations.

Section 8.2Performance.

Notwithstanding anything to the contrary contained in this Agreement, Coteau shall not incur any liability to respond in damages for failure to perform its obligations pursuant to this Agreement if such failure is due to an event described in Section 11.1 hereof or if such failure is due to control exercised by Dakota in accordance with this Agreement or results from the failure of Dakota to perform its obligations in accordance herewith.

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ARTICLE IX

SAMPLING AND ANALYSIS, WEIGHTS

Section 9.1Sampling and Analysis.

Except for the analyses of pit samples of Sub-Quality Lignite pursuant to Subsection 5.5(d) hereof, the quality of the lignite sold and delivered hereunder from Coteau's Mine shall be determined by analyses of samples taken from at least five thousand (5,000) Tons of lignite at a point or points mutually agreed upon by Coteau and Dakota. Sampling and analysis shall be performed by methods which meet the standards of the American Society of Testing Materials, or by such other methods as may be mutually agreed upon by Coteau and Dakota. Each sample shall be divided into two (2) parts and put into suitable air-tight containers. One (1) part shall be submitted to Dakota for analysis and the second part shall be properly sealed and labeled and retained by Dakota for thirty (30) days, to be analyzed if a dispute arises with respect to the results of the analyses of Dakota. Coteau shall be given copies of all analyses made by Dakota and Coteau shall have the right to have a representative present at any and all times to observe the sampling and analyses performed by Dakota.

If any dispute arises with respect to the results of the analyses of Dakota, an analysis of the second part shall be made by an independent commercial testing laboratory mutually chosen by Coteau and Dakota and the analysis of the independent commercial testing laboratory shall be controlling. The cost of the analysis made by such commercial laboratory shall be paid by Coteau and shall be included in the Cost of Production. If any dispute arises with respect to the methods of sampling or analyses performed or being performed by Dakota, Coteau shall so advise Dakota. Coteau and Dakota shall meet promptly and shall, within thirty (30) days of notice of such dispute, mutually agree upon modifications or changes in such method(s) to resolve such dispute.

Section 9.2Weights.

The weight of the lignite sold and delivered hereunder for use at Dakota's Plants shall be determined by Coteau on scales located on the conveyors between the Primary Truck Dump and the Secondary Crusher Building at Dakota's Primary Plants or at such other location(s) mutually agreed to by the Parties; provided, however, that when Coteau's scales are inoperable, the weight of lignite sold and delivered hereunder for use at Dakota's Primary Plants and Dakota's Other Plants shall be determined by Basin Electric's and/or DGC's scales at Dakota's Primary Plants. Dakota shall be given a record of all weight determinations made by Coteau and shall have the right to have a representative present at any and all times to observe the weighing of lignite sold and delivered hereunder. If Dakota at any time questions the accuracy of the weights, Dakota shall so advise Coteau and Coteau shall permit Dakota's representatives to test and check such scales. If such tests show that any scale is inaccurate, it shall be adjusted by mutual agreement of Coteau and Dakota to an accurate condition.

The weight of lignite redelivered by Dakota to Dakota's Secondary Plant and to Other Plants shall be determined from rail car or truck weight receipts acquired from the transportation contractor(s), or by some other method mutually agreeable to the Parties. The weight of the lignite utilized by Dakota's Primary Plants and Dakota's Other Plants shall be determined by subtracting the weight of the lignite ultimately delivered to Dakota's Secondary Plant and to Other Plants from the total lignite measured on Coteau's scales at the location(s) specified in this Section 9.2. For the weight of all lignite redelivered by Dakota to Dakota's Secondary Plant and Other Plants, Coteau shall be given a record of all weight determinations made by Dakota, and Coteau shall have the right to have a representative present at any or all times to observe the weighing of lignite delivered hereunder. If Coteau should at any time question the accuracy of the weights, Coteau shall so advise Dakota and Dakota shall permit Coteau's representatives to test and check such scales. If such tests show that any scale is inaccurate, it shall be adjusted by mutual agreement of Coteau and Dakota to an accurate condition.

If it is determined that any scale or any other method used to weigh lignite is inaccurate, the quantities of lignite delivered hereunder during the period when such inaccuracy existed shall be adjusted pursuant to procedures agreed to by the Parties.

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ARTICLE X

LOAN AND LEASE OBLIGATIONS

Section 10.1Loan and Lease Obligations.

It will be necessary for Coteau to obtain loans and/or leases for the construction and equipping of Coteau's Mine, which shall be indebtedness or lease obligations of Coteau not guaranteed by North American Coal. If Dakota so requests, Coteau shall use its best efforts to obtain long-term loans and/or long-term leases (such loans and leases and such continued or additional loans or leases as may be necessitated by replacement of or addition to Coteau's · equipment, or by the expiration of any lease of equipment to Coteau prior to the expiration of this Agreement being referred to herein collectively as the "Loans and Leases'') in amounts sufficient for the following purposes: developing, equipping and operating of Coteau's Mine, including, without limitation, (a) developing roadways, (b) constructing tipples and cleaning plants, (c) acquiring machinery and (d) maintaining working capital for operating Coteau's Mine; provided, however, that (i) the Loans and Leases and the amounts thereof must be approved by Dakota in its sole discretion and shall be made if directed by Dakota and (ii) if such Loans and Leases are not available to Coteau, or Dakota does not request that Coteau obtain the same or does not approve the same, Dakota shall assume the responsibility for obtaining the Loans and Leases for such amounts and on such terms as it shall reasonably determine to be necessary to meet the foregoing purposes. If Dakota has such responsibility, Dakota itself shall (w) provide the Loans and Leases, (x) arrange for Loans or Leases by Coteau from third persons, (y) direct Coteau to borrow or lease from third persons or (z) combine Dakota's Loans or Leases with those of third persons. If the Loans and Leases shall be arranged with third persons, Dakota shall have the right subsequently to discharge the Loans or Leases and substitute itself as lender or lessor for the balance of the term of such Loans or Leases. Any Loan or Lease provided, arranged for or directed by Dakota in the exercise of its rights under this Section 10.1 shall not be less favorable to Coteau than a Loan or Lease for the same term which could be obtained by Coteau directly. Dakota shall have the right to cause part or all of its obligations under this Section 10.1 with respect to Coteau's Mine to be performed by an Affiliate, but such performance by an Affiliate shall not relieve Dakota of its responsibility for arranging subsequent Loans and Leases for Coteau's Mine.

Section 10.2Negative Pledge.

Coteau shall not incur any long-term debt or pledge or encumber any assets owned by it in fee or any leasehold interests which it may hold except in connection with financing which has been approved by Dakota or an Affiliate of Dakota.

ARTICLE XI

FORCE MAJEURE

Section 11.1Force Majeure/Coteau.

In the event of strikes, labor disputes, fires, accidents at Coteau's Mine, failure of equipment, inability of Coteau to obtain necessary equipment by reason of a general short supply thereof, failure of transportation or shortage of transportation equipment, federal, state or local laws or regulations or other contingencies, whether of a like or different nature, beyond the control of Coteau and not due to its negligence, any of which contingencies prevents or interferes with the production or shipment of lignite hereunder, the shipments contracted for may, at the election of Coteau, be suspended or partially suspended as the case may require for the duration of the contingency.

Section 11.2Force Majeure/Dakota.

In the event of strikes, labor disputes, fires, accidents at Dakota's Plants, failure of equipment, the inability to obtain necessary equipment for Dakota's Plants by reason of a general short supply thereof, failure of transportation or shortage of transportation equipment, federal, state or local laws or regulations or other contingencies, whether of a like or different nature, beyond control of Dakota and not due to its negligence, any of which contingencies prevents or interferes with the taking of delivery of the lignite purchased hereunder at Dakota's Plants to which, under instructions of Dakota, such lignite is then currently being delivered, or which prevents or interferes with the processing of such lignite or the

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subsequent transportation of the product to be produced at Dakota’s Plants, or in the event that the product to be produced at Dakota’s Plants cannot be sold on an economic basis, then shipments contracted for shall, at the election of Dakota, be suspended or partially suspended as the case may require for the duration of such contingency.

Section 11.3Idle Mine Expenses.

Notwithstanding the suspensions of delivery of lignite provided for in Sections11.1 and 11.2 hereof, if Coteau's Mine is substantially idle during a calendar month pursuant to such Sections, or if Dakota takes no deliveries in any calendar month, Dakota shall pay to Coteau as part of the Cost of Production or otherwise reimburse Coteau for the actual out-of-pocket idle mine expenses and depreciation for such month.

Section 11.4Resumption After Interruption.

Interruptions in tendering delivery or acceptance of shipments and deliveries referred to in this Article XI shall not invalidate the remainder of this Agreement, but upon removal of the cause of such interruptions, delivery shall be resumed at the rate specified herein. In the event of such interruptions, the Party immediately affected by such contingency shall, if possible, give reasonable advance notice confirmed in writing to the other Party of the extent and probable duration thereof, with sufficient detail to enable the other Party to verify the same.

ARTICLE XII

LIGNITE FEE LAND AND LEASE ACQUISITION AND MAINTENANCE

Section 12.1Leases.

Coteau shall proceed as directed by Dakota to acquire leases or the fee title to lignite reserves within the Dedicated Lignite. Coteau shall drill said areas to the extent that Dakota determines is necessary to establish the estimated quantity and the estimated quality of lignite therein and shall provide Dakota with access to all cores and access to and copies of all logs and other records of such drilling. In its acquisition and drilling program, Coteau shall follow any guidelines stated in writing by Dakota as to terms and conditions as well as the maximum amount it may pay for fee interests or in lease rentals or in tonnage royalties and amounts to be spent for drilling, and shall keep Dakota currently advised as to the progress of such acquisition and drilling programs. Upon the request of Dakota, Coteau shall provide, at the expense of Dakota, good and sufficient evidence of the right, title and interest of Coteau in and to leases and fee title to lignite reserves within the Dedicated Lignite. As to any parcel of land, whether mineral or surface or both, which by reason of its location is within the Dedicated Lignite, if Coteau notifies Dakota of the availability of such parcel for acquisition and Dakota does not request that it be acquired, North American Coal shall be free to acquire the same for its own account in accordance with the Coal Reserve Agreement and it shall not thereafter be considered a part or portion of the Dedicated Lignite.

Section 12.2Recoverable Tons.

At the time Additional Dedicated Lignite is acquired by Coteau or assigned, transferred or subleased by Dakota to Coteau, Dakota and Coteau shall mutually agree as to the total quantity of economically recoverable Tons of lignite contained in such lignite reserves. If Coteau and Dakota cannot agree on the quantity of economically recoverable Tons of lignite contained within such reserves, Coteau and Dakota shall jointly select a qualified independent consultant to make a final and binding determination of such quantity.

Section 12.3Protection of Reserves.

Coteau, utilizing lease maintenance and payment procedures approved by Dakota in writing, agrees to make all payments due under those leases acquired by or assigned or transferred to Coteau in the Dedicated Lignite in a timely manner, not to permit any default under said leases to occur, not to surrender said leases in whole or in part without the written consent of Dakota and not to encumber, assign or sublease said leases, except in connection with financing pursuant to Section 10.1 hereof.

Section 12.4Remedy for Failure to Protect.

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If Coteau, without the written consent of Dakota, causes or permits any such lease covering lignite with a calorific content of six thousand two hundred (6,200) BTUs per pound or more, on an as-received basis, to be surrendered, terminated or cancelled prior to the expiration of its term or encumbers, assigns or subleases any such lease, (a) Coteau shall (i) at its sole expense, remove the encumbrance(s), (ii) reinstate such lease or (iii) acquire and make available a substitute lease or leases within the Dedicated Lignite which, to the reasonable satisfaction of Dakota, covers lignite of no less total BTU content than the lignite covered by any such lease which was surrendered, terminated, cancelled, assigned or subleased, or (b) Coteau may, at its sole discretion, deliver to Dakota substitute lignite of no less total BTU content than the lignite covered by any such lease which was surrendered, terminated, cancelled, assigned or subleased at a per-Ton cost each month equal to the average of the Cost of Production, as defined in Section 5.2 hereof, for the twelve (12) month period preceding such month in which the substitute lignite is delivered to Dakota plus the applicable Agreed Profit. For the purposes of Subsections 12.4(a)(iii) and 12.4(b) hereof, only lignite with a calorific content of six thousand two hundred (6,200) or more BTUs per pound, on an as-received basis, shall be considered. For the activities described in Subsections 12.4(a)(ii) and 12.4(a)(iii) hereof, Coteau shall pay the acquisition costs (as hereinafter defined), drilling costs, engineering and testing costs, any increase in the annual advance engineering and testing costs and any increase in the annual advance royalty or rental payments and/or the production royalty rates. For the purposes of this Section 12.4 and Article XII hereof, the term 11 acquisition costs11 shall mean the salaries, associated overhead costs and related expenses of employees engaged in the reinstatement of any lease(s) or in the acquisition of a substitute lease(s), bonus or advance royalty for a lease(s), brokerage fees, legal and other expenses in establishing and reviewing titles, closing expenses and all drilling, exploratory, analytical and engineering costs directly related to such acquisition work. It is understood and agreed that in the event of a default by Coteau of its obligations under Section 12.3 hereof, Dakota's sole exclusive remedy shall be the enforcement of the obligations of Coteau set forth in this Section 12.4.

ARTICLE XIII

LIMITATION OF COTEAU'S ACTIVITIES

Section 13.1Sales to Others.

Coteau shall engage in no business other than the ownership and operation of

Coteau's Mine, the sale of the products thereof and the rental of property which is owned as an incident to its mining business. Coteau shall not sell outside of this Agreement any lignite extracted from the Dedicated Lignite which would make Coteau unable to give first priority to the performance of its obligations under this Agreement, including any extensions thereof. Coteau shall notify Dakota in writing annually of the amount of lignite to be extracted from the Dedicated Lignite, if any, which it proposes to sell outside this Agreement in advance of such sale, and Dakota shall be entitled to prohibit such sale if, in the reasonable judgment of Dakota, such sale would impair Coteau's ability to perform its obligations under this Agreement including any extensions thereof. In addition to the foregoing restrictions, such sales outside this Agreement shall not without written consent of Dakota exceed two million (2,000,000) Tons per calendar year during the first ten (10) calendar years of this Agreement.

Any sale of lignite by Coteau to third parties shall be from lignite reserves within the Dedicated Lignite. All Tons of lignite sold by Coteau to third parties shall be treated as if such Tons were sold and delivered to Dakota's Primary Plants for purposes of Section 5.7 hereof. In consideration of Dakota providing the financing that has enabled and will enable Coteau to acquire equipment which Coteau has used and will use to produce and sell lignite under this Agreement and to third parties, Coteau shall pay to Dakota for each Ton of lignite sold by Coteau during the term of this Agreement to third parties a fee equal to [* * *] per Ton, which fee shall be adjusted as provided in Subsection 5.5(a) hereof. In addition, Coteau shall include in the cost of lignite sold to third parties a cost per Ton not less than the then current Cost of Production per Ton. For all Tons of lignite sold to third parties, Coteau also shall reimburse Dakota or its Affiliate a proportionate amount of the costs that Dakota or such Affiliate has incurred, and for which Dakota has not been reimbursed by Coteau, of providing financing for Coteau's Mine or for which Dakota

* * * Confidential Treatment Requested

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or its Affiliates anticipate Dakota or its Affiliates will incur during the period of time that said lignite is being sold to said third parties and would not otherwise be reimbursed by Coteau.

Section 13.2Other Activities.

Notwithstanding the provisions of Section 13.1 hereof, it is contemplated that Coteau may provide other services to Dakota such as solid waste disposal, disposal of excess lignite fines, snow removal as well as such other services, in each instance as may be mutually agreed upon by Coteau and Dakota. It is further contemplated that Coteau shall provide said services to Dakota at a price agreed to by the Parties.

ARTICLE XIV

TERM, PREMATURE TERMINATION AND EXPIRATION OPTIONS

Section 14.1Term.

The original term of this Agreement shall commence on the date first written above and shall expire on April 22, 2007, provided that Dakota shall have the option to extend this Agreement for up to ten (10) successive five (5) year periods by giving written notification to Coteau not less than three (3) years before the expiration of the original term or, in the case of renewal terms, eighteen (18) months before the expiration of the renewal term then in effect; provided, however, that this Agreement shall terminate upon the exhaustion of the Dedicated Lignite. The lignite covered by any particular lease shall be deemed to be exhausted upon the expiration of such lease without further right of renewal.

Section 14.2Premature Termination.

a) If all of Dakota's Plants are permanently closed or if a federal, state or local law, rule or regulation is enacted or promulgated which, at the time of said enactment or promulgation, permanently prohibits or permanently prevents the mining of lignite in North Dakota, Dakota shall have the right to terminate this Agreement by giving Coteau nine (9) months' prior written notice unless Dakota is prevented from giving such prior notice by such federal, state or local law, rule or regulation in which case if Dakota so notifies Coteau in writing, this Agreement shall terminate upon the permanent closure of all of Dakota's Plants or the effective date when the mining of lignite in North Dakota is prohibited or prevented pursuant to federal, state or local law, rule or regulation as the case may be.

b) If Dakota exercises its right to terminate this Agreement in accordance with Subsection 14.2(a) hereof and provided North American Coal has not exercised its put option under the Option Agreement, Coteau shall retain title to all machinery, equipment and improvements or other assets of Coteau's Mine and shall retain title to all lignite which has not been mined at the date of such termination and the acquisition cost of which has been reimbursed to Coteau by Dakota or its Affiliates. Provided that (i) Dakota has paid all amounts due hereunder including all indebtedness and lease obligations which have theretofore been incurred by Coteau pursuant to Section 10.1 hereof, (ii) Dakota has reimbursed Coteau for all Premature Termination Mine Closing Costs and (iii) Dakota has assigned to Coteau all leases for equipment, machinery and other things leased or subleased by Dakota to Coteau, then Coteau shall pay to Dakota (x) the fair market value of all machinery, equipment, improvements and other assets then at Coteau's Mine and owned by Coteau (other than surface and/or lignite lands and leases) and (y) an amount equal to the acquisition costs and carrying charges of unmined lignite for which Dakota or one of its Affiliates has reimbursed Coteau for the acquisition costs plus interest on such costs and charges at the prime rate charged from time to time by Ameritrust Company National

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Association, Cleveland, Ohio, from the date of reimbursement to Coteau by Dakota or an Affiliate to the time of payment by Coteau to Dakota or an Affiliate.

c) If Dakota exercises its right to terminate this Agreement in accordance with Subsection 14.2(a) hereof and North American Coal elects not to exercise its put option under the Option Agreement, Coteau and Dakota shall meet promptly and negotiate in good faith to determine the amount of the Premature Termination Mine Closing Costs. The Premature Termination Mine Closing Costs shall be determined as though Coteau's Mine were closing on the effective date of the termination of this Agreement, regardless of Couteau’s intention regarding the future operation of Coteau’s Mine. If within six (6) months following the commencement of such negotiations the Parties are unable to agree on the amount of any such Premature Termination Mine Closing Costs, the Parties shall mutually select disinterested mining engineers, appraisers, actuaries or other qualified experts on the issues in controversy to determine the amounts of all such disputed mine closing costs. The determination of such experts shall be binding on the Parties.

Upon payment by Dakota of the Premature Termination Mine Closing Costs, Coteau shall assume in writing and shall indemnify and hold Dakota harmless from any costs and liabilities associated with Coteau’s Mine and this Agreement.

For purposes of this Section 14, 11 Premature Termination Mine Closing Costs11 shall mean all costs which would be incurred by Coteau if Coteau was to close down Couteau’s Mine with the following exceptions: pension payments and medical benefits to retired employees and the cost of reclaiming structures and improvements to real property including but not limited to buildings, haul roads, access roads, ponds, stockpiles and coal handling equipment.

Section 14.3Expiration.

In the event of the expiration of this Agreement other than as provided in Section 14.2 hereof, and provided that Dakota has not exercised its rights as provided in Section 14.4 hereof, Dakota shall pay all sums then due to Coteau hereunder and shall expressly assume in writing the primary obligation to pay all remaining indebtedness and lease obligations incurred by Coteau with respect thereto to acquire all machinery, equipment and improvements or other assets (other than lignite lands) held by Coteau in connection with Coteau’s Mine. Coteau shall execute and deliver to Dakota appropriate deeds, assignments, bills of sales and other instruments of transfer without further payment by Dakota. Any expense, including sales or transfer taxes, in connection with such transfer shall be paid by Dakota.

Notwithstanding the foregoing paragraph, Coteau shall have the right to retain title to all or any specified items of such property as shall be specified in writing by notice to Dakota upon payment to Dakota in cash of the fair market value of the property so retained or the amount of liens or lease rentals owing thereon, whichever is greater.

Dakota shall have no right to acquire Coteau’s lignite reserves or surface lands which were owned by it or North American Coal or an Affiliate of North American Coal prior to October 1, 1971.

Coteau shall be entitled to retain the lignite which has not been mined at the date of such termination and the acquisition cost of which has been reimbursed to Coteau by Dakota or its Affiliates upon payment to Dakota of an amount equal to the acquisition costs and carrying charges for such lignite plus an amount equal to interest on such costs and charges at the prime rate charged from time to time by Ameritrust Company National Association, Cleveland, Ohio, from the date of reimbursement to Coteau by Dakota or its Affiliates to the time of payment by Coteau to Dakota or its Affiliates. This right shall apply to all but not part of such lignite.

All lignite lands, the acquisition costs and carrying charges of which were paid by Dakota or its Affiliates which are not retained by Coteau as hereinabove provided in the foregoing paragraph, shall be transferred to Dakota by quitclaim deeds or assignment of leases without recourse, and Dakota shall pay only the expense, including transfer taxes, of such transfer.

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Section 14.4Exercise of Option for Escrowed Stock.

Provided that Dakota has not exercised any of its rights under Section 14.2 hereof, upon the expiration of the original term of this Agreement or expiration of any renewal term of this Agreement, as the case may be, Dakota may exercise its right, pursuant to the Option Agreement, to cause the transfer of the Escrowed Stock to Dakota. To exercise said right, Dakota shall give written notice to Coteau with a copy to the escrow agent under the Option Agreement not less than three (3) years before the expiration of the original term or, in the case of renewal terms, eighteen (18) months before the expiration of the renewal term then in effect and shall otherwise comply with the terms and conditions of the Option Agreement.

ARTICLE XV

FEDERAL GOVERNMENT PROVISIONS

Section 15.1Buy American.

Coteau agrees that no funds advanced by Dakota or any of its Affiliates directly or indirectly to Coteau for development of Coteau's Mine shall, without the approval of Dakota, be used to acquire (a) unmanufactured articles, materials or supplies as have been mined or produced outside the United States, or (b) manufactured articles, materials or supplies mined, produced or manufactured outside the United States or manufactured inside the United States substantially all from articles, materials or supplies mined, produced or manufactured, as the case may be, outside the United States.

Section 15.2Historic Preservation.

Coteau shall not, without the approval of Dakota, use any funds advanced directly or indirectly by Dakota or any of its Affiliates for the development of Coteau's Mine to construct any facilities which will involve any district, site, building, structure or object which is included in the National Register of Historic Places, maintained by the Secretary of the Interior pursuant to the Historic Sites Act of 1935 and the National Historic Preservation Act.

Section 15.3Nondiscrimination.

a) Coteau shall not discriminate against any employee or applicant for employment because of race, color, religion, sex or national origin. Coteau shall take affirmative action to ensure that applicants are employed, and that employees are treated during employment without regard to their race, color, religion, sex or national origin. Such action shall include but not be limited to the following: employment, upgrading, demotion or transfer; recruitment or recruitment advertising; layoff or termination; rates of pay or other forms of compensation; and selection for training, including apprenticeship. Coteau shall post in conspicuous places, available to employees and applicants for employment, notices to be provided setting forth the provisions of this nondiscrimination clause.

b) Coteau shall, in all solicitations or advertisements for employees placed by or on behalf of Coteau, state that all qualified applicants shall receive consideration for employment without regard to race, color, religion, sex or national origin.

c) Coteau shall send to each labor union or representative of workers with which it has a collective bargaining agreement or other contract or understanding, with respect to Coteau's Mine, a notice to be provided advising the said labor union or workers' representative of Coteau's commitments under this Section 15.3 and shall post copies of the notice in conspicuous places available to employees and applicants for employment.

d) Coteau shall comply with all provisions of Executive Order 11246 of September 24, 1965, and of the rules, regulations and relevant orders of the Secretary of Labor to the extent applicable to Coteau.

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e) Coteau shall furnish all information and reports required by Executive Order 11246 of September 24, 1965, and by the rules, regulations and orders of the Secretary of Labor applicable thereto or pursuant thereto, and shall permit access to its books, records and accounts by the Rural Electrification Administration and the Secretary of Labor for purposes of investigation to ascertain compliance with such rules, regulations and orders.

f) In the event of Coteau's noncompliance with the nondiscrimination clauses of this Agreement or with any of the said rules, regulations or orders referred to above, this Agreement may be cancelled, terminated or suspended by the U.S. Department of Labor in whole or in part and Coteau may be declared ineligible for further government contracts or federally assisted construction contracts in accordance with procedures authorized in Executive Order 11246 of September 24, 1965, and such other sanctions may be imposed and. remedies invoked as provided in the said Executive Order or by rule, regulation or order of the Secretary of Labor, or as otherwise provided by law.

g) Coteau shall include the provisions of paragraphs (a) through (g) of this Section 15.3 in every subcontract or purchase order for construction work which is paid for in whole or in part with funds advanced directly or indirectly to Coteau by Dakota or an Affiliate, unless exempted by rules, regulations or orders of the Secretary of Labor issued pursuant to Section 204 of Executive Order 11246, dated September 24, 1965, so that such provisions will be binding upon each such subcontractor or vendor. Coteau shall take such action with respect to any subcontract or purchase order as the U.S. Department of Labor may direct as a means of enforcing such provision, including sanctions for noncompliance; provided, however, that in the event Coteau becomes involved in, or is threatened with, litigation with a subcontractor or vendor as a result of such direction by such agency, Coteau may request Dakota or an Affiliate and the United States to enter into such litigation to protect the interests of Dakota and the United States.

h) In employing persons to carry out this Agreement, Coteau shall take affirmative action to employ and advance in employment qualified handicapped individuals as defined in Section 7(a) of the Federal Rehabilitation Act of1973 and qualified veterans covered by the Vietnam Era Veterans Readjustment Act of 1974 when applicable.

ARTICLE XVI

GENERAL

Section 16.1Effect of Waiver.

Waiver by either Party of any breach by the other Party of any of the terms and provisions of this Agreement shall not be deemed to be a waiver of breach on any other occasion of the same, nor a waiver of breach of any other term or condition. No course of dealing by either of the Parties shall operate as a waiver of any rights in respect to this Agreement. No delay or omission on the part of either Party in exercising any right in respect to this Agreement shall operate as a waiver of such right or any other right hereunder.

Section 16.2Arbitration.

A dispute between the Parties arising out of Section 4.3 hereof shall be tried by arbitration pursuant to the Rules of the American Arbitration Association in effect at the time of such arbitration, with the exceptions, as hereinafter provided for. The request for arbitration shall be in writing, setting forth in detail the claim or claims to be arbitrated, the amount involved, if any, and the remedy sought. It shall be delivered to the other Party within ninety (90) days of the date of the first knowledge of the claiming Party of the occurrence or conditions giving rise to the dispute. Any failure to request arbitration within such ninety (90) day period shall be deemed a waiver of the right to arbitrate the dispute. Within fifteen (15) days after the delivery of the request, the Parties shall agree upon an arbitrator. If the Parties are unable to agree upon the arbitrator within such fifteen (15) days, the arbitrator, who shall be an expert in the field of knowledge wherein the controversy lies, shall be selected by the Senior Judge of the United States Court of Appeals for the Eighth Circuit. The decision of the arbitrator shall be limited to selecting either the

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position and remedy stated by the Party in its request or the position and remedy stated by the other Party in its response to such request. The arbitrator shall have no power to mediate or compromise any dispute, but shall have only the limited authority herein provided to review the information presented by the Parties and to select the position and remedy proposed by one of the Parties. The award of the arbitrator shall be binding upon the Parties.

It is mutually understood that the existence of a dispute which has or may become the subject of an arbitration shall in no way excuse either Coteau or Dakota from performing its obligations under Section 4.3 hereof, and each of the Parties hereto shall continue to perform in accordance with the terms of this Agreement irrespective of the existence of any such dispute.

Section 16.3Assignment.

This Agreement shall not be assigned by either Party without the written consent of the other Party except that either Coteau or Dakota may assign its interest in this Agreement either in connection with the merger, consolidation or sale of substantially all the assets of the assigning Party or under their respective mortgages or indentures to finance any of Coteau's Mine or Dakota's Plants. Any such permitted assignment shall not relieve the assignor of its obligation hereunder.

Section 16.4Conduct of Operations.

Coteau shall conduct its mining operations hereunder in a careful, good and workmanlike manner according to the best mining practices prevalent in the field. Coteau shall also use its best efforts to operate Coteau's Mine in accordance with the laws, rules and regulations of all applicable federal, state and local governments, or their instrumentalities, if any, relating to mining operations and using of mining premises; provided, however, that Coteau shall have the right to contest in good faith through appropriate legal proceedings the validity or applicability of any such law, rule or regulation so long as Coteau gives Dakota prompt written notice of such proceedings and so long as the exercise of such right does not result in excessive additional costs or does not result in the closure of Coteau's Mine or a substantial portion thereof.

Section 16.5Right of Inspection.

Dakota or its Affiliates, as Dakota's designees, shall upon reasonable notice have the right and privilege at any time of entering Coteau's Mine in order to inspect or survey the same and Dakota may designate a permanent representative for such purpose; provided, however, that the exercise of such rights shall not interfere with the operation of Coteau's Mine. Coteau shall implement the written recommendations made by Dakota pursuant to written notice in accordance with Section 16.13 hereof with respect to Coteau's mining operations; provided, however, that such suggestions or recommendations are consistent with sound engineering and design practices and in accordance with applicable laws, rules and regulations, unless Coteau shall have responded in writing to Dakota setting forth the reasons for not implementing such recommendations and such reasons must be based on prudent management practices.

Section 16.6Insurance.

Coteau shall obtain and maintain insurance, to the extent available, with such coverage and of such types, limits and amounts as may be from time to time required and approved by Dakota, including but not limited to public liability, fire insurance with extended coverage and additional extended coverage, insurance covering physical damage to equipment and mine restoration.

Section 16.7Third Party Beneficiaries.

Coteau and Dakota acknowledge and agree that this Agreement is intended to directly benefit the Affiliates of Dakota, including Basin Electric and DGC, and the Affiliates of Coteau, including North American Coal, which are third party beneficiaries to this Agreement.

Section 16.8Table of Contents and Headings.

The table of contents, titles and headings of the Articles and Sections of this Agreement have been inserted for the convenience of reference only, are not to be considered part hereof and shall in no way modify or restrict the meaning of the terms or provisions hereof. As used herein, any gender shall include

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any other gender, the singular shall include the plural and the plural shall include the singular, wherever appropriate.

Section 16.9Governing Law.

This Agreement and the rights and obligations of the Parties to this Agreement shall be governed and construed in accordance with the laws of the State of North Dakota.

Section 16.10Amendments.

This Agreement may not be amended, except in each instance pursuant to a written document executed by the Parties.

Section 16.11Representations and Warranties.

a) Coteau represents and warrants to Dakota that: (i) Coteau is a corporation duly organized, validly existing and in good standing under the laws of the State of Ohio qualified to do business in the State of North Dakota, (ii) the execution and delivery of this Agreement by Coteau and the performance of its obligations hereunder have been duly authorized by all requisite corporate action, (iii) neither the execution and delivery of this Agreement nor the performance of its obligations hereunder by Coteau shall, or after the lapse of time or with the giving of notice shall, conflict with, violate or result in a breach of, or constitute a default under the Articles of Incorporation or Regulations of Coteau or any law, statute, rule or regulation applicable to it, or except as set forth in that certain letter agreement dated August 3, 1990 among the Parties, North American Coal and Basin Electric conflict with, violate or result in a breach of or constitute a default under any material agreement to which it is a party or by which it or any of its properties is bound, or any judgment, order, award or decree to which Coteau is a party or by which it is bound, or, except as set forth in Section 16.15 hereof require any approval, consent, authorization or other action by any court, governmental authority or regulatory body or any creditor of Coteau or any other person or entity and (iv) this Agreement constitutes a valid and binding obligation of Coteau and this Agreement is enforceable against Coteau in accordance with its terms.

b) Dakota represents and warrants to Coteau that: (i) Dakota is a corporation duly organized, validly existing and in good standing under the laws of the State of North Dakota, (ii) the execution and delivery of this Agreement by Dakota and the performance of its obligations hereunder have been duly authorized by all requisite corporate action, (iii) neither the execution and delivery of this Agreement nor the performance of its obligations hereunder by Dakota shall, or after the lapse of time or giving of notice shall, conflict with, violate or result in the breach of, or constitute a default under the Articles of Incorporation or Bylaws of Dakota or any law, statute, rule or regulation applicable to it, or except as set forth in that certain letter agreement dated August 3, 1990 among the Parties, North American Coal and Basin Electric conflict with, violate or result in the breach of or constitute a default under any material agreement to which it is a party or by which it or any of its properties is bound, or any judgment, order, award or decree to which Dakota is a party or by which it is bound, or except as set forth in Section 16.15 hereof require any approval, consent, authorization or other action by any court, governmental authority or regulatory body or any creditor of Dakota or any other person or entity and (iv) this Agreement constitutes a valid and binding obligation of Dakota and this Agreement is enforceable against Dakota in accordance with its terms.

Section 16.12Counterparts.

This Agreement may be executed simultaneously in any number of counterparts, each of which shall be deemed an original, and it shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart.

Section 16.13Notices.

Coteau and Dakota each shall appoint a designee to receive and give on behalf of Coteau and Dakota all notices and other communications required or permitted under this Agreement.

26

Except as otherwise expressly stated in this Agreement, any such notice or other communication shall be in writing to the other Party and shall be deemed to have been duly given when delivered in person or posted by United States registered or certified mail, with postage prepaid, addressed to the designated representatives of Coteau and Dakota as follows:

a) To Coteau:

The Coteau Properties Company

P.O. Box 1089

Beulah, ND 58523

Attention: President

with copies to:

The Coteau Properties Company

2000 Schafer Street

Box No. 5500

Bismarck, ND 58502-5500

Attention: Chairman

and

The North American Coal Corporation

13140 Coit Road

Suite 400

Dallas, TX 75240-5784

Attention: President and

Chief Executive Officer

b) To Dakota:

Dakota Coal Company

1600 East Interstate Avenue Bismarck, NO 58501-0561 Attention: Vice President and Chief Operating Officer

c) To such other address or addresses as the Parties may from time to time

designate in writing.

Section 16.14Prior Agreement.

Coteau and Dakota, as assignee of ANG’s rights, interests and obligations under the Coal Sales Agreement, hereby agree that, effective as of the date hereof, the Coal Sales Agreement is hereby terminated and shall be of no further force and effect; provided, however, that Section 5.6 and Section 5.7 of the Coal Sales Agreement are not terminated hereby but shall survive such termination hereunder and shall remain in full force and effect until such time as the Coal Reserve Agreement is of no further force and effect; and provided further, however, that any and all liabilities and obligations of Coteau, ANG and Dakota under the Coal Sales Agreement which have accrued prior to such termination are not terminated hereby but shall survive such termination.

Section 16.15REA Approval.

The effectiveness of this Agreement is subject to the approval of the Administrator of the Rural Electrification Administration, United States Department of Agriculture, or his designee.

27

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed on their behalf by their respective authorized representatives as of the day first written above.

THE COTEAU PROPERTIES COMPANY

By:

s/ H. D. Jacot________________

Chairman

ATTEST:

/s/ Thomas A. Koza

Secretary

DAKOTA COAL COMPANYY

By:

_/s/ Robert L. McPhail _______

President and Chief

Executive Officer

ATTEST:

_/s/ Signature Illegible__________

Secretary

28

29

30

EXHIBIT C

to Coteau Lignite Sales

Agreement referred to in

Subsection 5.4(a) thereof

PAGE 1 of 2

SAMPLE CALCULATION OF MODIFICATION OF

AGREED PROFIT FOR DAKOTA 1S PRIMARY PLANTS LIGNITE

ADJUSTED PURSUANT TO

PARAGRAPH 7 OF COAL RESERVE AGREEMENT

______________________________________________________

Base Index:

Date of Delay Rental Payment - November, 1975

Amount of Delay Rental Payment= [* * *]

Base Producer Price Index - All Commodities (PPI)

November, 1975 = 59.5

Unescalated Rate per Ton for Delay Rental Payback - [* * *]

EXAMPLE - Monthly Adjustment

Current PPI = 111.5 (Most Recently Published Monthly PPI)

Modified Agreed Profit for Dakota’s Primary Plants Lignite for Year X:

First 10,000,000 Tons = [* * *] per Ton

Above 10,000,000 Tons = [* * *] per Ton

Adjusted Rate Per Ton for Delay Rental Payback=

111.5 X [* * *] = [* * *]

59.5

Adjusted Agreed Profit for Delay Rental Payback for Dakota’s Primary Plants

Lignite for Year X:

First 10,000,000 Tons - [* * *] - [* * *] = [* * *] per Ton

Above 10,000,000 Tons - [* * *] - [* * *] = [* * *] per Ton

Deliveries of Dakota’s Primary Plants Lignite Total 1,000,000 Tons

1,000,000 Tons x [* * *] = [* * *]

Current Month Adjusted Agreed Profit= [* * *]

* * * Confidential Treatment Requested

31

EXHIBIT C

to Coteau Lignite Sales

Agreement referred to in

Subsection 5.4(a) thereof

PAGE 2 of 2

SAMPLE CALCULATION OF MODIFICATION OF

AGREED PROFIT FOR DAKOTA 1S PRIMARY PLANTS LIGNITE

ADJUSTED PURSUANT TO

PARAGRAPH 7 OF COAL RESERVE AGREEMENT

EXAMPLE - Annual December Adjustment

Average PPI

For Year X

January    110.3

February    110.8

March    111.5

April    112.3

May    113.1

June    112.8

July    112.7

August    112.0

September    112.3

October    112.7

November    113.0

1,233.5 ÷ 11 =

112.1

Adjusted Rate Per Ton for Delay Rental Payback for Year X =

112.1 X [* * *] = [* * *]

59.5

Adjusted Agreed Profit for Delay Rental Payback for Dakota’s Primary Plants

Lignite for Year X:

First 10,000,000 Tons - [* * *] - [* * *] = [* * *] per Ton

Above 10,000,000 Tons - [* * *] - [* * *] = [* * *] per Ton

Deliveries of Dakota’s Primary Plants Lignite Total 11,000,000 Tons

10,000,000 Tons x [* * *] =     [* * *]

1,000,000 Tons x [* * *] =     [* * *]

Total Year X Adjusted

Agreed Profit    [* * *]

* * * Confidential Treatment Requested

32

EXHIBIT D

to Coteau Lignite Sales

Agreement referred to in

Subsection 5.5(a) thereof

SAMPLE CALCULATION OF MODIFICATION OF AGREED PROFIT

FOR DAKOTA’S PRIMARY PLANTS LIGNITE

Base Index:

Producer Price Index - All Commodities (PPI)

July 1988 = 107.9 (1982 = 100 base)

Agreed Profit, in July 1, 1988 dollars, for Dakota’s Primary Plants Lignite:

Up to and including 10,000,000 Tons - [* * *]

above 10,000,000 Tons - [* * *]

EXAMPLE

Average PPI for Year X = 122.2

Adjustment Factor for Dakota’s Primary Plants Lignite –

Modification of Agreed Profit for Dakota’s Primary Plants Lignite:

First     10,000,000 Tons = 1.1325 x [* * *] = [* * *] per Ton

Above    10,000,000 Tons = 1.1325 x [* * *] = [* * *] per Ton

* * * Confidential Treatment Requested

33

EXHIBIT E

to Coteau Lignite Sales

Agreement referred to in

Subsection 5.5(b) thereof

PAGE 1 of 2

SAMPLE CALCULATION OF MODIFICATION OF AGREED PROFIT

FOR DAKOTA’S OTHER PLANTS LIGNITE

Modified Agreed Profit as of Year X - [* * *] per Ton

EXAMPLE 1

Average PPI for Year X = 122.2

Average PPI for Year Y = 132.6

Index, Year X = 122.2

Index, Year Y = 132.6

Percentage Increase in Index for Year Y = 100% x

Adjustment Factor for Modification of Agreed Profit:

0 – 4.00%    = 4.00% x .75 = 3.00%

4.01% - 7.99%    = 4.00% x 1.00 = 4.00%

Equal to or greater than     8.00%     = 0.51% x 1.00 =

Modification of Agreed Profit fort Dakota’s Other Plants Lignite, Year Y:

[* * *] x (1 + 0.0751) = [* * *] per Ton

EXAMPLE 2

Average PPI for Year X = 122.2

Average PPI for Year Y = 131.1

* * * Confidential Treatment Requested

34

EXHIBIT E

to Coteau Lignite Sales

Agreement referred to in

Subsection 5.5(b) thereof

PAGE 2 of 2

Index, Year X = 122.2

Index, Year Y = 132.6

Percentage Increase in Index for Year Y =

100% x

Adjustment Factor for Modification of Agreed Profit:

For Increase up to 4.o%

4% x 0.75 = 3%

For Increase above 4.0% but below 8%

(( + 0.4987) x (Z - 4.01) = Adjustment Factor (%)

(( + 0.4987) x (7.28 - 4.01) = 3.12%

Where Z = Percentage Increase in Index for Year (%)

Aggregate Adjustment Factor for Modification of Agreed Profit:

0 – 4.00%    = 4.00% x .75 = 3.00%

4.01% - 7.99%    =     =

Equal to or greater than     8.00%     = 0.51% x 1.00 =

Modification of Agreed Profit fort Dakota’s Other Plants Lignite, Year Y:

[* * *] x (1 + 0.0612) = [* * *] per Ton

* * * Confidential Treatment Requested

35

EXHIBIT F

to Coteau Lignite Sales

Agreement referred to in

Subsection 5.5(c) thereof

SAMPLE CALCULATION OF MODIFICATION OF AGREED PROFIT

FOR DAKOTA’S SECONDARY PLANTS LIGNITE AND OTHER PLANTS LIGNITE

Base Index - July 1988 (See Exhibit D) = 107.9

Agreed Profit, in July 1, 1988 Dollars, for Dakota’s Secondary Plant Lignite and Other Plants Lignite:

Up to and including 1,25,000 Tons = [* * *] per Ton

1.250,001 through 2,499,999 Tons = [* * *] per Ton

2,500,000 Tons and above         = [* * *] per Ton

EXAMPLE

Average PPI - All Commodities for Year X = 127.3

Index, Year X = 127.3

Adjustment Factor for Dakota’s Secondary Plant Lignite and Other Plants Lignite =

127.3 - 107.9 = 19.4

19.4 x 0.75 = 14.6

107.9 + 14.6 = 122.5

= = 1.1353

Average

Agreed Profit for Dakota’s Secondary Plant Lignite and Other Plants Lignite

First 1,250,001 Tons = 1.1353 x [* * *] = [* * *] per Ton

1,250,001 through 2,499,999 Tons = 1.1353 x [* * *] = [* * *] per Ton

2,500,000 Tons and above = 1.1353 x [* * *] = [* * *] per Ton

* * * Confidential Treatment Requested

36

EXHIBIT G

to Coteau Lignite Sales

Agreement referred to in

Subsection 5.5(d) thereof

PAGE 1 of 2

SAMPLE CALCULATION OF AGREED PROFIT ADJUSTMENT

FOR BTU VALUE

Heating Value for Total Lignite Shipments = 6,199 BTUs/Pound

Adjustment Factor for Heating Value:

Agreed Profit Rates Adjusted for Heating Value:

Dakota’s Primary Plants Lignite:

If within first 10,000,000 Tons:

[* * *] x = [* * *] per Ton

If above 10,000,000 Tons:

[* * *] x = [* * *] per Ton

Dakota’s Secondary Plant and Other Plants Lignite:

If within first 1,250,000 Tons:

[* * *] x = [* * *] per Ton

If within 1,250,001 to 2,49,999 Tons:

[* * *] x = [* * *] per Ton

If 1,250,000 Tons or more:

[* * *] x = [* * *]per Ton

* * * Confidential Treatment Requested

37

EXHIBIT G

to Coteau Lignite Sales

Agreement referred to in

Subsection 5.5(d) thereof

PAGE 2 of 2

Dakota’s Other Plants Lignite:

[* * *] x = [* * *] per Ton

EXAMPLE

Deliveries of Dakota’s Primary Plants Lignite Total 1,000,000 Tons and

Deliveries of Dakota’s Secondary Plants Lignite Total 100,000 Tons. 1,000,00 Tons delivered at Heating Value of 6,199 BTU.

1,000.000 Tons x [* * *]        = [* * *]

100,000 Tons x x [* * *] = [* * *]

Total Agreed Profit            = [* * *]

* * * Confidential Treatment Requested

38

EXHIBIT H

to Coteau Lignite Sales

Agreement referred to in

Subsection 5.4(a) thereof

PAGE 1 of 2

SAMPLE CALCULATION OF THE

ANNUAL RECOMPUTATION OF AGREED PROFIT

Recomputation of Agreed Profit for Dakota’s Primary Plants

Base Index:

Producer Price Index - All Commodities (PPI)

July 1988    = 107.9 (1982 = 100 base)

Average PPI

For 1989

January    110.3

February    110.8

March    111.5

April    112.3

May    113.1

June    112.8

July    112.7

August    112.0

September    112.3

October    112.7

November    113.0

1,346.6 ÷ 12 =

112.2

39

EXHIBIT H

to Coteau Lignite Sales

Agreement referred to in

Subsection 5.4(a) thereof

PAGE 2 of 2

Recomputed Profit for 1989:

Adjusted Index for 1989:

PPI = 112.2

111.2 X [* * *] per Ton = [* * *] per Ton up to and including 10,000,000 Tons

107.9

111.2 X [* * *] per Ton = [* * *] per Ton in excess of 10,000,000 Tons

107.9

* * * Confidential Treatment Requested

40

EXHIBIT I

To Coteau Lignite

Sales Agreement

Page 1 of 2

EXAMPLE CALCULATIONS OF ADJUSTMENT OF

GENERAL AND ADMINISTRATIVE COSTS AMOUNT

Pursuant to Subsection 5.2(b) of the Coteau Lignite Sales Agreement, as amended, the general and administrative costs amount shall be adjusted as of December 31 of each calendar year by 100% of the first 4% change in the PPI-AC average for the first eleven months of the year under consideration relative to the previous year's PPI-AC average for the first eleven months, 80% of the change in said PPI-AC average which is greater than 4% and less than 8% and 60% of the change in said PPI-AC average which is equal to or greater than 8%.

Formula for adjustment of the general and administrative costs amount pursuant to Subsection 5.2(b)(i) if the percentage increase in the PPI-AC average for the year under consideration is less than or equal to 4%:

GA= [1 +(Dx 1)] Xa

Formula for adjustment of the general and administrative costs amount pursuant to Subsection 5.2(b)(ii) if the percentage increase in the PPI-AC average for the year under consideration is greater than 4% and less than 8%:

GA = [1 + [0.04 + ((D - 0.04) x 0.80)11x A

Formula for adjustment of the general and administrative costs amount pursuant to Subsection 5.2(b)(iii) if the percentage increase in the PPI-AC average for the year under consideration is equal to or greater than 8%:

GA = [1 + [0.04 + (0.0399 x 0.80) + ((D - 0.0799) x 0.60)]] x A

Formula for calculating "D", the percentage change in the PPI-AC average for the year under consideration:

D =	Ic - Ip
	Ip

Where:

GA =	adjusted general and administrative costs amount
A =	applicable general and administrative costs amount, from year prior to year under consideration, pursuant to Subsection 5.2(b)
D =	percentage change in the PPI-AC average for the first eleven months of the year under consideration
Ic =	PPI-AC average for the first eleven months of the year under consideration
Ip =	PPI-AC average for the first eleven months of the year immediately preceding the year under consideration

41

EXHIBIT I

To Coteau Lignite

Sales Agreement

Page 2 of 2

EXAMPLE CALCULATIONS

Note: The PPI-AC average and general and administrative costs amount figures in these examples are for illustrative purposes only and are not intended to relate to actual circumstances or to be used in actual calculations.

Example 1

Assume:

1.PPI-AC for December, 1996 = 129.1

2.PPI-AC average for first eleven months of 1997 = 132.4

3.General and administrative costs amount as of January 1, 1997 = [* * *] per Ton

D= (132.4 - 129.1)

129.1

D= 0.0256

GA = [1 + (0.0256 x 1)] x [* * *] = [* * *] per Ton

Example 2

Assume:

1.PPI-AC average for first eleven months of 1997 = 132.4

2.PPI-AC average for first eleven months of 1998 = 140.3

3.General and administrative costs amount as of January 1, 1998 = [* * *] per Ton

D= (140.3 - 132.4)

132.4

D= 0.0597

GA = [1 + [(0.04) + ((0.0597 - 0.04)]] x [* * *] = [* * *] per Ton

Example 3

Assume:

1.PPI-AC average for first eleven months of 1998 = 140.3

2.PPI-AC average for first eleven months of 1999 = 152.2

3.General and administrative costs amount as of January 1, 1999 = [* * *] per Ton

D= (152.2 - 140.3)

140.3

D= 0.0848

GA = [1 + [(0.04) + ((0.0399 x [* * *]) + ((0.0848 - 0.60)]] x [* * *] = [* * *] per Ton

* * * Confidential Treatment Requested

42

EX-10.12

CONFIDENTIAL TREATMENT REQUESTED FOR PORTIONS OF THIS DOCUMENT.  PORTIONS FOR WHICH CONFIDENTIAL TREATMENT IS REQUESTED HAVE BEEN MARKED WITH THREE ASTERISKS [***] AND A FOOTNOTE INDICATING “CONFIDENTIAL TREATMENT REQUESTED”.  MATERIAL OMITTED HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

Exhibit 10.12

FIRST AMENDMENT TO COTEAU LIGNITE SALES AGREEMENT

THIS FIRST AMENDMENT TO COTEAU LIGNITE SALES AGREEMENT ("Amendment") dated as of June 1, 1994, is byand between THE COTEAU PROPERTIES COMPANY, an Ohio corporation authorized to do business in the State of North Dakota (Coteau) and DAKOTA COAL COMPANY, a North Dakota corporation (Dakota).

WITNESSETH:

WHEREAS, Coteau and Dakota are parties to the Coteau Lignite Sales Agreement dated as of January 1, 1990 (the Coteau Lignite Sales Agreement); and

WHEREAS, the Parties desire to amend the Coteau Lignite Sales Agreement in certain respects;

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained herein, the Parties agree as follows:

1.All capitalized terms used in this Amendment shall have the meanings ascribed to them in the Coteau Lignite Sales Agreement unless such terms are otherwise defined herein, or unless the context clearly otherwise requires.

2.Section 1.1 of the Coteau Lignite Sales Agreement hereby is amended by adding the following definition after the definition of the term ANG:

Antelope Valley shall mean the Antelope Valley Station, consisting of two 450 MW generating units named "Unit 1" and "Unit 2", located at a site adjacent to Great Plains near Beulah, North Dakota, and which is controlled and operated by Basin Electric.

3.Section 1.1 of the Coteau Lignite Sales Agreement hereby is amended by adding the following definition after the definition of the term Dakota:

Dakota Option Agreement shall mean the Dakota Option Agreement dated January 1, 1992 by and among Coteau, Dakota and the State of North Dakota doing business as the Bank of North Dakota (as escrow agent).

4.The definitions of the terms Dakota's Other Plants and Dakota's Primary Plants in Section 1.1 of the Coteau Lignite Sales Agreement hereby are amended to read in their entirety as follows:

Dakota's Other Plants shall mean all additional generating units installed by Basin Electric that increase the original generating capacity of Antelope Valley and all additional gasifiers as well as the incremental increased capacity achieved by replacing one or more of the existing gasifiers with a replacement gasifier having a capacity greater than that of the gasifier being replaced at or near Great Plains.

Dakota's Primary Plants shall mean collectively Antelope Valley and Great Plans.

5.Section 1.1 of the Coteau Lignite Sales Agreement hereby is amended by adding the following definition after the definition of the term Escrowed Stock:

GAAP shall mean generally accepted accounting principles.

6.Section 1.1 of the Coteau Lignite Sales Agreement hereby is amended by adding the following definition after the definition of the term Glenharold Mine:

Great Plains shall mean the Great Plains Coal Gasification Plant, the first phase of which consists of a Lurgi lignite gasification facility with the capability of producing approximately 175 MMSCF/D of pipeline quality synthetic natural gas and is located on a site adjacent to Antelope Valley near Beulah, No4th Dakota, which is owned and operated by DGC.

7.The definition of the term Index in Section 1.1 of the Coteau Lignite Sales Agreement hereby is amended to read in its entirety as follows:

Index shall mean the average Producer Price Index - All Commodities on the base 1982 = 100, published by the Bureau of Labor Statistics of the U.S. Department of Labor, for the months of January through November of said calendar year. The base for calculating changes in the Index in Subsections 5.5(a), 5.5(b) and 5.5(c) hereof shall be the Producer Price Index - All Commodities for July 1988.

8.The fifth paragraph of Section 4.10 of the Coteau Lignite Sales Agreement hereby is amended to read in its entirety as follows:

Coteau shall develop formal written policies with respect to donations to charitable and civic organizations and corporate sponsorships, which policies shall be subject to approval by Dakota. All expenditures by Coteau for donations and sponsorships that are included in the cost of Production shall be subject to approval by Dakota.

9.Section 5.2(a) of the Coteau Lignite Sales Agreement hereby is amended by deleting clauses (xiv) and (xv) in their entirety and adding the following in lieu thereof:

xiv) Acquisition costs and carrying charges payable to Cocteau for surface and coal interests which are within the areas of Dedicated Lignite,

xv) Amounts payable to WCDC pursuant to paragraph 7 of the Coal Reserve Agreement, and

xvi) Amounts payable to WCDC pursuant to paragraph 8 of the Coal Reserve Agreement.

10.Subsection 5.4(a) of the Coteau Lignite Sales Agreement hereby is amended to read in its entirety as follows:

a) i) For lignite sold and delivered hereunder in any calendar year before January 1, 1994 and after December 31, 2006 for use at Dakota's Primary Plants, the Agreed Profit, expressed in July 1, 1988 dollars, shall be [* * *] per Ton for all Tons of lignite up to and including ten million (10,000,000) Tons for such year and shall be [* * *] per Ton for all Tons of lignite which exceed ten million (10,000,000) Tons for such year, which such amounts of Agreed Profit shall be adjusted as provided in Subsection 5.5(a) hereof..

ii) For lignite sold and delivered hereunder in any calendar year between January 1, 1994 and December 31, 2006 for use at Antelope Valley, the Agreed Profit, expressed in July 1, 1988 dollars, shall be [* * *] per Ton for all Tons of lignite until the total quantity of lignite delivered to all of Dakota's Primary Plants equals ten million (10,000,000) Tons for such year and thereafter shall be [* * *] per Ton for all Tons in excess of ten million (10,000,000) Tons sold and delivered to Dakota's Primary Plants in such year, which such amounts of Agreed Profit shall be subject to adjustment as provided in Subsection 5.5(a) hereof. Notwithstanding the foregoing sentence, if Great Plains permanently and completely ceases production of synthetic natural gas on or before December 31, 1997, then for a period of two (2) years following the date on which Great Plains so ceases such production, the Agreed Profit for lignite sold and delivered hereunder for use at Antelope Valley, after adjustment pursuant to Subsection 5.5 (a) hereof, shall be reduced by [* * *] per Ton, which amount of reduction shall not be subject to any adjustment. If Great Plains permanently and completely ceases production of synthetic

* * * Confidential Treatment Requested

natural gas after December 31, 1997, then the Agreed Profit for Lignite sold and delivered hereunder for use at Antelope Valley, after adjustment pursuant to Subsection 5.5(a) hereof, shall not be reduced thereafter by the [* * *].

iii) For lignite sold and delivered hereunder in any calendar year between January 1, 1994 and December 31, 2006 for use at Great Plains, the Agreed Profit, expressed in July 1, 1988 dollars, shall be [* * *] per Ton, which such amount of Agreed Profit shall be subject to adjustment as provided in Subsection 5.5(a) hereof and after such adjustment shall be reduced by [* * *] per Ton, which amount of reduction shall not be subject to any adjustment.

iv) For the first one hundred seventy-six million six hundred one thousand nine hundred forty-nine (176,601,949) Tons of lignite sold and delivered from the Dedicated Lignite for use at Dakota's Primary Plants following December 31, 1989, the Agreed Profit per Ton, after adjustment pursuant to Subsection 5.5(a) hereof, shall be reduced by an amount equal to [* * *] adjusted in the manner as provided in paragraph 7 of the Coal Reserve Agreement. An example of the aforesaid calculation is attached hereto as Exhibit c and made a part hereof.

11.The references to Subsection 5.4 (a) that are contained in Subsections 5.4(b) and 5.4(c) hereby are amended to mean and refer to Subsection 5.4(a) (i). In addition, the second reference to Subsection 5.4(a) that is contained inclause (i) of Subsection 5.7(a) hereby is amended to mean and refer to Subsection 5.4(a) (i).

12.Section 5.6 of the Coteau Lignite Sales Agreement hereby is amended to read in its entirety as follows:

Section 5.6    Further Modifications.

If at any time during the term of this Agreement it is reasonably believed by either Party that the Producer Price Index - All Commodities or any index substituted therefor in accordance with the following provisions no longer reflects the true change in purchasing power of the United States dollar, then upon the written request of either Party a substituted index or method whereby such change in purchasing power of the United States dollar can be determined shall be substituted by mutual agreement. In the event that the Producer Price Index - All Commodities or any substituted index is changed in the future to use some base other than the base of 1982 = 100, then, for the purposes hereof, the Producer Price Index - All Commodities or any substitute index, as the case may be, shall be adjusted so as to be in correct relationship to the base of 1982 = 100, or some

* * * Confidential Treatment Requested

other alternative base which is mutually agreeable to Coteau and Dakota. In the event publication of the Producer Price Index - All Commodities or any substituted index is no longer made by any federal agency, the index to be used as aforesaid shall be that index agreed to by the Parties which, after necessary adjustment, if any, provides the most reasonable substitute for said index.

13.Exhibits C, D, E and F hereto hereby are substituted for Exhibits C, D, E and F to the Coteau Lignite Sales Agreement, respectively, each of which shall be of no further force or effect.

14.Section 13.2 of the Coteau Lignite Sales Agreement hereby is amended to read in its entirety as follows:

Section 13.2    Other Activities.

Notwithstanding the provisions of Section 13.1 hereof, it iscontemplated that Coteau may provide other services to Dakota or its Affiliates such as solid waste disposal, disposal of excess lignite fines, snow removal as well as such other services, in each instance as may be mutually agreed upon by Coteau and Dakota. It is further contemplated that Coteau shall provide such services to Dakota or its Affiliates at a price agreed to by the Parties.

15.Section 14.1 of the Coteau Lignite Sales Agreement hereby is amended to read in its entirety as follows: Section 14.1 Term.

a) The original term of this Agreement shall commence on January 1, 1990 and shall expire on April 22, 2007, provided that Coteau shall have the option to extend this Agreement for up to six (6) successive five (5) year periods by giving written notification to Dakota not less than three (3) years before the expiration of the original term, or in the case of renewal terms, eighteen (18) months before the expiration of the renewal term then in effect.

b) If Coteau elects to extend this Agreement for all six (6) such periods, then Dakota shall have· the option to extend this Agreement for up to four (4) additional successive five (5) year periods by giving written notification to Coteau not less than eighteen (18) months before the expiration of the renewal term then in effect. If Coteau does not elect to extend this Agreement for all six (6) such periods, then Dakota shall have no right to extend this Agreement for any additional periods.

c) Notwithstanding the foregoing, this Agreement shall terminate upon the exhaustion of the Dedicated Lignite. The lignite covered by any particular lease shall be deemed to be exhausted upon the expiration of such lease without further right of renewal.

16.Section 14.4 of the Coteau Lignite Sales Agreement hereby is amended to read in its entirety as follows:

Section 14.4    Exercise of Option of Escrowed Stock.

a) Upon the expiration of the original term of this Agreement, Dakota may exercise its right pursuant to the option Agreement to cause the transfer of the Escrowed Stock to Dakota, provided that Coteau has not exercised its right to extend the original term of this Agreement pursuant to Section 14.1 hereof and provided, further, that Dakota has not exercised any of its rights under Section 14.2 hereof. To exercise said right, Dakota shall give written notice to Coteau with a copy to the escrow agent under the Option Agreement not less than twenty-four (24) months and not more than thirty-five (35) months before the expiration of the original term and shall otherwise comply with the terms and conditions of the Option Agreement.

b) Upon the expiration of any renewal term of this Agreement that occurs on or before April 22, 2032, Dakota may exercise its right pursuant to the Option Agreement to cause the transfer of the Escrowed Stock to Dakota, provided that Coteau has not exercised its right to further extend such renewal term of this Agreement pursuant to Section 14.1 hereof and provided, further, that Dakota has not exercised any of its rights under Section 14.2 hereof. To exercise said right, Dakota shall give written notice to Coteau with a copy to the escrow agent under the Option Agreement not less than twelve (12) months and not more than seventeen (17) months before the expiration of such renewal term and shall otherwise comply with the terms and conditions of the Option Agreement.

c) Upon the expiration of any renewal term of this Agreement that occurs on or after April 22, 2037, Dakota may exercise its right pursuant to the Option Agreement to cause the transfer of the Escrowed Stock to Dakota, provided that Dakota has not exercised any of its rights under Section 14.2 hereof. To exercise said right, Dakota shall give written notice to Coteau with a copy to the escrow agent under the Option Agreement not less than seventeen (17) months before the expiration of such renewal term and shall otherwise comply with the terms and conditions of the Option Agreement.

17.Article XIV of the Coteau Lignite Sales Agreement hereby is amended by adding a new Section 14.5 thereto, which shall read in its entirety as follows:

Section 14.5 Reimbursement for Certain Additional

Deferred Tax Liabilities and Assets.

On January 1, 1990, the effective date of this Agreement, GAAP required Coteau to follow Accounting Principles Board Opinion No.11, entitled "Accounting for Income Taxes” ("APB 11"), or Statement of Financial Accounting Standard No. 96, entitled "Accounting for Income Taxes" ("SFAS 96"). Coteau did not adopt SFAS 96, and no further reference to SFAS 96 is either intended or implied herein. For fiscal years commencing after December 15, 1992, GAAP have required Coteau to adopt Statement of Financial Accounting Standard No. 109, entitled "Accounting for Income Taxes" ("SFAS 109"), which supersedes APB 11. Under SFAS 109, because of the difference between the financial statement and income tax basis of its assets and its liabilities, Coteau is required to record additional net deferred tax liabilities (“ADTL") on its financial statements for certain years that it was not required to record under APB 11. The amount of the ADTL will decrease with time. If Coteau continues inoperation for a sufficient period of time, Coteau will not have to pay any portion of the ADTL and may be required to record additional net deferred tax assets ("ADTA") on its financial statements for certain years that it would not be required to record under APB 11.

So long as GAAP requires that ADTL continue to be recorded on Coteau's financial statements, the amount of dividends Coteau is able to pay under Section 4.8 hereof will be reduced, because the amount of the ADTL will reduce the earned surplus from which such dividends may be paid. Accordingly, the Parties agree that if this Agreement terminates and/or if the Escrowed Stock is transferred to Dakota for any reason, then in addition to any other payments by Dakota to North American Coal provided for in this Agreement, the Option Agreement and/or the Dakota Option Agreement, Dakota shall pay to North American Coal an amount equal to the difference between (x) the amount of net deferred tax liabilities recorded on Coteau's financial statements on the date the Escrowed stock is transferred to Dakota and (y) the amount of net deferred tax liabilities that Coteau would have recorded on such date if Coteau had determined such liabilities by the method it used prior to its required adoption of SFAS 109. Under no circumstances shall the amount of the payment by Dakota under this Subsection 14.5 exceed the total Agreed Profit paid to Coteau since its adoption of SFAS 109 less the sum of (i) the dividends paid by Coteau since its adoption of SFAS 109, (ii) the income tax payments made by Coteau with respect to years for which SFAS 109 was adopted, and (iii) the net deferred tax liabilities that would be payable by Coteau following the transfer of the Escrowed Stock in respect of its prior mining operations, if such deferred taxes were determined by the method Coteau used prior to its required adoption of SFAS 109, so long as GAAP requires that ADTA continue to be recorded on Coteau's financial statements, the amount of dividends Coteau is able to pay under Section 4 hereof will be increased by the amount of the ADTA. Accordingly, the Parties agree that if this Agreement terminates and/or if the Escrowed Stock is transferred to Dakota for any reason, then Coteau shall retain as an asset, and North American Coal shall not cause or permit Coteau to distribute to it as a dividend, an amount equal to the difference between (X) the amount of net deferred tax assets recorded on Coteau's

financial statements on the date the Escrowed Stock istransferred to Dakota and (y) the amount of net deferred tax assets that Coteau would have recorded on such date if Coteau had determined such assets in accordance with SFAS 109. Article XV of the Coteau Lignite Sales Agreement and all references thereto in the Coteau Lignite Sales Agreement hereby are deleted in their entirety effective as of June 1, 1994. Section 16.15 of the Coteau Lignite Sales Agreement hereby is deleted in its entirety effective as of January 1, 1990. All of the other terms and provisions of the Coteau Lignite Sales Agreement not expressly amended hereby shall continue and remain in full force and effect. 21. This Amendment may be executed in any number of counterparts, each of which, when executed and delivered, shall be an original, but all of which shall collectively constitute one and the same instrument.

IN WITNESS WHEREOF, the Parties have caused this Amendment to be executed on their behalf by their respective authorized representatives as of the day first written above.

ATTEST: /s/ Thomas A. Koza Secretary ATTEST: /s/ Signature Illegible Secretary THE COTEAU ROPERTIES COMPANY By /s/ Robert L. Benson    Robert L. Benson, its President DAKOTA COAL COMPANY By/s/ Kent E. Jenssen Title: Vice President & Chief Operating Officer

EXHIBIT C

to Coteau Lignite Sales

Agreement referred to in

Subsection 5.4(a)(iv)

thereof

PAGE 1 OF 4

SAMPLE CALCULATIONS OF ADJUSTMENT OF

AGREED PROFIT FOR DAKOTA'S PRIMARY PLANTS LIGNITE

PURSUANT TO

PARAGRAPH 7 OF COAL RESERVE AGREEMENT

Pursuant to Subsection 5.4(a) (iv) of the Coteau Lignite Sales Agreement, as amended, for the first 176,601,949 Tons of lignite sold from the Dedicated Lignite for use at Dakota's Primary Plants after December 31, 1989, the Agreed Profit per Ton, after adjustment pursuant to Subsection 5.5(a), shall be reduced by [* * *] (the “delay rental payment”) adjusted in accordance with paragraph 7 of the Coal Reserve Agreement. Under paragraph 7 of the Coal Reserve Agreement, the PPI figure to be used as the base for adjusting each delay rental payment (denoted as “C” in the formulae below) is the PPI figure for the month in which such delay rental payment was made.

Formula for adjustment of Agreed Profit pursuant to Subsection 5.4(a) (iv) for deliveriesto Great Plains in years 1994 through 2006:

AP =	PXI	.9 - [* * *]-	I x [* * *]
	107		C

Formula for adjustment of Agreed Profit pursuant to Subsection 5.4(a) (iv) for deliveries to Great Plains in all other years:

AP =	PXI	.9 -	I x [* * *]
	107		C

Formula for adjustment of Agreed Profit pursuant to Subsection 5.4(a) (iv) for deliveries to Antelope Valley each year if Great Plains does not close prior to December 31, 1997:

AP =	PXI	.9 -	I x [* * *]
	107		C

* * * Confidential Treatment Requested

PAGE 2 OF 4

Formula for adjustment of Agreed Profit pursuant to Subsection· 5.4(a) (iv) for deliveries to Antelope Valley for two years following closure of Great Plains if Great Plains closes prior to December 31, 1997:

AP =	PXI	.9 -	I x [* * *]
	107		C

Where:

AP	=	Adjusted Agreed Profit figure
P	=	Applicable Agreed Profit, in July 1, 1988 dollars pursuant to clause (i), clause (ii) or clause (iii) of Subsection 5.4(a)
I	=	Index for the calendar under consideration
C	=	Applicable PPI figure to be used as the denominator pursuant to paragraph 7 of the Coal Reserve Agreement

EXAMPLE CALCULATIONS

Note: The PPI and delivery figures for 1998 and 2009 in these examples are not intended to relate to actual circumstances or to be used in actual calculations.

PPI figures for First Eleven Months of Years 1998and 2008

	1,998	2,008
January	130.0	200.0
February	130.8	200.8
March	131.5	201.5
April	132.3	202.3
May	132.5	202.5
June	132.8	202.8
July	132.9	202.9
August	133.1	203.1
September	133.3	203.3
October	133.4	203.4
November	133.6	203.6
Index (I)	132.4	202.4

* * * Confidential Treatment Requested

PAGE 3 OF 4

Annual Deliveries in Years 1998 and 2008

Antelope Valley	5,100,000 Tons
Great Plains	6,400,000 Tons
Total	11,500,000 Tons

At the time the first 10,000,000 Tons were delivered in both years, it is assumed that 4,400,000 Tons were delivered to Antelope Valley and 5,600,000 Tons were delivered to Great Plains.

Example 1

Assume:

1. Year 1998

2. Great Plains operates through December 31, 1997

3. Delay rental payment made on November 30, 1979 in the amount of [* * *] is being repaid

4. PPI for November 1979 is 82.6

Agreed Profit per Ton for deliveries to Great Plains:

AP =	P x I	.9 - [* * *]-	I x [* * *]
	107		C

AP =	[* * *] x 132.4	.9 - [* * *] -	132.4 x 0.05	0.6
	107		82

= [* * *]

Agreed Profit per Ton for deliveries to Antelope Valley:

AP =	PXI	.9 -	I x [* * *]
	107		C

AP =	[* * *] x 132.4	.9 -	132.4 x 0.05	0.6
	107		82

= [* * *] until the first 10,000,000 Tons are delivered to Dakota's Primary Plants

* * * Confidential Treatment Requested

PAGE 4 OF 4

AP =	[* * *] x 132.4	.9 - [* * *]-	132.4 x 0.05	0.6
	107		82

= [* * *] after the first 10,000,000 Tons are delivered to Dakota's Primary Plants

Total Agreed Profit for 1998:

=(6,400,000 x [* * *]) + (4,400,000 x [* * *]) = (700,000 x [* * *])

=[* * *]

Example 2

Assume:

1. Year 2008

2. Delay rental payment made on December 1, 1983 in the amount of [* * *] is being repaid

3. PPI for December 1983 is 102.3

Agreed Profit per Ton for deliveries to Great Plains and Antelope Valley:

AP =	P x I	.9 -	I x [* * *]
	107		C

AP =	[* * *] x 202.4	.9 - [* * *] -	202.4 x 0.05	0.3
	107		102

=[* * *] until the first 10,000,000 Tons are delivered to Dakota's Primary Plants

Agreed Profit per Ton for deliveries to Antelope Valley:

AP =	P x I	.9 -	I x [* * *]
	107		C

AP =	[* * *]x 202.4	.9 -	202.4 x 0.05	0.3
	107		102

= [* * *] after the first 10,000,000 Tons are delivered to Dakota's Primary Plants

Total Agreed Profit for 2008:

=(10,000,000 x [* * *]) = (1,500,000 x [* * *])

=[* * *]

* * * Confidential Treatment Requested

EXHIBIT D

to Coteau Lignite Sales

Agreement referred to in

Subsection 5.4(a)(iv)

thereof

PAGE 1 OF 4

SAMPLE CALCULATIONS OF ADJUSTMENT OF AGREED PROFIT

FOR DAKOTA'S PRIMARY PLANTS LIGNITE

Pursuant to Subsection 5.5(a) of the Coteau Lignite Sales Agreement, as amended, the Agreed Profit per Ton shall be adjusted as of December 31 of each calendar year by 10% of the percentage difference between the Index for the year under consideration and the base Index figures, which is 107.9.

Formula for adjustment of Agreed Profit pursuant to Subsection 5.5(a) for deliveriesto Great Plains in years 1994 through 2006:

AP =	P x I	.9 - [* * *]
	107

Formula for adjustment of Agreed Profit pursuant to Subsection 5.5(a) for deliveries to Great Plains in all other years:

AP =	P x I	0.9
	107

Formula for adjustment of Agreed Profit pursuant to Subsection 5.5(a) for deliveries to Antelope Valley for two years following closure of Great Plains if Great Plains closes prior to December 31, 1997:

AP =	P x I	.9 - [* * *]
	107

* * * Confidential Treatment Requested

PAGE 2 OF 4

Where:

AP	=	adjusted Agreed Profit figure
P	=	applicable Agreed Profit, in July 1, 1988 dollars pursuant to clause (i), clause (ii) or clause (iii) of Subsection 5.4(a)
I	=	Index for the calendar under consideration

EXAMPLE CALCULATIONS

Note: The PPI and delivery figures in these examples are note intended to relate to actual circumstances or to be used in actual calculations.

PPI figures for First Eleven Months of Years 1998and 2008

	1,998	2,008
January	130.0	200.0
February	130.8	200.8
March	131.5	201.5
April	132.3	202.3
May	132.5	202.5
June	132.8	202.8
July	132.9	202.9
August	133.1	203.1
September	133.3	203.3
October	133.4	203.4
November	133.6	203.6
Index	132.4	202.4

Annual Deliveries in Years 1998 and 2008

Antelope Valley	5,100,000 Tons
Great Plains	6,400,000 Tons
Total	11,500,000 Tons

At the time the first 10,000,000 Tons were delivered in both years, it is assumed that 4,400,000 Tons were delivered to Antelope Valley and 5,600,000 Tons were delivered to Great Plains.

PAGE 3 OF 4

Example 1

Assume:

1. Year 1998

2. Great Plains operates through December 31, 1997

Agreed Profit per Ton for deliveries to Great Plains:

AP =	P x I	.9 - [* * *]
	107

AP =	[* * *]x 132.4	.9 - [* * *]
	107

= [* * *]

Agreed Profit per Ton for deliveries to Antelope Valley:

AP =	P x I	0.9
	107

AP =	[* * *]x 132.4	0.9
	107

=[* * *] until the first 10,000,000 Tons are delivered to Dakota's Primary Plants

AP =	[* * *]x 132.4	0.9
	107

= [* * *] after the first 10,000,000 Tons are delivered to Dakota's Primary Plants

Total Agreed Profit for 1998:

=(6,400,000 x [* * *]) + (4,400,000 x [* * *]) = (700,000 x [* * *])

=[* * *]

Example 2

Assume:Year 2008

Agreed Profit per Ton for deliveries to Great Plains and Antelope Valley:

* * * Confidential Treatment Requested

PAGE 4 OF 4

AP =	P x I	0.9
	107

=	[* * *]x 202.4	0.9
	107

=[* * *] until the first 10,000,000 Tons are delivered to Dakota's Primary Plants

AP =	[* * *]x 202.4	0.9
	107

=[* * *] until the first 10,000,000 Tons are delivered to Dakota's Primary Plants

Total Agreed Profit for 2008:

=(10,000,000 x [* * *]) = (1,500,000 x [* * *])

=[* * *]

* * * Confidential Treatment Requested

PAGE 1 OF 3

EXHIBIT E

to Coteau Lignite Sales Agreement referred to in Subsection 5.5(b) thereof

PAGE 1 OF 2

SAMPLE CALCULATIONS OF ADJUSTMENT OF AGREED PROFIT

FOR DAKOTA'S PRIMARY PLANTS LIGNITE

Pursuant to Subsection 5.5(b) of the Coteau Lignite Sales Agreement, as amended, the Agreed Profit per Ton of lignite sold for use at Dakota's Other Plants shall be adjusted as of December 31 of each calendar year b 75% of the first 4% change in the Index for the year under consideration, under consideration, and 100% of the portion of the percentage change in the Index for the year under consideration that is equal to or greater than 8%.

Formula for adjustment of Agreed Profit pursuant to Subsection 5.5(b) if the percentage increase in the Index for the year under consideration is equal to or less than 4%:

AP = [1 + (D x 0.75)] x P

Formula for adjustment of Agreed Profit pursuant to Subsection 5.5(b) if the percentage increase in the Index for the year under consideration is equal to or less than 4% but less than 8%:

AP = [1.03 + (6.2657 D x 0.4987] x (D - 0.0401)] x P

Formula for adjustment of Agreed Profit pursuant to Subsection 5.5(b) if the percentage increase in the Index for the year under consideration is equal to or less than 8%:

AP = [1 + (D - 0.0101)] x P

AP = [0.9899 + D] x P

Formula for calculating “D”, the percentage change in the Index for the year under consideration:

D =	Ic - Ip
	Ip

PAGE 2 OF 3

Where:

AP	=	adjusted Agreed Profit figure
P	=	applicable Agreed Profit, in July 1, 1988 dollars pursuant to Subsection 5.4(b)
Ic	=	Index for the year under consideration
Ip	=	Index for the year immediately preceding the year under consideration
D	=	Applicable PPI figure to be used as the denominator pursuant to paragraph 7 of the Coal Reserve Agreement

EXAMPLE CALCULATIONS

Note: The Index and Agreed Profit figures in these examples are not intended to relate to actual circumstances or to be used in actual calculations.

Example 1

Assume:

1. Index for 1996 = 122.2

2. Index for 1997 = 132.6

3. Agreed Profit for 1996 = [* * *]

D =	Ic - Ip	—	132.6 - 122.2	0.0851
	Ip	=	122.2

Agreed Profit per Ton for deliveries to Dakota's Other Plants:

AP = [1 + (D - 0.101)] x P

AP = [0.9899 + D]x P

= [0.9899 + 0.0851] x [* * *] = [* * *]

* * * Confidential Treatment Requested

PAGE 3 OF 3

Example 2

Assume:

1. Index for 1996 = 122.2

2. Index for 1997 = 131.1

3. Agreed Profit for 1996 = [* * *]

EXHIBIT F

to Coteau Lignite Sales Agreement referred to in Subsection 5.5(c) thereof

PAGE 1 OF 2

SAMPLE CALCULATIONS OF ADJUSTMENT OF AGREED PROFIT

FOR DAKOTA'S SECONDARY PLANT LIGNITE AND OTHER PLANTS LIGNITE

Pursuant to Subsection 5.5(c) of the Coteau Lignite Sales Agreement, as amended, the Agreed Profit per Ton of lignite sold for use at Dakota's Secondary Plant and Other Plants shall be adjusted as of December 31 of each calendar year by 75% of the percentage difference between the Index figure, which is 107.9.

Formula for adjustment of Agreed Profit pursuant to Subsection 5.5(c):

AP =	1 = (	I - 107.9	.9) x [* * *]x P
		107

Where:

AP	=	adjusted Agreed Profit figure
P	=	applicable Agreed Profit, in July 1, 1988 dollars, pursuant to Subsection 5.4(c)
I	=	Index for the calendar year under consideration

EXAMPLE CALCULATIONS

Note: The PPI and delivery figures in this example are not intended to relate to actual circumstances or to be used in actual calculations.

* * * Confidential Treatment Requested

PAGE 2 OF 2

PPI figures for First Eleven Months of Years 1998and 2008

	1,998
January	130.0
February	130.8
March	131.5
April	132.3
May	132.5
June	132.8
July	132.9
August	133.1
September	133.3
October	133.4
November	133.6
Index	132.4

AP =	1 + (	132.4 - 107.9	.9)x[* * *] x [* * *]
		107

=[* * *] per Ton for the first 1,250,000 Tons

AP =	1 + (	132.4 - 107.9	.9)x[* * *]x [* * *]
		107

=[* * *] per Ton for Tons 1,250,001 through 2,499,999

AP =	1 + (	I 132.4 - 107.9	.9)x[***]x[* * *]
		107

=[* * *] per Ton for Tons 2,500,000 and above

* * * Confidential Treatment Requested

EX-10.13

CONFIDENTIAL TREATMENT REQUESTED FOR PORTIONS OF THIS DOCUMENT. PORTIONS FOR WHICH CONFIDENTIAL TREATMENT IS REQUESTED HAVE BEEN MARKED WITH THREE ASTERISKS [***] AND A FOOTNOTE INDICATING “CONFIDENTIAL TREATMENT REQUESTED”. MATERIAL OMITTED HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

Exhibit 10.13

SECOND AMENDMENT

TO

COTEAU LIGNITE SALES AGREEMENT

THIS SECOND AMENDMENT TO THE COTEAU LIGNITE SALES AGREEMENT ("Amendment") dated as of January 1, 1997, is by and between THE COTEAU PROPERTIES COMPANY, an Ohio corporation authorized to do business in the State of North Dakota ("Coteau"), and DAKOTA COAL COMPANY, a North Dakota corporation (“Dakota”).

WITNESSETH:

WHEREAS, Dakota and Coteau are parties to the Coteau Lignite Sales Agreement dated as of January 1, 1990, as amended by the First Amendment dated as of June 1, 1994(hereinafter referred to as the "Coteau Lignite Sales Agreement"); and

WHEREAS, the Parties desire to further amend the Coteau Lignite Sales Agreement as hereinafter provided.

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained herein, the Parties agree as follows:

1. All capitalized terms used in this Amendment shall have the meanings ascribed to them in the Coteau Lignite Sales Agreement unless such terms are otherwise defined herein, or unless the context otherwise clearly requires.

2. Subsection 4.2(a) of the Coteau Lignite Sales Agreement is hereby amended to read in its entirety as follows:

“a) An annual capital budget containing estimates of all commitments in excess of$25,000. Within forty-five (45) days after Dakota's receipt of the foregoing

annual capital budget, Dakota shall give Coteau written notice of Dakota'sapproval or disapproval of such capital budget. If Dakota shall fail to give such notice within such forty-five (45) day period, Dakota shall be deemed to have approved such budget. Coteau may submit proposed capital budgets for previously unforeseen capital expenditures at any time, and Dakota shall give due consideration to such requests and shall respond to such requests within thirty (30) days. Upon the approval of any capital budget or portion thereof by Dakota, such budget or portion thereof shall be deemed part of the Mining Plan."

3. The first paragraph of Section 4.3 of the Coteau Lignite Sales Agreement is hereby amended to read in its entirety as follows:

“Coteau shall not make any expenditures unless they are generally reflected in a budget, or portion thereof, approved by Dakota as aforesaid; nor shall Coteau make ) any single expenditure (except for expenditures made to maintain inventory levels as approved by Dakota from time to time) for materials, supplies, equipment, facilities or services in excess of $25,000, or enter into any contracts, agreements or commitments involving more than $25,000, unless such item has been specifically identified in a budget, or portion thereof, approved by Dakota or unless Dakota has otherwise approved thereof.”

4. Section 4.6 of the Coteau Lignite Sales Agreement is hereby amended to read in its entirety as follows:

“Coteau and Dakota shall cooperate to maintain and use a cost and physical progress data reporting system which (a) provides actual cost and expenditure scheduling status· reports to Dakota for the immediately preceding calendar month by the fifteenth (15th) Business Day of every month, (b) reports actual cost and operational statistics relative to the Mining Plan and (c) provides adequate audit trail information. Such cost control system may include the preparation by Coteau, as requested by Dakota, or various budget, expenditure and operational statistical reports in a format acceptable to Dakota, or such other documents as requested by Dakota.”

5. Section 4.7 of the Coteau Lignite Sales Agreement is hereby deleted in its entirety.

6. The second paragraph of Section 4.9 of the Coteau Lignite Sales Agreement is hereby amended to read in its entirety as follows:

“Coteau's accounting system and practices shall conform to Dakota's specifications, which shall be in accordance with generally accepted accounting principles, and shall be subject to Dakota's approval. Coteau shall notify Dakota in writing of any proposed material changes to Coteau's accounting system and practices previously approved by Dakota. Coteau's accounting system shall provide for cost classifications (chart of accounts) as requested by Dakota which shall include the maintenance of separate cash accounts to the extent requested by Dakota.”

7. Section 4.10 of the Coteau Lignite Sales Agreement is hereby amended to read in its entirety as follows:

“Expenditures by Coteau for memberships in trade associations which are included in the Cost of Production shall be limited to the expenditures for one such membership, unless expenditures for additional memberships are approved by Dakota. Coteau shall keep Dakota apprised of the activities of the trade associations of which Coteau is a member and shall use its influence as a member to support the causes of Dakota. Further, Coteau shall consider the advice and counsel of Dakota with regard to national issues concerning coal and the affairs of Dakota's customers.

Coteau's policies and practices with respect to matters such as materials, supplies, facilities, services and equipment procurement, executive compensation plans, travel and entertainment, overtime, labor reporting, attendance at seminars, meetings andschools, use of company vehicles, mine-related cost allocation methods, equipment replacement, employee insurance, relocation expense, donations to charitable and civic organizations, corporate sponsorships and vacation and retirement benefits shall be generally consistent with those of North American Coal or the surface coal mining industry. Such policies and practices shall be subject to approval by Dakota, and any material changes to the aforementioned policies and practices shall be subject to approval by Dakota.

Such approval shall not be unreasonably withheld if such policies and practices are consistent with those of North American Coal or the surface coal mining industry.”

8. Subsection 5.2(a)(i) of the Coteau Lignite Sales Agreement is hereby amended to read in its entirety as follows:

“(i) Labor costs, which include wages and the costs of all related payroll taxes, benefits and fringes, including welfare plans, health benefits, vacations and other comparable benefits of employees and corporate officers of Coteau located at Coteau's Mine, and employees of Coteau and Affiliates of Coteau located elsewhere in North Dakota, whose labor costs are properly charged to Coteau's Mine,”

9. Subsection 5.2(a)(ix) of the Coteau Lignite Sales Agreement is hereby amended toread in its entirety as follows:

"(ix) Worker's compensation insurance, either in the state fund or self-insurance, whichever in the best judgment of Coteau is more advantageous,"

10. Subsection 5.2(a) of the Coteau Lignite Sales Agreement is hereby amended by adding the following provision at the end thereof:

“If any of the foregoing items in Subsection 5.2(a) hereof includes costs incurred byan Affiliate of Coteau and charged to Coteau, they shall be included only at the cost to such Affiliate without addition for loading, inter-company profit or service charge and shall be allocated to Coteau on the basis of time spend or (in the case of buildings) space used.”

11. Subsection 5.2(b) of the Coteau Lignite Sales Agreement is hereby amended to read in its entirety as follows:

“b) The sum of [* * *] per Ton of lignite sold and delivered hereunder (subject to adjustment as set forth herein) shall be added to the Cost of Production for general and administrative costs. General and administrative costs which are to be

* * * Confidential Treatment Requested

covered by such amount of [* * *] (and are not to be otherwise included in the Cost of Production) are: (i) general accounting and billing expense for those functions performed at locations other than Coteau's Mine, (ii) salaries and related expenses, such as payroll taxes, pensions and worker'scompensation, of corporate officers and employees of Coteau and corporateofficers and employees of Affiliates of Coteau not included inSubsection 5.2(a)(i) hereof, unless such expenses are specifically approved by Dakota to be charged to the Cost of Production, (iii) travel, telephone, postage and general office expense for persons or services included in general and administrative costs, (iv) computer hardware and software operated at locations other than Coteau's Mine and other North Dakota facilities, (v) national memberships and contributions of Affiliates of Coteau (vi) audit expense of Coteau and Affiliates of Coteau pursuant to Subsection 6.1(a) hereof and (vii) legal expense of Coteau and Affiliates of Coteau except (A) such legal expense incurred through the use of attorneys who are not employees of Coteau and Affiliates of Coteau (i.e., outside legal counsel) provided that such use of outside legal counsel is approved by the President of Coteau, and (B) such other legal expenses, as are specifically approved by Dakota, in writing, to be charged to the Cost of Production. Such [* * *] per Ton shall exclude amounts for general insurance expenses.

Beginning on December 31, 1997, for the year 1997, and by eachDecember 31 thereafter for the preceding calendar year, the amount of [* * *] per Ton of lignite sold and delivered hereunder for general and administrative costs shall be adjusted utilizing the Producer Price Index - All Commodities published by the U.S. Department of Labor, Bureau of Labor Statistics ("PPI-AC") for December, 1996 (129.1) as the base, and using the average of the PPI-AC for the first eleven months of each calendar year, by:

i) One hundred percent (100%) of that portion of the percentage increase or decrease in the average PPI-AC relative to the previous year'saverage PPI-AC which is less than or equal to four percent (4%), and

* * * Confidential Treatment Requested

ii) Eighty percent (80%) of that portion of the percentage increase or decrease in the average PPI-AC relative to the previous year's average PPI-AC which is greater than four percent (4%) and less than eight percent (8%) and

(iii) sixty percent (60%)of that portion of the percentage increase or decrease in the average PPI-AC relative to the previous year's average PPI-AC which is equal to or greater than eight percent (8%).

Subsequent to each such adjustment, the amount for general and administrative costs shall never be less than [* * *] per Ton of lignite sold and delivered hereunder. Examples of the aforesaid calculation are attached hereto as Exhibit I and made a part hereof.

In addition to the amount of [* * *] per Ton of lignite sold and deliveredhereunder for general and administrative costs, actual general insurance expenses incurred by Coteau or Affiliates of Coteau applicable to Coteau's Mine shall be included in the general and administrative costs category. Actual general insurance expenses shall include property, liability andexecutive risk (directors' and officers', fiduciary, fidelity) insurance. The types of insurance included in the definition of general insurance may be modified by mutual agreement of Coteau and Dakota.''

12. Section 6.1 of the Coteau Lignite Sales Agreement is hereby amended to read in its entirety as follows:

“a) Coteau shall have an audit of its accounts performed annually by a firm of independent certified public accountants and shall provide Dakota with a copy of such audit. Coteau or Affiliates of Coteau further shall have the right at any time to have an audit of Coteau's accounts performed by such other parties as Coteau or Affiliates of Coteau deem necessary.

* * * Confidential Treatment Requested

b) Dakota shall have the right at any time on reasonable notice in writing to Coteau to examine by its certified public accountants (which may include representatives of Basin Electric or its Affiliate) the records and books of account of Coteau and any Affiliate of Coteau, relating to the items and allocations of cost and production entering into the computation of the Cost of Production. Payment or payments under Article VII of this Agreement shall not be deemed a waiver of any rights of Dakota to have the price hereunder corrected.”

13. Section 12.3 of the Coteau Lignite Sales Agreement is hereby amended to read in its entirety as follows:

“Coteau agrees to make all payments due under those leases acquired by or assigned or transferred to Coteau in the Dedicated Lignite in a timely manner, not to permit any default under said leases to occur, not to surrender said leases in whole or in part without the written consent of Dakota and not to encumber, assign or sublease said leases, except in connection with financing pursuant to Section 10.1 hereof.”

14. All of the other terms and provisions of the Coteau Lignite Sales Agreement not expressly amended hereby shall continue and remain in full force and effect.

15. This Amendment may be executed in any number of counterparts, each of which, when executed and delivered, shall be an original, but all of which shall collectively constitute one and the same instrument.

IN WITNESS WHEREOF, the Parties have caused this Amendment to be duly executed on their behalf by their authorized representatives as of the day first written above.

THE COTEAU PROPERTIES COMPANY

By /s/ Marc M. Schulz

Marc M. Schulz

Its President

Attest

/s/ Thomas A. Koza

Secretary

DAKOTA COAL COMPANY

By /s/ Kent E. Janssen

Kent E. Janssen

Its Vice President & Chief Operating Officer

Attest

/s/ Mark D. Fossy

EXHIBIT I

To Coteau Lignite

Sales Agreement

Page 1 of2

EXAMPLE CALCULATIONS OF ADJUSTMENT OF

GENERAL AND ADMINISTRATIVE COST AMOUNT

Pursuant to Subsection 5.2(b) of the Coteau Lignite Sales Agreement, as amended, the general and administrative costs amount shall be adjusted as of December 31 of each calendar year by 100% of the first 4% change in the PPI-AC average for the first eleven months of the year under consideration relative to the previous year's PPI-AC average for the first eleven months, 80% of the change in said PPI-AC average which is greater than 4% and less than 8% and 60% of the change in said PPI-AC average which is equal to or greater than 8%.

Formula for adjustment of the general and administrative costs amount pursuant to Subsection 5.2(b)(i) if the percentage increase in the PPI-AC average for the year under consideration is less than or equal to 4%:

GA = [1 + (D x 1)] x A

Formula for adjustment of the general and administrative costs amount pursuant to Subsection 5.2(b)(ii) if the percentage increase in the PPI-AC average for the year under consideration is greater than 4% and less than 8%:

GA = [1+ [0.04 + ((D- 0.04) X 0.80)]] x A

Formula for adjustment of the general and administrative costs amount pursuant to Subsection 5.2(b)(iii) if the percentage increase in the PPI-AC average for the year under consideration is equal to or greater than 8%:

GA = [1 + [0.04 + (0.0399 X 0.80) + ((D- 0.0799) X 0.60)]] x A

Formula for calculating "D", the percentage change in the PPI-AC average for the year under consideration:

D =	Ic - Ip
	Ip

Where:

GA = adjusted general and administrative costs amount

A = applicable general and administrative costs amount, from year prior to year under consideration, pursuant to Subsection 5.2(b)

D = percentage change in the PPI-AC average for the first eleven months of the year under consideration

Ic = PPI-AC average for the first eleven months of the year under consideration

Ip = PPI-AC average for the first eleven months of the year immediately preceding the year

under consideration

EXHIBIT I

To Coteau Lignite

Sales Agreement

Page 2 of2

EXAMPLE CALCULATIONS

Note: The PPI-AC average and general and administrative costs amount figures in these examples are for illustrative purposes only and are no intended to relate to actual circumstances or to be used in actual calculations.

Example 1

Assume:

1. PPI-AC for December, 1996 = 129.1

2. PPI-AC average for first eleven months of 1997 = 132.4

3. General and administrative costs amount as of January 1, 1997 = [* * *] per Ton

D = (132.4 - 129.1)

129.1

D = 0.0256

GA = [1+ [0.0256 x 1)] x [* * *] = [* * *] per Ton

Example 2

Assume:

1. PPI-AC average for first eleven months of 1997 = 132.4

2. PPI-AC average for first eleven months of 1998 = 140.3

3. General and administrative costs amount as of January 1, 1998 = [* * *] per Ton

D = (140.3 - 132.4)

132.4

D = 0.0597

GA = [1 + [0.04 + ((0.0597 - 0.04) x 0.80)]] x [* * *] = [* * *] per Ton

Example 3

Assume:

1. PPI-AC average for first eleven months of 1998 = 140.3

2. PPI-AC average for first eleven months of 1998 = 152.2

3. General and administrative costs amount as of January 1, 1999 = [* * *] per Ton

D = (152.2 - 140.3)

140.3

* * * Confidential Treatment Requested

D = 0.0848

GA = [1 + [0.04 + ((0.0399 - 0.80) + ((0.0848 - 0.0799) x 0.60)]] x [* * *] = [* * *] per Ton

* * * Confidential Treatment Requested

EX-10.16

Exhibit 10.16

CONFIDENTIAL TREATMENT REQUESTED FOR PORTIONS OF THIS DOCUMENT.  PORTIONS FOR WHICH CONFIDENTIAL TREATMENT IS REQUESTED HAVE BEEN MARKED WITH THREE ASTERISKS [***] AND A FOOTNOTE INDICATING “CONFIDENTIAL TREATMENT REQUESTED”.  MATERIAL OMITTED HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

LIGNITE SALES AGREEMENT

between

MISSISSIPPI LIGNITE MINING COMPANY

and

CHOCTAW GENERATION LIMITED PARTNERSHIP

dated

April 1, 1998

TABLE OF CONTENTS

		Page
ARTICLE 1	DEFINITIONS	1
ARTICLE 2	TERM	6
2.01	Term	6
2.02	Delivery Period	6
2.03	Extension of Term	6
ARTICLE 3	DEDICATION, DEVELOPMENT, AND DELIVERY OF LIGNITE	6
3.01	Dedication of Lignite	6
3.02	Development of Lignite Mine	6
3.03	Delivery and Risk of Loss	6
3.04	Payment of Royalties	7
3.05	Buyer/Seller Indemnity	7
3.06	Shared Permitting Costs	7
3.07	Receipt of Permits	7
ARTICLE 4	LIGNITE QUANTITIES	7
4.01	All Requirements	7
4.02	Adjustment of Lignite Quantities	8
4.03	Revision of Annual Lignite Quantity	10
4.04	Stockpile Lignite	10
4.05	Alternate Fuel Sources	10
4.06	Sale to Others	11
ARTICLE 5	MEASUREMENT OF LIGNITE QUANTITIES,SCALES, RIGHT OF INSPECTION, AND PARTIES' ACCESS	11
5.01	Measurement of Lignite Quantities	11
5.02	Scales, Right of Inspection and Accuracies	12
5.03	Parties= Access	12
ARTICLE 6	FUEL QUALITY	12
6.01	Quality	12
6.02	Sampling and Analysis	13
6.03	Analytical Results	13
6.04	Notice of Sampling Results	13
6.05	Periodic Lignite Specifications and Price Adjustment	13
6.06	Rejectable Fuel	14
6.07	Secondary Fuel Quality Impacts	14
6.08	Testing of Sample System	15
ARTICLE 7	PRICE	15

7.01	Base Price	15
7.02	Billing Price	15
7.03	Modification of Index	15
7.04	Parallel Index Changes and Pass Through Costs under PPOA	15
ARTICLE 8	PAYMENT
8.01	Agreement to Pay	16
8.02	Method of Billing and Payment	16
8.03	Minimum Payments	16
8.04	Disputed Invoices	17
8.05	Failure to Pay Undisputed Invoices	17
8.06	Books and Records	17
8.07	Inspection of Price Records	17
ARTICLE 9	NOTICES TO PROCEEDS
9.01	Duty to Keep Informed	18
9.02	Buyer Notices	18
9.03	Commencement Date Notice	18
9.04	Copies of Permits	18
ARTICLE 10	DELAY AND SHUTDOWN
10.01	Delay of Commencement Date	19
10.02	Delay of Commercial Operation Date and Buyer Shutdown Option	19
10.03	Seller Delay	20
ARTICLE 11	REPRESENTATIONS, WARRANTIES AND COVENANTS	20
11.01	Representations, Warranties and Covenants of Seller	20
11.02	Representations, Warranties and Covenants of Buyer	21
11.03	Opinion	23
11.04	Certificates	23
ARTICLE 12	FORCE MAJEURE	23
12.01	Events of Force Majeure	23
12.02	Suspension of Obligations	24
12.03	Suspension of Lignite Deliveries	24
12.04	Time Limit for Claiming Force Majeure	24
12.05	Long Term Force Majeure	24
ARTICLE 13	DEFAULT	25
13.01	Events of Default	25
13.02	Procedure for Notifying a Party of Default	25
13.03	Limitations on Right of Termination	26
13.04	Step-In Rights	27

13.05	Subordinated Deed of Trust	28
ARTICLE 14	PROPRIETARY AND CONFIDENTIAL DATA	28
14.01	Proprietary and Confidential Data	28
14.02	Disclosure to Governmental Authorities	29
14.03	Press Releases	29
14.04	Liability for Disclosure of Data	29
ARTICLE 15	INSURANCE	29
15.01	Seller's Insurance	29
15.02	Buyer's Insurance	31
15.03	Certificates of Insurance	31
15.04	Issuance of Certificate	31
15.05	Waiver of Subrogation	32
15.06	Other Insurance Coverage	32
15.07	Obligation to Rebuild	32
ARTICLE 16	WAIVERS, REMEDIES, AMENDMENTS	32
16.01	Waivers and Remedies	32
16.02	Remedies Cumulative	33
16.03	Exclusions of Consequential Damages	33
16.04	Amendments	33
ARTICLE 17	NOTICES AND OTHER COMMUNICATIONS;AUTHORIZED REPRESENTATIVES	33
ARTICLE 18	DISPUTE RESOLUTION	34
ARTICLE 19	ARBITRATION	35
19.01	Arbitrators' Panel	35
19.02	Selection of Third Arbitrator	35
19.03	Qualification of Arbitrators	35
19.04	Governing Law	36
19.05	Hearing, Location	36
19.06	Authority of Arbitrator	36
19.07	Record of Hearing	36
19.08	Briefs	36
19.09	Claims of $100,000 or Less - Baseball Arbitration	37
19.10	Payment of Costs	37
19.11	Issuance and Effect of Arbitrators' Decision	37
19.12	Waiver of Jury Trial	37
ARTICLE 20	TAXES AND OTHER CHARGES	37
20.01	Applicable Taxes	37
20.02	Contested Taxes	38
20.03	Other Charges	38

20.04	Broad Industry Taxes or Charges	38
20.05	Income Taxes	38
ARTICLE 21	RIGHT OF FIRST REFUSAL AND ASSIGNMENT OF LEASES	38
21.01	Right of First Refusal	38
21.02	Right to Assignment of Lignite Mining Instruments and Purchase of Fee Lands	39
ARTICLE 22	MISCELLANEOUS	39
22.01	Successors and Assigns	39
22.02	Headings Not to Affect Construction	40
22.03	Written Instrument Contains Entire Agreement	40
22.04	Execution of Counterparts	40
22.05	Construction of Agreement	40
22.06	Severability	40
22.07	Amendments	40
22.08	Survivorship of Obligations	40
22.09	Negation of Partnership	41
22.10	Exhibits	41

LIGNITE SALES AGREEMENT

This Lignite Sales Agreement (this “Agreement”) is entered into and effective as of April 1, 1998, by and between Mississippi Lignite Mining Company, a Texas joint venture between Phillips Coal Company and The North American Coal Corporation (hereafter referred to as “Seller”), authorized to do business in the State of Mississippi, and Choctaw Generation Limited Partnership (hereafter referred to as “Buyer”), a Delaware limited partnership authorized to do business in the State of Mississippi (collectively, the “Parties”).

RECITALS

Buyer plans to construct a lignite-fired 440 MW atmospheric circulating fluidized bed power generation facility in Choctaw County, Mississippi, and Buyer currently estimates that the Facility will begin commercial operations on or before December 1, 2000.

Buyer has entered into a long-term Power Purchase and Operating Agreement dated as of February 20, 1997, with the Tennessee Valley Authority (“TVA”) whereby Buyer will sell electric power produced at its power generation Facility to TVA. Buyer may also enter into a steam supply agreement with one or more industrial customers to provide steam to be used in manufacturing processes at facilities to be constructed adjacent to the Facility.

Seller is in the business of mining and marketing coal and lignite and controls, by virtue of certain leases, substantial uncommitted, economically and commercially recoverable lignite reserves situated in its Chester lignite reserve, located in Choctaw County, Mississippi.

Buyer desires to purchase lignite from Seller, and Seller desires to sell lignite to Buyer.

ACCORDINGLY, in consideration of the foregoing, the benefits to be realized by the Parties, and the mutual promises contained herein, the Parties intending to be legally bound, agree as follows:

ARTICLE 1

DEFINITIONS

Whenever the following terms appear in this Agreement, including without limitation any Exhibit hereto, whether in the singular or in the plural, present or past tense, they shall have the meanings set forth in this Article 1.

“AAA” has the meaning set forth in Section 19.02.

“Adjusted Base Price” means the Base Price, as adjusted in accordance with the escalation formula contained in Exhibit E pursuant to Section 7.02.

“Affiliate” means any person, firm or corporation who or which, directly or indirectly, through one or more intermediaries controls, or is controlled by, or is under common control with, another person, firm or corporation. As used in this Agreement, the term “control” shall mean the power, through equity ownership, contract or otherwise, to direct the affairs of another person.

“Agreement” means this Lignite Sales Agreement.

“Alternate Fuel” means any lignite (other than the Dedicated Lignite) or coal, which meets the requirements of Article 6 and which is supplied by Seller to Buyer.

“Annual Lignite Quantity” for any Year means the amount of lignite for such Year initially set forth in Exhibit C, and as may be revised by Buyer from time to time in accordance with this Agreement.

“Annual Projection Notice” means that notice in the form of Exhibit D to be delivered by Buyer to Seller each Year during the Term of this Agreement, pursuant to Section 4.02(c), setting forth the estimated quantity of lignite to be purchased and delivered during the Year.

“Appraisal Procedure” has the meaning set forth in Section 13.04(b).

“Arbitration” means the dispute resolution process set forth in Article 19.

“ASTM” means the American Society for Testing and Materials.

“Authorized Representative” has the meaning set forth in Article 17.

“Base Annual Lignite Quantity” has the meaning set forth in Section 4.01.

“Base Price” means the price per MMBtus for Dedicated Lignite or Alternate Fuel delivered under this Agreement, prior to adjustment in accordance with the formula set forth in Exhibit E and prior to any adjustment required under Article 6.

“Billing Price” means the price per MMBtus to be paid by Buyer to Seller for Dedicated Lignite or Alternate Fuel delivered by Seller as determined in accordance with Section 7.02.

“Business Day” means any day except Saturday, Sunday, or a weekday that is observed by Buyer or Seller as a holiday (holidays currently include New Year's Day, Martin Luther King's Birthday, Presidents' Day, Memorial Day, Independence Day, Labor Day, Columbus Day, Veteran's Day, Thanksgiving Day, the day following Thanksgiving Day, Christmas Day, and the day following Christmas Day). In the event there is any change in the holidays currently observed by a Party, that Party shall notify the other as soon as practical so that the Business Day designation of the Day(s) in question can be changed accordingly.

“Btu” means a standard British thermal unit reflecting the calorific heating value of lignite, calculated on an Aas received@ basis in accordance with applicable ASTM standards.

“Buyer” means Choctaw Generation Limited Partnership, a Delaware limited partnership, its successors and permitted assigns which are approved in accordance with the terms and conditions of this Agreement.

“Check Scale” has the meaning set forth in Section 5.01.

“Commencement Date” means the date on which Buyer requires commencement of deliveries of Dedicated Lignite to the Facility for testing, which date is anticipated to be July 1, 2000.

“Commercial Operation Date” means with respect to the Facility the same date as the Commercial Operation Date under the PPOA.

“Contractor's Delay Costs” means 110% of the verifiable direct and indirect costs reasonably and prudently incurred resulting from a delay in the construction of the Facility, including but not limited to: additional costs of materials, costs of labor, including premiums and shift differentials, social security, old age and unemployment insurance, as well as fringe benefits required by agreement or custom, worker's compensation insurance, severance and other similar taxes, bond and insurance premiums, rental value of equipment and machinery, all actual and reasonably allocated costs of supervision, field office and home office, and all actual and reasonable costs, if any, of shutdown, delay and start-up; provided, however, that Contractor notifies Buyer if Contractor anticipates such shutdowns, delay and start-up costs in advance.

“Day” means a twenty-four hour period beginning at 12:00 o'clock midnight.

“Dedicated Lignite” means all lignite from the Lignite Property which Seller is required to deliver to Buyer to meet the quantity requirements and the quality specifications of this Agreement.

“Delivery Period” means the period set forth in Section 2.02.

“Effective Date” means the effective date of this Agreement, which is April 1, 1998.

“Electric Customer” means TVA or its successors or assigns under the PPOA.

“Environmental Laws” means any and all permits, applicable codes, laws, rules and regulations relating to actual or potential effect on human health, safety or the environment, the disposal of materials, the discharge or release of chemicals, gases, petroleum or petroleum products or other substances or materials into the environment, or the presence of such materials, chemicals, gases, petroleum or petroleum products or other substances.

“EPC Contract” means the agreement between Buyer and Becon Construction Company, Inc. (“Becon”), dated October 7, 1997, for the design and construction of the Facility.

“EPC Contractor” means Becon, its successors and permitted assigns.

“Event of Default” has the meaning set forth in Section 13.01.

“Excess Lignite Reserves” means the amount of lignite subject to Electric Customer's right of first refusal and Buyer's subordinate right of refusal, as set forth in Article 21.

“Facility” means the electric power generation facility in Choctaw County, Mississippi, to be constructed by Buyer and for which Buyer will purchase lignite under this Agreement.

“Facility Notice to Proceed” means the notification given by Buyer, pursuant to Section 9.02, authorizing Seller to proceed with the development of the Mine.

“Fair Market Value” has the meaning set forth in Section 13.04(b).

“Force Majeure” has the meaning set forth in Section 12.01.

“Hazardous Materials” means any and all "hazardous substances," "hazardous waste," "waste," or "pollutant or contaminant" as any of such terms may be defined in any Environmental Law, or the regulations promulgated thereunder, (including but not limited to "hazardous substances" as defined in 40 C.F.R. 302.4, and “hazardous materials” as defined in 49 C.F.R. 171.8), or case law interpreting the same, or any other pollutant or substance that is regulated under any Environmental Law or that may be the subject of liability for costs of response or remediation under any Environmental Law. Notwithstanding the foregoing, Hazardous Materials does not mean or include any quantity of any substance or material of whatsoever kind or nature that is inherently present in lignite or coal in its natural state prior to mining and sale hereunder.

“Interest” means that rate which is the lesser of (a) the prime rate as published by CitiBank, N.A., New York, New York, plus one percent (1%), or (b) the highest rate allowed by law, in each case as determined on a 365/366-day year rate, prorated daily.

“Joint Venture Agreement” means the Joint Venture Agreement between Phillips Coal Company and The North American Coal Corporation dated September 12, 1997, as amended.

“Lignite Mining Instruments” means the leases, subleases, deeds, agreements or other documents set forth in Exhibit H giving Seller the right to mine the Dedicated Lignite from the Lignite Property.

“Lignite Property” means those properties in Choctaw County, Mississippi depicted on Exhibit A from which Dedicated Lignite will be mined and delivered to Buyer by Seller under this Agreement.

“Maximum Allowable Tolerance” means that tolerance to be established by the Parties pursuant to Section 6.03.

“Mine” means the Red Hills Lignite Mine to be developed and operated by Seller on the Lignite Property.

“Minimum Annual Take Quantity” has the meaning set forth in Section 4.02(e).

“Minimum Annual Take Quantity Credit” has the meaning set forth in Section 4.02(i).

“Month” means a calendar month.

“Parties” means Buyer and Seller, or their successors and permitted assigns.

“Pay Scale” has the meaning set forth in Section 5.01.

“Point of Delivery” for Dedicated Lignite or Alternate Fuel means the horizontal plane immediately below the bottom of the truck support beams at the lignite dump hoppers located at the point described in Exhibit B.

“PPOA” means the Power Purchase and Operating Agreement dated as of February 20, 1997, between Buyer and Electric Customer covering the supply of electrical capacity and energy to Electric Customer from the Facility for a period of thirty (30) years commencing on the Commercial Operation Date.

“Price Components” mean the individual elements which comprise the adjustment factors to the Base Price for lignite, as set forth in Exhibit E.

“Rejectable Fuel” has the meaning set forth in Section 6.06.

“Seller” means Mississippi Lignite Mining Company, its successors and permitted assigns which are approved in accordance with the terms and conditions of this Agreement.

“Shut Down” means the suspension of operation of the Facility by Buyer pursuant to Section 10.02 because of technological or operational difficulties, other than normal or periodic repair, maintenance or outages.

“Step-In Notice” has the meaning set forth in Section 13.04(a)(2).

“Step-In Rights” has the meaning set forth in Section 13.04.

“Term” means that period of time set forth in Article 2.

“Three-Way Arbitration Agreement” means the arbitration agreement dated April 1, 1998, between Buyer, Seller and TVA, the form of which is attached hereto as Exhibit F.

“Ton” means 2000 pounds avoirdupois.

“TVA” means the Tennessee Valley Authority, a corporate instrumentality and agency of the United States of America.

“Year” means a calendar year that begins on January 1 and ends on the following December 31.

ARTICLE 2

TERM

2.1Term. The Term of this Agreement shall commence on the Effective Date and, unless sooner terminated in accordance with this Agreement, shall continue until the end of the Delivery Period as provided in Section 2.02 below.

2.2Delivery Period. The Delivery Period under this Agreement shall begin on the Commencement Date and shall end thirty (30) years after the Commercial Operation Date, unless the Term is sooner terminated in accordance with this Agreement, or unless the Term is extended in accordance with Section 2.03 below.

2.3Extension of Term. Upon mutual agreement of the Parties, the Term of this Agreement may be extended for up to two (2) additional ten (10) year periods.

ARTICLE 3

DEDICATION, DEVELOPMENT, AND DELIVERY OF LIGNITE

3.1Dedication of Lignite. Seller dedicates to Buyer pursuant to this Agreement sufficient reserves of Dedicated Lignite lying in, on or under the Lignite Property to satisfy its obligations under this Agreement; provided, however, that Seller shall not be required to dedicate specific portions of the Lignite Property. Upon request of Buyer, Seller shall cooperate with Buyer or its consultant to allow Buyer to substantiate and document such dedication and its plan to mine such reserves to the reasonable satisfaction of Buyer. Seller agrees to notify Buyer of any material changes to the Dedicated Lignite, the plan to mine such reserves or in its interest in the Lignite Property. Exhibit H sets forth all Lignite Mining Instruments in effect as of the Effective Date. On or before each anniversary date of the Effective Date of this Agreement, Seller shall amend and restate Exhibit H to provide a then current listing of the Lignite Mining Instruments.

3.2Development of Lignite Mine. Upon receipt of the Facility Notice to Proceed from Buyer, Seller will begin and diligently pursue construction of the Mine in a good and workmanlike manner, in accordance with mining standards generally employed and accepted in the lignite mining industry, on a schedule which will assure that Seller (a) will be ready to begin to mine, sell and deliver to Buyer Dedicated Lignite from the Lignite Property on the Commencement Date, and (b) will be capable of mining and delivering Dedicated Lignite from the Lignite Property to Buyer in accordance with the terms and conditions of this Agreement throughout the Delivery Period.

3.3Delivery and Risk of Loss. Seller shall, throughout the Term of this Agreement, timely deliver to the Point of Delivery Dedicated Lignite which meets the quantity and quality requirements of Articles 4 and 6. The title to and risk of loss of Dedicated Lignite or Alternate Fuel delivered under this Agreement shall pass from Seller to Buyer at the Point of Delivery.

3.4Payment of Royalties. Seller shall pay any and all royalties and overriding royalties due on the Dedicated Lignite mined and supplied from the Lignite Property to the Facility by, or on behalf of, Seller, including but not limited to any royalty or overriding royalty owned by John David Sistrunk, Jr. Such royalties and overriding royalties shall be included in the Billing Price as the Royalty component, as set forth in Exhibit E.

3.5Buyer/Seller Indemnity. Seller and Buyer agree to indemnify and hold each other harmless from and against all claims, demands, losses, liabilities and expenses (including reasonable attorneys' fees and expenses and fines or penalties imposed by governmental entities) for personal injury or death to persons and damage to each other's property or facilities or the property of any other person or entity to the extent arising out of, resulting from or caused by (a) the negligent or intentional acts, errors or omissions of, or (b) the introduction to the Facility of any Hazardous Materials by, the indemnifying Party, but not to the extent caused by the negligent or intentional acts, errors or omissions of the indemnified Party. Notwithstanding the foregoing, Seller shall not be required to indemnify Buyer from any claims, demands, losses, liabilities and expenses described above for personal injury or property damage arising out of,

resulting from or caused by any substance or material of whatsoever kind or nature that is inherently present in lignite in its natural state prior to mining and sale hereunder, it being the intent of the Parties that Buyer accept and assume liability for any and all substances and materials that are inherently present in such lignite in its natural state.

3.6Shared Permitting Costs. Buyer and Seller will share, in such proportions as are reasonable, any costs which are necessary to obtain all permits required to construct both the Mine and the Facility and which are not readily identifiable as associated exclusively with either operation.

3.7Receipt of Permits. Buyer and Seller agree that time is of the essence for Buyer and Seller to obtain by September 1, 1998, all permits required for the development and operation of the Mine and the Facility. The Parties agree to use their reasonable best efforts to obtain their respective permits by such deadline, subject to Force Majeure.

ARTICLE 4

LIGNITE QUANTITIES

4.1All Requirements. Except as otherwise expressly permitted herein, Buyer shall purchase only Dedicated Lignite as fuel for the Facility during the Term of this Agreement. Subject to the terms of this Agreement, Seller shall sell and deliver to Buyer, and Buyer shall purchase and receive from Seller and pay for, all Dedicated Lignite required by the Facility during the Term of the Agreement. The projected annual Dedicated Lignite requirement for the Facility from the Commercial Operation Date through the Term of this Agreement is 32,881,536 MMBtus (“Base Annual Lignite Quantity”). The Base Annual Lignite Quantity shall be adjusted from time to time in accordance with this Agreement.

4.2Adjustment of Lignite Quantities.

(1) Test Fuel. At least 180 Days prior to the anticipated Commencement Date designated by Buyer pursuant to Section 9.02, Buyer shall provide Seller with its written notice of the total quantity of lignite Buyer reasonably estimates will be required for testing and for Buyer=s stockpile prior to the Commercial Operation Date.

(2) First Twenty-four (24) Months Deliveries. At least 180 Days prior to the anticipated Commercial Operation Date designated by Buyer pursuant to Section 9.02, Buyer shall provide written notice to Seller of the quantity of lignite required, by Month, for the first twenty-four Months after the Commercial Operation Date and for the remainder of the Year following the end of such twenty-four Month period, which quantity, subject to Section 4.02(e), shall be prorated for the number of Months in such remainder of the Year. Such estimate may be revised by Buyer within

seven (7) Days following completion of its acceptance test results analysis with the EPC Contractor.

(3) Annual Projection Notices. On or before June 1 of the Year following the Commercial Operation Date, and on or before June 1 of each Year thereafter, Buyer shall furnish Seller with a non-binding Annual Projection Notice, in the form attached hereto as Exhibit D, showing the projected quantity of Dedicated Lignite required by Month for the following Year.

(4) Consistent Monthly Deliveries. Buyer shall specify in its Annual Projection Notices, to the extent reasonably practical, the projected Monthly quantities of Dedicated Lignite required, recognizing annual Facility preventative maintenance and the seasonal dispatch of energy by the Electric Customer. To assist Seller in scheduling delivery of Dedicated Lignite hereunder, Buyer shall promptly provide Seller with copies of Electric Customer=s “Monthly Dispatch Estimate” as set forth in the PPOA.

(5) Minimum Annual Take Quantity Purchases. Beginning with the Year following the Year in which the first twenty-four Months of deliveries following the Commercial Operation Date ends, and each Year thereafter during the Term of this Agreement, Buyer must take, or pay for, in each Year at least 32,881,536 MMBtus of Dedicated Lignite or Alternate Fuel when delivery of Alternate Fuel is permitted in accordance with the terms of this Agreement (“Minimum Annual Take Quantity”). Such Minimum Annual Take Quantity shall be reduced to the extent (i) Buyer is unable to take Dedicated Lignite due to an approved Scheduled Outage (as defined in the PPOA), (ii) Buyer is unable to use such quantity due to unforseen operational problems at the Facility other than Force Majeure, but in no event shall any such reduction exceed 3,288,154 MMBtus of Dedicated Lignite or Alternate Fuel per Year, (iii) Buyer is unable to use such quantity due to Force Majeure (including Force Majeure of Electric Customer as defined in the PPOA), (iv) Buyer is unable to take lignite because of Seller=s excused or unexcused failure to deliver, (v) Buyer uses gas for combustion stabilization, and (vi) Buyer uses other fuels permitted under Section 4.05(b) (up to 5% of total Btu requirements of the Facility for the Year).

(6) Required Monthly Deliveries. Seller shall be obligated to deliver in any Month up to but not more than 3,300,000 MMBtus of Dedicated Lignite, or Alternate Fuel when delivery of Alternate Fuel is permitted under the terms of this Agreement. At the request of Buyer, Seller shall use

commercially reasonable efforts to provide more than 3,300,000 MMBtus of Dedicated Lignite per Month.

(7) Minimum Take Deficiency. In the event and to the extent Buyer is prevented from taking and using, in any given Year the full required Minimum Annual Take Quantity of Dedicated Lignite or Alternate Fuel scheduled to be taken and used during such Year, net of adjustments for Section 4.02(e) due to the Electric Customer's failure to meet its “Minimum Take Quantity” requirement under the PPOA, then to the extent Buyer is paid a “Minimum Take Deficiency” payment under terms of the PPOA, Buyer shall remit the Fuel Component portion of the Adjusted Base Price hereunder to Seller. In no event shall Buyer be obligated to pay Seller under this Section 4.02(g) until Electric Customer has paid Buyer the Minimum Take Deficiency under the PPOA. Buyer shall aggressively pursue all claims it may have against Electric Customer for any “Minimum Take Deficiency.”

(8) Alternate Fuel. Subject to the provisions of Section 4.05(a), as long as the total cost to Buyer of producing electricity utilizing Alternate Fuel is no greater than the total cost to Buyer of producing electricity utilizing Dedicated Lignite of the specifications in Article 6 and such utilization does not violate or erode emission or utilization capacity of any permits, regulations or approvals with which Buyer is required to comply, Buyer agrees to accommodate Seller to the extent possible by accepting deliveries of Alternate Fuel at the Point of Delivery by whatever mode of transportation is mutually acceptable to the Parties. If, and to the extent, Alternate Fuel is delivered as provided in this Section 4.02(h), such quantities shall be credited against the Parties' obligations regarding Dedicated Lignite or Alternate Fuel to be delivered during such period.

(9) Credits. (i) Buyer shall receive a lignite quantity credit (on a MMBtus basis) (the “Minimum Annual Take Quantity Credit”) for all Dedicated Lignite or Alternate Fuel quantities purchased by Buyer in any Year in excess of 36,169,689 MMBtus. Such Minimum Annual Take Quantity Credit may be used by Buyer and applied against deliveries of Dedicated Lignite or Alternate Fuel only in the following two (2) Years and only to the extent that Buyer purchases quantities less than the Minimum Annual Take Quantity for such Year(s) (as adjusted pursuant to Section 4.02(e)). (ii) If in any Year Buyer fails to take the Minimum Annual Take Quantity for such Year (as adjusted pursuant to Section 4.02(e)), Buyer shall receive a Minimum Annual Take Quantity Credit (on a MMBtus basis) for the quantity of Dedicated Lignite paid for but not taken by Buyer which is less than such Minimum Annual Take Quantity. Such credit may be used by Buyer and applied against deliveries of Dedicated Lignite or Alternate Fuel only in the two (2) Years following the Year for which the credit is

received and only to the extent such deliveries are in excess of 32,881,536 MMBtus in the Year such credit is taken.

4.3Revision of Annual Lignite Quantity.

(1) The quantities of Dedicated Lignite set forth in Exhibit C are based upon an anticipated Commencement Date of July 1, 2000. In the event for any reason the actual Commencement Date differs from such anticipated date, Seller and Buyer shall meet as soon as practicable to mutually agree upon revisions to Exhibit C to reflect a pro rata revision in the Annual Lignite Quantity for the first and last Years.

(2) If Electric Customer notifies Buyer of a revision in its expected dispatch of the Facility for any Year, Buyer shall be entitled and required to revise the Annual Projection Notice for such Year (or partial Year).

4.4Stockpile Lignite. Seller shall maintain a stockpile of run-of-mine Dedicated Lignite consistent with good mining practices for a mine-mouth lignite facility serving the independent power industry sufficient to enable Seller to meet its obligations to deliver Dedicated Lignite to the Facility under this Agreement. Buyer shall maintain a stockpile of Dedicated Lignite at the Facility of such quantity that is consistent with good utility practice (including independent power producers) for mine-mouth generating facilities. Seller=s stockpile of Dedicated Lignite will be sufficient to enable Seller to meet its obligations to make deliveries at all times of the Year taking into account the effects of normal rainfall and temperature upon the Mine operations and seasonal changes such that rainfall and temperature impacts on Mine operations will not prevent Seller from meeting its delivery obligations.

The Parties acknowledge that these stockpiles will fluctuate in size because different quantities of Dedicated Lignite are required on different Days as well as for other reasons.

4.5Alternate Fuel Sources.

(1) Seller and Buyer acknowledge that the Facility is being constructed to utilize Dedicated Lignite as its primary fuel. If for any reason, other than Force Majeure, Seller cannot supply sufficient Dedicated Lignite to meet the requirements of this Agreement, Seller shall be responsible for the prompt supply of the necessary Alternate Fuel to enable Buyer to continue to operate the Facility without interruption. Seller shall supply such Alternate Fuel at a cost to Buyer which is the then applicable Billing Price determined in accordance with Article 7. Seller shall have the right, upon 72 hours prior notice to Buyer, to supply Alternate Fuel to Buyer from any source so long as such fuel meets the requirements of Section 4.02(h).

(2) Buyer shall have the right to procure Mississippi wood or wood-product residue to supply up to, but not more than, five percent (5%) of the total Btu requirements of the Facility for any given Year. If Buyer is asked by the Electric Customer or the Choctaw County economic development officials to burn tires or other suitable waste products, other than Mississippi wood product residue, at its Facility, Buyer and Seller shall renegotiate in good faith the terms of this Agreement to allow Buyer to consume such waste products as fuel in reasonable levels in lieu of Dedicated Lignite. Provided, however, in no event shall Buyer burn Mississippi wood, wood product residue, tires, or other waste product fuels to supply more than five percent (5%) of the total Btu requirements of the Facility in any given Year.

4.6Sale to Others. Seller shall have the right to sell outside this Agreement lignite from the Lignite Property, provided that Seller can reasonably demonstrate to Buyer that the exercise of such right does not impair Seller's ability to perform its obligations under this Agreement.

ARTICLE 5

MEASUREMENT OF LIGNITE QUANTITIES,

SCALES, RIGHT OF INSPECTION, AND PARTIES' ACCESS

5.1Measurement of Lignite Quantities. The lignite unloading and handling facilities to be located at the Point of Delivery, including the truck dump, shall be designed, constructed, owned, maintained and operated by Buyer at its sole risk and expense. Buyer shall determine the quantities of lignite delivered by Seller by means of a belt scale (the “Pay Scale”) to be designed, constructed, owned, maintained and operated by Buyer at its sole risk and expense, except for calibration as noted below, in accordance with standards recommended by the equipment manufacturer, and agreed to by the Parties, as may be amended from time to time. If such standards are discontinued, the Parties shall continue to use the last effective standards and shall use reasonable efforts to find and agree to replacement standards. If the Parties are unable to agree, the matter shall be submitted to Arbitration. The last effective standards shall remain effective until the matter is resolved either by agreement or Arbitration. Seller shall have the right to review and comment on the designs of the unloading and handling facilities, and the Parties agree to use reasonable efforts to coordinate design and equipment selection for lignite delivery unloading and handling. Seller also shall have the right to install a check scale on the conveyor belts at Seller's sole risk and expense (the “Check Scale”). Seller shall be obligated to operate, maintain and calibrate the Check Scale in accordance with standards recommended by the equipment manufacturer and agreed to by the Parties.

5.2Scales, Right of Inspection and Accuracies. Buyer and Seller shall arrange for an appropriately certified independent third party to calibrate the Pay and Check Scales, respectively, at least twice per year. Both Parties may, by mutual consent, waive third-party calibration of the scales and perform such calibrations jointly. In such event, both Parties agree

to be bound by the result of such joint calibration until the next semiannual calibration of the scales takes place. The cost of calibration of the Pay Scale and Check Scale, however accomplished, shall be shared equally by Buyer and Seller. Each Party shall have the right, at its own expense, to inspect the other Party=s lignite sampling, weighing and the laboratory testing facilities, and to observe the other Party=s sampling, weighing and analytical procedures. Either Party may request a calibration of the Pay Scale or Check Scales at any time. If the scales are found to be within manufacturer accuracy limits, the requesting Party will pay for the test; otherwise, the other Party shall pay for the test. If the scales are found to be in error outside the manufacturer=s allowable tolerance by more than one-half percent (0.5%) of the base quantity being measured, the weights and corresponding invoices and payments shall be adjusted accordingly from the point of error, or if such point cannot be agreed upon between the Parties, such adjustment shall be for one-half (2) of the tonnage of Dedicated Lignite or Alternate Fuel delivered since the last determination of accuracy.

5.3Parties= Access. Each Party shall have the right from time to time during the Term of this Agreement to arrange for its employees, geologists, lenders, consultants and engineers and similar representatives of Electric Customer to visit the Mine and the Facility, on reasonable prior notice to the other Party and so long as it does not unreasonably interfere with the other Party=s operations.

ARTICLE 6

FUEL QUALITY

6.1Quality. The Dedicated Lignite or Alternate Fuel to be supplied hereunder shall be substantially free from impurities such as, but not limited to, bone, slate, earth, rock, pyrite, wood, tramp metal and mine debris. In addition, the Dedicated Lignite or Alternate Fuel shall not be contaminated with any Hazardous Materials. Seller agrees that the weighted average Aas received@ quality of Dedicated Lignite or Alternate Fuel supplied hereunder over the term of this Agreement will be as follows:

CharacteristicsSpecifications

Moisture, % by weight 41.75%

Ash, % by weight 14.64%

Sulfur, % by weight 0.58%

Calorific Value, Btu/lb (HHV) 5294 Btu/lb.

If the weighted average "as received" quality of Dedicated Lignite or Alternate Fuel delivered to Buyer by Seller over the term of this Agreement does not meet the above specifications, Seller shall not be deemed to be in default hereunder except as provided in Section 6.06 below, and Buyer shall not be entitled to damages or compensation of any kind, other than the amounts and remedies provided in this Article 6.

6.2Sampling and Analysis. All sampling and analysis will be performed in accordance with methods approved by ASTM or such alternate written standards and procedures mutually agreed to by the Parties. The quality of Dedicated Lignite or Alternate Fuel delivered to Buyer by Seller shall be determined by analysis of samples taken daily at the Facility by the Buyer at a point mutually agreed to by the Parties. Buyer will take samples by means of an automatic mechanical sampling system to be owned, operated and maintained by Buyer. Buyer shall cause the samples to be transported to a laboratory of Buyer=s choice. Buyer=s laboratory shall participate in round robin testing to verify the accuracy of sample preparation and analysis. If the round robin testing establishes that the laboratory=s sample preparation and analysis is inaccurate, the Parties will agree upon a new laboratory. Each sample shall be processed, split into three equal parts and placed in suitable airtight containers by Buyer or the laboratory. Part one of each sample shall be analyzed by the laboratory at Buyer=s expense. Part two of each sample shall be properly identified and stored at the laboratory for a period of not less than fifteen (15) Business Days for Seller to analyze at its own expense if it so desires. Part three of each sample shall be properly identified and stored for a period of not less than thirty (30) Business Days. The cost of analysis of part three of the sample, if required, shall be borne equally by Buyer and Seller. For deliveries for which a sample is not available or for which a sample is agreed by Buyer and Seller to be incorrect, the weighted average of the immediately preceding three (3) Days= sample analyses which are available shall be utilized.

6.3Analytical Results. The results of the analyses performed by the laboratory on part one of the samples shall be binding on the Parties and shall be deemed to represent the quality of the Dedicated Lignite or Alternate Fuel delivered hereunder unless one Party notifies the other of a dispute concerning such analysis within the fifteen (15) Business Day period specified in Section 6.02. If the analysis of part one is disputed and the analyses of parts one and two differ by more than a maximum tolerance range as shall be agreed to by the Parties (the “Maximum Allowable Tolerance”), then part three of such sample shall be analyzed by a commercial testing laboratory mutually chosen and using mutually accepted procedures. When all three parts of a sample are analyzed, the average of the two closest sample results will be used to represent the quality of the lignite delivered on the Day such samples were taken; provided, however, that if the two closest sample results differ by more than the Maximum Allowable Tolerance, then the weighted average of the immediately preceding three (3) Days= sample analyses which are available shall be deemed to be the quality of the Dedicated Lignite or Alternate Fuel under consideration. The Billing Price for the Dedicated Lignite or Alternate Fuel represented by such samples shall be adjusted on the next invoice submitted by Seller as specified in Section 8.02

6.4Notice of Sampling Results. Within the first five (5) Business Days after each daily sample is taken, Buyer shall furnish Seller with a written notice depicting the laboratory results for part one of each sample. Reasons for Rejectable Fuel, as specified in Section 6.06, shall be stated in the notice. If Seller elects to analyze part two of a sample, Seller shall provide written notification to Buyer within the fifteen (15) Business Day period specified in Section 6.02. In addition, Seller shall deliver the results of such analysis to Buyer within five (5) Business Days of receiving such results.

6.5Periodic Lignite Specifications and Price Adjustment. If the quality of Dedicated Lignite or Alternate Fuel delivered by Seller to Buyer pursuant to this Agreement deviates from the quality specifications listed in Section 6.01 on an “as-received” daily basis, but falls above the minimum and below the maximum specifications listed in this Section 6.05, then for such Dedicated Lignite or Alternate Fuel there shall be a price adjustment for that Day=s delivery:

Specifications

CharacteristicsMinimumMaximum

Calorific Value, Btu/lb (HHV)4,4008,000

Moisture, % by weight2049.4

Ash, % by weight5.023.5

Sulfur, % by weight0.151.23

The methodology for such adjustment is set forth in Exhibit J, Quality and Property Price Adjustment.

6.6Rejectable Fuel. If the analysis performed pursuant to Section 6.02 and Section 6.03 reveals that the quality of Dedicated Lignite or Alternate Fuel delivered during any Day is below any minimum or above any maximum specification listed in Section 6.05, then such Dedicated Lignite or Alternate Fuel shall be deemed to be “Rejectable Fuel.” Once delivered, any Rejectable Fuel shall be the property of Buyer. For any Rejectable Fuel consumed by the Facility, Buyer shall be entitled to deduct the charges for that quantity of Rejectable Fuel from Seller=s invoices. Notwithstanding the above, all deliveries of Rejectable Fuel count towards Buyer=s Minimum Annual Take Quantity. If for any cumulative period of 90 Days out of any twelve-Month period the cumulative average for all Dedicated Lignite or Alternative Fuel delivered would be Rejectable Fuel hereunder, an Event of Default by Seller shall have occurred.

6.7Secondary Fuel Quality Impact. If the quality of Dedicated Lignite or Alternate Fuel delivered by Seller is not within the ranges specified below for the listed characteristics, the Parties shall work together to determine how to ensure that the Dedicated Lignite or Alternate Fuel delivered in the future shall be within such ranges. If the Buyer is fined or penalized by governmental authorities for emission permit violations caused by the Dedicated Lignite or Alternate Fuel delivered by Seller not being within the specified ranges, then Seller shall reimburse Buyer for such fines or penalties.

Specifications

CharacteristicsMinimumMaximum

Nitrogen, % by weightnone0.82

Fuel Nitrogen, lbN/MMBtusnone1.5

CaO, % ash mineral analysis2.6none

Potassium Oxide, % ash mineral analysisnone2.5

Sodium Oxide, % ash mineral analysisnone2.5

Fuel Size, inches2x0, d50=3000 micron24x36x48

Hardgrove Grindability Index23 115

6.08 Testing of Sample System. During the first twelve (12) Months after the Commercial Operation Date, Buyer shall perform one (1) bias test of the sampling system. Thereafter, commencing from the date of such bias test, Buyer shall perform additional bias tests of the sampling system at least once every thirty (30) Months or as recommended by the manufacturer=s standards, unless Buyer and Seller mutually agree otherwise. Seller shall have the right to have a representative present at any and all times to observe the sampling. Seller shall also have the right to request a bias test of the sampling system if Seller questions the accuracy of said system. Seller shall pay all costs of any such challenge bias test unless the sampling system is found to be in error in excess of that specified by the equipment manufacturer, in which case Buyer shall reimburse Seller for the costs of such test. Any errors found in the sampling system by the bias test shall be immediately corrected.

ARTICLE 7

PRICE

7.1Base Price. The Base Price for all Dedicated Lignite or Alternate Fuel delivered under this Agreement shall be [* * *] per MMBtus F.O.B. Point of Delivery. The Base Price consists of eight (8) indexed components, a power cost component, a pass-through component, a royalty component and a fixed component as set forth in Exhibit E.

7.2Billing Price. The Billing Price for all Dedicated Lignite or Alternate Fuel delivered under this Agreement shall be determined by taking the Base Price, adjusting that Base Price in accordance with the formula set forth in Exhibit E to determine the Adjusted Base Price, and then applying any quality adjustments pursuant to Article 6.

7.3Modification of Index. Subject to Section 7.04, should any of the indices used for escalation adjustment as set forth in Exhibit E be revised by the agency publishing such index, then invoices prepared subsequent to the revision shall use the revised index. If the numerical value of any index is changed by the issuing agency subsequent to the initial publication, then any subsequent use of this index in making calculations under this Exhibit will be made using the most recent numerical value of that index. If the referenced index is no longer published, the index designated by the agency responsible for publishing said index as the replacement will be used. If no replacement index is specified, a new index which most accurately reflects changes for the applicable cost components shall be substituted by mutual agreement of the Parties. In the event the Parties fail to agree, such matter shall be submitted to Arbitration.While the Arbitration concerning the appropriate substitute index is pending, the values contained in the relevant index prior to its discontinuance shall be used subject to true-up at the conclusion of the Arbitration.

* * * Confidential Treatment Requested

7.4Parallel Index Changes and Pass Through Costs under PPOA. Seller and Buyer acknowledge that as to the following rights of Seller under this Agreement, Buyer has similar rights against Electric Customer under the PPOA:

(1) Changes to the indices used for escalation and adjustments pursuant to Section 7.03; and

(2) Seller's right to pass through to Buyer as a component of the Billing Price the cost of certain taxes, fees and charges as set forth in Sections 20.01 and 20.04 and Exhibit E.

If Seller claims that any index should be changed or that any tax, fee or charge should be passed through to Buyer, Buyer shall make and diligently pursue negotiations with Electric Customer for the same index change or pass-through under the PPOA, and Seller shall cooperate with, support and assist Buyer in Buyer's efforts to obtain Electric Customer's consent to the same index change or pass-through of tax, fee or charge under the PPOA. Buyer agrees to (1) keep Seller fully informed of such efforts, (2) provide Seller with copies of all documents or portions thereof received by Buyer from Electric Customer pertinent to such index changes, and (3) permit Seller to participate in all meetings and discussions with Electric Customer regarding such efforts. If Buyer=s negotiations with Electric Customer are unsuccessful, then the dispute shall be settled pursuant to the Three-Way Arbitration Agreement.

The foregoing notwithstanding, no change to indices pursuant to this Section 7.04 shall be made unless Electric Customer has agreed to parallel changes in the PPOA or unless a change to indices is required to comply with an Arbitration award or court order.

ARTICLE 8

PAYMENT

8.1Agreement to Pay. Except as otherwise specifically provided in this Agreement, Buyer shall pay to Seller the Billing Price for Dedicated Lignite or Alternate Fuel, F.O.B. the Point of Delivery, on an Aas-received@ basis.

8.2Method of Billing and Payment. Seller shall invoice Buyer on or after the tenth (10^th) Day of each Month for Dedicated Lignite or Alternate Fuel delivered during the immediately preceding Month. If there is insufficient information regarding quality, Seller may render an invoice using an estimate of quality with appropriate adjustments to be made as soon as sufficient information is available. Buyer will make payment therefor, by bank wire transfer of funds to a bank account to be designated by Seller on or before the twenty-fifth (25^th) Day after receipt of each invoice.

8.3Minimum Payments. If in any Year Buyer fails to purchase the Minimum Annual Take Quantity and such failure to take is not excused pursuant to the terms of this Agreement, then Seller's last invoice for such Year shall include, in addition to the charge for the amount of Dedicated Lignite or Alternate Fuel actually delivered and taken, the charge for the amount of Dedicated Lignite that Buyer must pay for though not taken pursuant to Section 4.02(e) or (g), as the case may be. The charge for Dedicated Lignite not taken shall be based upon the Adjusted Base Price in effect at the time the invoice is sent with no adjustment for quality.

8.4Disputed Invoices. If Buyer disagrees with the amount of any invoice for any reason, Buyer shall promptly notify Seller in writing of such disagreement so that the difference may be resolved before the due date of payment of the invoice. If Buyer fails to give such notification, or if Buyer and Seller resolve such disagreement before the due date, such invoice shall be paid in full according to its terms or as agreed to by Buyer and Seller on the due date. If Buyer does give such notification and if Buyer and Seller do not resolve such disagreement before the due date, the portions of the invoice not in dispute shall be paid in accordance with the terms of Section 8.02 hereof on the due date, with the remaining portion of the disputed invoice to be withheld subject to adjustment upon final resolution of the disagreement, with any adjustment due Seller to bear Interest for each Day commencing on the due date and continuing until paid. Notwithstanding the above, either Party hereto shall be entitled to a credit or refund for erroneous payments made, whether such payments were made with or without notice of disagreement, provided that written claim for such credit or refund has been made within twenty-four (24) Months following the date on which the invoice was rendered. Such credit or refund shall bear Interest from the date the erroneous payment was made until the credit is taken or until the refund is paid. Neither Party hereto shall be entitled to take such credit or receive such refund until such other Party hereto shall have agreed to the same or until final resolution of the disagreement relating to any disputed credit or refund.

8.5Failure to Pay Undisputed Invoices. If Buyer fails to pay any undisputed invoice or undisputed part thereof rendered by Seller, then Buyer shall pay to Seller Interest on the unpaid balance of such invoice, calculated from the due date until the date of payment by the Buyer.

8.06Books and Records. Seller shall maintain, for a period of at least five (5) Years, books and records of all payments, price revisions, adjustments, credits, debits and all other data relating to its operations hereunder in order that the provisions of this Agreement and, more specifically, the provisions of the attached Exhibit E can be adequately administered.

8.07Inspection of Price Records. At all reasonable times, upon written notice from Buyer, Seller shall make such records and books of accounts as are needed to verify compliance with the pricing terms of this Agreement available for inspection and audit. Such an audit may be conducted, at Buyer's option, by (a) Buyer's or Electric Customer's internal audit staff, or (b) a firm of certified public accountants to be selected by Buyer or Electric Customer. Buyer's or Electric Customer's auditors shall treat as confidential any and all proprietary information (including auditors' work papers) of Seller, furnished to or examined by them in connection with audit work performed for Buyer. Electric Customer's rights hereunder shall extend only to

inspection and audits of pass-through pricing items and taxes that are subject to audit under the PPOA or under federal law.

ARTICLE 9

NOTICES TO PROCEED

9.01Duty to Keep Informed. During the permitting, development and construction of the Facility and the Mine, both Parties agree to keep the other informed, in writing, on a timely basis on all aspects of development, permitting (including the supply of samples or data) and construction, and any changes to any permitting, development or construction schedules shown in Exhibit I, Permitting and Construction Schedule.

9.02Buyer Notices. If Buyer pre-releases the EPC Contractor to begin detailed design work for the Facility, Buyer shall so notify Seller. At such time as Buyer issues the final release for the EPC Contractor to begin work at the Facility site, Buyer shall, by issuance of a Facility Notice to Proceed, notify Seller and authorize Seller to proceed with construction of the Mine as set forth in Section 3.02, in accordance with the terms and conditions of this Agreement. The Facility Notice to Proceed shall include confirmation of the anticipated Commencement Date of July 1, 2000 or notify Seller of a different anticipated Commencement Date and the anticipated Commercial Operation Date. Except as set forth in Section 3.06, until such time as Buyer issues such Facility Notice to Proceed to Seller and notifies Seller of the anticipated Commencement Date and the anticipated Commercial Operation Date, Buyer shall have no financial obligation to Seller, and Seller shall have no obligation to Buyer, for construction of the Mine other than for permitting and preconstruction development purposes. Provided that Buyer issues the Facility Notice to Proceed to Seller simultaneously with Buyer's issuance of a final release for the EPC Contractor to begin work at the site in accordance with the PPOA and at the same time notifies Seller of the anticipated Commencement Date and the anticipated Commercial Operation Date, Seller shall timely proceed with construction of the Mine, and Seller will be ready to commence lignite delivery in accordance with this Agreement.

9.03Commencement Date Notice. Three Months prior to the anticipated Commencement Date, Buyer shall confirm or revise the date of the anticipated Commencement Date and the anticipated Commercial Operations Date contained in the Facility Notice to Proceed and the lignite quantity required for testing. The anticipated Commencement Date may be moved to an earlier date than that provided in the Facility Notice to Proceed only if it is mutually agreeable. Subject to the last sentence of Section 9.02, Seller agrees to be ready to deliver lignite in sufficient quantities to the Facility, and Buyer agrees to be ready to accept quantities on the Commencement Date for the Facility. Buyer and Seller shall keep each other informed of progress on construction of the Facility and the Mine on a Monthly basis. The Parties acknowledge that the actual date for commencement of lignite deliveries may change as construction of the Facility proceeds. The rights and obligations of the Parties as to any such delays, however, shall be as set forth in Article 10.

9.04Copies of Permits. Buyer shall provide Seller with copies of all permits and approvals for the Facility as they are obtained. Seller shall give Buyer prompt written notice upon receipt by Seller of all permits and approvals required for the construction, development and initial operation of the Mine and shall provide Buyer with copies of permits and approvals as they are obtained.

ARTICLE 10

DELAY AND SHUTDOWN

10.01Delay of Commencement Date. To the extent that there is an unexcused delay of Commencement Date beyond the specified anticipated Commencement Date in the Notice to Proceed in Section 9.02 resulting from actions or inactions of Buyer and/or any contractor of Buyer (other than Electric Customer or Seller), and if such delay exceeds two Months, Buyer shall pay to Seller as liquidated damages $42,500 per Day for each Day that the delay continues beyond two Months until the actual Commencement Date.

10.02Delay of Commercial Operation Date and Buyer Shutdown Option.

(a) To the extent that a delay of Commercial Operation Date as specified by Buyer in the notice referred to in Section 9.02 results from actions or inactions of Electric Customer and as a result of such delay Electric Customer pays Buyer the capacity payment as provided in Section 4.3(a) of the PPOA, Buyer shall pass through to Seller the "Fixed Component" portion of the Base Price as set forth in Exhibit E. To the extent that an unexcused delay of the Commercial Operation Date results from actions or inactions of Buyer and/or any contractor of Buyer (other than Electric Customer or Seller), Buyer shall pay to Seller as liquidated damages the amount of $56,200 per Day for each Day that the delay continues.

(b) Seller acknowledges that from time to time during the first twenty-four (24) Months following the Commercial Operation Date, Buyer may desire to temporarily shut down and suspend, either partially or wholly, operation of the Facility because of technological or operational problems preventing the Facility from performing according to specifications. As a result of such interruptions, Buyer may fail to take the full quantity of Dedicated Lignite requested by Buyer pursuant to Section 4.02(b). Nevertheless, to compensate Seller for having constructed the Mine in a timely fashion to be ready to deliver such quantity during the first twenty-four (24) Months following the Commercial Operation Date, and notwithstanding that Buyer shall have no Minimum Annual Take Quantity obligation during such period, Seller and Buyer agree that, if during either the first half or the second half of the first twenty-four (24) Month period following the Commercial Operation Date Buyer takes and pays for a quantity of Dedicated Lignite or Alternate Fuel having a Billing Price less than $20,232,000, Buyer shall pay Seller as liquidated damages the

difference between $20,232,000 and the amount of money paid for Dedicated Lignite or Alternate Fuel actually taken during such twelve (12) Month period.

10.03Seller Delay. To the extent that Seller's unexcused failure to deliver appropriate quantities of lignite of appropriate quality delays the testing of the Facility, then Seller shall be liable to Buyer for damages in an amount equal to $95,000 per Day plus Contractor's Delay Costs pursuant to the EPC Contract for the period of the delay. If such delay results in a delay of the Commercial Operation Date, Seller shall be liable to Buyer for damages in an amount equal to (a) the damages Buyer pays to Electric Customer resulting from such delay, plus Buyer's capacity payments that Buyer would have received from Electric Customer but for Seller's non-delivery (less expenses Buyer would have incurred to operate the Facility), or (b) at Seller's option, the cost to Buyer of replacement fuel sufficient to meet Electric Customer's dispatch of the Facility in excess of the price of Dedicated Lignite under this Agreement.

ARTICLE 11

REPRESENTATIONS, WARRANTIES AND COVENANTS

11.01Representations, Warranties and Covenants of Seller. Seller makes the following representations, warranties and covenants:

(a) Seller is a joint venture between Phillips Coal Company (PCC) and The North American Coal Corporation (NAC) duly organized and validly existing in good standing under the laws of the State of Texas and authorized to do business in Mississippi. PCC is a Nevada corporation and NAC is a Delaware corporation. Each of Seller, PCC and NAC has

full power and authority to carry on its business as presently conducted and to execute and deliver this Agreement and perform its obligations under this Agreement. Seller is duly qualified to do business and is in good standing in each jurisdiction, including the State of Mississippi, in which Seller is required to qualify to do business as the joint venture that is Seller.

(b) The execution, delivery and performance by Seller of this Agreement have been duly authorized by all necessary action on the part of Seller, and neither the execution, delivery nor the performance of this Agreement by Seller nor the fulfillment of the terms, provisions and conditions of this Agreement by Seller (i) requires any approval or consent of any trustees or holders of any indebtedness or obligations of Seller, other than in connection with obtaining necessary financing for the Mine, (ii) subject to receipt of all necessary regulatory approvals with respect to the Mine, contravenes any law or any government rule, regulation, or order binding

on Seller, (iii) violates the Joint Venture Agreement of Seller or requires any additional approval or consent of the joint venturers, PCC and NAC, or (iv) contravenes the provisions of, or constitutes an event of default (or other event which after lapse of time, notice, or both would constitute an event of default) under any indenture, deed of trust, contract, or other agreement to which Seller is a party or by which Seller is affected or bound.

(c) This Agreement has been duly executed and delivered by Seller and constitutes a legal valid and binding agreement of Seller enforceable against Seller in accordance with its terms, subject, however, to the effects of bankruptcy, insolvency, reorganization, moratorium and similar laws, as well as to general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law).

(d) There are no actions, suits or proceedings pending except for pending permit applications with respect to the Mine, nor, to the best of Seller's knowledge, are any actions, suits or proceedings threatened before any court, administrative agency, arbitrator or governmental body which might, if determined adversely to Seller, materially and adversely affect the business or financial condition of Seller or materially and adversely affect the ability of Seller to perform its obligations under this Agreement.

(e) To the best of Seller's knowledge and belief, Seller is in compliance in all material respects with all applicable statutes and regulations of the United States of America, all states and municipalities and all agencies and instrumentalities of the foregoing, relating to the conduct of its business and ownership of its properties, and Seller shall continue to be in compliance in all material respects until the Term is completed to the extent necessary to perform its obligations under this Agreement.

(f) Seller has, and shall maintain throughout the Term of this Agreement, good and marketable title to sufficient Dedicated Lignite in, on or under the Lignite Property of a quality and in quantities which will enable Seller to timely satisfy all the requirements of this Agreement. Seller shall make no sales of lignite outside this Agreement which will cause the amount of Dedicated Lignite to fall below that required to fulfill its obligations to Buyer hereunder.

(g) PCC and NAC each agree that they will not sell or otherwise transfer their interest in Seller or the Mine (other than to Seller or Affiliates of Seller) without the consent of Buyer, which consent of Buyer shall not be unreasonably withheld.

11.02Representations, Warranties and Covenants of Buyer. Buyer makes the following representations, warranties and covenants:

(a) Buyer is a limited partnership duly organized and validly existing in good standing under the laws of the State of Delaware and has full power and authority to carry on its business as presently conducted and to execute and deliver this Agreement and perform its obligations under this Agreement. Buyer is duly qualified to do business and is in good standing in each jurisdiction, including the State of Mississippi, in which Buyer is required to qualify to do business as a foreign limited partnership.

(b) The execution, delivery and performance by Buyer of this Agreement have been duly authorized by all necessary partnership action on the part of Buyer and neither the execution, delivery or the performance of this Agreement by Buyer, nor the fulfillment of the terms, provisions and conditions of this Agreement by Buyer (i) requires any approval or consent of any trustee or holders of any indebtedness or obligations of Buyer other than in connection with obtaining necessary financing for the Facility, (ii) subject to receipt of all necessary regulatory approvals with respect to the Facility, contravenes any law or any government rule, regulation or order binding on Buyer, (iii) violates the partnership agreement of Buyer, or (iv) contravenes the provisions of, or constitutes an event of default (or other event which after lapse of time, notice or both would constitute an event of default) under any indenture, deed of trust, contract or other agreement to which Buyer is a party or by which Buyer is affected or bound.

(c) This Agreement has been duly executed and delivered by Buyer and constitutes a legal, valid and binding agreement of Buyer, enforceable against Buyer in accordance with its terms, subject, however, to the effects of bankruptcy, insolvency, reorganization, moratorium and similar laws, as well as to general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law).

(d) There are no actions, suits or proceedings pending other than pending permit applications required for the Facility, nor, to the best of Buyer's knowledge, are any actions, suits or proceedings threatened before any court, administrative agency, arbitrator or governmental body which might, if determined adversely to Buyer, materially and adversely affect the business or financial condition of Buyer, or materially and adversely affect the ability of Buyer to perform its obligations under this Agreement.

(e) Buyer intends to operate the forwarding, receiving and all material handling systems in accordance with OSHA.

(f) To the best of Buyer's knowledge and belief, Buyer is in compliance in all material respects with all applicable statutes and regulations of the United

States of America, all states and municipalities and all agencies and instrumentalities of the foregoing, relating to the conduct of its business and ownership of its properties to the extent necessary to perform its obligations under this Agreement, and Buyer shall continue to be in compliance in all such material respects until the Term is completed.

11.03Opinion. Seller agrees to provide opinions of counsel with regard to the above representations, dedication of lignite and enforceability of Seller's right to mine or other matters as Buyer or its lenders may reasonably request if required to secure Buyer financing.

11.04Certificates. Seller agrees to provide officer's certificates with regard to such matters as Buyer or its lenders may reasonably request.

ARTICLE 12

FORCE MAJEURE

12.01Events of Force Majeure. The term “Force Majeure” as used in this Agreement shall mean any and all events or causes, whether foreseen or unforeseen, which are beyond the reasonable control and without the fault or negligence of the Party failing to perform and which prevent the mining, producing, processing, transporting and/or delivering of Dedicated Lignite by Seller or the receiving, accepting, and/or utilizing Dedicated Lignite by Buyer at the Facility, or otherwise prevent Seller or Buyer from performing its obligations under this Agreement. Events of Force Majeure include, but are not limited to, acts of God, lightning, storms, sabotage, riot, insurrection, war, strike, labor disputes or labor slowdowns closure of all or part of the Mine or the Facility because of imminent danger to the Mine or the Facility, material breakdowns or material damage to the Mine or the Facility or equipment, fire or accident or explosion or casualty where such fire or accident or explosion or casualty is beyond the reasonable control of the Party claiming Force Majeure, and acts of civil governmental authority (including TVA with regard to its board's record of decision of Environmental Acceptability of the Facility, as defined in the PPOA Articles 1 and 2, or any other action of TVA when acting in its governmental agency EIS review capacity), including without limitation compliance in good faith with any regulation (or change in interpretation or enforcement of a regulation), direction or order (whether valid or later found to be invalid) made by or on behalf of governmental authorities after the Effective Date of this Agreement, which compliance materially and adversely affects the Mine or the Facility.

Notwithstanding the foregoing, “Force Majeure” shall not include (a) a decrease in demand for electric power from the Facility caused by changes in market conditions or economic climate that decreases the demand by the Facility for lignite below the amounts required in Section 4.02 of this Agreement, (b) the enactment, adoption, promulgation or imposition of any legal requirement that restricts or prevents the utilization or burning of Dedicated Lignite supplied by Seller under this Agreement at the Facility, unless such legal requirement completely prevents Buyer from utilizing or burning any such Dedicated Lignite at the Facility under any circumstances or (c) weather conditions other than severe weather conditions.

12.02Suspension of Obligations. If, because of Force Majeure, either Party hereto is unable to carry out any of its obligations under this Agreement (other than the obligation of a Party to pay money when due in connection with the performance of this Agreement), and if such Party shall promptly give to the other Party written notice of such Force Majeure, then the obligation of the Party giving such notice shall be suspended to the extent made necessary by such Force Majeure and during its continuance, provided, however, that the Party giving such notice shall use its best efforts to eliminate such Force Majeure insofar as possible with a minimum of delay, except such Party shall not be obligated to settle strikes, labor disputes or labor slowdowns. Any deficiencies in (a) deliveries of Dedicated Lignite hereunder by Seller caused by Force Majeure, or (b) deficiencies in the receipt of Dedicated Lignite by Buyer hereunder caused by Force Majeure, shall not be made up except by mutual consent. In the event Force Majeure causes only a partial reduction in the total quantity of Dedicated Lignite Seller can deliver or Buyer can utilize, Seller shall deliver to Buyer all of the Dedicated Lignite within the Annual Projection Notice which can be produced from the Mine, and Buyer shall receive all of such Dedicated Lignite which can be accepted by Buyer during the continuance of such partial reduction.

12.03Suspension of Lignite Deliveries. Either Party hereto shall have the right to elect to suspend the purchase or sale of Dedicated Lignite, as the case may be, for the period of time during which such Force Majeure may exist and to the extent of the quantity of Dedicated Lignite affected by Force Majeure. During such period of Force Majeure, Seller shall have the right but not the obligation to supply Alternate Fuel to Buyer in quantities sufficient to fulfill the Facility's MMBtu requirements at no additional cost to Buyer. If Seller elects not to supply such Alternate Fuel, then Buyer, if it so elects, shall have the right during such period to purchase alternate fuel from other sources in quantities sufficient to meet the Facility's fuel requirements.

12.04Time Limit for Claiming Force Majeure. A Party seeking to claim that it has experienced a Force Majeure must so notify the other Party in accordance with Section 12.02 hereof within forty-eight (48) hours of its discovery of the Force Majeure. If a Party fails to provide notice of a Force Majeure within forty-eight (48) hours of its discovery but subsequently provides notice of the Force Majeure, such Party=s obligations shall be suspended as of the date of such late notice but not for any period prior to the delivery of such late notice.

12.05Long Term Force Majeure. In the event a Force Majeure occurs and continues for an uninterrupted period of one (1) Year, either Seller or Buyer may terminate this Agreement by giving written notice to the other Party within ninety (90) Days after the expiration of such one (1) Year period; provided, however, in the event a Party can reasonably demonstrate during such one (1) Year period that such Force Majeure can be cured within two (2) Years from the commencement of the Force Majeure, the other Party shall be entitled to terminate this Agreement only if such Force Majeure continues uninterrupted for two (2) Years, otherwise this Agreement shall continue in full force and effect for the full remaining Term thereof.

ARTICLE 13

DEFAULT

13.01Events of Default. The occurrence of any one of the following shall constitute an Event of Default under this Agreement:

(a) the failure in any material respect of any Party to perform any material covenant, condition or obligation under this Agreement (including but not limited to Seller's delivery of Dedicated Lignite or Alternate Fuel),

(b) the breach in any material respect by a Party of a material warranty or representation made by that Party in this Agreement,

(c) the insolvency of a Party (other than as a result of the other Party's withholding of payment of disputed charges),

(d) the filing of a voluntary or involuntary petition in bankruptcy respecting a Party,

(e) the appointment of a receiver or trustee for the benefit of creditors of a Party, or

(f) the execution by a Party of an assignment for the benefit of creditors, or

(g)an Event of Default as described in Section 6.06.

13.02Procedure for Notifying a Party of Default.

(a) Upon the occurrence of any Event of Default under Section 13.01 (a) or (b), the non-defaulting Party shall notify the defaulting Party in writing of the occurrence of such Event of Default. Within not more than five (5) Days after such Notice, the defaulting Party shall submit an action plan to cure such Event of Default. The defaulting Party shall have sixty (60) Days from such notice to cure such Event of Default. If such Event of Default cannot be cured with reasonable efforts within such sixty (60) Day period and the defaulting Party is diligently pursuing cure through the action plan, the defaulting Party shall be permitted an additional reasonable period of time not to exceed more than one hundred eighty (180) Days to cure such Event of Default and the non-defaulting Party shall not terminate this Agreement during such additional time period.

(b) In the event the non-defaulting Party gives notice of an Event of Default occurring under Section 13.01 (a) or (b), and the defaulting Party fails to cure such default within the foregoing sixty (60) Day period (or such longer period as may be approved by the non-defaulting Party, which

approval shall not be unreasonably withheld), then the non-defaulting Party shall have the right to terminate this Agreement by giving the defaulting Party notice of such termination. This Agreement shall terminate thirty (30) Days after receipt by the defaulting Party of the notice of termination. In the event of such termination, the non-defaulting Party will have available to it all remedies contained in this Agreement and all remedies allowed by law; provided, however, that the forum for resolution of disputes arising out of this Agreement shall be Arbitration conducted pursuant to the provisions of Article 19. Notwithstanding the foregoing, if the defaulting Party gives the non-defaulting Party notice that the defaulting Party disputes that such Event of Default has occurred and is continuing, and that the defaulting Party is submitting the matter to Arbitration in accordance with Article 18 of this Agreement, then the defaulting Party shall not be deemed in default under this Agreement and the non-defaulting Party shall not have the right to terminate this Agreement until the matter has been so finally determined by Arbitration.

(c) If there is an Event of Default under Section 13.01(c) through (g), upon giving notice to the defaulting Party, the non-defaulting Party may terminate this Agreement effective upon proper delivery of such notice under the terms of this Agreement. Except as provided in Section 13.04(d), in the event of such termination, the non-defaulting Party will have available to it all remedies contained in this Agreement and all remedies allowed by law; provided, however, that the forum for resolution of disputes arising out of this Agreement shall be Arbitration conducted pursuant to the provisions of Article 19.

13.03Limitations on Right of Termination. Notwithstanding anything to the contrary contained in this Article 13, neither Party shall have the right to terminate this Agreement on the grounds of a default if such default has occurred and is continuing solely as a result of:

(a) any material failure by the Party desiring to terminate, or any material failure by an agent of or contractor (other than Buyer or Seller) to such Party to carry out such Party's material obligations under this Agreement;

(b)any failure to pay any sum due pursuant to this Agreement;

(c) a reasonable difference with governmental authorities as to the interpretation of applicable governmental laws, rules or regulations or impossibility of compliance therewith, so long as the affected Party is diligently pursuing a resolution of the matter with the governmental authorities.

13.04Step-In Rights.

(a)Step-In Triggering Events. If:

(1) this Agreement is terminated by Buyer pursuant to Section 13.02(b); or

(2) there is an Event of Default by Seller as described in Section 13.01(c), (d), (e), (f) or (g) and Seller is unable to substantially perform its obligation to deliver Dedicated Lignite or Alternate Fuel,

then Buyer shall have the right, but not the obligation, to give Seller written notice thereof (the AStep-In Notice@) stating that Buyer desires to exercise its rights under this Section 13.04 ("Step-In Rights").

(b) Step-In. In the event the Step-In Notice is given by Buyer pursuant to subsection 13.04(a)(1) or (2) above, Buyer at its option shall have the right to succeed to all right, title, and interest of Seller in and to the Dedicated Lignite and all mining equipment, permits, rights and other assets for the Mine, and, if elected by Buyer in its Step-In Notice, that portion of the Mine which is necessary for producing the Dedicated Lignite. For all mining equipment, permits, rights, or other assets to which Buyer shall take title pursuant to a Step-In Notice pursuant to subsection 13.04(a)(1) or (2) above, Buyer will pay Seller the Fair Market Value thereof, less any damages or costs incurred by Buyer as a result of Seller's default as of the date of Buyer's Step-In. The Fair Market Value of any property as of any date shall mean the cash price obtainable in an arm's length sale between an informed and willing buyer (under no compulsion to purchase) and an informed and willing seller (under no compulsion to sell), for the property in question. Such price may be established by a bona fide offer to Seller for the purchase of such property which Seller is willing to accept or by mutual agreement of the Parties. If Fair Market Value cannot be established by the process described above, such Fair Market Value shall be the value determined in accordance with a procedure ("Appraisal Procedure") whereby two independent appraisers, one chosen by Buyer and one by Seller, shall mutually agree upon the Fair Market Value determination described herein. Buyer and Seller shall each deliver a written notice to the other appointing its appraiser within fifteen (15) Days after one Party has notified the other Party of its desire to utilize the Appraisal Procedure to establish a Fair Market Value. If, within thirty (30) Days after their appointment, the two appraisers are unable to agree to the Fair Market Value, a third independent appraiser shall be chosen within ten (10) Days thereafter by the mutual consent of such first two appraisers. However, if such first two appraisers fail to agree upon the appointment of a third appraiser, such appointment shall be made by the

AAA, or any successor organization thereof, and shall be a disinterested person qualified in the matter to be determined. The three appraisers shall make the determination of Fair Market Value in accordance with the rules of the AAA or any such successor then in effect, and such determination shall be binding and conclusive on Buyer and Seller. Each Party shall pay the costs of its own appraiser and shall share equally in the costs, if any, of a third appraiser. Seller agrees to execute and record such documents as Buyer may reasonably request to perfect Buyer's Step-In Rights.

(c) Indemnity. Buyer shall indemnify and hold harmless Seller and its joint venture partners, and each of their respective shareholders, directors, officers, employees and agents from and against any and all claims, costs, causes of action, and liabilities to the extent arising out of or in any way relating to Buyer's (or Buyer=s assignee=s, agent=s or contractor=s) operation of the Mine following Buyer's exercise of its Step-In Rights or following Buyer=s foreclosure under the Subordinated Deed of Trust.

(d) Sole Remedy. Except as otherwise specified in this Article 13, if Buyer elects to exercise its Step-In Rights or to foreclose under the Subordinated Deed of Trust, such exercise shall constitute Buyer's sole and exclusive remedies for an Event of Default of Seller under this Article 13, except for damages incurred by Buyer prior to the date of exercise of such Step-In Rights or foreclosure, and only with respect to the Event of Default giving rise to the exercise of the Step-In Rights or foreclosure.

13.05Subordinated Deed of Trust. In order to secure the full performance by Seller of its obligations under this Agreement, and to support Buyer's right to step in pursuant to Section 13.04 of this Agreement, Seller shall grant to Buyer and record within six (6) Months after the Effective Date of this Agreement a lien on and security interest in Seller's property, plant and equipment comprising the Mine by a Subordinated Deed of Trust and Security Agreement substantially in the form attached hereto and made a part hereof as Exhibit G, such UCC financing statements and other actions as Buyer may reasonably require in order to confirm and continue the validity, priority and perfection of such lien.

ARTICLE 14

PROPRIETARY AND CONFIDENTIAL DATA

14.01Proprietary and Confidential Data. In the event either Party furnishes the other Party with data which it considers proprietary and/or confidential, such data shall be clearly identified as such. The Parties shall use or disclose to third parties such proprietary and/or confidential data only for the purposes of licensing, construction, operation or maintenance of the Mine or the Facility as is required by applicable law and shall not publish or otherwise

disclose such information to third parties without written approval of the other Party. In the event a dispute arises between the Parties with respect to any obligation hereunder, either Party may disclose the other's proprietary and/or confidential data on a confidential basis to any expert provided that such expert signs a statement not to further disclose such proprietary and/or confidential data and promptly furnishes the other Party with a copy of such statement. The term "Confidential Material" does not include information that was or becomes generally available to a Party on a non-confidential basis, provided that the source of such information was not bound by a confidentiality agreement. The term "Confidential Material" also does not include (i) information which is now or hereafter enters the public domain through no action on the part of the respective Parties in violation of the terms or conditions hereof or (ii) information disclosed by a Party to others on an unrestricted, nonconfidential basis after the date hereof.

14.02Disclosure to Governmental Authorities. Notwithstanding the provisions of Section 14.01, either Party shall have the right to disclose such proprietary and/or confidential data to any Governmental Authorities but shall exert reasonable effort to secure confidential treatment of such data to be so disclosed.

14.03Press Releases. Buyer and Seller agree to provide the other with an opportunity to review in advance any press releases, advertisements, technical papers, and trade journal articles, including technical papers and trade journal articles that are to be presented at professional conferences, regarding the other Party's operations or facilities.

14.04Liability for Disclosure of Data. Any breach of the obligations made in this Article 14 shall subject the breaching Party to payment for damages actually sustained by the non-breaching Party.

ARTICLE 15

INSURANCE

15.01Seller's Insurance. Seller shall maintain the following insurance coverages for the duration of this Agreement:

(a)Workers' Compensation and

Employers Liability Insurance:as required by law

(b)Comprehensive General Liability:

Bodily Injury and

Property Damage Combined$500,000 Each Occurrence

$500,000 Aggregate

Such insurance shall have the following coverage:

1. Contractual Liability for the contractual liability assumed by the Seller in contracts with Buyer.

2. Independent Contractors' Liability for any portion of the work that is subcontracted.

3.Premises & Operations (in progress) Hazard.

4. Explosion/Collapse/Underground Hazard. Explosion coverage is waived where blasting operations are not involved. Where digging, grading, excavation and like operations are necessary, Underground Hazard and Collapse Hazard coverages are required.

5.Products and Completed Operations Hazard.

6. Broad Form Property Damage Liability Including Products and Completed Operations Hazard.

7. Personal Injury Liability with the deletion of the Employee Exclusionand the Contractual Exclusion.

(c)Automobile Liability:

Bodily Injury Liability and

Property Damage Liability

Combined$500,000 Each Occurrence

Covered Autos:Any Auto (Comprehensive Form,

Owned, Hired and Non-Owned Autos)

Additional Provisions Required:

1. Contractual Liability coverage or at least specific Contractual Coverage for the contractual liability assumed by the Seller in contracts with Buyer.

(d) Excess Liability Insurance: Umbrella coverage with equal or broader coverages than that of underlying policies, including broad form contractual liability with combined single limit for bodily injury and property damage of $10,000,000 per occurrence.

15.02Buyer's Insurance. Buyer shall maintain the following insurance coverages for the duration of this Agreement:

(a)Workers' Compensation and

Employers Liability Insurance:as required by law

(b)Comprehensive General Liability:

Bodily Injury and

Property Damage Combined$500,000 Each Occurrence

$500,000 Aggregate

(c)Automobile Liability:

Bodily Injury Liability and

Property Damage Liability

Combined$500,000 Each Occurrence

Covered Autos:Any Auto (Comprehensive

Form, Owned, Hired and

Non-Owned Autos)

Additional Provisions Required:

1. Contractual Liability coverage or at least specific Contractual Coverage for the contractual liability assumed by the Buyer in contracts with Seller.

(d) Excess Liability Insurance: Umbrella coverage with equal or broader coverages than that of underlying policies, including broad form contractual liability with combined single limit for bodily injury and property damage of $10,000,000 per occurrence.

15.03Certificates of Insurance. Seller and Buyer shall provide to each other a certificate of insurance evidencing compliance with the requirements of Section 15.01 and Section 15.02 as applicable.

15.04Issuance of Certificate. Certificates of insurance are to be issued to Seller at P. O. Box 908, Ackerman, MS 39735-0908, and to Buyer at 1177 W. Loop South, Houston, TX 77027, Attn: Red Hills Generation Facility Project Director. Such certificates of insurance shall include the following information:

(a) Name of insurance company providing coverages and policy numbers.

(b)Types and limits of coverages.

(c)Policy period (includes effective and expiration dates).

(d) Statement in Remarks Section of Certificate, if not otherwise provided for on certificate that general liability and auto liability policies provide coverage for the contractual liability assumed by the insured in contracts with the other Party.

(e) A statement guaranteeing thirty (30) Days' written notice to each Party if policies are to be canceled or significantly changed before expiration date.

(f) Name, address and telephone number of insurance agent, broker or company and signature of authorized representative.

(g) Description of operations, locations, vehicles, restrictions, special items and remarks.

15.05Waiver of Subrogation. Seller's policies shall contain a waiver of subrogation by the insurer in favor of Buyer. Buyer's policies shall contain a waiver of subrogation by the insurer in favor of Seller.

15.06Other Insurance Coverage. Seller and Buyer may carry such other insurance as each respectively deems necessary and all such insurance shall be for the account of the insured Party.

15.07 Obligation to Rebuild. If Seller receives insurance proceeds resulting from or related to damages to the Mine or equipment necessary for the operation of the Mine, Seller shall use such proceeds to restore the Mine and its operations to a level necessary to perform its obligations pursuant to this Agreement, or in lieu thereof shall provide appropriate assurances, acceptable to Buyer, regarding the supply of Dedicated Lignite or Alternate Fuel in accordance with Seller's obligations for the remaining term of this Agreement.

ARTICLE 16

WAIVERS, REMEDIES, AMENDMENTS

16.01Waivers and Remedies. The failure of either Party hereto to insist in any one or more instances upon strict performance of any provision of this Agreement by the other Party hereto, or to take advantage of any of its rights hereunder, shall not be construed as a waiver by it of any such provision or the relinquishment by it of any such rights in respect of any subsequent nonperformance of such provision, but the same shall continue and remain in full force and effect. The pursuit by either Party of any remedy available under this Agreement shall not constitute an election or waiver of any other remedy available to that Party under this Agreement or at equity or in law by reason of the violation or breach of any of the terms, provisions, covenants, representations or warranties of this Agreement; provided, however, that the forum for resolution of disputes arising out of this Agreement shall be Arbitration conducted pursuant to the provisions of Article 19. No waiver of any violation or breach shall be deemed or construed to constitute a waiver of any other violation or breach, and forbearance to enforce one or more of the remedies available for a violation or breach shall not be deemed to constitute a waiver of that or any other violation or breach.

16.02Remedies Cumulative. Except as otherwise provided in this Agreement, each remedy specifically provided for under this Agreement shall be taken and construed as cumulative and in addition to every other remedy provided for herein or by law; provided, however, that the exclusive forum for resolution of disputes arising out of this Agreement shall be Arbitration conducted pursuant to the provisions of Article 19.

16.03Exclusions of Consequential Damages. Notwithstanding any other provision of this Agreement, under no circumstances shall Buyer or Seller be entitled to any special or consequential damages of any kind or nature whatsoever.

16.04Amendments. Any and all amendments, supplements, and modifications to this Agreement shall be in writing and signed by the Parties hereto.

ARTICLE 17

NOTICES AND OTHER COMMUNICATIONS;

AUTHORIZED REPRESENTATIVES

Buyer and Seller each shall appoint a representative ("Authorized Representative") to receive and give on behalf of Buyer and Seller all notices, approvals, disapprovals and other communications required or permitted under this Agreement.

Except as otherwise expressly stated in this Agreement, any such notice or approval, disapproval or other communication shall be in writing to the other Party and shall be deemed to have been duly given when delivered in person to the Authorized Representative or upon delivery by telephonic facsimile transmission, or when actually received (as evidenced by return receipt after posting by United States certified mail, return receipt requested), with postage prepaid, addressed to the Authorized Representatives of Buyer and Seller as follows:

As to Seller, the Authorized Representative shall be:

General Manager

Mississippi Lignite Mining Company

P.O. Box 908

Ackerman, MS 39735-0908

Copies of all notices shall be sent to Seller to:

President

Phillips Coal Company

2929 North Central Expressway

Richardson, TX 75080-2043

President

The North American Coal Corporation

Signature Place II

14785 Preston Road, Suite 1100

Dallas, TX 75240-7891

As to Buyer, the Authorized Representative shall be:

Project Director

Choctaw Generation Limited Partnership

Copies of all notices shall be sent to Buyer to:

Choctaw Generation Limited Partnership

c/o Tractebel Power, Inc.

1177 West Loop South, Suite 900

Houston, TX 77027

The designation of the Authorized Representative of each Party or the addresses of same may be changed at any time by any Party upon written notification by its Authorized Representative to the other Party's Authorized Representative.

ARTICLE 18

DISPUTE RESOLUTION

18.01The Parties shall for a period of up to ninety (90) Days after either Party has given notice that a dispute exists engage in good faith discussions and negotiations in an attempt to resolve such dispute. If, by the earlier of the end of such ninety (90) Day period, (unless such period is extended by mutual agreement of the Parties), or such time as the Parties agree the Parties have been unable to resolve such dispute, then they shall submit such dispute to binding Arbitration in accordance with Article 19 below.

ARTICLE 19

ARBITRATION

19.01Arbitrators' Panel. Any Arbitration hereunder shall be before three (3) neutral arbitrators, one of whom shall be named by Seller, one of whom shall be named by Buyer, and the third of whom shall be selected in accordance with the procedure set forth in Section 19.02.

If either Buyer or Seller fails to select an arbitrator within fifteen (15) Days after its receipt of notice of Arbitration under this Article 19, then the other Party shall have the right to appoint an arbitrator for the Party not acting.

19.02Selection of Third Arbitrator. The third arbitrator shall be chosen by the two arbitrators selected pursuant to Section 19.01, provided that if the arbitrators cannot agree within ten (10) Days on a third arbitrator, the third arbitrator shall be chosen by Buyer and Seller from a panel of the American Arbitration Association ("AAA") as follows:

(a) Immediately upon the expiration of such ten (10) Day period the Parties shall request the AAA to submit simultaneously to each Party an identical list of persons chosen from the AAA's panel.

(b) Each Party shall have thirty (30) Days from the date of receipt in which to cross off any names objected to, number the remaining names to indicate the order of preference, and return the list to the AAA. If a Party does not return the list within the time specified, all persons named therein shall be deemed acceptable to that Party.

(c) From the persons who have been approved on both lists, and in accordance with the designated order of mutual preference, the AAA shall invite the acceptance of an arbitrator to serve as the third arbitrator, or if acceptable arbitrators are unable to act, or if for any other reasons the appointment cannot be made from the submitted lists, the AAA shall have the power to make the appointment from among other members of the panel of the AAA without the submission of any additional list.

19.03Qualification of Arbitrators. Persons selected as neutral arbitrators hereunder shall have the following minimum qualifications:

(a) Shall be impartial, disinterested, independent of the Parties and their affiliates and have a reputation for fairness; provided, however, that this definition shall not exclude the employees of consulting firms that have not performed consulting services having a value in excess of $50,000 in the aggregate for either Party or its Affiliates within the twenty-four (24) Months preceding the commencement of Arbitration. Consulting services do not include publications, reports (including regional reports or studies), data bases and data services which are purchased from the coal/lignite industry or independent non-regulated electric power industry consulting firm and are offered for sale by the consulting firm to multiple customers in a substantially similar form; and

(b) Shall have expertise in the process of interpreting coal or lignite supply agreements.

19.04Governing Law. Arbitration proceedings conducted pursuant to this Article 19 will be governed by the laws of the State of Texas (without regard to its choice of law rules) and

the Commercial Arbitration Rules of the AAA then in effect, except as specified herein. Within thirty (30) Days of the appointment of the third arbitrator, the complaining Party shall submit a statement of claim. The Party not submitting a statement of claim shall have thirty (30) Days after being served with the statement of claim to submit an answer. Both the statement of claim and the answer shall concisely and with specificity state the Party's position and the basis for that position.

19.05Hearing, Location. The Arbitration hearing shall be conducted in Houston or Dallas, Texas or such other location as may be agreed to by the Parties and shall begin within sixty (60) Days of submittal of the answer, unless the Parties agree otherwise. The arbitration hearing shall be concluded within one hundred twenty (120) Days of the appointment of the third arbitrator pursuant to Section 19.02 hereof unless the Parties agree otherwise.

19.06Authority of Arbitrator. The arbitrators' authority shall be limited to the extent that the arbitrators shall be bound by the laws of the State of Texas the facts and issues, and by the Texas Rules of Evidence, to the same extent as a trial court and the arbitrators shall make no decision which is not in accordance with applicable laws and Section 19.10 hereof; depositions may be admitted to the extent testimony would be admissible and this shall not prevent live testimony by any witness who was deposed; and reasonable discovery limited to the issues to be arbitrated shall be available.

19.07Record of Hearing. A stenographic transcript of the testimony and of the record of such proceedings shall be taken.

19.08Briefs. The brief of the complaining Party shall be filed with the arbitrators within thirty (30) Days after completion of the hearings, and the brief of the other Party shall be filed within thirty (30) Days after the receipt of the complaining Party's brief. The arbitrators may designate the portion or portions of the record which they require for their decision, but nothing shall prevent a Party from presenting a complete record, if it do desires.

19.09Claims of $100,000 or Less - Baseball Arbitration. With respect only to disputes where the dollar difference in the position of the Parties is $100,000 or less, the arbitrators shall have no power to mediate or compromise any claim, but shall have only the authority to review the information presented by the Parties and to select the position proposed by one of the Parties.

19.10Payment of Costs. Each Party shall pay for the services and expenses of its witnesses and attorneys and the arbitrator it appoints; all other costs incurred in connection with the arbitration shall be paid by equal parts by the Parties, unless the award shall specify a different division of costs.

19.11Issuance and Effect of Arbitrators' Decision. The award of the arbitrators shall require a majority of the arbitrators, shall be in writing setting forth the arbitrator's reasoning based on the evidence admitted and rendered and served on both Buyer and Seller within thirty (30) Days of filing of the last brief under Section 19.08. The decision of the arbitrators shall be final and binding and enforceable pursuant to the laws of the State of Texas by filing in any court

having jurisdiction thereof. It is agreed that during the pendency of any arbitration proceedings, the Parties shall continue to perform their obligations under this Agreement in the same manner as prior to the institution of arbitration proceedings, and neither Party shall depart from the status quo of performance under this Agreement as it existed prior to instituting the arbitration, and such conduct shall not be deemed to be in breach of this Agreement unless and until it is found to be so by the arbitrators' decision. To the extent necessary and proper, the arbitrators' decision may be retroactive.

19.12Waiver of Jury Trial. The Parties hereto waive trial by jury in connection with proceedings or counterclaims brought by either of the Parties hereto to enforce or appeal an arbitration award rendered under this Article 19.

ARTICLE 20

TAXES AND OTHER CHARGES

20.01Applicable Taxes. All present or future federal, state, municipal or other lawful taxes (other than those described in Section 20.04 (Broad Industry Taxes and Charges) below)) applicable by reason of the operation of the Mine or assessable on Seller's property or operations other than those listed in Exhibit E, shall be Seller's responsibility. Seller shall have the responsibility to pay the taxes listed in Exhibit E; provided, however, that payment of such taxes by Seller shall be without prejudice to the understanding of the Parties that the cost of such taxes shall be passed through to, and borne by Buyer as a component of the Billing Price for lignite delivered hereunder as provided in said Exhibit E to the extent the Buyer can pass such items through to the Electric Customer. Buyer shall pay all existing and any new sales, use, excise, ad valorem, and any other similar taxes, if any, imposed or levied by a governmental agency on the capacity or energy sold and delivered from the Facility. Buyer shall indemnify, defend, and hold Seller harmless from any liability for all such taxes for which Buyer is responsible. Seller shall indemnify, defend, and hold Buyer harmless from any liability from all such taxes for which Seller is responsible. Buyer shall reimburse Seller promptly on demand for the amount of any such tax that is Buyer's responsibility hereunder that Seller remits, plus any penalties and interest incurred and remitted, except such penalties as result from Seller's conduct. Likewise, Seller shall reimburse Buyer promptly on demand for the amount of any such tax that is Seller's responsibility hereunder that Buyer remits, plus any penalties, interest incurred and remitted, except penalties as a result from Buyer's conduct.

20.02Contested Taxes. Neither Party shall be required to pay any such tax, assessment, charge, levy, account payable or claim if the validity, applicability or amount thereof is being contested in good faith by appropriate actions or proceedings which will prevent the forfeiture or sale of any property utilized under this Agreement or any material interference with the use thereof.

20.03Other Charges. Subject to Section 20.02, Seller and Buyer each will pay and discharge all lawful assessments and governmental charges or levies imposed upon it or in respect to all or any part of its property or business, all trade accounts payable in accordance with

usual and customary business terms, and all claims for work, labor, or materials which, if unpaid might become a lien or charge upon any of its property.

20.04Broad Industry Taxes or Charges. Notwithstanding the above, if taxes, fees, charges or programs are imposed by any state or federal government on the mining or consumption of fossil fuel for electric generating facilities (e.g., a carbon tax, Btu tax, new offset program), the Parties shall use all reasonable efforts to develop a mitigation plan to reduce the impact of such taxes, fees, charges or programs. If such taxes, fees, charges or impacts of programs result in additional costs that are not otherwise assessed against Buyer, pricing under this Agreement shall be renegotiated, to fully pass through such costs to Buyer and fully reimburse Seller for such amounts, but only to the extent that Buyer is reimbursed for such amounts by the Electric Customer. These pricing renegotiations shall be subject to Arbitration only for the purpose of establishing the amount by which Seller shall be fully compensated for these additional costs. Conversely, any future tax relief (such as a tax credit) to Seller related to such pricing under this Agreement shall be fully passed through to Buyer.

20.05Income Taxes. In no event shall Seller be entitled to pass through existing, new, or increased income taxes.

ARTICLE 21

RIGHT OF FIRST REFUSAL AND ASSIGNMENT OF LEASES

21.01Right of First Refusal. Seller agrees to grant Electric Customer as provided in Section 17.4 of the PPOA, an exclusive right of first refusal, and Seller further agrees to grant to Buyer an exclusive right of refusal subordinate to Electric Customer's right, to purchase that portion of the lignite reserves in the Lignite Property which is in excess of the Dedicated Lignite ("Excess Lignite Reserves@). Seller shall execute and record such documents as are reasonably required by Buyer or Electric Customer to grant, perfect and subordinate such rights of refusal, consistent with the notice, exercise periods, and other procedural matters contained in the similar right of refusal of Electric Customer in the PPOA.

21.02Right to Assignment of Lignite Mining Instruments and Purchase of Fee Lands. Seller has the right to release, in whole or in part, any of the coal leases, subleases or agreements described in Exhibit H, and any extensions and/or renewals thereof; and to sell all or part of the lands owned by Seller (fee lands) and described in Exhibit H, so long as such release or sale does not violate Seller=s commitment to maintain reserves of Dedicated Lignite sufficient to meet its obligations under this Agreement as set forth in Sections 3.01 and 11.01(f). In addition to Buyer=s subordinate right of first refusal as set forth in Section 21.01 above, Seller agrees to give Buyer at least sixty (60) Days advance written notice of its intention to release any of said coal leases, subleases, agreements, or any extensions and/or renewals thereof, or to sell any of said fee lands. Seller shall include in such notice an estimate of the cost (if any) that Buyer would incur to receive an assignment and to maintain such leases, subleases or other agreements,

and/or the estimated fair market value of such fee lands, as established by a licensed real estate appraiser, knowledgeable of real estate values in Choctaw County, Mississippi, and jointly selected by the Parties. Seller shall provide to Buyer such geological data which Sellers owns, or has developed to determine the quality and quantity of lignite within such property. In the event that Buyer should request in writing within thirty (30) Days after receipt of such notice, an assignment of the leases, subleases or agreements which Seller proposes to release; and/or to purchase the fee lands which Seller proposes to sell, for the estimated fair market value set out in said notice, Seller will assign such leases, subleases or agreements, and/or sell such fee lands to Buyer at the price offered in said notice. Seller shall not be required to notify Buyer prior to releasing all or any part of a lease, sublease, agreement, or the sale of any lands, after mining and reclamation thereof has been completed.

ARTICLE 22

MISCELLANEOUS

22.01Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the Parties hereto and their respective successors and assigns; provided, however, this Agreement may not be assigned by either Seller or Buyer without the written consent of the other Party, which consent will not be unreasonably withheld, and provided further that no such consent is necessary in the event of (a) pledge, assignment or other security arrangement to secure indebtedness incurred for the purpose of or in connection with the construction or operation of the Facility or any refinancing thereof, or performance under this Agreement or the PPOA or any indebtedness secured by lien on the Facility or revenue therefrom, or (b) the assignment by either Party of all or any part of its interest in this Agreement to its own parent company or to a subsidiary or subsidiary of such assigning Party's parent company or to a partnership or joint venture in which the assigning Party owns at least a fifty (50) per cent interest, provided such assignee assumes the obligations of the Party under this Agreement to the extent of the interest so assigned. If Buyer assigns its rights and interests hereunder in connection with or as collateral security for a financing or refinancing, then, upon request of Buyer, Seller shall execute and deliver to assignee or its designees a consent to assignment in form and substance typical in project finance transactions as shall be reasonably requested by such assignee.

22.02Headings Not to Affect Construction. The headings to the respective sections and paragraphs of this Agreement are inserted for convenience of reference, and are neither to be taken to be any part of the provisions hereof nor to control or affect the meaning, construction or effect of the same.

22.03Written Instrument Contains Entire Agreement. This written instrument, including all exhibits attached hereto, contains the entire agreement between the Parties hereto in respect of the subject matter, and there are no other understandings or agreements between said Parties, or either of them, in respect thereof.

22.04Execution of Counterparts. This instrument may be simultaneously executed in any number of counterparts, and all such counterparts shall constitute but one and the same instrument.

22.05Construction of Agreement. This Agreement shall be governed by and construed according to the laws of the State of Texas without giving effect to the conflict of laws principles thereof.

22.06Severability. In the event that any of the terms, covenants or conditions of this Agreement, other than the obligation to pay money pursuant to the terms of this Agreement, or the application of any such term, covenant or condition, shall be held invalid as to any person or circumstances by any court having jurisdiction in the premises, the remainder of this Agreement and the application of its terms, covenants or conditions to such person or circumstances shall not be affected thereby but shall remain in force and effect.

22.07Amendments. No amendment to this Agreement or the exhibits hereto shall be effective unless approved in writing by each Party hereto.

22.08Survivorship of Obligations. The termination or cancellation of this Agreement shall not discharge any Party from any obligation it owes to the other Party under this Agreement by reason of any transaction, loss, cost, damage, expense or liability which shall occur or arise prior to such termination. It is the intent of the Parties that any such obligation owed (whether the same shall be known or unknown as of the termination or cancellation of this Agreement) will survive the termination or cancellation of this Agreement. The Parties also intend that the indemnification provisions contained in this Agreement shall remain operative and in full force and effect, regardless of any termination or cancellation of this Agreement, except with respect to actions or events occurring or arising after such termination or cancellation is effective.

22.09Negation of Partnership. None of the terms or provisions of this Agreement shall be deemed to create a partnership between the Parties and their businesses or otherwise, nor shall it cause them to be considered joint venturers or members of any joint enterprise.

22.10 Exhibits. The following exhibits to which reference is made in this Agreement are deemed incorporated into this Agreement in their entirety:

Exhibit A - The Lignite Property

Exhibit B - Depiction of Point of Delivery

Exhibit C - Annual Lignite Quantity Table

Exhibit D - Form of Annual Projection Notice

Exhibit E - Adjustment to Base Price

Exhibit F - Form of Three-Way Arbitration Agreement

Exhibit G - Form of Subordinated Deed of Trust and Security Agreement

Exhibit H - List of Lignite Mining Instruments (current/will be updated

over time)

Exhibit I - Permitting and Construction Schedule

Exhibit J - Quality and Property Price Adjustment

IN WITNESS WHEREOF, each Party has caused this Agreement to be executed on its behalf by its duly authorized representative as of April 1, 1998, to be effective for all purposes as of such date.

SELLER:
	MISSISSIPPI LIGNITE MINING COMPANY
	By Its Joint Venturers:
	PHILLIPS COAL COMPANY
	By:	/s/ Paul M. Thompson
	Title:	President
	Date:	April 29, 1998
	THE NORTH AMERICAN COAL CORPORATION
	By:	Clifford R. Miercort
	Title:	President and Chief Executive Officer
	Date:	April 29, 1998

BUYER:
	CHOCTAW GENERATION LIMITED PARTNERSHIP
	By: Choctaw Generation, Inc.
	Its General Partner
	By:	/s/ Paul Margaratis
	Title:	Vice President
	Date:	24 April 98

EXHIBIT C

TO

LIGNITE SALES AGREEMENT

ANNUAL LIGNITE QUANTITY

	Facility BTU
Year	Burn/Year	Approximate Tonnage
	(millions)	@5294 Btu/lb
2000	10,811,600	1,021,000
2001	32,881,536	3,105,547
2002	32,881,536	3,105,547
2003	32,881,536	3,105,547
2004	32,881,536	3,105,547
2005	32,881,536	3,105,547
2006	32,881,536	3,105,547
2007	32,881,536	3,105,547
2008	32,881,536	3,105,547
2009	32,881,536	3,105,547
2010	32,881,536	3,105,547
2011	32,881,536	3,105,547
2012	32,881,536	3,105,547
2013	32,881,536	3,105,547
2014	32,881,536	3,105,547
2015	32,881,536	3,105,547
2016	32,881,536	3,105,547
2017	32,881,536	3,105,547
2018	32,881,536	3,105,547
2019	32,881,536	3,105,547
2020	32,881,536	3,105,547
2021	32,881,536	3,105,547
2022	32,881,536	3,105,547
2023	32,881,536	3,105,547
2024	32,881,536	3,105,547
2025	32,881,536	3,105,547
2026	32,881,536	3,105,547
2027	32,881,536	3,105,547
2028	32,881,536	3,105,547
2029	32,881,536	3,105,547
2030	32,881,536	3,105,547
TOTAL	997,257,680	94,187,410

EXHIBIT D

TO

LIGNITE SALES AGREEMENT

ANNUAL PROJECTION NOTICE FOR	(year)
ANNUAL LIGNITE QUANTITY
DATE OF NOTICE

Month	(A) Monthly Portion of Annual Lignite Quantity	Average Daily Delivery
January
February
March
April
May
June
July
August
September
October
November
December
TOTAL
AVERAGE

.

(A)     Seller shall not be obligated to deliver more than 3,300,000 MM Btus in any.

EXHIBIT E

TO

LIGNITE SALES AGREEMENT

ADJUSTMENTS TO BASE PRICE

Introduction - This Exhibit E describes the terms and conditions, and the specifications for the payment by the Buyer for lignite delivered to the Facility. There are several price components for which quarterly adjustments will be made to reflect actual conditions and escalation or de-escalation. The specific price components subject to adjustment, including the bases and methodology to be used in making those adjustments, are detailed below. Pricing subsequent to December 31, 1999, will be escalated in accordance with the formula cited below.

Base Price - The Base Price is [* * *]/MMBtus and is comprised of eight (8) Indexed components, Power Cost component, Pass-through component, Royalty component, and a Fixed component as indicated in the Lignite Price Component Escalation Table, below:

Table	LIGNITE PRICE COMPONENT ESCALATION
Initial Component Price		Reference Index*
Index Escalating:
[* * *]/MMBtus Capital		PPI (CC 112)
[* * *]/MMBtus Labor		Table (C2, SIC 122)
[* * *]/MMBtus Diesel		PPI (CC 057303)
[* * *]/MMBtus Tires		PPI (CC 071)
[* * *]/MMBtus Parts		PPI (CC 1126)
[* * *]/MMBtus Industrial		PPI (CC 03 thru 15)
[* * *]/MMBtus G & A		CPI Urban Consumers - All Items
[* * *]/MMBtus Other		CPI Urban Consumers - All Items
[* * *]/MMBtus Index Subtotal
Power Cost Escalating:
[* * *]/MMBtus Power		Actual Electric Rates
Pass-through:
[* * *]/MMBtus Taxes & Regs		Actual Pass-through
Royalty Constant %:
[* * *]/MMBtus Royalty		Constant % - 5.5% of Total Adjusted Base
Fixed Cost:
[* * *]/MMBtus Fixed		Fixed Payment
[* * *]/MMBtus Total Base Price

* * * Confidential Treatment Requested

EXHIBIT F

TO

LIGNITE SALES AGREEMENT

THREE WAY ARBITRATION AGREEMENT

This Three-Way Arbitration Agreement (this "Agreement") is entered into and effective as of April 1, 1998, by and among the Tennessee Valley Authority, a corporate instrumentality and agency of the United States of America ( "TVA"), Choctaw Generation Limited Partnership, a Delaware limited partnership authorized to do business in the State of Mississippi ("Choctaw"), and Mississippi Lignite Mining Company, a Texas joint venture between Phillips Coal Company and The North American Coal Corporation, authorized to do business in the State of Mississippi ("MLMC"). The term “Party herein shall mean TVA, Choctaw or MLMC as the context indicates, and the term “Parties” shall mean TVA, Choctaw and MLMC.

RECITALS

A. Choctaw and MLMC are parties to a Lignite Sales Agreement dated April 1, 1998, (the “LSA”), pursuant to which MLMC will sell and Choctaw will purchase lignite as fuel for Choctaw’s lignite-

fired 440 MW atmospheric circulating fluidized bed power generation facility (the “Facility”) in Choctaw County, Mississippi.

B. Choctaw and TVA are parties to a long-term Power Purchase and Operating Agreement dated as of February 20, 1997 (the “PPOA”), whereby Choctaw will sell electric power produced at the Facility to TVA.

C. Pursuant to both the LSA and PPOA, the parties under those respective Agreements have agreed to resolve certain disputes concerning selection of new escalation indices and the impact on pricing of certain taxes (or tax credits), fee and charges imposed by state or federal government on the mining or consumption of fossil fuel for electric generating facilities (“Pass Through Charges(s)”).

THEREFORE, in consideration of the mutual premises set forth herein, and other good and valuable consideration, receipt of which is acknowledged by the Parties, the Parties agree as follows:

ARTICLE I

DISPUTE RESOLUTION

1.01 For a period of up to ninety (90) days after a Party has made claim that an index used in the LSA and PPOA is no longer published or for a Pass-Through Charge, the Parties shall engage in good faith discussions and negotiations in an attempt to resolve such claim. Such discussions shall include at least one face-to-face meeting of officers of the Parties held for the purpose of resolving the claim. If, by the earlier of the end of such ninety (90) day period (unless such period is extended by mutual agreement of the Parties), of such time as the Parties agree that a dispute exists and they have been unable to resolve such dispute, then they shall submit such dispute to binding arbitration in accordance with Article 2 below.

ARTICLE II

ARBITRATION

2.01 (a) Arbitrators' Panel. Any arbitration hereunder shall be before three (3) neutral arbitrators, who meet the qualifications set forth in Section 2.02 and who have not been employed or retained previously by any Party and do not have a direct or indirect interest in a Party or the subject matter or an arbitration between the Parties. Subject to the provision below for Alternate Arbitration Panel Selection, in the event two Parties substantially agree on the matter to be submitted to arbitration (the two such Parties being referred to as "Concurring Parties" and being considered a single party for purposes of selection of the arbitrators), the Concurring Parties and the third Party (being transferred to as the "Non-Concurring Party") shall select the three arbitrators from a panel of the American Arbitration Association ("AAA") as follows:

1) Immediately upon the expiration of the period in Section 1.01, the Concurring Parties or the Non-Concurring Party shall request the AAA to submit simultaneously to the Concurring Parties and the Non-Concurring Party an identical list of not less than fifteen (15) persons chosen from the AAA's Panel with appropriate information regarding their experience, including past arbitrations in which such person have participated and background of such persons. The Concurring Parties and the Non-Concurring Party shall have the right to provide written questions to such persons as part of the selection process and the Concurring Parties and the Non-Concurring Party shall be provided copies of such questions and such person's answers thereto.

2) Both the Concurring Parties and the Non-Concurring Party shall have thirty (30) days from the date of receipt in which to cross off any names objected to, number the remaining names to indicate the order of preference, and return the list to the AAA. If either the Concurring Parties or the Non-Concurring Party does not return the list within the time specified, all persons named therein shall be deemed acceptable to the Party that does not return the list.

3) From the persons who have been approved on both lists, and in accordance with the designated order of highest mutual preference (or a fair selection of alternating preferences of the Parties, if necessary), the AAA shall invite the acceptance of three arbitrators. If acceptable arbitrators are unable to act, or if for any other reasons the appointment cannot be made from the submitted lists, a senior official of AAA shall have the power to make the appointments from among other persons meeting the qualifications set forth in this Section and in Section 2.02, without the submission of any additional list.

(b) Alternate Arbitration Panel Selection. In the event the two Parties do not substantially agree upon the matter to be submitted to arbitration or upon mutual agreement of all Three Parties, the following method selection of the arbitration panel may be utilized. Any arbitration hereunder shall be before three (3) neutral arbitrators who meet the qualifications set forth in Section 2.02 and who have not been employed or retained previously by any Party and do not have a direct or indirect interest in a Party or the subject matter of an arbitration between the Parties, chosen by MLMC, TVA, and Choctaw from a panel of the American Arbitration Association ("AAA) as follows:

1) Immediately upon the expiration of the period in Section 1.01, MLMC, TVA or Choctaw shall request the AAA to submit simultaneously to MLMC, TVA and Choctaw an identical list of not less than fifteen (15)

persons chosen from the AAA's Panel with appropriate information regarding their experience, including past arbitrations in which such persons have participated and background of such persons. Each Party shall have the right to provide written questions to such persons as part of the selection process and all Parties shall be provided copies of such questions and such persons' answers thereto.

2) MLMC, TVA and Choctaw shall have thirty (30) days from the date of receipt in which to cross off any names objected to, number the remaining names to indicate the order of preference, and return the list to the AAA. If any one of MLMC, TVA, or Choctaw does not return the list within the time specified, all persons names therein shall be deemed acceptable to that Party.

3) From the persons who have been approved on all three lists, and in accordance with the designated order of highest mutual preference (or a fair selection of alternating preferences of the Parties, if necessary), the AAA shall invite the acceptance of three arbitrators. If acceptable arbitrators are unable to act, or if for any other reasons the appointment cannot be made from the submitted lists, a senior official of AAA shall have the power to make the appointments from among other persons meeting the qualifications set forth in this Section and in Section 2.02, without the submission of any additional list.

c) Dispute on Arbitration Selection. In the event the Parties are unable to agree on whether two Parties substantially agree upon the matter to be submitted to arbitration, the claim or claims of the Party or Parties to be submitted to arbitration and the arguments of all other Parties and any supporting materials concerning where there is substantial agreement of any two Parties upon such claims or claims shall be submitted in writing to the AAA. The AAA shall select a single arbitrator that meets the qualifications set forth in Section 2.02 and who has not been employed or retained previously by any Party and does not have a direct or indirect interest in a Party or the subject matter of an arbitration between the Parties. Within thirty (30) days of selection, the arbitrator shall make its decision solely on the matter of whether or not there is substantial agreement of any two Parties concerning the matter to be submitted to arbitration. Upon such decision, the arbitration panel's selection shall be made in accordance with Section 2.01(a) or (b) consistent with the arbitrator's written decision.

2.02 Qualification of Arbitrators. Persons selected as arbitrators hereunder shall have the following minimum qualifications:

(a) Shall be impartial, disinterested, independent of the Parties and their Affiliates and have a reputation for fairness; provided, however, that this definition shall not exclude the employees of consulting firms that have not performed consulting services having a value in excess of $50,000 in the aggregate for any Party or its Affiliates with the twenty-four (24) Months preceding the commencement of arbitration (provided that no such firm shall at the time be engaged with any Party or its Affiliates): and

(b) Shall have demonstrated and recognized expertise in the process of interpreting the pricing provisions customary in coal or lignite supply agreements and power purchase agreements.

2.03 Governing Law. Arbitration proceedings conducted pursuant to this Article 2 will be governed by the federal laws of the United States of America (without regard to its choice of law rules) and the Commercial Arbitration Rules of AAA then in effect, except to the extent such Rules may be inconsistent with this Agreement.

2.04 Claims and Responses. The claims and responses shall be filed as follows: Within thirty (30) days of the appointment of the panel or arbitrators, the Party and Parties making a claim shall submit a statement of their claim to the other Party or Parties and the panel of arbitrators. The receiving Party or Parties shall have thirty (30) days after being served with the statement of claims to submit an answer to the panel of arbitrators and the other Party or Parties. Both the Statement of claims and the answer shall concisely and with specificity state each Party's position and the basis for that position.

2.05 Hearing, Location. The arbitration hearing shall be conducted in alternating locations of the home offices of TVA and Choctaw and MLMC or such other location as may be agreed to by the Parties, provided if no other location is mutually agreeable, the arbitration hearing shall commence with TVA's office in Knoxville, Tennessee and shall begin within sixty (60) days of submittal of the answer, unless the Parties agree otherwise. The arbitration hearing shall be concluded within one hundred twenty (120) days of the appointment of the panel of arbitrators unless the Parties agree otherwise.

2.06 Authority of Arbitrator. The arbitrators' authority shall be limited to the extent that the arbitrators shall be bound by the federal laws of the United States of America, the facts and issues, and by the Federal Rules of Evidence, to the same extent as a trail court, and the arbitrators shall make no decision which is not in accordance with applicable laws and Section 2.09 hereof; depositions may be admitted to the extent testimony would be admissible and this shall not prevent live testimony by any witness who was deposed; and reasonable discovery limited to the issues to be arbitrated shall be available. The decision of the arbitrators shall be limited to a determination on the issues which may be arbitrated as set forth in Section 1.01.

2.07 Record of Hearing. A stenographic transcript of the testimony and of the record of such proceedings shall be taken.

2.08 Briefs The briefs of the Party or Parties submitting a claim shall be filed with the arbitrators within thirty (30) days after completion of the hearings, and the brief of the other Party or Parties shall be filed within thirty (30)days after the receipt of the briefs of the Party or Parties submitting the claims. The arbitrators may designate the portion or portions of the record which they require for their decision, but nothing shall prevent the Parties from presenting a complete record, if it so desires.

2.09 Issuance of Arbitrators' Decision. The award of the arbitrators shall require a majority of the arbitrators, shall be in writing setting forth the arbitrators' reasoning based on the evidence admitted and rendered and served on all Parties within thirty (30) days of filing of the last brief under Section 2.08. If with such thirty (30) day period, a majority of the arbitrators cannot reach agreement on an award, each arbitrator shall present his or her proposed decision as set forth above. Any party may then request that AAA appoint a fourth arbitrator who shall only be permitted to make an award of the proposed decision of one of the arbitrators' decisions previously set forth. Such fourth arbitrator shall render his or her decision within thirty days in writing.

2.10 Payment of Costs. Each of the Parties shall pay for the services and expenses of its representatives, witnesses, and attorneys; all other costs incurred in connection with the arbitration shall be paid as follows: fifty percent by the Non-Concurring Party, with the Concurring Parties each bearing twenty-five percent of the costs; provided that if Alternate Arbitration Panel Selection is utilized such cost shall be paid as follows: (1/3 each) by MLMC, TVA and Choctaw.

2.11 Effect of Arbitrators' Decision. The decision of the arbitrators shall be final and binding upon MLMC, TVA and Choctaw and enforceable pursuant to the laws of the United States of American and judgment thereon may be filed in any court having jurisdiction thereof. It is agreed that during the pendency of any arbitration proceedings, MLMC, TVA and Choctaw shall continue to perform their obligations under the LSA and the PPOA pending the decision of the arbitrators. To the extent necessary and proper, the arbitrators' decision shall be retroactive.

2.12 Waiver of Jury Trial. MLMC, TVA and Choctaw waive any right they may have to trial by jury in connection with proceedings or counterclaims brought by MLMC, TVA or Choctaw to enforce or appeal an arbitration award rendered under this Article 2.

ARTICLE 3

INTERACTION OF LSA AND PPOA

3.01 Parallel Pass-Throughs. MLMC and Choctaw have agreed in the LSA that no change to any indices and no Pass-Through Charge imposed on the mining of fossil fuel for electric generating facilities shall be made under the LSA unless TVA has agreed to parallel changes in the PPOA or unless a change to indices or a Pass-Through Charge is required to comply with an arbitration award or court order entered pursuant to this Agreement.

3.02 TVA Obligations Limited to PPOA. MLMC and Choctaw each acknowledge and agree that TVA has no knowledge of, has not agreed to, and is in no way bound by any provision of the LSA. TVA is obligated under the PPOA and, to the extent of Arbitration of escalation index selection and Pass-Through Charges, obligated to arbitrate pursuant to this Agreement only. In no way does TVA's acceptance of this Agreement expand its obligations as to the PPOA other than to require that the Arbitration of index selection and Pass-Through Charges be conducted among TVA, Choctaw and MLMC so that the indexes and Pass-Through Charges will be parallel between the PPOA and the LSA, but only to the extent consistent with the Provisions of the PPOA.

ARTICLE 4

NOTICES

Any notices provided for in this Agreement must be in writing and shall be effective on the business day following the day on which it is actually received (provided that such day is a business day, otherwise it shall be effective on the business day immediately following such day), in person by U.S. mail or other nationally recognized service, or by facsimile transmission at the following address:

If to TVA

Address:	Tennessee Valley Authority, 1101 Market Street, Chattanooga,
	Tennessee 37402-2601
Attention:	Executive Vice President, Transmission/Power Supply Group
Phone:	(423) 751-4925
Fax:	(423) 751-8352

If to Choctaw

Address:	Choctaw, Generation Limited Partnership, 1177 West Loop South,
	Houston, Texas 77027
Attention:	Mississippi Lignite Project Director
Phone:	(713) 599-2656
Fax:	(713) 599-2858

If to MLMC

Address:	Mississippi Lignite Mining Company,
	Post Office Box 098, Ackerman, Mississippi 39735
Attention:	General Manager
Phone:	(601) 285-0066
Fax:	(601) 285-2372

ARTICLE 5

MISCELLANEOUS

5.01 Except as otherwise specifically defined herein, capitalized items used in this Agreement shall have the same definitions set forth for those terms in the LSA or the PPOA, as the case may be.

5.02 The term of this Agreement shall commence on the effective date herein and shall continue for so long as both the LSA and the PPOA remain in effect.

5.03 No waiver of any breach of this Agreement shall be a waiver of any other or subsequent breach.

5.04 This Agreement, together with the LSA and the PPOA, sets forth all the understandings of the Parties with respect to its subject matter, and any other prior agreements, understandings and representations, whether oral or written, relating to such subject matter are merged into and superseded by this Agreement, provided that as between Choctaw and MLMC in the event of a conflict between provisions of this Agreement and the LSA, the LSA shall control and as between Choctaw and TVA in the event of a conflict between the provisions of this Agreement and the PPOA, the PPOA shall control; provided, however, with regard to the conduct of the arbitration, including sharing the costs of conducting the arbitration, selection of arbitrators and other related matters, all Parties agree that the provisions of this Agreement shall control as to the specific matters submitted to arbitration under this Agreement.

5.05. No amendment to this Agreement shall be effective unless approved in writing by each Party hereto.

THE BALANCE OF THIS PAGE INTENTIONALY LEFT BLANK

IN WITNESS WHEREOF, each Party has caused this Agreement to be executed on its behalf by its duly authorized representative to be effective for all purposes as of the date first set forth above.

	TENNESSEE VALLEY AUTHORITY
	By
	Title
Witness:	Date

	CHOCTAW GENERATION LIMITED PARTNERSHIP
	By:	Choctaw Generation, Inc.
	Its:	General Partner
	By
	Title
Witness:	Date

	MISSISSIPPI LITNTE MINING COMPANY
	By Its Joint Ventures
	Phillips Coal Company
	By
	Title
Witness:	Date

	The North American Coal Corporation
	By
	Title
Witness:	Date

EXHIBIT G

TO

LIGNITE SALES AGREEMENT

This Subordinated Deed of Trust was prepared by and when recorded mail to:

Mark T. Davis

Watkins Ludlam Winter & Stennis, P.A.

633 North State Street

Jackson, Mississippi 39202

(601) 949- 4900

Indexing Instructions:

EXHIBIT I

TO

LIGNITE SALES AGREEMENT

BETWEEN THE MISSISSIPPI LIGNITE MINING COMPANY AND CHOCTAW GENERATION LIMITED PARTNERSHIP

PERMITTING AND CONSTRUCTION SCHEDULE

JOINT	WEEK OF:
DEIS Public Meeting	3/9/1998
FEIS NOA	6/22/1998
EIS. Record of Decision	8/17/1998
MDEQ Public Hearing on Permits	6/22/1998

MINE
COE Wetlands Permits (1st five-year area)	8/24/1998
MSHA Pond Approvals	8/24/1998
SHPO Approvals (Section 106)	8/24/1998
Surface Mine Permit	8/24/1998
Facility Notice to Proceed	9/1/1998
Completion of Ponds and Roads	10/1/1999
Commencement Date	7/1/2000

POWER PLANT
PSD Permit	8/24/1998
Water Withdrawal Permit	8/24/1998
NPDES Storm Water Permit	8/24/1998
COE Wetlands Permit	8/24/1998
Solid Waste Permit	8/24/1998
Facility Notice to Proceed	9/1/1998
Start of Construction of Truck Dump	3/1/1999
Commercial Operation	12/1/00*

*This milestone is specific to a particular day, not a week

EXHIBIT J

TO

LIGNITE SALES AGREEMENT

QUALITY & PROPERTY PRICE ADJUSTMENT

Introduction - This Exhibit J describes the methodology for calculating the daily quality adjustment to be applied to the Adjusted Base Price pursuant to Section 6.05 of the Agreement. The equations contained in this Exhibit J shall be used to calculate the change in costs that Buyer will incur at the Facility as a result of daily quality variations in the Dedicated Lignite or Alternate Fuel (collectively, “Fuel”) delivered by Seller to Buyer. These equations are based on four key parameters:

- Fuel Calorific Value

- Fuel Ash Content

- Fuel Moisture Content

- Fuel Sulfur Content

For an equivalent amount of electrical generation, the Fuel, limestone and ash flows for the daily delivered Fuel shall be calculated and compared to the material flows that would result from the use of Fuel with the specifications set forth in Section 6.01 of the Agreement. The difference in operating and maintenance costs associated with these material flows is the quality adjustment for the daily delivered Fuel.

Definitions

Facility Parameters -The parameters used to establish baseline Facility performance, which are set forth below, are based on EPC Contract guarantees and major equipment performance data. For purposes of calculating the quality adjustment, these parameters shall remain constant for the Term of this Agreement..

Net Unit Facility Capacity	-440,020 kW	(WOUT)
Turbine Heat Rate	-8013.0 Btu/Kwh	(HRT)
Sulfur Removal Efficiency	-0.95%	(%R)
Overall Ca/S Ratio	-2.2904	(Ca/Sall)
Utilization of CaO in Ash	-30%	(CaOutil)
Limestone Purity	-80%	(%CaCO3)
Facility Auxiliary Load	-49,943 kW	(AuxLoad)
% of Auxiliary Load attributed to Fuel	-40%	(AuxF)
% of Auxiliary Load attributed to Ash	-5.0%	(AuxA)
% of Auxiliary Load attributed to Limestone	-5.0%	(AuxL)
Fuel Flow Base	-8141,844 Lbs/hr	(FFB)
Ash Production Base	-151,816 Lbs/hr	(AB)
Limestone Consumption Base	-33,203 Lbs/hr	(LB)

Design Fuel Specifications - As set forth in Section 6.01 of the Agreement, the design Fuel specifications are as follows:

Calorific Value, Btu/lb	-5294 BTU/lb	(HHV)
Sulfur Content% by weight	-0.58%	(%S)
Ash Content, % by weight	-14.64%	(%A)
Moisture Content, % by weight	-41.75%	(%M)

Unit Operating and Maintenance Costs - The costs affected by changes in Fuel quality are those costs directly affected by the Fuel, ash, and limestone flow. For the purpose of calculating the cost impact of variations in Fuel quality, the base unit costs shall be as follows:

1.) Fuel Charge (CF)	[* * *] / MMBtu
2.) Fuel Handling Maintenance Cost (CFM)	[* * *] / Fuel ton
3.) Limestone Cost (CL)	[* * *] / limestone ton
4.) Limestone Maintenance Cost (CLM)	[* * *] / limestone ton
5.) Ash Disposal Cost (CA)	[* * *] / ash ton
6.) Ash Maintenance Cost (CAM)	[* * *] / ash ton
7.) Electricity Cost (CE)	[* * *] / kWhr

Where: C_F = Total Base Price - Pass-through component price

Unit Operating and Maintenance Cost Escalation- The “Unit Operating And Maintenance Costs” listed above shall be adjusted to reflect the changes in the Fuel Charge. The Fuel Charge shall be adjusted on a Monthly basis and shall be equal to the Adjusted Base Price for the current Month (in $/MMBtu) less the Pass-through component price for the current Year (in $/MMBtu)

All unit costs, other than the Fuel Charge, shall be adjusted Monthly as follows:

* * * Confidential Treatment Request

	ACxn = (CFn/[* * *]/MMBtu) x Cx
Where:	ACxn = Adjusted Unit Cost for item “x” in the current Month
	CFn= Fuel Charge for the current month ($/MMBtu)
	Cx= Unit Cost amount for item “x” set forth in “Unit Operating and
		Maintenance Costs” above
Where:	x = Items 2.) through 7.) in “Unit Operating and Maintenance Costs”
	n = current Month

Quality Adjustment - Based on the Facility parameters, Fuel quality and unit operating and maintenance costs listed above, a price adjustment for quality (“Quality Adjustment”) shall be calculated on a daily basis. The Quality Adjustment for each Month shall be equal to the sum of the daily Quality Adjustments during such Month and shall be included in Seller's Monthly invoice. The equations to be used to calculate the Quality Adjustment and an example of such adjustment calculation are set forth in the attached Quality Adjustment Table.

Annual Limestone Cap Quality Adjustment - Before January 1 of each Year Buyer and Seller shall establish a Predicted Annual Limestone Consumption (PALC) and an Annual Minimum Limestone Contract Take (AMLCT), where AMLCT equals 75% of PALC, based upon the expected annual power generation, Fuel sulfur & CaO content, and limestone quality performance. At Year-end, the PALC. will be adjusted for changes in annual power generation, and the AMLCT shall be adjusted for changes occurring during the Year due to contract limestone quality changes. The Seller's Total Annual Quality Adjustment shall be decreased or increased to the extent the actual limestone tonnage falls below the 75% Year-end PALC or above the 125% Year-end PALC times the average annual limestone unit cost.

Basic Equations

The equations contained in the Quality Adjustment Table of this Exhibit J were derived by Bums & McDonnell (Project 96-615-1 for Tractabel Power, Inc.) These equations, which are needed to calculate Fuel flow, limestone flow and ash production for a circulating fluidized bed boiler, are as follows:

Heat Input and Fuel Flow

HI =	WOUT * HR	Equation 1
HI =	WOUT * HRT/ŋ
FF =	HI
	HHV
FF =	WOUT *HR	Equation 2
	HHV
FF =	WOUT *HRT /ŋ
	HHV

* * * Confidential Treatment Request

The boiler efficiency is affected by the moisture content of the Fuel. Based on information received from Foster-Wheeler Energy Corp., the relationship between Fuel moisture and boiler efficiency in the circulating fluidized bed is:

ŋ = 0.9477 - 0.375 * %M

This boiler efficiency/lignite moisture content relationship is graphically presented at the end of this section.

Substituting the above formula for the relationship between Fuel moisture and boiler efficiency for the value of “ŋ', the above equations for heat input and Fuel flow become:

HI =	WOUT * HRT/		Equation 1a
		(0.9477 - 0.375 *%M)
FF =	WOUT * HRT/		Equation 2a
	(0.9477 - 0.375 *%M)
	HHV

Limestone Flow

L=	100	(	Ca	)	* FF * %S
	32		S
	%CaCO3

Equation 3

A relationship between the ash content and Calcium Oxide (CaO) content in the ash of the Fuel has been established. A regression formula based on over 100 core samples was developed to calculate percent CaO in the ash based on percent ash on an as-delivered basis. The regression formula is:

%CaO = (230.452 / %ash) - 3.176

The relationship between the ash content and Calcium Oxide (CaO) content in the ash is graphically presented at the end of this section.

Ash Flow

Ash flow from a CFB is made up of four parts (Fuel ash, SO₂ removal reaction products, unreacted lime and limestone inerts) as follows:

A =	[%A * FF * (1-%Ca)] +	136	* FF * %S * %R
		32

+	56	*(	Ca	-%R)	* FF * %S
	32		S

+	100	*(	Ca	)	* FF * %S * (1 - %CaCO3)
	32		S
	%CaCO3

Equation 4

Basic Calculations

The total heat input and Fuel, limestone and ash flows for the Facility design conditions are calculated from equations 1, 2, 3 and 4, respectively, using the Fuel specifications contained in Section 6.01 of the Agreement and Facility Parameters listed in this Exhibit J. Design condition parameters are identified by the subscript B. Similarly, the actual total heat input and Fuel, limestone and ash flows for the current period are calculated from equations 1a, 2a, 3 and 4, respectively, using the current period Fuel quality data. Current period parameters are identified by the subscript C. Differences between the current period values and the design condition values are used to determine the total impact of the Fuel quality change. The appropriate cost factors are then used to determine the total cost impact of the Fuel quality change as follows:

Cost Calculations:

The total change in operating and maintenance costs of the Facility is the sum of the change in Fuel costs, limestone costs, ash disposal costs, power costs and maintenance costs. Using the change in heat input and the Fuel, limestone and ash flow changes calculated above, these costs are calculated as follows:

EX-10.18

Exhibit 10.18

CONFIDENTIAL TREATMENT REQUESTED FOR PORTIONS OF THIS DOCUMENT. PORTIONS FOR WHICH CONFIDENTIAL TREATMENT IS REQUESTED HAVE BEEN MARKED WITH THREE ASTERISKS [***] AND A FOOTNOTE INDICATING “CONFIDENTIAL TREATMENT REQUESTED”. MATERIAL OMITTED HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

SECOND RESTATEMENT OF COAL SALES AGREEMENT

between

THE FALKIRK MINING COMPANY

and

GREAT RIVER ENERGY

dated as of January 1, 2007

SECOND RESTATEMENT OF COAL SALES AGREEMENT

THIS SECOND RESTATEMENT OF COAL SALES AGREEMENT (“Agreement”) is made as of January 1, 2007, between THE FALKIRK MINING COMPANY, an Ohio corporation qualified to do business in North Dakota (“Falkirk”), and GREAT RIVER ENERGY, a Minnesota cooperative corporation (“GRE”).

W I T N E S S E T H:

WHEREAS, Cooperative Power Association and United Power Association (the “Cooperatives”) built a coal-fired electric generating station called Coal Creek Station (“Coal Creek Station”) that has two 550 megawatt generating units and is located in Township 145 North, Range 82 West, McLean County, North Dakota;

WHEREAS, Falkirk, a wholly owned subsidiary of The North American Coal Corporation (“North American Coal”), has developed a mine to supply the fuel requirements of the Coal Creek Station;

WHEREAS, Falkirk and the Cooperatives entered into a Coal Sales Agreement dated as of July 1, 1974 (the “Coal Sales Agreement”);

WHEREAS, GRE was formed on January 1, 1999 when the Cooperatives consolidated their operations and assigned all of their interests in the Coal Sales Agreement to GRE;

WHEREAS, Falkirk, GRE and the Cooperatives adopted a Restatement of Coal Sales Agreement effective as of January 1, 2000 to incorporate the various amendments and related letter agreements to the Coal Sales Agreement and to make certain other changes therein;

WHEREAS, the Cooperatives completed a merger with and into GRE effective as of May 1, 2006, with GRE being the surviving entity possessing all of the rights and property and succeeding to all the obligations of the Cooperatives, including but not limited to the Restatement of Coal Sales Agreement, Funding Agreement, Mortgage and Security Agreement and Option Agreement; and

WHEREAS, Falkirk and GRE hereby desire to extend the term of the Restatement of Coal Sales Agreement and to make certain other changes therein.

NOW, THEREFORE, the following Second Restatement of Coal Sales Agreement (“Agreement”) hereby is adopted and supersedes the Restatement of Coal Sales Agreement that Falkirk, GRE and the Cooperatives executed prior to the effective date hereof:

Section 1.Definitions

As used in this Agreement, the following terms shall have the following meanings:

(a) “Affiliate” shall mean a person controlling, controlled by or under common control with another person.

(b) “Agreed Profit” shall have the meaning ascribed to the term in Section 5.4 hereof.

(c) “Cost of Production” shall have the meaning ascribed to the term in Section 5.2 hereof.

(d) “CPI-U” shall mean the Consumer Price Index for All Urban Consumers on the base 1982-1984=100, published by the Bureau of Labor Statistics of the United States Department of Labor.

(e) “Falkirk's Mine” shall mean all mining areas developed by Falkirk in the Underwood Coal.

(f) “FAS 87” shall have the meaning ascribed to the term in Section 5.7(c) hereof.

(g) “FAS 106” shall have the meaning ascribed to the term in Section 5.7(b)(i) hereof.

(h) “Funding Agreement” shall mean the Funding Agreement dated as of April 8, 1976, and as subsequently amended, by and between Falkirk and the Cooperatives, or any replacement thereof.

(i) “IPD-GDP” shall mean the Implicit Price Deflators for Gross Domestic Product on the base 2000=100, published by the U.S. Department of Commerce Bureau of Economic Analysis.

(j) “Leases” shall have the meaning ascribed to the term in Section 4(a) hereof.

(k) “Loans” shall have the meaning ascribed to the term in Section 4(a) hereof.

(l) “Mortgage and Security Agreement” shall mean the Mortgage and Security Agreement dated as of April 8, 1976, and as subsequently amended, by and between Falkirk and the Cooperatives, or any replacement thereof.

(m) “Option Agreement” shall mean the Restatement of Option Agreement dated as of January 1, 1997, by and among Falkirk, the Cooperatives and The Bank of North Dakota, or any replacement thereof.

(n) “Parties” shall mean Falkirk and GRE.

(o) “Party” shall mean either Falkirk or GRE as indicated by the context.

(p) “Pension Plan” shall mean the pension plans administered by North American Coal for the benefit of Falkirk employees.

(q) “Riverdale Coal Field” shall mean that area bounded by the Missouri River to the west and south, County Road 14 to the north and U.S. Highway 83 to the east, as delineated in Annex A, which is attached hereto and made a part hereof.

(r) “Sublease Agreement” shall mean the Sublease Agreement dated as of December 15, 1993, by and between Falkirk and North American Coal Royalty Company, which is attached hereto as Annex B and made a part hereof or any replacement thereof.

(s) “Ton” shall mean a net ton of 2,000 pounds.

(t) “Underwood Coal” shall mean all coal within the Underwood Coal Field and the Riverdale Coal Field that (i) Falkirk, North American Coal and other Affiliates of Falkirk had under lease or owned in fee as of January 1, 2007, and (ii) Falkirk acquires hereunder in fee or by leasehold with the approval of GRE.

(u) “Underwood Coal Field” shall mean that area located within a radius of five (5) miles from the center of Underwood, North Dakota, as delineated in Annex A.

Section 2.Term; Tonnage and Rate of Delivery; Use of Coal

(a) GRE hereby agrees to purchase and accept from Falkirk, and, subject to Section 2(b) hereof, Falkirk hereby agrees to sell and deliver to GRE, in accordance with the terms of this Agreement, the coal requirements of the Coal Creek Station (including all expansions and additions thereto) during the term commencing January 1, 2007, and ending December 31, 2045. Except as otherwise expressly provided herein, GRE shall purchase coal only from Falkirk as fuel for the Coal Creek Station during the term of this Agreement.

(b) The quantity of coal to be mined and delivered by Falkirk shall not exceed the production capability of Falkirk's Mine. When any increase in GRE's coal requirements occurs which necessitates the acquisition by Falkirk of additional equipment, Falkirk shall not be obligated to supply such increased requirements until such time as it is able to acquire and install such additional equipment and do all other things necessary to supply such increased requirements. All expansion of Falkirk's Mine required to produce the coal pursuant to this Section 2(b) shall be subject to GRE's obligation to finance under Section 4 hereof.

(c) Scheduled deliveries shall be in approximately equal monthly amounts. GRE shall have the right to reduce shipments during planned shutdowns of a unit of the Coal Creek Station.

(d) In addition to purchasing coal for use at the Coal Creek Station, GRE may purchase coal hereunder for use at any other generating station in which GRE has a financial interest or at any other facility that is located on Coal Creek Station's site that utilizes coal that passes through Falkirk's coal handling systems.

Section 3.Description of Coal

(a) The coal to be sold and delivered hereunder shall be from Falkirk's Mine and shall be crushed mine-run coal having a top size of one and one-half inches (1½”) or such larger size as GRE may specify in a written notice to Falkirk. Exposed coal from different locations in Falkirk's Mine shall be blended as requested by GRE to the extent feasible.

Falkirk shall deliver the coal so as to be reasonably free from contamination but Falkirk makes no representations or warranties as to the inherent quality and characteristics of the Underwood Coal.

(b) Falkirk shall consult with GRE from time to time in advance of removing overburden as to the areas in which such removal shall occur so that to the extent practicable the blend of coal delivered under this Agreement shall be most suitable for consumption at the Coal Creek Station. At least annually, Falkirk shall furnish to GRE a projection of its mining plans for one year with a statement of the expected characteristics of the coal which will be exposed by carrying out such mining plan.

(c) The Parties agree that the quality of coal delivered to the Coal Creek Station has a major impact on the operation and production economics of the Coal Creek Station, and periodically, or at the request of GRE, the Parties shall meet to discuss the quality of delivered coal and to determine what corrective actions, if any, are necessary to improve delivered coal quality.

Section 4.Loans; Leases

(a) It will be necessary for Falkirk to obtain loans for the acquisition of mineral coal and surface lands not now controlled by Falkirk or an Affiliate and loans or leases for the construction and equipping of Falkirk's Mine, which shall be indebtedness or lease obligations of Falkirk not guaranteed by any Affiliate of Falkirk (such loans and leases and such continued or additional loans or leases as may be necessitated by Falkirk's acquisition of mineral coal and surface lands and by replacement of or addition to Falkirk's equipment, or by the expiration of any lease of equipment to Falkirk prior to the expiration of this Agreement being referred to herein as the “Loans” and/or “Leases”). GRE agrees to arrange for Loans and Leases in amounts sufficient for developing, equipping and operating Falkirk's Mine to the capacity required for producing the quantity of coal to be furnished hereunder including, without limitation, (i) acquiring mineral coal and surface lands, (ii) developing haulageways, (iii) constructing tipples and cleaning plants, (iv) electric power distribution systems, (v) water drainage and distribution systems, (vi) acquiring machinery and (vii) maintaining working capital necessary for operating Falkirk's Mine. Falkirk shall use any cash in its accounts, except an amount equal to its undistributed earnings, for one or more of the above purposes before requesting additional Loans and Leases. GRE shall (w) provide the Loans and Leases, (x) arrange for Loans and Leases by Falkirk from third persons, (y) direct Falkirk to borrow or lease from third persons or (z) combine GRE's Loans and Leases with those of third persons. So long as this Agreement is in effect, GRE shall be responsible for and shall provide, arrange for or direct such continued or additional Loans and Leases as may be necessitated by Falkirk's acquisition of mineral coal and surface lands and by replacement of or addition to Falkirk's equipment, by the expiration of any lease of equipment to Falkirk prior to the expiration of this Agreement or by the need for additional working capital, in each case to equip Falkirk's Mine to the capacity required for producing the quantity of coal to be furnished hereunder in accordance with GRE's then requirements and increases, if any, specified by GRE pursuant to Section 2(b) hereof. Subject to Section 5.7(a) hereof, GRE shall not be required to finance the acquisition of replacement equipment having a greater estimated useful life than the balance of the term of this Agreement. If the Loans and Leases are arranged with third persons, GRE shall have the right subsequently to discharge the Loans and Leases and substitute itself as lender or lessor for the balance of the term of such Loans and Leases. Any Loans and Leases provided, arranged for or directed by GRE in the exercise of its rights and obligations under this Section 4 shall not be less favorable to Falkirk than Loans and Leases for the same term which could be obtained by Falkirk directly. If Falkirk has any objection under the previous sentence to financing proposed by GRE, it shall notify GRE of such objection thirty (30) days before GRE becomes committed to such financing. In connection with any financing pursuant to this Section 4, Falkirk shall create a security interest in any or all assets of Falkirk except its undistributed net earnings in favor of any lender to Falkirk and/or any guarantor of any Loan to Falkirk and/or any lender or guarantor of any lender to GRE with respect to funds which GRE makes available to Falkirk under this Section 4.

(b) In connection with any guaranty by GRE of Loans and Leases, Falkirk shall create security interests in favor of GRE in all assets of Falkirk except its undistributed net earnings but subject to the security interests in favor of lenders and lessors and subject to the performance by GRE of its obligations under this Agreement. For the protection of GRE, Falkirk agrees that it shall not declare dividends on its stock except out of earned surplus.

(c) If GRE fails to provide all the funds contemplated by Section 4(a) hereof and in consequence Falkirk is unable to produce the tonnage of coal required by Section 2 hereof, Falkirk shall be deemed to have fulfilled its obligations under Section 2 hereof if it produces and sells to GRE the quantity of coal which can be produced from time to time from Falkirk's Mine developed with the funds so provided by GRE pursuant to this Section 4.

Section 5.Price

5.1Determination of Price. GRE shall pay for the coal sold and delivered hereunder a price which annually equals the Cost of Production plus the Agreed Profit, as adjusted in accordance with Section 5.5 hereof.

5.2Cost of Production. Except as otherwise expressly stated herein, “Cost of Production” for the purposes of this Agreement shall mean the costs actually incurred by Falkirk in the mining, processing and delivery of Underwood Coal hereunder. Such costs shall be determined and allocated in accordance with generally accepted accounting principles (except as otherwise expressly stated in this Section 5.2), consistently applied and shall include the following:

(a) All production, maintenance and delivery costs including without limitation the following types of costs, but excluding any costs which are properly includible under Section 5.2(c) hereof:

(i) Labor costs, which include wages and the costs of all related payroll taxes, benefits, including post-retirement medical benefits, and fringes, including welfare and pension plans, worker's compensation coverage (either in the state fund or self-insurance, whichever in the best judgment of Falkirk is more advantageous), group insurance, vacations and other comparable benefits of corporate officers and employees of Falkirk located at Falkirk's Mine and employees of Affiliates of Falkirk located in North Dakota, whose labor costs are properly charged directly to Falkirk's Mine;

(ii) Supplies and major repairs, including materials utilized in the operation of Falkirk's Mine;

(iii) Contract services;

(iv) Rental of machinery and equipment, but excluding any payments under leases included under Section 5.2(d) hereof;

(v) Miscellaneous costs, including membership costs for membership by Falkirk and Affiliates of Falkirk in one national industry association or trade group (such as the National Mining Association or similar group), or such other industry associations as specifically approved by GRE, in writing, to be charged to the Cost of Production;

(vi) Reasonable and necessary services by other than Affiliates of Falkirk;

(vii) Insurance;

(viii) Taxes and fees, but not including income taxes, imposed by any government or governmental unit;

(ix) Overhead costs, which include travel, telephone, postage, office machine costs and other office maintenance costs, business expenses and training costs for employees of Falkirk and employees of Affiliates of Falkirk located in North Dakota whose costs are properly charged directly to Falkirk's Mine;

(x) Development costs, which shall be amortized ratably; and

(xi) Reclamation and other costs, including labor and supplies, required to comply with regulations of federal, state or local governments not otherwise included as an element of cost herein.

If any of the foregoing includes costs incurred by an Affiliate of Falkirk and charged to Falkirk, they shall be included only at the cost to such Affiliate without addition for any overhead, loading, intercompany or intracompany profit or service charge. Except as expressly set forth in this Agreement and specifically approved by GRE, GRE shall not be charged for any costs incurred by Affiliates of Falkirk. In determining costs, Falkirk shall give GRE the proportionate benefit of volume purchases participated in by Falkirk and Affiliates of Falkirk.

(b)Coal and surface costs:

(i) The tonnage royalty under leases (including a proration of lease bonus payments, rental payments and other capitalized leasehold expenses), current delay rental on coal lands and other current expense of maintaining leaseholds, including reasonable attorneys' fees and other legal expenses for abstracts and title opinions and for land and lease title curative or research activities but excluding royalty payments made by Falkirk under the Sublease Agreement to any Affiliate of Falkirk and any other overriding or other royalties payable by Falkirk to any Affiliate of Falkirk;

(ii) Depletion of the capital cost of any coal acquired by Falkirk in fee, based upon estimated reserves; and

(iii) Ten cents ($0.10) per Ton of either fee or leasehold coal mined from the Underwood Coal Field only, which shall be paid by Falkirk to CSTL LLC, a Delaware limited liability company, or its successors and assigns.

All coal and surface acquired in fee and all coal and surface lease acquisitions, lease bonuses, prepaid royalties and rentals relating to the Underwood Coal Field prior to June 30, 1974, shall be paid for by Falkirk out of its own capital, without financing pursuant to Section 4 hereof and without recovery of interest thereon by Falkirk. All Underwood Coal Field acquisitions, lease bonuses, prepaid royalties and rentals after June 30, 1974, shall be financed pursuant to Section 4 hereof. All coal and surface acquired in fee and all coal and surface lease acquisitions, lease bonuses, prepaid royalties and rentals relating to the Riverdale Coal Field prior to December 15, 1993, shall be paid for by Falkirk out of its own capital, without financing pursuant to Section 4 hereof and without recovery of interest thereon by Falkirk. All Riverdale Coal Field acquisitions, lease bonuses, prepaid royalties and rentals on or after December 15, 1993, shall be financed pursuant to Section 4 hereof.

(c) General and administrative costs:

(i) Commencing January 1, 1999, the sum of [* * *] (which shall be adjusted as set forth

* * * Confidential Treatment Requested

in Section 5.2(c)(ii) hereof) shall be added for general and administrative costs. General and administrative costs that are to be covered by such [* * *] (and are not to be otherwise included in the Cost of Production) are: (i) general accounting and billing expense for those functions performed at other than Falkirk's Mine, (ii) except as otherwise provided in Sections 5.2(a)(i) and 5.2(a)(ix) hereof, salaries and related expenses, such as payroll taxes, pensions and worker's compensation, of corporate officers and employees of Falkirk and officers and employees of Affiliates of Falkirk, unless such expenses are specifically approved by GRE, in writing, to be charged to the Cost of Production or are subject to Sections 5.2(a)(i) or 5.2(a)(ix) hereof, (iii) travel, telephone, postage and office maintenance expense for persons or services included in general and administrative costs, (iv) memberships and contributions of Affiliates of Falkirk, audit expense of Falkirk and Affiliates of Falkirk, legal expense of Falkirk and Affiliates of Falkirk, except (A) legal expense that is connected with financing of Falkirk and capitalized as part of the financing, and (B) reasonable legal expense associated with the acquisition and maintenance of coal leases or surface lands owned or held by Falkirk, or such other legal expenses that are specifically approved by GRE, in writing, to be charged to the Cost of Production, (v) insurance expense incurred by Affiliates of Falkirk and (vi) franchise taxes.

(ii) The amount set forth in Section 5.2(c)(i) for general and administrative costs shall be adjusted annually, beginning on January 1, 2000, for the calendar year 2000, and on January 1 of each year thereafter in the percentage by which the CPI-U for December of the previous calendar year differs from the CPI-U for December of 1998. An example calculation illustrating such annual adjustment calculation is set forth in Annex C, which is attached hereto and made a part hereof.

(d) Capital-related costs:

(i) Rent paid to a lessor or owner of a lessor under Leases (including interest thereon, if any) incurred pursuant to Section 4 hereof as the same shall become due and payable, excluding, however, any amounts becoming due and payable pursuant to any default, acceleration or optional payment provision of any Lease.

(ii) Depreciation and/or amortization to which Falkirk is entitled, the rates of which shall be determined by Falkirk from time to time.

No depreciation or amortization shall be included in the Cost of Production with respect to items of property for which a lessor under a Lease has taken depreciation or amortization and included the same in computing the rent under such Lease. Unless the Parties mutually agree otherwise, the rates of such depreciation and/or amortization shall be limited to a straight-line basis over the anticipated useful service life of the assets and shall not exceed the maximum deduction allowable under applicable federal income tax laws and regulations. GRE shall be entitled to the correction from time to time of anticipated useful service lives to conform to experience. The amount of any investment tax credit under Section 38 of the United States Internal Revenue Code or similar subsequent provisions of said Code which is realized by Falkirk shall be credited to current Cost of Production. Falkirk shall claim such investment tax credits, or similar subsequent tax benefits, at the times and in the amounts that will produce the greatest tax savings to Falkirk and resulting credits to GRE. Net gains or losses on the dispositions of capital assets shall be credited or charged, as the case may be, to the Cost of

* * * Confidential Treatment Requested

Production. Transactions between Falkirk and any one or more of its Affiliates involving capital assets (including contributions to the capital of Falkirk) shall be reflected in Falkirk's accounts at cost to the Affiliates of the assets involved, less accrued depreciation, as shown by the accounts of the transferring company, or salvage value if it is greater than depreciated cost. Falkirk shall submit to GRE annual budgets for the acquisition or leasing of all items of capital assets in each year in excess of $100,000 each. Modifications of such annual budgets for the acquisition of items of capital assets in excess of $100,000 each shall be submitted to GRE. If GRE reasonably disapproves in writing any items in any of said budgets, Falkirk shall not make such disapproved expenditures. All disputes about the reasonableness of GRE's disapproval shall be resolved by arbitration pursuant to Section 14 hereof. As to any items in any budget or revised budget, approval by GRE shall be conclusively deemed to have been given if GRE does not disapprove in writing within thirty (30) days after receipt thereof in the case of the annual budget, or within two (2) weeks after receipt thereof in the case of modifications of the budget. The foregoing provisions shall not preclude Falkirk from making acquisitions of capital assets to meet emergency conditions in Falkirk's Mine.

(e)Interest; Loan and Lease Expense:

The amount of interest, Loan and Lease commitment fees currently due and payable and amortization of other expenses incurred in connection with Falkirk obtaining Loans and Leases (to the extent not otherwise provided for under Section 5.2(d) hereof), accrued by Falkirk with respect to the Loans and Leases less interest or dividends received by Falkirk on its investments.

5.3Computation of Cost of Production. The Cost of Production shall be computed on a calendar year basis. The Cost of Production shall be determined on a cents per Ton basis by dividing the annual Cost of Production by the number of Tons produced by Falkirk hereunder in such year. During any calendar year in which Falkirk sells Underwood Coal to persons other than GRE, the Cost of Production shall first be determined as to all coal produced at Falkirk's Mine. The Cost of Production under this Agreement shall be that percentage of the total Cost of Production at Falkirk's Mine which the number of Tons sold in such year to GRE under this Agreement bears to the total number of Tons produced by Falkirk from Falkirk's Mine during such year.

5.4Agreed Profit.

(a) For all Tons of coal up to and including 5,600,000 Tons sold and delivered by Falkirk to GRE hereunder in any calendar year, the agreed profit (“Agreed Profit”), expressed in January 1, 2006 dollars, shall be [* * *] per Ton.

(b) For all Tons of coal in excess of 5,600,000 Tons sold and delivered by Falkirk to GRE hereunder in any calendar year, the Agreed Profit, expressed in January 1, 2006 dollars, shall be [* * *] per Ton.

5.5Adjustment of Agreed Profit.

(a) Adjustment of Agreed Profit for 2007 and 2008:

The Agreed Profit per Ton set forth in Section 5.4 hereof shall be adjusted on January 1, 2007, for the calendar year 2007, and on January 1, 2008, for the calendar year 2008, based upon

* * * Confidential Treatment Requested

the weighted average of 60 percent of the change in the IPD-GDP for the twelve months ending in June of the previous year and 40 percent of the change in the CPI-U for the twelve months ending in June of the previous year. An example calculation illustrating such annual adjustment calculation is set forth in Annex D, which is attached hereto and made a part hereof.

(b) Adjustment of Agreed Profit for calendar years commencing with 2009:

The Parties shall negotiate in good faith in an attempt to agree upon a method or methods of adjusting the Agreed Profit set forth in Section 5.4 hereof for three (3) year periods commencing with the calendar year 2009. The method or methods of adjusting the Agreed Profit set forth in Section 5.4 hereof shall be based on criteria that reflects the impact of changes in general inflation in the United States using the IPD-GDP, CPI-U or other government indices or combinations of indices as agreed to by the Parties. If by July 1 of the year preceding the commencement of each such three (3) year period, the Parties cannot agree upon a method of adjusting the Agreed Profit in Section 5.4 hereof for the three (3) year period under consideration, then such Agreed Profit during such three (3) year period shall be resolved by arbitration pursuant to the Rules of the American Arbitration Association in effect at the time of such arbitration. The Parties agree that such binding arbitration shall be completed no later than August 15 of such year. Arbitration under this Section 5.5(b) shall not be subject to arbitration pursuant to Section 14 hereof.

(c) When the Agreed Profit is adjusted pursuant to Section 5.5 hereof, such Agreed Profit shall be substituted for Agreed Profit provided for in Section 5.4 hereof.

5.6Revisions to Indices. . If at any time during the term of this Agreement the base of the IPD-GDP or CPI-U is revised from the applicable base set forth in Sections 1(d) and 1(i) hereof or a new base is adopted, then for the purposes hereof, the published index shall be adjusted so as to be in correct relationship to the applicable base set forth in Sections 1(d) and 1(i) hereof. If the CPI-U, IPD-GDP or any equivalent of such index ceases to be published by any federal agency, such index shall be replaced by that index which, after necessary adjustment, if any, provides the most reasonable substitute upon which the Parties mutually agree.

5.7Post-Mining Costs. The Parties mutually agree that, following termination of coal deliveries hereunder, reclamation, post-retirement medical benefits and pension costs with respect to Falkirk employees, which are covered pursuant to Section 5.2 hereof, shall continue to be paid by GRE as follows:

(a) Post-mining reclamation costs:

(i) Upon termination of coal deliveries hereunder, GRE shall pay for the reasonable and verifiable costs incurred by Falkirk that are required to comply with the applicable federal and state laws, rules and regulations with respect to reclamation of all surfaces disturbed by or in connection with Underwood Coal produced by Falkirk and sold hereunder. The reclamation costs payable under this Section 5.7 shall be determined in accordance with the principles for determining the Cost of Production pursuant to Section 5.2 hereof. When requested by GRE, but in any event at least five (5) years prior to and upon termination of this Agreement, Falkirk shall submit to GRE for its review and written approval the proposed plans and budgets for such reclamation activities. GRE shall not unreasonably withhold its approval of such plans and budgets. Until such plans and budgets are approved by GRE, or if such plans and budgets are disapproved by GRE, until the matter is resolved by mutual agreement of the Parties

or by arbitration pursuant to Section 14 hereof, GRE shall not be obligated to fund or pay for any reclamation costs under this Section 5.7; provided, however, that GRE shall fund and pay for those reclamation costs incurred pursuant to those portions of any plans and budgets specifically approved in writing by GRE. After GRE's written approval of such plans and budgets (or portions thereof), Falkirk shall seek GRE's prior written approval of any changes for any reason to or from such plans and budgets. Falkirk shall submit such reports regarding Falkirk's activities and reclamation costs incurred as GRE may request from time to time. The reclamation costs payable under this Section 5.7 shall be invoiced by Falkirk to GRE at such times and pursuant to such methods as Falkirk and GRE may mutually agree from time to time. GRE or GRE's representative shall have the right at any time on notice in writing to Falkirk to examine the records and books of account of Falkirk and any Affiliate of Falkirk relating to the reclamation costs to be borne by GRE under this Section 5.7.

(ii) GRE shall not be obligated to fund or pay for any costs related to post-mining reclamation activities that GRE believes are (A) not reasonable and verifiable, (B) not reasonably required to comply with applicable reclamation laws, (C) not related to or incurred in connection with surfaces disturbed by or in connection with Underwood Coal produced by Falkirk and sold hereunder or (D) not incurred pursuant to and in accordance with plans and budgets (or portions thereof) approved in writing by GRE. However, if Falkirk disputes GRE's determination of its obligation to fund and pay for any such costs, the dispute shall be resolved by mutual agreement of the Parties or by arbitration pursuant to Section 14 hereof. Falkirk may invoice GRE for any costs in dispute, but Falkirk shall not apply such costs in dispute against advances or loans made under the Funding Agreement, and GRE shall not be obligated to pay such invoice(s), until the dispute is resolved.

(b) Post-retirement medical benefits:

(i) Upon termination of coal deliveries hereunder, GRE shall pay for Falkirk's unfunded accumulated post-retirement medical benefits obligation with respect to Falkirk employees, as determined in accordance with Statement of Financial Accounting Standard No. 106 of the Financial Accounting Standards Board (or any successor Standard) (“FAS 106”), only to the extent that such costs are properly allocable to work performed by a Falkirk employee in connection with coal mined, processed and delivered to the Coal Creek Station or to other locations specified by GRE pursuant to this Agreement, or reclamation of surfaces disturbed by or in connection therewith. On or before September 1 of each calendar year until Falkirk ceases to accrue any additional employee post-retirement medical benefits obligation, Falkirk shall notify GRE of its unfunded accumulated post-retirement medical benefits obligation as of January 1 of such calendar year, as determined by the actuarial firm designated by Falkirk. Together with such notice, Falkirk shall provide GRE with reasonably detailed information regarding the actuary's determination of such obligation. Within thirty (30) days after GRE's receipt of such notice from Falkirk, GRE shall approve or disapprove the increase, if any, in Falkirk's unfunded accumulated post-retirement medical benefits obligation for such calendar year. Such approval by GRE shall not be unreasonably withheld. In the event of any changes in FAS 106 or the interpretation thereof, Falkirk shall consult with GRE before implementing any change in the manner

in which the unfunded accumulated post-retirement medical benefits obligation is determined.

(ii) The Parties acknowledge that the amount of Falkirk's unfunded accumulated post-retirement medical benefits obligation is dependent, in part, on the portion of the post-retirement medical benefits that Falkirk elects to pay as an employer contribution. Accordingly, on or before September 1 of each calendar year, Falkirk shall notify GRE of the proposed percentage increase, if any, in Falkirk's post-retirement medical benefits employer contributions for the following calendar year. Within thirty (30) days of GRE's receipt of such notice from Falkirk, GRE shall approve or disapprove the percentage increase, if any, in Falkirk's proposed post-retirement medical benefits employer contributions for the calendar year under consideration from the amount of such contributions by Falkirk for the immediately preceding calendar year. Such approval by GRE shall not be unreasonably withheld. Falkirk agrees to provide such supporting information, as well as such access to its books and records, as GRE may reasonably request in order to review the proposed percentage increase, if any, in Falkirk's post-retirement medical benefits employer contributions.

(iii) The Parties acknowledge that the amount of Falkirk's unfunded accumulated post-retirement medical benefits obligation is dependent, in part, on the post-retirement benefits plans that Falkirk elects to offer to its employees. Accordingly, Falkirk agrees that, without the prior written approval of GRE, it shall not make any modifications in the provisions of Falkirk's current post-retirement medical benefits plans that would cause an increase in the amount which GRE is required to pay for Falkirk's unfunded accumulated post-retirement medical benefits obligation, except for any modifications required by federal or state laws, rules or regulations. Such approval by GRE shall not be unreasonably withheld.

(iv) Subject to Section 5.7(b)(i) hereof, Falkirk shall record on its books an account receivable from GRE in an amount equal to Falkirk's unfunded accumulated post-retirement medical benefits obligations. Upon request of Falkirk from time to time, GRE shall provide to Falkirk the funds necessary for Falkirk to pay the actual costs of Falkirk's post-retirement medical benefits obligation for the calendar year under consideration.

(v) Disputes, if any, arising from this Section 5.7(b) shall be resolved by mutual agreement of the Parties or by arbitration pursuant to Section 14 hereof; provided, however, GRE shall be obligated to pay the undisputed portion of the post-retirement medical benefits obligation for the calendar year(s) under consideration. If a dispute involves a determination of whether or not GRE has unreasonably withheld its approval under this Section 5.7(b) with respect to Falkirk's post-retirement medical benefits obligation (other than benefits provided by Falkirk under a collective bargaining agreement), such approval shall be deemed reasonably withheld if Falkirk is proposing to offer a post-retirement medical benefits program that provides net benefits in excess of the average post-retirement medical benefits program offered by other coal mining companies in North Dakota or the Powder River Basin.

(c) Pension Plan assets and liabilities:

(i) Upon termination of coal deliveries hereunder, GRE shall pay for the accumulated pension benefit obligation with respect to Falkirk employees, as determined based on the provisions of the Employee Retirement Income Security Act of 1974, as amended, on applicable accounting standards, on the provisions of the Pension Plan in effect upon termination of this Agreement and in accordance with Statement of Financial Accounting Standard No. 87 of the Financial Accounting Standards Board (or any successor Standard) (“FAS 87”). If, upon termination of this Agreement, the accumulated pension obligation with respect to Falkirk employees is less than the market value of assets attributable to contributions made to the Pension Plan with respect to such employees, Falkirk's account in the Pension Plan shall be regarded as having a credit balance that is owed to GRE. Credit balances shall accrue income from the date of termination of the Agreement until the date that credit balances are eliminated through cash payments to GRE. The income accrued on credit balances shall be in proportion to earnings on total Pension Plan asset balances. Whenever a credit balance offsets the need for cash contributions by other participating employers in the Pension Plan, cash payments shall be remitted promptly to GRE, and the credit balance shall be appropriately reduced. Cash payments shall continue until the credit balance of Falkirk's account is eliminated; provided, however, the credit balance of Falkirk's account shall be eliminated not later than three (3) years following the termination of this Agreement. Notwithstanding the foregoing, if this Agreement terminates prior to December 31, 2008, then the foregoing three (3) year period shall be extended to five (5) years.

(ii) If, upon termination of this Agreement, the accumulated pension benefit obligation with respect to Falkirk employees exceeds the market value of assets attributable to contributions made to the Pension Plan with respect to such employees, GRE promptly shall make the value of pension fund assets equal to the accumulated pension benefit obligation.

(iii) The Parties agree that it is Falkirk's obligation and responsibility to maintain an orderly and appropriate pension funding policy for the duration of this Agreement.

(iv) In determining the accumulated pension benefit obligation, the Parties shall select the lowest quote for the purchase of an annuity contract from proposals submitted by several insurance companies mutually agreed upon by the Parties.

(v) The total accumulated pension benefit expense shall be adjusted upon termination of this Agreement to equal the total accumulated pension benefit contributions required since the effective date of the Coal Sales Agreement. The accrued/prepaid pension cost, as defined in FAS 87, shall be charged or credited to the Cost of Production as appropriate.

(d) This Section 5.7, as well as the other provisions of this Agreement that by their nature extend beyond the termination of this Agreement, shall survive the termination of this Agreement and shall remain in effect until all obligations are satisfied. Such other provisions include, without limitation, Section 4 (Loans; Leases), Section 5.2 (Cost of Production), Section 7 (Reports and Audit), Section 13 (Effect of Waiver), Section 14 (Arbitration), Section 15 (Assignment), Section 16 (Notices) and Section 18 (Conduct of Operations; Reclamation; Right of Inspection; Non-Removal of Property). References in Section 18(a) hereof regarding Falkirk's mining operations and mining practices shall be deemed to include Falkirk's

reclamation activities. Further, the Funding Agreement and the Mortgage and Security Agreement shall continue until the latest to occur of (i) completion of all post-mining reclamation activities, and (ii) satisfaction of all obligations owed by Falkirk to GRE and all obligations owed by GRE to Falkirk, including those obligations described in this Section 5.7.

Section 6.Point of Deliveries

Unless otherwise agreed to in writing by GRE and Falkirk, delivery of coal for use at the Coal Creek Station shall be made f.o.b. Falkirk's silo adjacent to the Coal Creek Station.

Section 7.Reports and Audit

On or before August 1 of each calendar year, Falkirk shall furnish to GRE an estimate of the price of coal hereunder during the succeeding calendar year. On or before the twenty-fifth day of each month, Falkirk shall furnish to GRE a detailed statement of the Cost of Production at Falkirk's Mine for the preceding calendar month. Such statement shall be in a form to be agreed upon from time to time by the Parties. From time to time (but not more frequently than semiannually) Falkirk shall furnish to GRE estimates in the form requested by GRE of future expenditures that will be a part of the Cost of Production as set forth in Section 5.2 hereof. GRE shall have the right at any time on notice in writing to Falkirk to examine the records and books of account of Falkirk and any Affiliate of Falkirk relating to the items and allocations of cost and

production included in the computation of the price hereunder. Payment or payments under Section 8 hereof shall not be deemed a waiver of any rights of GRE that the price hereunder be corrected.

Section 8.Billing and Accounts

The monthly billing of coal sold and delivered hereunder in a calendar month shall be paid by the twenty-fifth day of the calendar month following the month of delivery. The billing of coal sold and delivered in each calendar month shall be based on the actual Cost of Production for the month plus the Agreed Profit as determined in Section 5.4 hereof. In determining the Cost of Production pursuant to this Section 8, the quantity of all coal sold to persons other than GRE shall be included, and it shall be assumed for purposes of such determination that the Cost of Production of coal sold to persons other than GRE was fully recovered from such persons so that no Cost of Production with respect to coal sold to persons other than GRE is charged against GRE. In addition, the following amounts shall be deducted from the final price for each calendar year:

(a) If Falkirk is not currently paying interest on loans from GRE and GRE is currently paying interest to its lenders of the money loaned by GRE to Falkirk, an amount per Ton of coal sold to persons other than GRE during such year equal to the interest so paid by GRE to its lenders for such year divided by the total number of Tons of coal produced at Falkirk's Mine during such year multiplied by the number of Tons of coal sold to persons other than GRE; plus

(b) If GRE is (i) providing electrical power for use at Falkirk's Mine, (ii) paying lease payments on any equipment used at Falkirk's Mine, (iii) amortizing any costs for power lines or other facilities installed by GRE for use at Falkirk's Mine or (iv) paying for any loading or handling costs associated with coal sold to persons other than GRE, an amount per Ton of coal sold to persons other than GRE during such year equal to GRE's accounts for the foregoing costs for such year divided by the total number of Tons of coal produced at Falkirk's Mine during such year multiplied by the number of Tons of coal sold to persons other than GRE; plus

(c) One-half the excess, if any, of (i) the price per Ton of coal sold to persons other than GRE during such year over (ii) the price per Ton payable by GRE hereunder (computed without reference to Sections 8(a), 8(b), or 8(c) hereof) plus the payment per Ton under Sections 8(a) and 8(b) hereof, multiplied by the number of Tons of coal so sold to persons other than GRE.

Section 9.Weights

(a) Unless otherwise agreed to in writing by GRE and Falkirk, the weight of the coal delivered to the Coal Creek Station hereunder shall be determined by Falkirk on scales on silo conveyor belts adjacent to the Coal Creek Station near the point where delivery of coal is made. The make of scale to be used and the method(s) of installation shall be subject to the agreement of GRE. GRE shall have the right to have representatives present at any and all times to observe the weighing of coal delivered hereunder. The accuracy of the scales shall be tested and, if necessary, the scales shall be corrected at least once every two (2) weeks. Falkirk shall permit GRE's representatives to monitor the testing and correcting of said scales; provided, however, if GRE and Falkirk are not able to agree on such tests or adjustments or the methods thereof, the scale or methods of weighing shall be tested and adjusted to a condition of accuracy by the appropriate North Dakota state department or agency, and the costs of such tests and adjustments shall be shared equally between Falkirk and GRE.

(b) If it is determined that the scale used to weigh coal delivered hereunder has been inaccurate, adjustment of the quantities of coal delivered hereunder shall be made for half the period since the scale was last adjusted to an accurate condition.

Section 10.Force Majeure

(a) In the event of strikes, labor disputes, fires, accidents at Falkirk's Mine, failure of equipment, inability of Falkirk to obtain necessary equipment by reason of a general short supply thereof, failure of transportation or shortage of transportation equipment, federal or state laws or regulations, or other contingencies, whether of a like or different nature, that are beyond the control of Falkirk and are not due to its negligence and that prevent or interfere with production or shipment of coal hereunder, then, at the election of Falkirk, the shipments contracted for may be suspended or partially suspended as the case may require for the duration of the contingency, but Falkirk shall use its best efforts to eliminate the cause of suspension.

(b) In the event of strikes, labor disputes, fires, accidents, failure of equipment, inability of GRE to obtain necessary equipment by reason of a general short supply thereof, federal or state laws or regulations, or other contingencies, whether of a like or different nature, that are beyond control of GRE and are not due to its negligence, any of which contingencies prevent or interfere with the taking of delivery at the Coal Creek Station of the coal purchased hereunder, then, at the election of GRE, shipments contracted for shall be suspended or partially suspended as the case may require for the duration of such contingency, but GRE shall use its best efforts to eliminate the cause of suspension.

(c) Notwithstanding the suspensions of delivery provided for in Sections 10(a) and 10(b) hereof, if Falkirk's Mine is substantially idle during a calendar month pursuant to such Sections 10(a) and 10(b), GRE shall pay to Falkirk not less than the actual out-of-pocket mine idle expense for such month.

(d) Interruptions in making or acceptance of shipments and deliveries referred to in Sections 10(a), 10(b) and 10(c) hereof shall not invalidate the remainder of the Agreement, but upon removal of the cause of such interruptions, delivery shall be resumed at the rate specified herein. In the event of such interruptions, the Party immediately affected by such contingency, if possible, shall give reasonable advance notice to the other Party of the extent and probable duration thereof, with sufficient detail to enable the other Party to verify the same.

(e) If GRE's water permit from the state of North Dakota is suspended or revoked for a cause beyond the control of GRE, then during the period of such suspension or revocation shipments contracted for are suspended or partially suspended at the election of GRE, and if, notwithstanding reasonable efforts, GRE is unable to have said permit reinstated, then GRE, at its election, may terminate its obligations to purchase coal hereunder.

Section 11.Acquisition of Additional Reserves

As coal becomes available for lease or purchase in the Underwood Coal Field or the Riverdale Coal Field, Falkirk shall request approval by GRE of the proposed bonus payments, tonnage royalty rates, minimum royalty rates or price per acre of coal to be acquired in fee or by leasehold. Within the limits of such approval, Falkirk shall use its best efforts to acquire such coal in the quantities that are available and that GRE requests. However, if the acquisition of such coal is required to meet GRE's requirements for coal under this Agreement, Falkirk shall acquire such coal on the best available terms, and all costs thereof shall be included in the Cost of Production. Neither North American Coal nor any other Affiliate of Falkirk may acquire for its own account any coal within the Riverdale Coal Field or the Underwood Coal Field until Falkirk first seeks GRE's approval for Falkirk's acquisition of the coal. If GRE does not approve such acquisition, any Affiliate of Falkirk may acquire the coal for its own account.

Section 12.Termination Options

(a)If:

(i) as of the end of the most recent calendar year the actual Cost of Production for such calendar year, on a per Ton basis, for any reason other than force majeure exceeds the actual Cost of Production, on a per Ton basis, for the prior calendar year by more than twenty-five percent (25%), provided that the per Ton Cost of Production for purposes of this paragraph shall be determined exclusive of the effects of any special energy generation-related taxes such as a carbon-based tax, BTU-based tax or severance tax any of which is greater than that imposed in the prior calendar year, and provided, further, that the actual Cost of Production for the most recent calendar year shall be adjusted to reflect the impact on the price per Ton resulting from a change of more than five percent (5%) in the tonnage delivered from the prior calendar year, as determined by mutual agreement of the Parties, when computing under this paragraph the per Ton Cost of Production differences from one calendar year to the next; or

(ii) Falkirk materially breaches any of the terms, conditions or provisions, resulting in an event of default as defined in any Loan or Lease and Falkirk fails to remedy such breach before the parties (other than Falkirk) to such Loan or Lease are permitted by such Loan or Lease to exercise their rights with respect to an event of default thereunder; or

(iii) there exists at any time and for any reason other than force majeure any deficiency in deliveries of coal in excess of twenty percent (20%) of the amount required to be delivered hereunder during the immediately preceding six (6) month period or in excess of ten percent (10%) of the amount required to be delivered hereunder during the immediately preceding twelve (12) month period; or

(iv) by reason of Falkirk's default in performing its obligations under any Loan or Lease and after ten (10) days' notice of its intention to do so, GRE or a third party pays or directly assumes Falkirk's obligation under any such Loan or Lease,

then GRE at its option may acquire certain assets of Falkirk pursuant to the Option Agreement. Upon the acquisition of such assets by GRE or its nominee pursuant to said Option Agreement, this Agreement shall terminate.

(b) Notwithstanding anything in this Section 12 to the contrary, GRE shall not have the option to acquire certain assets of Falkirk pursuant to the Option Agreement or otherwise if an event of the nature described in Section 12(a) hereof shall have occurred and been continuing:

(i) as a result of any failure by GRE to carry out its obligations under this Agreement or under any document entered into by GRE in connection with any Loan or Lease entered into pursuant to Section 4 hereof; or

(ii) as a result of any failure by GRE to pay to Falkirk any sum claimed by Falkirk to be due from GRE pursuant to this Agreement; provided, however, that if liability for such sum is in dispute, such failure by GRE shall be deemed not to have occurred if GRE, without prejudice to its position in such dispute, pays all or such portion of the full sum claimed by Falkirk in good faith to be due as will be sufficient to enable Falkirk to prevent the occurrence of an event of the nature described in Section 12(a) hereof.

(c) Notwithstanding anything in this Section 12 to the contrary, GRE shall not have the option to acquire certain assets of Falkirk pursuant to the Option Agreement or otherwise by reason of Falkirk's default of performance of its obligations under Sections 18(a) and 18(b) hereof if such default is solely because of a reasonable difference with governmental authorities as to the interpretation of governmental rules and regulations, impossibility of performance therewith or GRE's consent to non-performance thereof.

Section 13.Effect of Waiver

Waiver by either Party of any breach by the other of any of the terms and provisions hereof or failure to exercise any option or right hereunder shall not be deemed to be a waiver of such breach, option or right on any other occasion of the same, nor a waiver of breach of any other term or condition nor a waiver of any other right to exercise any option or right.

Section 14.Arbitration

Except as otherwise expressly provided herein, any dispute between the Parties arising out of this Agreement (including failure to agree on matters slated to be determined by agreement) shall be determined by arbitration pursuant to the Rules of the American Arbitration Association in effect at the time of such arbitration, with the exceptions as hereinafter provided for the method of selecting the arbitrator and the rights to appeal the award of the arbitrator. The request for arbitration shall be in writing, setting forth in detail the claim or claims to be arbitrated, the amount involved, if any, and the remedy sought, which may

include, without limitation, an award of damages for breach of this Agreement and a prospective determination of what are permissible mining practices under this Agreement. Such request shall be delivered to the other Party within two (2) years of the occurrence or condition giving rise to the dispute. Any failure to request arbitration within such two (2) year period shall be deemed a waiver of the right to arbitrate the dispute. Within fifteen (15) days after the delivery of the request, the Parties shall agree upon an arbitrator. If the Parties are unable to agree upon the arbitrator within such fifteen (15) days, the arbitrator, who shall be an expert in the field of knowledge wherein the controversy lies, shall be selected by the Chief Judge for the United States District Court for North Dakota. The award of the arbitrator may be appealed to any court of competent jurisdiction; in any such appeal the court shall accord the award of the arbitrator the status of a verdict of a jury. The existence of a dispute which has or may become the subject of an arbitration shall in no way excuse either Party from performing its obligations under this Agreement, and each of the Parties shall continue to perform in accordance with the terms of the Agreement regardless of the existence of any such dispute.

Section 15.Assignment

This Agreement shall not be assignable by either Falkirk or GRE without the written consent of the other, except that either Falkirk or GRE may assign its interest in this Agreement either in connection with the merger, consolidation or sale of substantially all the assets of the assigning Party or under their respective mortgages or indentures.

Section 16.Notices

All notices to be given from Falkirk to GRE shall be given to Great River Energy, Attention: Chief Executive Officer, 17845 East Highway 10, P.O. Box 800, Elk River, Minnesota 55330-0800, unless and until GRE shall notify Falkirk in writing of its appointment of a substitute agent for such purposes. All notices to be given from GRE to Falkirk shall be given to The Falkirk Mining Company, Attention: President, 2801 1st. Street SW, P.O. Box 1087, Underwood, North Dakota 58576-1087, with a copy to The North American Coal Corporation, Attention: President and Chief Executive Officer, Signature Place II, 14785 Preston Road, Suite 1100, Dallas, Texas 75254-7891, until Falkirk shall notify GRE in writing of its appointment of a substitute agent for such purposes.

Section 17.Protection of Reserves; “Most Favored Nation” Pricing

Falkirk shall not sell outside of this Agreement a quantity of Underwood Coal or for a period which would make Falkirk unable to give first priority to the performance of its obligations under this Agreement. Falkirk shall notify GRE annually of the amount of coal that it proposes to sell outside this Agreement during each calendar year. Without the written consent of GRE, Falkirk shall not sell coal outside of this Agreement at a price less than the price then being billed under this Agreement pursuant to Section 8 hereof. Any sale of Underwood Coal outside of this Agreement shall be subject to the provisions of Section 8 hereof.

Section 18. Conduct of Operations; Reclamation; Right of Inspection; Non-Removal of Property

(a) Falkirk shall conduct its mining operations hereunder in a careful, good and workmanlike manner according to the best mining practices prevalent in the field in which it is operating and with efficient and economical management and shall use its best efforts to conduct its mining operations according to the laws, rules and regulations of the federal and state governments, or their instrumentalities, if any, relating to mining operations and use of mining premises, including air and water pollution and other environmental laws, rules and regulations. GRE shall not be entitled to claim damages for breach of this Section 18(a) unless

it has given Falkirk written notice of a claim of breach and Falkirk has failed to cure the same within ninety (90) days.

(b) Falkirk shall comply with all applicable laws with respect to reclamation of all surface disturbed by or in connection with mining. Without limiting the generality of the foregoing, Falkirk shall return such land to at least the level of agricultural productivity that existed prior to mining or disturbance and will conduct its mining operation in accordance with the recommendations of the North Dakota State Water Commission with respect to the protection of existing groundwater supplies, water courses, water quality and other water resources related matters. Falkirk is aware that GRE's water permit from the state of North Dakota involves in several respects the operations of Falkirk in the conduct of its mining and reclamation and Falkirk agrees to take whatever action is possible which is necessary for GRE to comply with the conditions of its said water permit. Falkirk shall supply GRE with all information requested by GRE in order to permit such compliance. GRE shall supply water to Falkirk from its water supply facilities at a reasonable cost in the event successful reclamation requires the application of supplemental water to aid plant growth on lands being reclaimed.

(c) From time to time Falkirk shall notify GRE of the names of the persons principally responsible for the operation of Falkirk's Mine. Falkirk shall consider and discuss with GRE any comments it makes with respect to such persons.

(d) GRE shall have the right and privilege at any time of entering Falkirk's Mine in order to inspect or survey the same.

(e) Falkirk shall not without the prior written consent of GRE use any movable property financed pursuant to Section 4 hereof except at Falkirk's Mine.

Section 19.Representations and Warranties

(a) Falkirk represents and warrants to GRE that: (i) Falkirk is a corporation duly organized, validly existing and in good standing under the laws of the state of Ohio and is qualified to do business in the state of North Dakota, (ii) the execution and delivery of this Agreement by Falkirk and the performance of its obligations hereunder have been duly authorized by all requisite corporate action, (iii) neither the execution and delivery of this Agreement nor the performance of its obligations hereunder by Falkirk shall, or after the lapse of time or giving of notice shall, conflict with, violate or result in a breach of, or constitute a default under the Articles of Incorporation or Regulations of Falkirk or any law, statute, rule or regulation applicable to it, or conflict with, violate or result in a breach of or constitute a default under any material agreement to which it is a party or by which it or any of its properties is bound, or any judgment, order, award or decree to which Falkirk is a party or by which it is bound, or require any approval, consent, authorization or other action by any court, governmental authority or regulatory body or any creditor of Falkirk or any other person or entity and (iv) this Agreement constitutes a valid and binding obligation of Falkirk and is enforceable against Falkirk in accordance with its terms.

(b) GRE represents and warrants to Falkirk that: (i) GRE is a cooperative corporation duly organized, validly existing and in good standing under the laws of the state of Minnesota and is qualified to do business in the state of North Dakota, (ii) the execution and delivery of this Agreement by GRE and the performance of its obligations hereunder have been duly

authorized by all requisite corporate action, (iii) neither the execution and delivery of this Agreement nor the performance of its obligations hereunder by GRE shall, or after the lapse of time or giving of notice shall, conflict with, violate or result in a breach of, or constitute a default under the Articles of Incorporation or Bylaws of GRE or any law, statute, rule or regulation applicable to it, or conflict with, violate or result in the breach of or constitute a default under any material agreement to which it is a party or by which it or any of its properties is bound, or any judgment, order, award or decree to which GRE is a party or by which it is bound, or require any approval, consent, authorization or other action by any court, governmental authority or regulatory body or any creditor of GRE or any other person or entity and (iv) this Agreement constitutes a valid and binding obligation of GRE and is enforceable against GRE in accordance with its terms.

Section 20.Confidentiality

The Parties agree that information exchanged between the parties, including but not limited to business development strategies, land and leasehold owners, maps, designs, drawings, and Sections 5.2(c), 5.4, 5.5 and Annexes A, B, C and D of this Agreement, shall be kept strictly confidential and shall not be disclosed to any third party without the prior consent of the other Party, except to the Affiliates, attorneys, auditors or financial advisors of a party.

Section 21.Amendments

Any modification or amendment of the terms and provisions of this Agreement shall be valid and effective only if and when made in writing and duly executed on behalf of the Parties.

Section 22.Right of Extension

If this Agreement is not terminated before December 31, 2045, then the term of this Agreement shall be extended automatically for periods of one year each for as long as the following conditions exist:

(a) Falkirk has sufficient Underwood Coal to supply GRE's fuel requirements during such extension(s);

(b) the Coal Creek Station continues in operation and is not permanently closed; or

(c) governmental regulations do not prohibit the Coal Creek Station from utilizing Underwood Coal as a fuel source.

Section 23.Option and Right Upon Termination

Upon the termination of this Agreement other than as provided in Section 12 hereof, GRE shall have the option within three (3) months after such termination, subject to the rights of any lenders and lessors under Loans and Leases referred to in Section 4 hereof, to purchase all but not part of the real and personal property constituting Falkirk's Mine, excluding mineral rights, at Falkirk's net book value thereof, provided that all Loan and Lease obligations pursuant to Section 4 hereof have been paid in full, and provided further that, if GRE desires to exercise such option, Falkirk nevertheless shall have the right to retain all such property if it pays GRE an amount equal to the excess of the fair market value (but not less than net book value) of such property over and above the amount of indebtedness and Loan and Lease obligations incurred under Section 4 hereof and then remaining unpaid. Whether or not GRE exercises such option, it shall be entitled within three (3) months after the termination of this Agreement to remove and keep without payment to Falkirk all coal the Cost of Production of which has been paid for by GRE. Further, even if Falkirk elects

to retain such property and pays such amount to GRE, GRE's mortgage and security interest in such property as granted by the Mortgage and Security Agreement and the Funding Agreement shall continue until the later to occur of (i) completion of all post-mining reclamation activities, and (ii) satisfaction of all obligations owed by Falkirk to GRE and all obligations owed by GRE to Falkirk.

IN WITNESS WHEREOF, the Parties, with the intent to be bound, have executed this Agreement as of the day and year first above written.

THE FALKIRK MINING COMPANY

By	/s/ Dan W. Swetich
Its	President
Attest	/s/ Thomas A. Koza
	Secretary

GREAT RIVER ENERGY

By	/s/ David Saggau
Its	President and CEO
Attest	/s/ Eric J. Olson

Annex A

Annex B

Annex C

Annex D

Document No. 321871

ANNEXB

SUBLEASE AGREEMENT

THIS SUBLEASE AGREEMENT ("Agreement") is made and entered into as of the 15th day of December, 1993, by and between NORTH AMERICAN COAL ROYALTY COMPANY, a Delaware corporation authorized to do business in the state of North Dakota with offices at 2000 Schafer Street, Box No. 5500, Bismarck, North Dakota 58502-5500 (hereinafter called "Sublessor") and THE FALKIRK MINING COMPANY, an Ohio corporation authorized to do business in the state of North Dakota whose address is Post Office Box 1087, Underwood, North Dakota 58576-1087 (hereinafter called "Sublessee").

WITNESSETH THAT:

WHEREAS, Sublessor is the owner of certain leases covering lands situated in McLean County, North Dakota, which leases are described in Exhibit A attached hereto and made a part hereof ("Leases"); and

WHEREAS, Sublessee desires to sublease all of Sublessor's interest in and to the Leases; and

WHEREAS, Sublessor is willing to sublease such interests to Sublessee on the terms and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements set forth herein, the parties hereto agree as follows:

1. Sublessor does hereby sublet unto Sublessee all of Sublessor's right, title and interest in and to all of the Leases.

2. The term of this Agreement shall commence on the date hereof and shall continue in force and effect until all of the Leases have expired, or until terminated in accordance with the provisions set forth in this Agreement, whichever first occurs.

3. Sublessee shall perform on Sublessor's behalf all the covenants, obligations and conditions which are to be performed by Sublessor, as lessee, under the Leases, including, but not limited to, the payment of rentals, advance royalties, tonnage royalties and other sums due under the Leases. Sublessee shall indemnify and hold harmless Sublessor from and against all claims, suits, causes of action, loss, damage, expense and 1iability arising out of Sublessee's non-performance of such covenants, obligations and conditions.

It is understood and agreed that in the event that Sublessee fails to perform on Sublessor's behalf any of the covenants, obligations or conditions under the Leases, including the payment of royalties, Sublessor shall have the right to perform the same, and Sublessee shall promptly reimburse Sublessor for all costs incurred by Sublessor in connection therewith upon the request of Sublessor and receipt of appropriate documentation evidencing such costs.

Sublessor shall indemnify and hold harmless Sublessee from and against all claims, suits, causes of action, loss, damage, expense and liability arising out of sublessor's non-performance of its obligations under the Leases prior to the date of this Agreement.

4. In consideration of the subleasing by Sublessor hereunder of its interest in the Leases to Sublessee and in further consideration of the costs incurred by Sublessor to acquire and maintain the Leases and to explore the lands covered by the Leases to determine the quality and quantity of the coal reserves, Sublessee shall pay to sublessor an overriding royalty ("Royalty") in the amount of Fifteen Cents ($0.15)

per ton for each and every ton of two thousand (2000) pounds of coal mined and removed from the coal properties covered by the Leases in which Sublessor holds a one hundred percent (100%) interest in the coal estate. If Sublessor holds less than a one hundred percent (100%) interest, such Royalty shall be payable in the proportion which the interest in the coal estate held by Sublessor bears to a one hundred percent (100%) interest in such coal estate. Such Royalty payment shall be made to Sublessor by Sublessee on or before the thirtieth (30th) day of each month for all coal mined and removed by Sublessee during the preceding calendar month from the coal properties covered by the Leases. Such Royalty payment shall be accompanied by a report of the number of tons of coal mined and removed from the coal properties covered by the Leases during such applicable month, the percentage interest held by Sublessor and the Royalty calculations made by Sublessee. All Royalty payments due hereunder shall be made payable to the sublessor and shall be made by mailing or delivering the same to the offices of Sublessor at the address set forth herein.

5. Following the execution and delivery of this Agreement, Sublessee, at its expense, shall notify the lessors under the Leases that Sublessor has subleased its interest in the Leases to Sublessee and that Sublessee, on Sublessor's behalf, will make all payments due under the Leases.

Sublessor represents and warrants that this Agreement and the rights granted hereby do not breach any term or condition of the Leases. Sublessor covenants and agrees to promptly provide to the Sublessee copies of any notice or other communication made or given by the lessors of the Leases.

6. By this Agreement, Sublessor intends to sublease all of Sublessor's rights and interests to the surface and coal within the area shown on the map attached hereto as Exhibit B and made a part hereof ("Area of Interest”), and Sublessor agrees that any right or interest of Sublessor to surface and coal within the Area of Interest which is now held by Sublessor within the Area of Interest shall be deemed to be subleased to Sublessee under this Agreement for the considerations set forth herein. During the term of this Agreement, Sublessor agrees that it shall not voluntarily acquire, without the consent of Sublessee, any interest in land within the Area of Interest. If Sublessor, with the consent of Sublessee, hereafter acquires any additional interests in surface or coal properties within the Area of Interest, Sublessor will offer to sublease the same to Sublessee on the same terms as provided herein. If Sublessee accepts such offer, the parties will amend this Agreement and Exhibit A to add such properties to this Agreement.

7. Sublessee, upon thirty (30) days prior written notice to Sublessor shall have the right to terminate this Agreement at any time by delivering to Sublessor a notice of such termination, together with a release or releases in recordable form satisfactory to Sublessor, together with payment of all tonnage royalties and Royalty then accrued, and other amounts, if any, payable under the Leases. Such release(s) shall terminate the obligation of Sublessee to make any payment of tonnage royalties and Royalty except those then accrued and due under the Leases and this Agreement.

Further, Sublessee, upon thirty (30) days prior written notice to Sublessor, shall have the right to release from this Agreement any of the Leases by delivering to Sublessor a release or releases in recordable form satisfactory to Sublessor. Such release(s) shall not terminate the obligation of Sublessee to make payment of Royalty as provided in Section 4 of this Agreement or the payments due under the Leases remaining subject to the Agreement as provided in Section 3 hereof.

8. No change or division in ownership of Sublessor's interests under the Leases or Royalty due hereunder, however accomplished, shall operate to enlarge the obligations or diminish the rights of Sublessee. No such change or division in the ownership of such interests or Royalty shall be binding upon Sublessee for any purpose until forty-five (45) days after the person acquiring any such interest shall furnish Sublessee with written notice thereof and the instrument or instruments, or certified copies thereof, evidencing such change, transfer or division of ownership, provided that Sublessee may, at its election, recognize any such change or division prior to the expiration of such forty-five (45) day period of time and make payment to the new owner(s). Except as provided in Section 25 of this Agreement, the rights and obligations of the

Sublessee hereunder may not be assigned without the prior written consent of Sublessor, which consent shall not be unreasonably withheld.

9. Sublessor agrees to execute and deliver to Sublessee any and all forms as from time to time may be required by any governmental or other regulatory agency in connection with Sublessee's mining operations hereunder.

10. Sublessee shall pay all taxes, if any, levied against its improvements and all taxes or other fees levied on the mining, production, severance, processing or sale of coal from the properties covered by the Leases. Sublessor shall pay all other taxes, assessments and other fees assessed against its interests under the Leases.

11. Notwithstanding anything to the contrary contained in this Agreement, if Sublessee does not tender to Sublessor on or before the due date any Royalty payment required to be made by Sublessee to Sublessor under this Agreement or if Sublessee otherwise does not comply with any of the provisions of this Agreement, this Agreement shall not terminate or be terminated by Sublessor except as hereinafter provided.

If Sublessee does not tender to Sublessor, on or before the due date, any Royalty payment required to be made by Sublessee to Sublessor under this Agreement, Sublessor may notify Sublessee in writing of such noncompliance. If, within thirty (30) days from the date Sublessee receives such notice, Sublessee does not tender to Sublessor said Royalty payment due under this Agreement, then Sublessor may, at its option, and in addition to any other rights or remedies that Sublessor may have under this Agreement, terminate this Agreement by notifying Sublessee in writing of such termination.

If Sublessee is not in compliance with any of the provisions of this Agreement, other than the Royalty payment provisions dealt with in the immediately preceding paragraph, Sublessor may notify Sublessee in writing of such noncompliance. If within ninety (90) days from the date Sublessee receives such notice, Sublessee does not commence and diligently pursue bona fide action to correct such noncompliance, provided that compliance or corrective action is not suspended under Section l2 of this Agreement, Sublessor may, at its option, terminate this Agreement by notifying Sublessee of such termination in writing.

Should Sublessor terminate this Agreement pursuant to either of the two preceding paragraphs, Sublessee, within thirty 30) days after receiving such written notice of termination, shall deliver to Sublessor a release or release(s) in recordable form satisfactory to Sublessor together with payment of all tonnage royalties and Royalty then accrued. Such release(s) shall terminate the obligation of Sublessee to make any payment of tonnage royalties and Royalty except those accrued and due under the Leases and this Agreement.

If Sublessee does not begin mining development in, upon or under any of the properties covered by the Leases within seven (7) years of the date of this Agreement, Sublessor shall have the right, at its option, to terminate this Agreement at any time prior to the beginning of such mining development by Sublessee by delivering to Sublessee a written notice of such termination. Upon receipt of such notice, Sublessee shall deliver to Sublessor within thirty (30) days a release or release(s) in recordable form satisfactory to Sublessor, together with payment of all advance royalties and other amounts, if any, then accrued under the Leases. Such release(s) shall terminate the obligation of Sublessee to make the payments due under the Leases.

12. All obligation(s) of Sublessee hereunder, other than those set forth in Sections 3, 4 and 10 hereof, shall be suspended during such period as Sublessee is rendered unable, in whole or in part, to comply therewith by strikes, lockouts, riots, insurrections, severe weather, storms, floods, fires, plant shutdowns, unusual mining conditions, faults in coal seams, damage to or destruction of plant, machinery, equipment or facilities, accidents, governmental laws, rules or regulations, orders or action of any governmental agency,

acts of God or any other cause condition or matter, whether of the kind herein enumerated or otherwise, beyond the control of Sublessee, and the period of any delay or interruption of Sublessee's operations occasioned thereby shall be disregarded in computing timely performance by Sublessee of its obligations

hereunder (except with respect to its obligations under Section 3, 4 or 10 of this Agreement).

13. In the event that Cooperative Power Association and United Power Association ("Cooperatives") acquire certain assets of Sublessee pursuant to the Option Agreement dated July 1, 1974, among Sublessee, the Cooperatives, and Society National Bank, and terminate the Coal Sales Agreement, dated July 1, 1974, as amended, between Sublessee and the cooperatives pursuant to Section 12(a) thereof, the cooperatives, as assignee of Sublessee's rights and obligations under this Agreement, at their option shall either (a) continue to pay the Royalty to Sublessor and the payments due under the Leases to the Lessors, or (b) pay to Sublessor in cash the then fair market value of the Leases in which case Sublessor shall execute and deliver to the Cooperatives an assignment of the Leases in recordable form satisfactory to the Cooperatives, or (c) terminate this Agreement in accordance with Section 7 of this Agreement.

14. Any written notice to Sublessor or Sublessee required or permitted hereunder shall be deemed given if delivered personally or by United States Certified Mail, Return Receipt Requested, postage prepaid and addressed as follows:

(a) To Sublessor:

North American Coal Royalty Company

2000 Schafer Street, Box No. 5500

Bismarck, North Dakota 58502-5500

Attention: Manager, Land

(b) To Sublessee:

The Falkirk Mining Company

Post Office Box 1087

Underwood, North Dakota 58576-1087

Attention: President

(c) To such other person(s) or address(es) as the parties hereto may designate in writing.

15. In conducting its operations hereunder, Sublessee shall comply with all applicable laws, rules and regulations and ordinances pertaining thereto. Sublessee reserves and shall have the right to challenge and/or appeal any law, ruling, regulation, order or other determination and to carry on its operations in accordance with Sublessee's interpretation of same, pending final determination.

Sublessee shall fully indemnify and save harmless, Sublessor, and its parent companies, and its and their shareholders, directors, officers, employees and agents, from and against any and all claims, liability, damages or loss to persons or property caused by or alleged to have been caused, directly or indirectly, by any act or omission on the part of Sublessee, any of its contractors, or any of their employees and agents, arising out of or in any way connected with Sublessee's use or occupancy of the properties covered by the Leases and/or Sublessee's exercise of the rights and privileges herein granted.Sublessee's obligations under this paragraph shall survive the expiration or termination of this Agreement.

16. Sublessee shall keep accurate books and records of the amount of coal severed from the properties covered by the Leases. Upon prior written notice to Sublessee, Sublessor and its agents shall have the right at all reasonable times (a)to inspect, audit and/or copy such books and records in the offices where they are kept and (b) to enter upon the properties covered by the Leases for the purpose of inspecting and surveying the same and/or determining Sublessee's compliance with its obligations under this Agreement;

provided, however, that no such inspection of Sublessee's records or the properties covered by the Leases shall unreasonably interfere with Sublessee's operations and activities and provided further that Sublessor shall be responsible for injury to Sublessor and/or Sublessor's agent(s) which occurs on the properties covered by the Leases, except to the extent that such injury is caused by Sublessee's negligence or willful actions.

17. Except as otherwise provided herein, whenever Sublessor has the right to enforce any rights against the lessor under the Leases because of default by lessor, and if within a reasonable period after Sublessee’s request, sublessor fails to enforce such rights, then Sublessee shall have the right, in the name of Sublessee or, if necessary, in the name of Sublessor, to enforce any such rights of Sublessor. Such enforcement shall be at the sole expense of Sublessee, and the amount of any recovery obtained by Sublessee shall be the property of sublessee, except that Sublessor shall be compensated therefrom for any damages sustained by Sublessor as a result of such default or breach on the part of the Lessor under the Leases.

18. Sublessor shall not modify or surrender any of the Leases, which are or remain subject to this Agreement, without the prior written consent of Sublessee.

19. Sublessor covenants that so long as Sublessee is not in default of its obligations under this Agreement, Sublessee shall not be disturbed in its use and possession of the lands covered by the Leases by Sublessor or any party claiming by or through Sublessor, but subject, however, to the terms of the respective Leases.

Sublessor covenants and agrees at all times during the term hereof to keep its interests in, to and under the Leases free and clear of any liens, claims and encumbrances arising from Sublessor's acts or obligations to the extent that such acts or obligations are not assumed by Sublessee under this Agreement.

20. This Agreement constitutes the entire agreement between the parties hereto and supersedes all prior negotiations, undertakings, notices, memoranda and agreements between the parties hereto, whether oral or written, with respect to the subject matter hereof. This Agreement may be amended or modified only by a written agreement duly executed by the parties hereto.

21. This Agreement shall be governed by, construed and enforced in accordance with the laws of the State of North Dakota. As used herein, any gender shall include any other gender, the singular shall include the plural and the plural shall include the singular, wherever appropriate.

22. Reference herein to "Sublessor" and "Sublessee" shall include reference to their respective nominees, successors and assigns.

23. If any provision of this Agreement shall be invalid, illegal or unenforceable in any respect, such provision shall be deemed to be severed from this Agreement, and the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected of impaired thereby

24. The failure of either party to insist in any one or more instances upon strict performance of any of the provisions of this Agreement or to take advantage of any of its rights hereunder shall not be construed as a waiver of any such provision or the relinquishment of any such rights, but the same shall continue and remain in full force and effect.

25. Notwithstanding anything herein to the contrary, Sublessee may assign its rights and obligations hereunder to the Cooperatives, in the event the Cooperatives acquire certain assets of Sublessee pursuant to the Option Agreement, dated July 1, 1974, among Sublessee, the Cooperatives, and Society National Bank, and terminate the Coal Sales Agreement, dated July 1, 1974, as amended, between Sublessee and the Cooperatives pursuant to Section 12(a) thereof.

In the event of such an assignment, the Cooperatives shall not have any liability or obligation under this Agreement for Sub lessee's failure to pay the Royalty under Section 4 of this Agreement which accrues on or before the date of such assignment. Further, from and after the date of such assignment, Sublessor

covenants and agrees to provide the Cooperatives with copies of any notices or other communications made or given by the lessors of the Leases, and to not amend, modify, terminate or release any of the Leases without the prior written consent of the Cooperatives. Sublessor and Sublessee agree that the provisions of this Agreement regarding the Cooperatives shall inure to the benefit of and be enforceable by the Cooperatives.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written:

SUBLESSOR:

NORTH AMERICAN COAL ROYALTY COMPANY

By: /s/ Thomas A. Koza

Thomas A. Koza, Its President

SUBLESSEE:

THE FALKIRK MINING COMPANY

By: /s/ Dan W. Swetich

Dan W. Swetich, Its President

EXHIBIT A TO ANNEXB

EXHIBIT B TO ANNEXB

ANNEX D

EXAMPLE OF ADJUSTMENT OF AGREED PROFIT

PURSUANT TO SECTION 5.5

Adjustment of Agreed Profit for 2007

Pursuant to Section 5.5 of the

Second Restatement of Coal Sales Agreement

dated as of January 1, 2007

Between The Falkirk Mining Company and Great River Energy

	Percent for Weighting	Index* as of June 30, 2005	Index as of June 30, 2006	Percent Change Last 12 Mos.	Weighted Changes to Last 12 Mos.
Implicit Price Deflator - Gross Domestic Product (IPD-GDP) Consumer Price Index - All Urban Consumers (CPI-U) Total	60.0%  40.0% 100.0%	112.219          194.5	115.887         202.9	3.269% 4.319%	1.961% 1.728% 3.689%
*The IPD-GDP index for the previous year may be revised slightly from the index used in the last calculation based on the BEA Annual Revision typically applied in the second quarter of each year to incorporate more complete, detailed and reliable data.

Two-tier Agreed Profit rates for 2007	2006 Rates	Escalation	2007 Rates
First 5,600,000 tons	[* * *]	3.689%	[* * *]	Per ton
Tons above 5,600,000 tons per year	[* * *]	3.689%	[* * *]	Per ton

Agreed by:
Great River Energy	Date
The Falkirk Mining Company	Date

* * * Confidential Treatment Requested

EX-10.21

Exhibit 10.21

THIRD RESTATEMENT OF

LIGNITE MINING AGREEMENT

BETWEEN

SOUTHWESTERN ELECTRIC POWER COMPANY

AND

THE SABINE MINING COMPANY

Effective as of January 1, 2008

NOTICE: THIS CONTRACT IS SUBJECT TO ARBITRATION UNDER THE TEXAS

GENERAL ARBITRATION ACT.

1

CONTENTS

Description

ARTICLE I.Definitions

ARTICLE II.Term

ARTICLE III.Scope of Engagement

ARTICLE IV.Development and Operation

of the Mine

ARTICLEV.Quantity and Scheduling

ARTICLEVI.Delivery

ARTICLEVII.Quality and Recovery

ARTICLEVIII.Loan and Lease Obligations

ARTICLEIX.Compensation

ARTICLEX.Sampling and Analysis; Weights

ARTICLEXI.Mine Closing Costs

ARTICLEXII.Billing and Accounts

ARTICLEXIII.Reports and Audit

ARTICLEXIV.Force Majeure

ARTICLEXV.Conduct of Operations

ARTICLEXVI.Insurance

ARTICLEXVII.Relationship of the Parties

ARTICLEXVIII.Arbitration

ARTICLEXIX.SABINE Default; Remedy

ARTICLEXX.Termination of Relationship

CONTENTS CONTINUED

Description

ARTICLE XXI.Notices and Other Communications;

Designated Representatives

ARTICLEXXII.Right of Inspection

ARTICLEXXlll.Limitations of SABINE Functions

ARTICLEXXlV.Assignment

ARTICLEXXV.Interpretation

ARTICLEXXVl.Severability

ARTICLEXXVII.Entire Agreement

ARTICLEXXVlll.Amendments

ARTICLEXXlX.Counterparts

ARTICLEXXX.Waiver of Remedies

ARTICLE XXXI.Representations, Warranties and

Covenants

ARTICLE XXXII.Short Form Supplement

ARTICLEXXXlll.Equal Employment Opportunity

Signature Page

Supplement A- Certification for

Employment Opportunities Programs

for Minorities and Veterans

CONTENTS CONTINUED

EXHIBITS:

Exhibit "A" Plat of South Hallsville No. 1 Reserves, South Marshall Reserves, Rusk Reserves and Norit Mine Area

Exhibit "B" Management Fee Escalation Example

Exhibit "C" Post-Production Period Management Fee Schedule

Exhibit "D" General and Administrative Costs Adjustment Examples

Exhibit "E" Invoice Calculation Procedure for Lignite Delivered by SABINE for Use at SWEPCO's Plant

Exhibit “F” Post-Production Period General and Administrative Costs Schedule

Exhibit “G” Example Calculation of Termination Fee

THIRD RESTATEMENT OF

LIGNITE MINING AGREEMENT

NOTICE: THIS CONTRACT IS SUBJECT TO ARBITRATION UNDER THE TEXAS GENERAL ARBITRATION ACT

THIS AGREEMENT is made and entered into as of January 1, 2008 by and between SOUTHWESTERN ELECTRIC POWER COMPANY, a Delaware corporation (hereinafter referred to as "SWEPCO"), and THE SABINE MINING COMPANY, a Nevada corporation (hereinafter referred to as "SABINE"), a wholly-owned subsidiary of The North American Coal Corporation, a Delaware corporation, SABINE being incorporated for the sole and single purpose of performing the services, functions, duties and obligations stated herein to be performed by SABINE.

W I T N E S S E T H:

WHEREAS, SWEPCO operates and has an ownership interest in a lignite-fired electric generating station called Henry W. Pirkey Unit No. 1 (hereinafter referred to as "SWEPCO's Plant") near Hallsville, Texas, having an approximate net generating capacity of 650 megawatts; and

WHEREAS, SWEPCO owns or controls (by lease, fee ownership or otherwise) certain lignite reserves located near SWEPCO's Plant, which may (at SWEPCO's election) be all or part of the source of the lignite supply for SWEPCO's Plant or which may be utilized for any other purposes, and lignite removed therefrom may be used at any other locations desired by SWEPCO; and

WHEREAS, SWEPCO and SABINE are parties to a Lignite Mining Agreement dated as of January 1, 1981, as amended (the "Lignite Mining Agreement"); and

WHEREAS, pursuant to the Lignite Mining Agreement, SWEPCO engaged SABINE to design, develop, construct and operate in the South Hallsville No. 1 Reserves (as hereinafter

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defined) a lignite mine having a productive capacity sufficient to supply the lignite requested by SWEPCO within the quantity and quality limits provided for in that agreement; and

WHEREAS, SWEPCO conducted its evaluation of the various future fuel options for SWEPCO's Plant (the "Pirkey Fuel Study"), which options included the use of sub-bituminous coal mined and delivered to SWEPCO's Plant from the Powder River Basin Area of Wyoming, the continued mining of the South Hallsville No. 1 Reserves pursuant to the Lignite Mining Agreement, and the proposal of SABINE (the "Proposal") to modify the Lignite Mining Agreement to include within the lignite reserves upon which SABINE is authorized to conduct mining operations certain other lignite reserves controlled by SWEPCO but not covered by the Lignite Mining Agreement (the "South Marshall Reserves", as hereinafter defined); and

WHEREAS, SWEPCO concluded pursuant to the Pirkey Fuel Study that an amendment to and restatement of the Lignite Mining Agreement which authorizes SABINE to conduct lignite surface mining operations in the South Marshall Reserves pursuant to the Proposal currently is the most economical fuel option for SWEPCO's Plant; and

WHEREAS, the parties by the Restatement of Lignite Mining Agreement dated as of January 1, 1996 (the “RLMA”) made certain amendments in the Lignite Mining Agreement so as to authorize SABINE to design, develop, construct and operate facilities to mine lignite in the South Marshall Reserves in accordance with the Proposal and the Pirkey Fuel Study and in a manner which permits an orderly and economic cessation of the mining operations in the South Hallsville No. 1 Reserves; and

WHEREAS, the parties entered into amendments to the RLMA dated as of October 1, 1998; November 1, 1999; January 6, 2000 and letter agreements dated as of March 2, 1998, and February 9, 2000, amending the RLMA; and

WHEREAS, the parties by the Second Restatement of Lignite Mining Agreement dated as of December 1, 2001 restated the Lignite Mining Agreement again to incorporate such amendments

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and letter agreements into a single document, to provide for invoice normalization and the addition of the Norit Mine Area, and to make certain other changes to the RLMA;

WHEREAS, the parties by this instrument desire to restate the Lignite Mining Agreement again to include within the lignite reserves upon which SABINE is authorized to conduct mining operations certain other lignite reserves controlled by SWEPCO but not covered by the Second Restatement of Lignite Mining Agreement (the "Rusk Reserves", as hereinafter defined), and to make certain other changes to the RLMA; NOW, THEREFORE, in consideration of the foregoing and the covenants and agreements of the parties as herein set forth, the following Third Restatement of Lignite Mining Agreement hereby is adopted as an amendment and restatement of the Lignite Mining Agreement.

ARTICLE I

Definitions

For the purposes of this Agreement, the following terms shall have the following meanings:

(a) "AAA" shall mean the American Arbitration Association.

(b)"AAA Rules" shall mean the Commercial Arbitration Rules of the AAA, as from time to time amended and in effect.

(c)"Affiliate of SABINE" shall mean a party or person owning fifty percent (50%) or more of the common stock of SABINE or otherwise controlling SABINE or controlled by or under common control with SABINE.

(d)"Annual Mining Plan" shall have the meaning set forth in Article IV,Section 2 (b).

(e)"Agreement" shall mean this Third Restatement of Lignite Mining Agreement.

(f)"As-delivered, as-received" shall mean the projected quality or the actual quality, as the case may be, of the mined lignite at the point of delivery to SWEPCO on an "as-received" moisture basis.

(g)"As-received" moisture basis shall have the meaning, as applicable, set forth in ASTM Standards D2013, D3173 and D3180.

(h)"ASTM" shall mean the American Society for Testing and Materials.

(i)"Btu" shall mean a Standard British Thermal Unit.

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(j)"Business Day" shall mean any calendar day other than a Saturday, Sunday or other day on which banks in New York City or Texas are required or authorized to be closed.

(k)"Cost of Production" shall have the meaning set forth in Article IX, Section 2(a).

(l)"Deferred Development Costs" shall have the meaning set forth in Article IX, Section 1(a).

(m)"Designated Representative" shall have the meaning set forth in Article XXI.

(n)"Development Period" shall mean, with respect to the development of any area of the Mine, the period from the date of SWEPCO's written approval of the Deferred Development Costs with respect to such area until such date that SWEPCO shall designate.

(o)"Emergency" shall mean a sudden and unexpected occurrence at the Mine, the nature of which requires prompt action in order to preserve or protect life or property, prevent damage, maintain production, or comply with any applicable law, rule or regulation and where there is not sufficient time for SABINE to notify SWEPCO of such occurrence and obtain advance approval of such remedial or preventive action.

(p)"Force Majeure" shall have the meaning set forth in Article XIV.

(q)"Laboratory" shall mean the laboratory which is used by SWEPCO to analyze the lignite samples taken by SWEPCO in accordance with the provisions of Article X, Section 1.

(r)"Life of Mine Plan" shall mean the Mining Plan covering life of mine requirements described in Article IV, Section 2(a).

(s)"Loan and Lease Obligations" shall mean all obligations of SABINE incurred in connection with loans, leases, extensions of credit and other financial arrangements entered into by SABINE with SWEPCO's advance approval and necessary for, but not limited to, the design, development, construction, equipment, operation and maintenance of the Mine to the capacity required for producing quantities of lignite to be furnished to SWEPCO under this Agreement, whether the same shall become due and owing during the term hereof or otherwise, including fees, if any, interest, rentals, late payment penalties, indemnification payments, and all payments arising as a result of any termination, premature or otherwise, or any default under any such financial arrangements or the agreement or agreements embodying the same.

(t) "Management Fee" shall have the meaning set forth in Article IX, Section 2 (c).

(u) "Mine" shall mean the mine developed, constructed and operated by SABINE in SWEPCO's Reserves.

(v)"Mining Plan" shall mean the Life of Mine Plan and/or Annual Mining Plan approved by SWEPCO as provided in Article IV of this Agreement, as revised and expanded pursuant to such Article IV.

(w)"mmBtus" shall mean one million Btus on an "as-delivered, as-received" basis.

(x)"North American Coal" shall mean The North American Coal Corporation (formerly called Nortex Mining Company), a Delaware corporation.

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(y)“Norit” shall mean Norit Americas, Inc., a Georgia corporation.

(z)“Norit Mine Area” shall mean the area so delineated in Exhibit “A”.

(aa)“Norit Tons” shall mean Tons of lignite mined by SABINE and delivered into trucks supplied by Norit, its agents or contractors, which quantity shall be no less than 225,000 TPY and no greater than 650,000 TPY.

(bb)"Option Agreement" shall mean, collectively, that certain Option Agreement, dated as of January 15, 1981, by and among North American Coal, SWEPCO, and Texas Commerce Bank-Longview, National Association (or their respective predecessors-in-interest), as amended by the following: (1) Addendum to Option Agreement, dated as of January 15, 1981, by and among North American Coal, SWEPCO, and Texas Commerce Bank-Longview, National Association (or their predecessors-in-interest), (2) Agreement, dated as of June 30, 1988, by and among North American Coal, SWEPCO, Texas Commerce Bank-Longview, National Association, SABINE, and North American Coal (or their respective predecessors-in-interest), (3) Amendment to Option Agreement, dated as of December 2, 1996, by and among North American Coal, SWEPCO, and Longview National Bank, and (4) Second Amendment to Option Agreement, dated as of ________________, by and among North American Coal, SWEPCO, and Regions Bank.

(cc)"Pirkey Fuel Study" shall have the meaning set forth in the fifth "WHEREAS" clause of this Agreement.

(dd)"Post-Production Management Fee" shall have the meaning set forth in Article IX, Section 3.

(ee)"Post-Production Period" shall mean the period from the date on which the Production Period ends until the end of the term of this Agreement.

(ff) "Production Period" shall mean the period from January 1, 1996 until the mining and delivery of lignite to SWEPCO hereunder ceases and the final Mine closing and Post-Production Period reclamation commences.

(gg)"Proposal" shall have the meaning set forth in the fifth "WHEREAS" clause of this Agreement.

(hh)"Recovery Period" shall mean the period(s) of time designated by SWEPCO over which the Deferred Development Costs for each Development Period are to be repaid by SWEPCO to SABINE in the Cost of Production.

(ii)"SABINE Default" shall have the meaning set forth in Article XIX, Section 1.

(jj)"SABINE Qualifying Force Majeure Event" shall mean each event of Force Majeure experienced by SABINE during a calendar year which has a duration greater than three (3) calendar days.

(kk)"South Hallsville No. 1 Reserves" shall mean the lignite reserves so designated in Exhibit "A" attached hereto and made a part hereof that are located from the surface to a depth of 200 feet below the surface and are owned by, leased to, or otherwise controlled by SWEPCO and shall also mean any additional economically surface mineable lignite to such 200 foot depth which SWEPCO hereafter acquires within the South Hallsville No. 1 Reserves area delineated in

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Exhibit "A." At SWEPCO's option, the 200 foot depth limitation may be extended to a greater depth.

(ll)"South Marshall Reserves" shall mean the lignite reserves so designated in Exhibit "A" attached hereto and made a part hereof that are located from the surface to a depth of 200 feet below the surface and are owned by, leased to, or otherwise controlled by SWEPCO, including the Norit Mine Area, and shall also mean any additional economically surface mineable lignite to such 200 foot depth which SWEPCO hereafter acquires within the South Marshall Reserves area delineated in Exhibit "A." At SWEPCO's option, the 200 foot depth limitation may be extended to a greater depth.

(mm)“Rusk Reserves” shall mean the lignite reserves so designated in Exhibit "A" attached hereto and made a part hereof that are located from the surface to a depth of 200 feet below the surface and are owned by, leased to, or otherwise controlled by SWEPCO and shall also mean any additional economically surface mineable lignite to such 200 foot depth which SWEPCO hereafter acquires within the Rusk Reserves the area delineated in Exhibit “A.” At SWEPCO's option, the 200 foot depth limitation may be extended to a greater depth.

(nn)"SWEPCO's Reserves" shall mean collectively the South Hallsville No. 1 Reserves, the South Marshall Reserves and the Rusk Reserves.

(oo)"Ton" shall mean a net ton of 2,000 pounds.

(pp)"Total Compensation" shall mean the total amount paid each year during the Production Period to SABINE pursuant to Article IX, Section 2.

(qq)"TPY" shall mean Tons per year.

(rr)"Uniform Rounding Practice" shall mean as follows: when the number to the right of the relevant number is four (4) or less, the relevant number shall remain unchanged. When the number to the right of the relevant number is five (5) or more, the relevant number shall be increased to the next higher number.

ARTICLE II

Term

This Agreement shall commence on the date hereof and shall remain in effect (a) (i) until 2035 and (ii) thereafter until the Mine has been closed, the reclamation work has been completed, the permit bonds have been released, and the permit to mine has been satisfied by successful completion of all reclamation operations in accordance with the approved Mining Plan, or (b) until such earlier time that this Agreement might expire or be terminated as provided herein.

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The termination or expiration of this Agreement shall not release either party from any obligations, payments or liabilities of such party that accrued during the term of this Agreement or as a result of operations under this Agreement.

ARTICLE III

Scope of Engagement

SWEPCO hereby engages SABINE to continue to design, develop, construct and operate the Mine in accordance with the provisions of this Agreement, and SABINE hereby accepts such engagement and undertakes to use its best efforts, best management and mining skills and best engineering and business judgments to perform its obligations under this Agreement for the compensation herein specified. SABINE shall design, develop, construct and operate the Mine as hereinafter provided and shall furnish, subject to SWEPCO's approval, all engineering, permitting, geological, operating, administrative and supervisory services and personnel necessary therefor. SABINE shall be responsible for preparing, processing, obtaining and shall use its best efforts to comply with the conditions of all permits required in connection with the operations contemplated hereby. After first obtaining SWEPCO's approval of any proposed permit application, exhibits thereto and related documents, SABINE shall process the same in the name of SABINE.

ARTICLE IV

Development and Operation of the Mine

Section 1. General

The design, development, construction and operation of the Mine shall consist of one or more Development Periods, a Production Period and a Post-Production Period.

During each Development Period, SABINE shall design, engineer, develop and construct the Mine in SWEPCO's Reserves.

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During the Production Period, SABINE shall operate the Mine and perform all engineering, geological, operational, administrative and other work required or requested by SWEPCO to supply lignite to SWEPCO under this Agreement.

During the Post-Production Period, SABINE shall perform all work and services required or requested by SWEPCO in connection with the final closing of the Mine and completion of final reclamation work. SWEPCO shall have the right at its election at any time during the Post-Production Period (with or without cause) to take over and conduct or complete the Post-Production work by the acquisition by SWEPCO of all the capital stock of SABINE pursuant to the Option Agreement after giving SABINE notice thereof, which notice shall be given at least 365 days in advance. During such notice period SABINE shall fully cooperate regarding the orderly transfer of operations.

SABINE shall have the right to employ consulting organizations approved by SWEPCO to provide engineering, design, environmental and other work required for SABINE to perform its obligations under this Agreement. Further, all charges of such consulting organizations not included in the Approved Annual Mining Plan must be approved in writing by SWEPCO.

Section 2. Mine Development

(a) Life of Mine Plan.

SABINE has provided to SWEPCO in writing a mining plan covering life of Mine requirements ("Life of Mine Plan") for the design, development, construction and operation of the Mine to furnish from SWEPCO's Reserves the lignite requirements requested by SWEPCO under the provisions of Article V hereof for the period 2008 through 2035. The Life of Mine Plan is in accordance with sound engineering and design practices and applicable laws, rules and regulations and shall include, but not be limited to, production schedules, manpower and equipment requirements, estimated costs per ton and per mmBtus, time schedules for mine development, method of operation, including method of operation of any coal handling facilities, reclamation and permitting

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schedules, capital expenditures and operating cost requirements, mine design, mine projection maps, mine progression and reserve studies, and other documentation requested by SWEPCO.

On or before October 1 of each calendar year, SABINE shall review and revise or expand, if necessary, the Life of Mine Plan based on the then current designation of annual deliveries provided by SWEPCO in the notice given pursuant to Section 3 of Article V hereof. SABINE, at a minimum, shall emphasize and set forth in specific detail in such revised Life of Mine Plan the next five (5) years of mining operations.

(b)Annual Mining Plan.

On or before October 1 of each calendar year during the term of this Agreement, SABINE shall provide to SWEPCO in writing a mining plan covering the operation of the Mine for the next calendar year ("Annual Mining Plan"). Such Annual Mining Plan shall include, but not be limited to, the following items for activities during the following calendar year:

(i) an estimated capital budget containing estimates of all capital expenditures and commitments;

(ii) an estimate of all operating costs and expenses in such detail as SWEPCO may reasonably request; and

(iii) an estimated monthly cash flow statement containing estimates of the cash requirements for the capital and operating budgets prepared pursuant to this subsection.

The Annual Mining Plan shall also include the details of an incentive compensation plan for SABINE's employees (except for SABINE's employees who are participants in a plan of an Affiliate of SABINE).

(c)Approval of Annual Mining Plan.

Within sixty (60) days after receipt by SWEPCO of an Annual Mining Plan, including the annual capital budgets, SWEPCO shall give SABINE written notice of SWEPCO's approval or disapproval of such Annual Mining Plan and capital budgets. As part of any such approval, SWEPCO shall agree to contribute any item or items of, or interest in, real property and non-depreciable capital assets, and SWEPCO may stipulate that it will contribute any item or items of,

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or interest in, depreciable capital assets provided for in such Annual Mining Plan and capital budget and thereupon, to the extent necessary or applicable, grant to SABINE sublease rights or other rights to permit SABINE to use the same as long as necessary in lieu of SABINE incurring any expense or obligation with respect thereto. If SWEPCO does not give SABINE such notice within sixty (60) days after SWEPCO's receipt thereof, SWEPCO shall be deemed to have approved such Annual Mining Plan and capital budgets. If SWEPCO disapproves an Annual Mining Plan, capital budgets or any portion(s) thereof, SWEPCO shall advise SABINE of the reasons for such disapproval, and SWEPCO and SABINE shall meet promptly and attempt in good faith to resolve their differences with respect to the Annual Mining Plan and/or capital budgets. If SWEPCO and SABINE are unable to resolve such differences within thirty (30) days after SWEPCO's disapproval, SABINE shall revise and resubmit the Annual Mining Plan and/or capital budgets as requested by SWEPCO. Under no circumstances shall SABINE acquire any interest in real property or non-depreciable capital assets without the mutual consent of the parties.

SABINE shall consult with and keep SWEPCO informed of the progress of the design, construction, development and operation of the Mine in such manner as SWEPCO may reasonably request.

In the event that any such annual review of the Annual Mining Plan and any revision, adjustments or modification thereof requested by SWEPCO should delay the final approval thereof by SWEPCO past the beginning of the next calendar year, SABINE shall have the right to continue its operations hereunder pursuant to the last approved capital budget and Annual Mining Plan extended (on a pro rata basis) into the next calendar year until the matter causing such delay has been resolved.

SWEPCO and SABINE shall meet at least quarterly (and at such other times as needed or requested by either party) to review the progress of the design, construction, development and operation of the Mine.

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SABINE shall not make any capital expenditures unless they are generally reflected in a capital budget approved by SWEPCO as part of an Annual Mining Plan or unless otherwise specifically approved by SWEPCO; provided, however, SABINE shall have the right during any calendar year to make capital expenditures required in the event of an Emergency without advance approval by SWEPCO, provided that SABINE shall make all reasonable efforts to obtain the approval of SWEPCO prior to making any such capital expenditure and if the nature of the Emergency and the time elements involved do not allow sufficient time to obtain SWEPCO's approval of such capital expenditure before it is incurred, SABINE shall subsequently and promptly (but not later than two (2) Business Days after such occurrence) give SWEPCO written notice thereof; and further provided, however, SABINE shall have the right to exceed the amount for any specific capital expenditure (i.e., line item) in any budget approved by SWEPCO by up to five percent (5%) but not more than $100,000.00 in any calendar year without the specific approval of SWEPCO.

If SABINE requests approval to exceed an individual capital line item by more than $100,000.00, and if SWEPCO neither approves nor disapproves such request within fifteen (15) days after SWEPCO's receipt thereof, SWEPCO shall be deemed to have approved such request.

Except in the event of an Emergency, no material modification of or deviation from the approved Annual Mining Plan shall be made without the written approval of SWEPCO, which approval shall not be unreasonably withheld. Within two (2) Business Days after the occurrence of any Emergency, SABINE shall notify SWEPCO thereof giving all details including nature, extent and reason for any material modification or deviation from the approved Annual Mining Plan.

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ARTICLE V

Quantity and Scheduling

Section 1. Quantity

The quantity of mmBtus of lignite to be mined and delivered to SWEPCO for use at SWEPCO's Plant and the quantity of Norit Tons to be mined and delivered shall be the quantities requested by SWEPCO in accordance with the provisions of this Agreement; provided, however, the quantity of mmBtus of lignite and the quantity of Norit Tons to be mined and delivered by SABINE shall not exceed the production capability of the Mine; and further provided, however, that when any increase in SWEPCO's mmBtus requirements or in the quantity of Norit Tons occurs which necessitates the acquisition by SABINE of additional equipment, SABINE shall not be obligated to supply any such increased requirements until such time as it is able to acquire and install such additional equipment and do all other things necessary to supply such increased requirements.

Section 2. Rate of Delivery

The delivery of lignite for use at SWEPCO's Plant shall be made in monthly quantities which approximate the monthly utilization of lignite at SWEPCO's Plant, or as otherwise directed by SWEPCO. The delivery of Norit Tons shall be made in approximately equal monthly quantities or as otherwise directed by SWEPCO.

Section 3. Designation of Annual Deliveries

No later than August 1 of each year during the term of this Agreement, SWEPCO shall notify SABINE in writing of the quantity of mmBtus of lignite to be delivered during the subsequent calendar year for use at SWEPCO's Plant and an estimate of the quantity requirements during each of the four (4) calendar years thereafter. No later than August 15 of each year during the term of this Agreement, SWEPCO shall notify SABINE in writing of the quantity of Norit Tons to be delivered during the subsequent calendar year and the delivery schedule therefor, which delivery schedule

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SWEPCO, upon written notice to SABINE, may increase or decrease by up to 5,000 Tons per month.

At any time and from time to time, SWEPCO shall have the right, upon written notice to SABINE, to increase or to decrease any previously issued annual nomination to the extent desired by SWEPCO, subject however, to the limitations set forth in Section 1 of this Article V.

If the total mmBtus of lignite actually delivered by SABINE to SWEPCO and Norit for use at SWEPCO's Plant and Norit's Plant during two (2) consecutive calendar years is less than ninety (90%) of the annual quantity of mmBtus designated by SWEPCO or Norit for use at SWEPCO's Plant or Norit's Plant for each of such two consecutive calendar years as set forth in the annual nomination in effect at the end of each such year, then the difference in the quantity delivered and ninety (90%) of the quantity requested for such calendar years shall be considered an "excess deficiency". If such "excess deficiency" is not caused by "Force Majeure" or is not caused by the failure of SWEPCO to accept delivery of such lignite, then in addition to any other remedies available to SWEPCO, it is agreed that SWEPCO shall receive a credit equal to the "per Ton" Management Fee in effect for such calendar years, as adjusted, multiplied by the number of Tons of such "excess deficiency", but not to exceed the total Management Fee paid or due to SABINE for such calendar years, which amount shall be credited to the Management Fee paid or due to SABINE for the next succeeding calendar year.

Section 4. Stockpiling

SABINE may establish and maintain at a location(s) agreed to by SWEPCO a run of mine lignite stockpile(s). SWEPCO shall have the right to limit, at any time, the size of the stockpile(s) by giving written notice to SABINE. SABINE shall maintain such stockpile(s) in accordance with good industry practices and shall take reasonable precautions to prevent spontaneous combustion and water accumulation in the stockpile.

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ARTICLE VI

Delivery

The lignite for use at SWEPCO's Plant shall be delivered by SABINE to SWEPCO at the lignite dump hopper at the boundary of the Mine adjacent to SWEPCO's Plant. The Norit Tons shall be delivered to the coal storage facility or other areas in the Mine designated by SWEPCO into trucks supplied by Norit, its agents or contractors.

For truck delivery purposes, the "boundary of the Mine" shall be the horizontal plane immediately below the bottom of the truck support beams at the lignite dump hopper. SABINE shall be responsible for the maintenance of the truck support. For belt delivery purposes, the “boundary of the Mine” shall be the location along the beltline that is designated by SWEPCO.

ARTICLE VII

Quality and Recovery

(a)The lignite to be supplied to SWEPCO and/or Norit shall be from the Mine in SWEPCO's Reserves and shall be of run-of-mine lignite quality.

SABINE shall deliver the lignite so as to be reasonably free from contamination, BUT SABINE MAKES NO REPRESENTATIONS OR WARRANTIES AS TO THE INHERENT QUALITY AND CHARACTERISTICS OF SWEPCO'S RESERVES.

Any unsatisfactory performance of such lignite caused by the inherent quality and characteristics thereof shall not excuse, alter or diminish the obligation of SWEPCO to make the payments provided for in Article XII and, so long as such lignite is mined and blended as requested by SWEPCO, shall not be an event of "Force Majeure" on the part of SWEPCO.

(b)SABINE shall consult with SWEPCO from time to time in advance of stripping overburden as to the locations in which such stripping will occur. SABINE shall drill and analyze samples of lignite at such locations to project "as-delivered, as-received" lignite quality and recovery in advance of stripping overburden and shall provide the results of such drilling and analyses to

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SWEPCO. SWEPCO shall have the right to review, inspect and approve in advance SABINE's drilling and testing methods and analytical procedures and data provided thereby. On or before October 1 of each year, SABINE shall furnish SWEPCO with a statement of the expected “as delivered-as received” lignite quality, recovery parameters, and other characteristics of the lignite which SABINE plans to mine during the following calendar year.

(c)Upon request by SWEPCO, SABINE shall analyze the exposed lignite from which the overburden has been stripped in advance of loading and shall furnish such analyses to SWEPCO. SABINE shall blend the exposed lignite so as to deliver, within the inherent characteristics of the exposed lignite, lignite of the characteristics desired by SWEPCO.

(d) The parties hereto recognize that the quality and recovery of the lignite delivered to SWEPCO and/or Norit hereunder, as opposed to the quality of the lignite "in-place," is directly related to good mine management practices by SABINE. SABINE shall keep SWEPCO fully informed of any significant changes in the lignite quality after mining thereof and its recovery.

ARTICLE VIII

Loan and Lease Obligations

It will be necessary for SABINE from time to time during the term of this Agreement to incur Loan and Lease Obligations. SWEPCO recognizes that such Loan and Lease Obligations will also be required for reasonable replacements at the end of the useful life of certain of SABINE's equipment, for additions to certain of SABINE's equipment, for meeting payment obligations incurred by SABINE in connection with Loan and Lease Obligations and for maintaining working capital necessary for operating the Mine in the most cost effective manner.

SWEPCO shall have the right to direct SABINE in incurring all such Loan and Lease Obligations; provided, however, that SABINE shall not be required to incur any Loan or Lease Obligation directed by SWEPCO if the terms thereof are less favorable to SABINE than the terms

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of a Loan or Lease Obligation which, for the same term, could be obtained by SABINE without such direction by SWEPCO.

SWEPCO shall have the right to approve or disapprove any agreement in respect of any Loan or Lease Obligation which SABINE proposes to incur to carry out its obligations under this Agreement. SABINE shall submit to SWEPCO a summary of the terms and conditions of any such proposed Loan or Lease Obligation. Within thirty (30) days after receipt by SWEPCO of written notice from SABINE requesting approval or disapproval of such terms and conditions, SWEPCO shall give SABINE written notice of SWEPCO's approval or disapproval thereof. If SWEPCO fails to give such notice within such thirty (30) day period, SWEPCO shall be deemed to have disapproved the same. Upon disapproval by SWEPCO, SABINE shall promptly renegotiate and resubmit to SWEPCO any new or alternate proposed arrangement involving a Loan or Lease Obligation, and the same procedure mentioned above shall be followed. No such Loan or Lease Obligation shall be incurred or agreed to by SABINE without SWEPCO's advance approval.

In connection with any financing pursuant to this Article VIII, SABINE, subject to SWEPCO's prior written approval, which approval shall not be unreasonably withheld, may create a security interest and/or grant a deed of trust or other appropriate lien, or any right of participation in respect thereof, on any or all assets of SABINE, including without limitation all or any portion of its rights hereunder, in favor of any lender or lessor to SABINE and/or any guarantor of any Loan or Lease Obligation of SABINE.

SABINE shall have the right to pay dividends on its stock only from earned surplus. For this purpose, "earned surplus" shall mean without duplication net income for the most recent fiscal period and/or retained income since incorporation less dividends previously paid, as determined in accordance with generally accepted accounting principles and as certified to annually by SABINE's independent public accountants.

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ARTICLE IX

Compensation

Section 1. Compensation During Development Period

(a) Deferred Development Costs.

During each Development Period, SABINE shall accrue all costs and expenses authorized by SWEPCO and associated with the design, development, construction, equipping and operation of any area of the Mine designated by SWEPCO (hereinafter referred to as "Deferred Development Costs"). It is understood and agreed by the parties hereto that the Deferred Development Costs with respect to any mining area of the Mine shall be repaid in full by SWEPCO during the applicable Recovery Period by the inclusion of such Deferred Development Costs in the Cost of Production (as hereinafter defined in Subsection 2(a) of this Article IX) for such Recovery Period.

(b)Compensation Under Certain Circumstances

If at any time during the term of this Agreement SABINE has not obtained sufficient financing to repay all Loan and Lease Obligations theretofore incurred by SABINE in connection with the development of the Mine, SWEPCO shall pay SABINE amounts from time to time sufficient to permit SABINE to satisfy Loan and Lease Obligations in accordance with their terms.

The provisions of this Subsection 1(b) shall be subject to the provisions of Section 2 of Article XII.

Section 2. Compensation During the Production Period

During the Production Period, SWEPCO shall pay SABINE in accordance with the provisions of Article XII for the services provided by SABINE under this Agreement a sum which equals the Cost of Production plus Loan and Lease Obligations plus a Management Fee (as determined hereinafter under Subsections (c) and (d) of this Section 2):

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(a)Cost of Production

For the purpose of this Agreement and except as otherwise expressly stated, "Cost of Production" shall mean the costs actually incurred by SABINE in performing its obligations under this Agreement, but shall exclude costs or expenses which have not been authorized pursuant to this Agreement or which have been incurred over the prior disapproval by SWEPCO thereof. Such costs shall be determined and allocated on an accrual basis in accordance with generally accepted accounting principles (except as otherwise expressly stated herein), consistently applied, and shall include but not be limited to the following:

(i) All production, maintenance, delivery and accounting costs including without limitation the following types of costs:

(aa) Labor costs, which include wages and the costs of an incentive compensation plan and all related payroll taxes, benefits and fringes, including welfare plans, group insurance, vacations and other comparable benefits of corporate officers and employees of SABINE located at the Mine.

(bb) Expense of payroll preparation, general accounting and billing performed at the Mine.

(cc) Consumable materials and supplies.

(dd) Consumable tools.

(ee) Machinery and equipment not capitalized or leased.

(ff) Rental of machinery and equipment, but not including any payments under leases included under Section 2(b) of this Article IX.

(gg) Electric power costs.

(hh) Reasonable and necessary services rendered by persons other than Affiliates of SABINE.

(ii) Insurance, including workers' compensation as required by law, liability, property damage, and such other insurance as requested by SWEPCO and in amounts and with insurance carriers (or self insurance) approved by SWEPCO, as provided in Article XVI.

(jj) Taxes, but not including income taxes imposed by any governmental unit, except for income taxes incurred as a result of reimbursement of governmental penalties and fines, and reclamation costs which are not deductible under the United States Internal Revenue Code.

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(kk) Cost of reclamation during the Production Period, including labor and supplies, as required to comply with the lignite leases and all applicable Federal, state, and local governmental laws, rules and regulations or at such higher level of reclamation as may be requested by SWEPCO.

(ll) Costs incurred by SABINE relating to this Agreement in connection with or as a result of the enactment, modification, interpretation, repeal or enforcement of all applicable Federal, state and local governmental laws, rules and regulations.

(mm) Usual membership fees of the National Mining Association (allocated to SABINE pro rata based on combined annual coal production of SABINE and its Affiliates) and a reasonable number of other professional, service and civic organization memberships paid for by SABINE which are commonly maintained by mining companies similarly situated in East Texas. Also, any contributions and other memberships that are approved in advance by SWEPCO.

(nn) Deferred Development Costs, which shall be amortized ratably as provided in Section 1(a) of this Article IX.

(oo) Cost of reclamation and similar performance bonds as required by any governmental entity obtained by SABINE in connection with the performance of its obligations hereunder.

(pp) Telephone and office costs, travel expenses and moving expenses of exempt employees of SABINE, provided that no moving expense will be allowed for any non-exempt employee of SABINE without SWEPCO's prior approval.

There shall be credited to costs under this Subsection 2(a) any investment tax credit or other tax credits based upon new investment incurred and taken by SABINE and any net receipts by SABINE from rental of, or other net income derived by SABINE, from real or personal property. There also shall be credited to costs under this Subsection (a) any gains and shall be so charged any losses on the disposal of any property owned by SABINE related to the Mine or SWEPCO's Reserves, any refunds or rebates related to the insurance program and any bond adjustments, any refunds or rebates received by SABINE from manufacturers or vendors and any interest or dividends received by SABINE on its investments, except investments of the Management Fee (as determined hereinafter) and undistributed net earnings.

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If any of the foregoing includes costs incurred by an Affiliate of SABINE and charged to SABINE and except as otherwise expressly provided, they shall be included only at the cost to such Affiliate without addition for any overhead, loading, intercompany profit or service charge. SABINE, in determining costs, shall give SWEPCO the proportionate benefit of volume purchases participated in by SABINE and Affiliates of SABINE.

(ii) Real property costs, if any, but none can be incurred without advance written approval by SWEPCO.

(iii)General and Administrative Costs.

(a) The following amount (which shall be subject to adjustment as set forth herein) shall be added to the Cost of Production for general and administrative costs each year during the Production Period, $668,430 for calendar year 2008 and subsequent years. SABINE shall invoice SWEPCO for such amounts (as adjusted) each calendar year in equal, consecutive, monthly installments.

(b) General and administrative costs which are to be covered by such amount of $668,430 (and which shall not otherwise be included in the Cost of Production), are salaries and related expenses such as payroll taxes, pensions and workers' compensation, together with travel, telephone, postage and office rent and office maintenance expense, of officers of SABINE not located at the Mine and of officers and employees of Affiliates of SABINE who perform, and for the time and to the extent they perform, functions relating to SABINE or this Agreement. Without limiting the generality of the foregoing, the expenses of executive office support, administrative support, operations management support, business development support and legal support (excluding outside litigation services and other outside legal services described below in clause (3) of Section 2(a)(iii)(c)), finance and accounting support, management

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information systems support, technical services support, human resources support and benefits support rendered by employees of Affiliates of SABINE shall be included in such $668,430.

(c) Notwithstanding anything to the contrary contained in Subsection 2(a)(iii)(b), general and administrative costs which are not to be covered by such amount of $668,430 and which otherwise shall be included in the Cost of Production are:

• corporate franchise taxes for SABINE paid to the State of Texas, but excluding corporate franchise taxes which SABINE is required to pay to Nevada, its state of incorporation;

(2) outside audit expense of SABINE;

• litigation and other legal expenses incurred through the use of attorneys who are not employees of SABINE or Affiliates of SABINE;

(1) actual costs of new reserve mine planning, mine permitting and special studies; and

(2) actual costs of geologic support on drilling and modeling provided by employees of Affiliates of SABINE.

Any costs associated with work provided by employees of Affiliates of SABINE that are not included in such amount of $668,430 must be approved by SWEPCO in writing.

(d) Effective for the calendar year 2008 and subsequent years, the amount of $668,430 for general and administrative costs for each such calendar year shall be adjusted in the same percentage by which the average of the IPD-GDP Index on the base 2000=100, published by the Bureau of Economic Analysis of the U.S. Department of Commerce, for the four calendar quarters consisting of (x) the fourth calendar quarter for the year immediately preceding the calendar year under consideration and (y) the first three calendar quarters of the year under consideration is greater or less than 103.646. If any adjustment of the amount of $668,430 for general and administrative costs made pursuant to this subsection is based upon an index figure which is subsequently revised, there shall be no further adjustment of such amount on

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the basis of such revision. All adjustments of the amount of $668,430 for general and administrative costs for a given year shall be made prior to the end of March of the year following the year under consideration, and any additional payment to be made by SWEPCO or refund to be made by SABINE shall be made accordingly. An example calculation of such year-end adjustment to the amount of $668,430 for general and administrative costs is set forth in Exhibit “D”, which is attached hereto and made part hereof.

(e) If at any time during the term of this Agreement it is reasonably believed by either party that neither the IPD-GDP Index nor any index substituted therefor in accordance with the following provisions reflects the true change in purchasing power of the United States dollar, then upon the written request of either party SWEPCO and SABINE shall undertake good faith negotiations to determine and agree upon a substituted index or method whereby such change in purchasing power of the United States dollar can be determined. When and if such substituted index or method has been determined and mutually agreed upon the same shall be substituted and put into effect commencing at a time mutually agreed upon. If the IPD-GDP Index or any substitute index is changed in the future to use some base other than the base of 2000=100, for the purposes hereof, the IPD-GDP Index or any substitute index, as the case may be, shall be adjusted so as to be in correct relationship to the base of 2000=100, or some other alternative base which is mutually agreeable to SWEPCO and SABINE. If publication of the IPD-GDP Index or any substituted index is no longer made by any Federal agency, the index to be used as aforesaid shall be that index agreed to by the parties which after necessary adjustment, if any, provides the most reasonable substitute for said index. If

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within ninety (90) days the parties hereto cannot agree upon a substitute index which will accomplish the purposes of this Subsection 2(a)(iii) the matter shall be resolved by arbitration pursuant to Article XVIII hereof.

(iv) Capital Related Costs. Depreciation and/or amortization to which SABINE is entitled, the rates of which shall be determined by SABINE from time to time. No depreciation or amortization shall be included in the Cost of Production with respect to items of property for which a lessor under a lease has taken depreciation or amortization. The rates of such depreciation and/or amortization (unless SWEPCO approves otherwise), for purposes of this paragraph, shall be limited to a straight-line basis over the mutually agreeable anticipated useful service life of the assets. SWEPCO shall be entitled from time to time to the correction of anticipated useful service lives to conform to experience. SABINE shall claim all investment tax credits or similar subsequent tax benefits at the times and in the amounts that will produce the greatest tax savings to SABINE and resulting credits to SWEPCO. Net gains or losses on the disposition of capital assets shall be credited or charged, as the case may be, to the Cost of Production. Transactions covered by this Agreement involving capital assets between SABINE and/or any one or more of the Affiliates of SABINE, including contributions to the capital of SABINE, shall be subject to SWEPCO's prior written approval, and such review and approval of any such intercompany transfers shall be based upon needs and financial justification and shall be reflected in SABINE's accounts at cost to the Affiliates of the assets involved, less accrued depreciation, as shown by the accounts of the transferring company. Transactions involving the disposition or transfer of capital assets shall be subject to SWEPCO's prior written approval.

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(v) Depletion. For any cost depletion from which SABINE obtains a tax benefit, tax credit or other benefit as a result of its performance under this Agreement, such benefit or credit shall be credited, at the statutory federal income tax rate applicable to SABINE, to costs under this Subsection 2(a) and SWEPCO shall receive the benefit therefor.

(b)Loan and Lease Obligations.

For purposes of this Section 2, Loan and Lease Obligations shall mean an amount equal to all amounts payable for such period by SABINE in respect of Loan and Lease Obligations but shall not include any amounts payable by SABINE in respect of the repayment of the principal amount of any indebtedness of SABINE for money borrowed except to the extent that SABINE does not at any time have available to it sufficient funds and credit facilities to permit it to meet its obligations in respect of such principal repayments. Any amounts so paid by SWEPCO in respect of principal shall be treated as advance payments by SWEPCO and credited by SABINE against the next succeeding payment obligation of SWEPCO under Section 2(a) of this Article IX.

(c)Management Fee.

Effective for the calendar year 2008 and subsequent calendar years during the Production Period, SWEPCO shall pay SABINE a base management fee (“Management Fee”) per Ton of lignite delivered to SWEPCO during each calendar year which shall be:

(i) $1.0250 per Ton of lignite on all Norit Tons,

(ii) $1.0250 per Ton of lignite on all Tons for use at SWEPCO's Plant up to and including2,800,000 Tons per year, and

(iii) $0.8546 per Ton of lignite on all Tons for use at SWEPCO's Plant over 2,800,000 Tons per year,

which base Management Fee shall be subject to further adjustment as hereinafter provided in Subsection 2(d) of this Article IX. SABINE shall invoice SWEPCO and SWEPCO shall pay SABINE on a monthly basis for such Management Fee.

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(d)Adjustment of Management Fee.

(i) Effective for the calendar year 2008 and subsequent calendar years, the Management Fee (including the maximum and minimum amounts) for each such calendar year shall be adjusted in the same percentage by which the average of the IPD-GDP Index on the base 2000 = 100, published by the Bureau of Economic Analysis of the U.S. Department of Commerce, for the four calendar quarters consisting of (x) the fourth calendar quarter for the year immediately preceding the calendar year under consideration and (y) the first three calendar quarters of the year under consideration is greater or less than 103.646. If any adjustment of the Management Fee made pursuant to this subsection is based upon an index figure which is subsequently revised, there shall be no further adjustment of the Management Fee on the basis of the final published figure for such index. All adjustments of the Management Fee for a given year shall be made prior to the end of March of the year following the year under consideration, and any additional payment to be made by SWEPCO or refund to be made by SABINE shall be made accordingly. An example calculation of such year-end adjustment to Management Fee is set forth in Exhibit “B,” which is attached hereto and made part hereof.

(ii)Further Modification of Management Fee.

If at any time during the term of this Agreement it is reasonably believed by either party that neither the IPD-GDP Index nor any index substituted therefor in accordance with the following provisions reflects the true change in purchasing power of the United States dollar, then upon the written request of either party SWEPCO and SABINE shall undertake good faith negotiations to determine and agree upon a substituted index or method whereby such change in purchasing power of the United States dollar can be determined. When and if such substituted index or method has been determined and mutually agreed upon the same shall be substituted and put into effect commencing at a time mutually agreed upon. In the event the IPD-GDP Index or any substitute index is changed in the future to use some base other than the base of 2000=100, for the purposes

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hereof, the IPD-GDP Index or any substitute index, as the case may be, shall be adjusted so as to be in correct relationship to the base of 2000=100, or some other alternative base which is mutually agreeable to SWEPCO and SABINE. If publication of the IPD-GDP Index or any substituted index is no longer made by any Federal agency, the index to be used as aforesaid shall be that index agreed to by the parties which after necessary adjustment, if any, provides the most reasonable substitute for said index. If within ninety (90) days the parties hereto cannot agree upon a substitute index which will accomplish the purposes of this Subsection 2(d)(iii) the matter shall be resolved by arbitration pursuant to Article XVIII hereof.

Section 3. Compensation for Mine Closing Operations

During the continuation of SABINE's operations hereunder during the Post Production Period as provided for in the fourth paragraph of Section 1 of Article IV, SWEPCO shall compensate SABINE, which compensation shall include payment of the mine closing costs provided for in Article XI, on the same basis as provided for in Section 2 of this Article IX, except that

(a) in lieu of the Management Fee provided for in Section 2(c), SWEPCO shall pay SABINE as additional compensation a Post-Production Management Fee in accordance with the schedule set forth in Exhibit "C" which is attached hereto and made a part hereof; and

(b) in lieu of the general and administrative costs provided for in Section 2(a)(iii), SWEPCO shall pay SABINE for general and administrative costs in accordance with the Post-Production General and Administrative Costs Schedule set forth in Exhibit “F” which is attached hereto and made a part hereof.

Such payments described in clauses (a) and (b) above shall be made on a monthly basis. The Post-Production Management Fee set forth in Exhibit "C" shall be adjusted in the same manner in which the Management Fee is adjusted pursuant to Subsection 2(d) of Article IX of this Agreement, and the general and administrative costs set forth in Exhibit “F” shall be adjusted in

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the same manner in which the general and administrative costs are adjusted pursuant to Section 2(a)(iii)(d) of Article IX of this Agreement.

ARTICLE X

Sampling and Analysis; Weights

Section 1. Sampling and Analysis

The quality of lignite delivered to SWEPCO from the Mine for use at SWEPCO's Plant shall be determined by analyses of samples taken at a point or points mutually agreed upon by SWEPCO and SABINE. Sampling and analyses shall be performed by methods which meet the standards of the ASTM, or by such other methods as may be mutually agreed upon between SWEPCO and SABINE. SWEPCO shall cause the samples to be transported to the Laboratory. Each sample shall be processed, split into three (3) equal parts and placed in suitable airtight containers by SWEPCO or the Laboratory. Part one of each sample shall be analyzed by the Laboratory, and the cost of such analysis shall be included in the Cost of Production. Part two of each sample shall be properly identified and stored in the Laboratory for a period of not less than sixty (60) days for either party to analyze at its own expense if it so desires. Part three of each sample shall be properly identified and stored by SWEPCO for a period of not less than sixty (60) days. The cost of analysis of part three of the sample, if required, shall be borne equally by SWEPCO and SABINE. For deliveries for which a sample is not available or for which a sample is agreed by SWEPCO and SABINE to be incorrect, the weighted average of the immediately preceding three (3) days sample analyses which are available shall be utilized.

The results of the analyses performed by the Laboratory on part one of the samples shall be binding on the parties and shall be deemed to represent the quality and characteristics of the lignite delivered hereunder unless one party notifies the other of a dispute concerning such analysis within the sixty (60) day period specified in the preceding paragraph. If the analysis of part one is disputed and the analyses of parts one and two of the sample differ by more than the reproducibility

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values specified by ASTM or any other mutually agreeable tolerances, then part three of such sample shall be analyzed by a commercial testing laboratory mutually chosen and using ASTM standards or mutually accepted procedures. When all three parts of a sample are analyzed, the average of the two closest sample results will be used to represent the quality of the lignite delivered on the day such samples were taken; provided, however, that if the two closest sample results differ by more than the reproducibility values specified by ASTM or any other mutually agreeable tolerances, then the weighted average of the immediately preceding three (3) days sample analyses which are available shall be deemed to be the quality and characteristics of the daily delivery of lignite under consideration.

As soon as practicable after the end of each month, SABINE shall furnish SWEPCO with a summary of the analyses performed by the Laboratory during the preceding month on part one of each sample. In addition, if either party elects to analyze part two of a sample, that party shall deliver the results of such analyses to the other party within seven (7) Business Days of receiving such results.

SABINE and SWEPCO each shall have the right to request a bias test of the sampling system if it questions the accuracy of said system. The party requesting such bias test shall pay all costs of any such challenge bias test unless the sampling system is found to be in error, in which case SWEPCO and SABINE each shall pay fifty percent (50%) of the costs of such test. SABINE shall have the right to have a representative present at any and all times to observe the sampling. If the sampling system is replaced or substantially modified, then SWEPCO shall perform, at its sole cost, a bias test of the sampling system as so replaced, altered or modified.

Section 2. Weighing

The weight of the lignite delivered to SWEPCO from the Mine for use at SWEPCO's Plant shall be determined on scales properly installed on conveyor belts leading from SWEPCO's lignite dumping facilities or by other means mutually agreed upon by SWEPCO and SABINE. SWEPCO

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shall consult with SABINE as to design, selection and installation of such scale(s), and the parties shall mutually agree as to such matters. The scales shall be maintained and calibrated in accordance with the manufacturer's recommended standards. SWEPCO shall calibrate such scale(s) on a regular basis during the Production Period (not less than monthly) and maintain such scale(s) within design tolerance. SABINE shall have the right to have a representative present at any and all times to observe the testing and calibration of the scale(s).

The weight of the Norit Tons shall be determined on scales furnished and maintained by Norit.

The weights thus determined shall be accepted as the quantity of lignite delivered under this Agreement and for which invoices are to be rendered and payments made in accordance with Article XII hereof.

SABINE shall be given a record of all weight determinations made by SWEPCO and Norit. If either SWEPCO or SABINE at any time questions the accuracy of SWEPCO's scales or the Norit scales, such party may request a prompt test and adjustment of such scales by utilizing a material weight test, the procedures for which the parties shall mutually agree, at the requesting party's expense. If such test reveals error in weight in excess of the manufacturer's specified tolerances, the scale shall be adjusted to an accurate condition, and an appropriate adjustment shall be made in the invoices and payments affected by such inaccuracy; provided, however, no such adjustment shall be for a period in excess of the lesser of (a) one-half of the period since the date that either party first questioned the accuracy of the weights and the date of the last regularly scheduled test of the scales, or (b) three (3) months.

ARTICLE XI

Mine Closing Costs

SWEPCO recognizes that Mine closing costs will be incurred by SABINE from time to time. SWEPCO shall reimburse SABINE for all such Mine closing costs, which costs shall include, but

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not be limited to, costs of dismantling and removal of equipment, reclamation of lands disturbed by SABINE's mining operations and activities pursuant to an approved Mining Plan, and actions taken by SABINE to prevent environmental pollution and to comply with applicable laws, rules and regulations of Federal, state and local governments and their instrumentalities. Such costs, when determined, shall be included within budgets and operating plans submitted to SWEPCO for its approval and shall be paid by SWEPCO as incurred and, when conducted during the Production Period, shall be deemed to be included within the Cost of Production in accordance with the provisions set forth herein. SWEPCO shall be given proper credit for all salvage value. SWEPCO from time to time may request that SABINE prepare an estimate of the total of the Mine closing costs to be incurred after the Production Period, based on the then current Mining Plan and a Mine closing date approved by SWEPCO. Effective January 1, 2003, Mine closing costs shall be determined in accordance with SFAS No. 143, “Accounting for Asset Retirement Obligations”.

ARTICLE XII

Billing and Accounts

Section 1. Payment Obligations; Billing Accounts;

Billing Procedure

Or before the twentieth (20th) day of each calendar month, SABINE shall furnish SWEPCO with two written invoices which set forth the compensation due SABINE under the provisions of Article IX or Article XX of this Agreement, as the case may be, for the immediately preceding month, one of which shall be for the lignite delivered for use at SWEPCO's Plant and the other of which shall be for the Norit Tons delivered. The amount of each invoice for the lignite delivered for use at SWEPCO's Plant shall be determined in accordance with Exhibit “E” hereto, and the amount of each invoice for Norit Tons delivered shall be determined by a mutually agreed cost allocation method based on the compensation due SABINE under the provisions of Article IX of this Agreement for the immediately preceding month with respect to such Norit Tons. SWEPCO shall pay SABINE the amount of such invoices within ten (10) days of SWEPCO's receipt of the same.

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All such billings and payments shall provide for credit to SWEPCO with regard to all refunds, rebates, advance payments and discounts of all types and shall be subject to audit by SWEPCO and corrections and adjustments where necessary. The correction and adjustment of any undisputed deficiencies shall be adjusted on the next monthly billing.

Section 2. Payment Obligations Absolute

Except as provided in Article XIII (and subject to the limitation specified therein) amounts payable by SWEPCO hereunder in respect of the Loan and Lease Obligations shall be payable under any and all circumstances, without set-off, counterclaim, recoupment, abatement, suspension, deduction or defense or other right which SWEPCO may have against SABINE or any other person for any reason whatsoever and shall not be refunded, it being the intention of the parties hereto that the obligations of SWEPCO in respect of such payments shall be absolute and unconditional, shall be separate and independent covenants and agreements and shall survive the expiration or other termination of this Agreement and continue unaffected unless the requirement to pay the same shall have been terminated pursuant to an express provision of this Agreement, provided that the foregoing shall not operate as a waiver by SWEPCO of its rights to pursue by separate action any claims it may have against any third party and any claims it may have against SABINE which are covered by insurance or bonds.

The provisions of this Section 2 of Article XII shall not be subject to the arbitration provisions of this Agreement.

ARTICLE XIII

Reports and Audit

Annually, SABINE shall have an audit of its accounts, made in whatever scope and detail requested by SWEPCO, by independent public accountants acceptable to SWEPCO and shall provide SWEPCO with a copy of such audit.

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On or before the twentieth (20th) day of each month, SABINE shall furnish to SWEPCO separate detailed statements of costs incurred by SABINE at the Mine for the preceding month in respect of the lignite for use at SWEPCO's Plant and the Norit Tons. Such statements shall be in such form and detail as requested by SWEPCO and shall list the quantity and costs incurred by SABINE in respect of the lignite for use at SWEPCO's Plant and the quantity and the costs incurred by SABINE in respect of the Norit Tons, as the case may be.

SWEPCO and its duly authorized representatives shall have the right to inspect all work being performed hereunder including work at the Mine. SABINE shall, at SWEPCO's request, furnish to SWEPCO, or to such person as SWEPCO may designate, a copy of SABINE's reports applicable to the work on which it was engaged and the location of such work.

SABINE shall furnish with any billing containing cost adjustments, data showing the computations and application of such adjustment and shall furnish promptly such additional documents and evidence as SWEPCO may request in support of such adjustment. SABINE agrees to maintain adequate books, payrolls and records satisfactory to SWEPCO in connection with any and all work performed hereunder, including but not limited to the verification of all provisions under this Article XIII. SABINE further agrees to retain all such work records for a period of not less than four (4) years after completion of such work, and SABINE further agrees to consult with SWEPCO prior to SABINE's disposal of such records. SWEPCO and its duly authorized representative shall have access at all reasonable times to the books, payrolls, records, correspondence and personnel of SABINE and any Affiliate of SABINE relating to any of the work performed hereunder for the purpose of auditing and verifying SABINE's charges for work or for any other reasonable purpose including, but not limited to, compliance by SABINE with other terms and provisions of this Agreement. SABINE agrees that (if and when applicable) these provisions will be included in any consulting services or other subcontracts relating to work performed for SABINE under provisions of this Agreement.

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SWEPCO shall have access and the right to examine all income tax filings of SABINE or in which SABINE is included. SABINE shall have the right to join with any Affiliates of SABINE in the filing of any consolidated tax return, but this right shall be applicable only if the exercise thereof will not increase the cost of lignite to SWEPCO. If SABINE so joins in such filing, SABINE shall promptly furnish SWEPCO a copy of North American Coal's consolidated tax sharing agreement and shall promptly furnish to SWEPCO a revised copy at any time such agreement is amended. Savings applicable to SABINE as a result of any such consolidation shall be invested by SABINE and will serve to further reduce the cost of lignite to SWEPCO. If SABINE files consolidated tax returns with an Affiliate or Affiliates of SABINE, it shall collect from such Affiliate or Affiliates any net tax benefit derived by any such Affiliate from such consolidation attributable to SABINE. Any net tax benefit collected by SABINE arising from any such consolidation which was directly attributable to SABINE shall be repaid promptly to any such Affiliate(s) in the event such net tax benefit is reversed for whatever reason.

Any correction and adjustment of undisputed audit deficiencies determined by audit shall be made within thirty (30) days after determination thereof. Any disputed audit deficiency shall be finally determined and resolved by a nationally recognized independent accounting firm selected by mutual agreement of SWEPCO and SABINE, and its decision and determination shall be binding on the parties, and the correction and adjustment shall be made within thirty (30) days after such determination. The cost and expense of such third-party audit of a disputed deficiency shall be borne by the losing party, meaning the party whose position is furthest from the final determination, and if SABINE is the losing party such cost and expense of audit shall not be recoupable from SWEPCO.

Anything to the contrary in the foregoing provisions of this Article XIII notwithstanding, SWEPCO hereby agrees that without the advance written approval of the obligees of all Loan and Lease Obligations then outstanding it will not collect from SABINE, in connection with any claim

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against SABINE hereunder, any amount in excess of SABINE's net income and retained earnings (determined without duplication), plus all amounts available to or from SABINE under bonding, insurance, and similar arrangements.

ARTICLE XIV

Force Majeure

In the event SWEPCO or SABINE is rendered unable, wholly or in part, by "Force Majeure" as hereinafter defined to carry out any of its obligations under this Agreement, and if such party shall (within two [2] Business Days after the declaring party is aware of the occurrence of such "Force Majeure" relied upon) give the other party concerned written notice and full particulars of such "Force Majeure", then the obligations of the party giving such notice shall be suspended to the extent made necessary by such "Force Majeure" from the inception of the "Force Majeure" and during its continuance, but for no longer; provided, however, that the party giving such notice shall diligently use its best efforts to eliminate the cause and effect of such "Force Majeure" insofar as possible with all reasonable dispatch. Any deficiencies in the production or delivery of lignite hereunder caused by "Force Majeure" shall not be made up under the provisions of this Agreement except by mutual agreement.

The term "Force Majeure" as used in this Agreement shall mean any and all causes beyond the control and without the fault or negligence of the party failing to perform, such as acts of God, strikes, lockouts or other industrial disturbances, labor disputes, labor or material shortages, acts of the public enemy, wars, blockades, insurrections, riots, epidemics, landslides, adverse geological conditions, faults in lignite seams, lightning, earthquakes, fires, storms, floods, washouts, major breakdowns of or damage to plant, SWEPCO's Plant, mine equipment, or facilities, interruptions to or contingencies of transportation, orders or acts of a military authority or civil authority (including without limitation, interruptions, whether by action or inaction, by Federal, state or local governments or court orders, present and future, or acts or failures to act of any regulatory body having proper

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jurisdiction) and any other causes, whether of the kind herein enumerated or otherwise, beyond the control and without the fault or negligence of the party failing to perform, which wholly or partly prevents the mining, producing, processing and delivering of the lignite by SABINE, or the receiving and/or utilizing of the lignite by SWEPCO. It is understood and agreed that the settlement of strikes or lockouts or industrial disputes or disturbances shall be entirely within the discretion of the party having the difficulty and that the above requirement that any "Force Majeure" shall be remedied with all reasonable dispatch shall not require the settlement of strikes or lockouts by acceding to the demands of the opposing party therein when such course is inadvisable in the discretion of the party having the difficulty.

It is agreed that no such event of "Force Majeure" shall excuse, alter or diminish the obligation of SWEPCO to make the payments provided for in Article XII hereof. During any period of "Force Majeure", SABINE agrees to make a diligent effort to minimize all costs and expenses incurred.

ARTICLE XV

Conduct of Operations

SABINE shall conduct its mining operations hereunder in a careful, good workmanlike manner. SABINE shall use its best efforts to design and operate the Mine in accordance with this Agreement and all applicable laws, rules and regulations of Federal, state and local governments or their instrumentalities; provided, however, that SABINE shall have the right to contest in good faith through appropriate legal proceedings the validity or applicability of any such law, rule or regulation so long as SABINE gives SWEPCO advance notice of the nature of and reasons for such proposed contest and of such proposed proceedings and obtains SWEPCO's advance approval of the projected cost and expenses thereof, which approval shall not be unreasonably withheld; and further provided, however, SABINE shall not be in default in the performance of its obligations under this Agreement if and to the extent such failure to perform its obligations is due to (1) an event described in Article XIV hereof, (2) control exercised by SWEPCO pursuant to

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Section 2(c) of Article IV or Article VIII of this Agreement, or (3) the failure of SWEPCO to perform its obligations hereunder.

SABINE represents that its management and supervisory personnel and a major portion of its other employees shall be well qualified and trained personnel with established credentials in engineering, constructing, operating and administering similar projects and that it will utilize and exercise high standards of industry practice and workmanship in the performance of all of its undertakings and obligations reflected in this Agreement. SABINE agrees to the foregoing and agrees that it shall diligently attempt and use its best efforts to:

(a) mine, recover and deliver the optimum quantity and quality of mineable commercial lignite, as defined in the approved Annual Mining Plan, in the most economical and efficient manner;

(b)conduct its operations and carefully plan and supervise its capital, operating and all other expenditures and acquisitions pursuant to the advance approval by SWEPCO as provided herein so as not to exceed the pre-approved budgets, as provided herein.

ARTICLE XVI

Insurance

SABINE shall procure or cause to be procured and maintain or cause to be maintained in full force and effect all insurance coverages specified in this Agreement. All insurance coverages shall be in accordance with the terms of this Article XVI using companies authorized to do business in the applicable jurisdiction where such services are to be performed. The insurance shall be of such types, limits, coverages and amounts, and deductible amounts and with such insurers as may periodically be required, requested or approved by SWEPCO applicable to the Mine, the equipment and property at the Mine, the operation of the Mine or operations incidental to the Mine and personnel at the Mine or utilized in connection therewith. Such insurance shall include, but shall not be limited to, public liability, contractual liability, all-risk property insurance including coverage for physical damage to equipment, mine reclamation bonds and workers' compensation insurance as required by law and the following:

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(a)Coverage for the legal liability of SABINE and its subcontractors for workers' compensation and occupational disease under the law of the state in which the work hereunder is to be performed; provided, however,

A. in states with a workers' compensation fund, SABINE and its subcontractors shall be contributors to the state workers' compensation fund and shall furnish a certificate to that effect.

B. in states without a workers' compensation fund, SABINE and its subcontractors shall maintain an insurance policy for workers' compensation from an insurance carrier approved for transacting workers' compensation business in the state in which the work is performed.

C. if SABINE or any subcontractor is a legally permitted and qualified self-insurer in the state in which the work is performed, it may furnish proof that it is such a self-insurer in lieu of submitting proof of insurance.

(b)commercial general liability insurance with limits of coverage of not less than $1,000,000 per occurrence and annual aggregate;

(c)commercial automobile liability insurance with limits of coverage for bodily injury and property damage of not less than $1,000,000 for each incident;

(d)excess or umbrella liability insurance with a combined single limit of coverage of not less than $5,000,000 per occurrence and annual aggregates of at least $10 million for bodily injury and property damage, and including coverage for the excess of Employers Liability and the insurance described in paragraphs (b) and (c) above;

(e)Property Damage and Boiler and Machinery coverage with combined limits of coverage of not less than $100 Million per occurrence and a deductible of no more than $1,000,000; and

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(f)pollution legal liability insurance with limits of coverage of not less than $1,000,000 per occurrence and annual aggregate.

SWEPCO, its parent, subsidiaries, Affiliates, directors, officers, agents, and employees, shall be named as additional insureds under the insurance policies described in paragraphs (b) through (d) and paragraph (f) above, and as loss payees under the insurance policies described in paragraph (e) above, with respect to SABINE's operations and the work to be performed under this Agreement. Such insurance shall be primary and non-contributory over any other insurance maintained by SWEPCO, its parent, subsidiaries and Affiliates.

SABINE shall obtain waivers of subrogation on all insurance maintained by SABINE hereunder. Such waivers shall be made for the benefit of SWEPCO, its parent, subsidiaries and Affiliates.

Any policies of insurance written on a “claims-made” basis shall be maintained for a period of five (5) years after termination of this Agreement, provided that such coverage is available and that SWEPCO pays all costs of maintaining such insurance.

SABINE shall furnish annually to SWEPCO two (2) copies of acceptable certificates of insurance covering the terms of the insurance policies maintained by SABINE. Such certificates of insurance shall state that the insurer has issued the policies providing for the insurance specified above, that such policies are in force and that the insurer shall give SWEPCO thirty (30) days prior written notice of any material change in, or cancellation of, such policies. If such insurance policies are subject to any exceptions to the terms specified herein, such exceptions shall be fully explained in such certificates. SWEPCO may, at its discretion, require SABINE to obtain insurance policies that are not subject to any exceptions.

SABINE shall require all contractors, subcontractors and its Affiliates engaged in work on or for the Mine to comply with the applicable workers' compensation laws of the State of Texas, or

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any other applicable state to the end that the employer is protected against any common law action by an employee and to maintain such other insurance as SWEPCO may deem advisable.

ARTICLE XVII

Relationship of the Parties

SWEPCO and SABINE agree that in performing services hereunder SABINE shall be an independent contractor and not the agent, servant or employee of SWEPCO or any of its affiliate companies or of Norit. Nothing contained in this Agreement shall be construed to constitute or create a joint venture, trust, mining partnership, commercial partnership or other relationship between SWEPCO or any of its affiliate companies or Norit and SABINE whereby either party hereto would be liable for the acts and deeds of the other party hereto, except as specifically set forth herein.

SABINE SHALL INDEMNIFY, HOLD HARMLESS AND DEFEND SWEPCO AND ITS SUBSIDIARIES, AFFILIATES AND THEIR DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS, THE SUCCESSORS AND ASSIGNS OF SWEPCO (COLLECTIVELY, “RELEASEES”), FROM ANY AND ALL LOSS AND LIABILITY AND FOR CLAIMS, DEMANDS, SUITS OR CAUSES OF ACTION AT LAW OR IN EQUITY FOR DAMAGES AND INJURIES (INCLUDING DEATH) OF EVERY KIND AND NATURE TO PERSONS (INCLUDING EMPLOYEES OF SABINE, SWEPCO AND ANY OF THEIR AFFILIATES) AND PROPERTY (INCLUDING LOSS OF USE THEREOF) ARISING OUT OF, OR CLAIMED TO HAVE BEEN CAUSED BY, OR IN ANY MANNER RELATED TO THE OPERATIONS OF SABINE OR OF ANY PERSON UNDER CONTRACT TO IT UNDER THIS AGREEMENT EVEN THOUGH CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE OF ANY SINGLE RELEASEE OR ANY COMBINATION OF RELEASEES THAT OPERATES CONCURRENTLY WITH THE NEGLIGENCE OF ANY PERSON OR ENTITY THAT IS NOT A RELEASEE, BUT IN NO EVENT FOR THE SOLE NEGLIGENCE OF ANY RELEASEE OR ANY COMBINATION OF RELEASEES;

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PROVIDED, HOWEVER, THAT, NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN, SABINE'S INDEMNITY OBLIGATION UNDER THIS PARAGRAPH SHALL BE LIMITED TO $500,000 AND SHALL BE SUPPORTED BY LIABILITY INSURANCE COVERAGE TO BE FURNISHED BY SABINE, AND PROVIDED, FURTHER, HOWEVER, THAT SABINE SHALL NOT BE OBLIGATED TO INDEMNIFY ANY RELEASEE (I) AGAINST ANY LOSS OR LIABILITY WITH RESPECT TO WHICH SABINE IS NOT COVERED BY SUCH INSURANCE, (II) FOR THE AMOUNT OF ANY LOSS OR LIABILITY IN EXCESS OF THE AMOUNT WHICH IS COVERED BY SUCH INSURANCE OR (III) FOR ANY LOSS OR LIABILITY WITH RESPECT TO ANY EMPLOYEE OF NORIT OR ANY OF ITS AGENTS OR CONTRACTORS.

Notwithstanding anything to the contrary contained in this Agreement, in the event of a disagreement, controversy or litigation between SABINE and SWEPCO involving this Agreement, any provision hereof or the subject matter hereof, the legal costs and expenses of SABINE in connection therewith shall not be recouped by SABINE or considered a Cost of Production or a reimbursable expense under the terms hereof, unless SABINE is the ultimate successful party in such disagreement, controversy or litigation.

ARTICLE XVIII

Arbitration

Any valid dispute between the parties arising out of this Agreement (including failure to agree on matters slated to be determined by mutual agreement) for which the ultimate resolution is not expressly provided by this Agreement or for which arbitration is not expressly excluded, shall be resolved by arbitration. The parties shall first make a diligent good faith attempt to resolve the dispute by mutual agreement. If unsuccessful, the request for arbitration shall be in writing setting forth in detail the claim or claims to be arbitrated, and the amount involved, if any, and shall specify the position of the party giving the notice, the reasons therefore and the remedy sought and shall name one qualified person to act as an arbitrator. It shall be delivered to the other party within 180

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days of the date of the first knowledge of the claiming party of the occurrence or conditions giving rise to the dispute. Any failure to request arbitration within such 180 day period shall be deemed a waiver of the right to arbitrate the dispute.

Within fifteen (15) days after such notice is received, the party receiving the notice shall by written notice to the other party specify its position, the reasons therefor and the remedy sought with respect to such issue and shall name one qualified person to act as an arbitrator. All persons appointed to act as arbitrator (including the third arbitrator selected as provided below) shall be disinterested persons qualified by experience to hear and determine the questions to be arbitrated, and if the nature of any such question shall so require, they shall be geologists or mining engineers experienced in the exploration for or mining of minerals under operating conditions similar to those which may be encountered hereunder.

The two arbitrators so designated shall select a third arbitrator. If the two arbitrators cannot agree within fifteen (15) days as to the designation of a third arbitrator, then said third arbitrator shall be selected pursuant to the AAA Rules. The arbitrators and SWEPCO and SABINE shall hold hearings in Dallas, Texas on the matters to be arbitrated within thirty (30) days after the appointment of the third arbitrator. The arbitrators shall make such examinations and investigations as they may deem necessary and shall render their decision in writing within sixty (60) days following such hearings.

The decision of the arbitrators shall be limited to selecting either the position and remedy stated by SWEPCO in its notice or the position and remedy stated by SABINE in its notice as provided above. The arbitrators shall have no power to mediate or compromise any dispute but shall have only the limited authority herein provided to review the information presented by the parties and to select the position and remedy proposed by one of the parties.

The decision of the arbitrators shall be final and binding on the parties, and judgment thereon may be entered in any court of competent jurisdiction. The cost and expense for the arbitration

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shall be shared equally between the parties. Except as herein otherwise specified, the arbitration shall be conducted pursuant to the AAA Rules in effect at the time of such arbitration. Unless the parties mutually agree otherwise, each arbitration procedure and hearing shall be limited in scope to one dispute.

Notwithstanding anything to the contrary contained in this Article XVIII, it is agreed that whenever it is provided in this Agreement that any act, event, decision, determination or other matter is or is not to be done, performed or made at the option, election, request or determination or in the opinion of SWEPCO or is subject to the right of approval or disapproval by SWEPCO, such determination, election, request, option, opinion, approval or disapproval by SWEPCO shall not be subject to arbitration hereunder.

It is mutually understood that the existence of a dispute which has or may become the subject of an arbitration shall in no way excuse either SWEPCO or SABINE from performing its obligations under this Agreement, and each of the parties hereto shall continue to perform in accordance with the terms of this Agreement irrespective of the existence of any such dispute.

ARTICLE XIX

SABINE Default; Remedy

Section 1. SABINE Default

For the purposes of this Agreement, any one of the following events is a "SABINE Default":

(a)there exists at any time during the Production Period for any reason other than Force Majeure, as defined in Article XIV, a deficiency of deliveries of mmBtus of lignite in excess of twenty-five percent (25%) of the amount required to be delivered under Article V for use at SWEPCO's Plant during the immediately preceding six-month period or a deficiency of deliveries of mmBtus of lignite in excess of twenty percent (20%) of the amount required to be delivered under Article V for use at SWEPCO's Plant during the immediately preceding twelve-month period;

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(b)SABINE fails to perform any of its obligations in accordance with the performance standards recited in Article XV hereof, which failure to perform has a material adverse effect on the operations of SWEPCO's Plant, and such failure continues unremedied for sixty (60) days after written notice thereof shall have been given to SABINE by SWEPCO;

(c)SABINE materially breaches any of the terms, conditions or provisions which results in an event of default in respect of any Loan or Lease Obligation, which default is not remedied by SABINE prior to the time that any party (other than SABINE) to such Loan or Lease Obligation is permitted by such Loan or Lease Obligation to exercise its rights with respect to such event of default thereunder;

(d)SABINE or North American Coal commences a voluntary case under any chapter of the Federal Bankruptcy Code or consents to (or fails to controvert in a timely manner) the commencement of an involuntary case against SABINE or North American Coal under said Code;

(e)SABINE or North American Coal institutes proceedings for liquidation, rehabilitation, readjustment or composition (or for any related or similar purpose) under any law other than the Federal Bankruptcy Code or consents to (or fails to controvert in a timely manner) the institution of any such proceedings against SABINE or North American Coal;

(f)SABINE or North American Coal is insolvent (within the meaning of any applicable law), or is unable, or admits in writing its inability, to pay its debts generally as they come due or makes an assignment for the benefit of creditors or enters into any arrangement for the adjustment or composition of debts or claims;

(g)a court or other governmental authority or agency having jurisdiction in the premises enters a decree or order (i) for the appointment of a receiver, liquidator, assignee, trustee or sequestrator (or other similar official) of SABINE or North American Coal or of any part of the property of such person or for the winding-up or liquidation of the affairs of such person, and such decree or order remains in force undischarged and unstayed for a period of more than thirty (30)

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days, or (ii) for the sequestration or attachment of any property of SABINE or North American Coal without its unconditional return to the possession of such person, or its unconditional release from such sequestration or attachment, within thirty (30) days thereafter;

(h)a court having jurisdiction in the premises enters an order for relief in an involuntary case commenced against SABINE or North American Coal under the Federal Bankruptcy Code, and such order remains in force undischarged and unstayed for a period of more than thirty (30) days;

(i)a court or other governmental authority or agency having jurisdiction in the premises enters a decree or order approving or acknowledging as properly filed or commenced against SABINE or North American Coal a petition or proceedings for liquidation, rehabilitation, readjustment or composition (or for any related or similar purpose) under any law other than the Federal Bankruptcy Code, and any such decree or order remains in force undischarged and unstayed for a period of more than thirty (30) days; or

(j)SABINE or North American Coal takes corporate action for the purpose or with the effect of authorizing, acknowledging or confirming the taking or existence of any action or condition specified in paragraphs (d), (e) or (f) of this Section 1.

Provided, however, if SWEPCO claims that a SABINE Default of the nature described in this Section 1 has occurred and is continuing, SABINE shall have sixty (60) days (notwithstanding the provisions of Article XVIII hereof) after its receipt of written notice from SWEPCO of such SABINE Default to:

(i)except for a SABINE Default of the nature described in Subsection 1(a) of this Article XIX, which such default is not subject to this paragraph (i), correct such SABINE Default, or, if such SABINE Default is not correctable within said sixty (60) day period, to submit to SWEPCO for its approval, which approval shall not be unreasonably withheld, a plan and timetable for correcting such SABINE Default. If such Default is not corrected within said time, or any extended time approved by SWEPCO, SWEPCO's remedies provided for herein shall thereupon be fully available; or

(ii)give SWEPCO written notice that SABINE disputes that such SABINE Default has occurred and is continuing and that SABINE is submitting the matter to arbitration in accordance with the provisions of Article XVIII of this Agreement. If arbitration is so sought,

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SABINE shall not be deemed in default until the matter has been determined finally by arbitration under the provisions of Article XVIII hereof.

Section 2. Remedy of SWEPCO Upon SABINE Default

Upon the occurrence of any SABINE Default, SWEPCO, in its discretion (and in addition to any other rights or remedies available to SWEPCO), may exercise (without any other prerequisites) its rights, options and powers under the Option Agreement, in which event no further Management Fee will be payable to SABINE or North American Coal. Any amounts paid by SWEPCO other than to SABINE in respect of any Loan or Lease Obligation shall be credited against its obligations hereunder to make payments in respect of such Loan or Lease Obligation. The exercise by SWEPCO of any remedy hereunder shall be governed by the last sentence of Article XIII.

Section 3. Limitations on SWEPCO's Rights Under Article XIX

Notwithstanding anything to the contrary contained in this Article XIX, SWEPCO shall not have the right to exercise the Option Agreement if a SABINE Default of the nature described in Section 1 of this Article XIX has occurred and is continuing:

(a)as a result of any failure by SWEPCO to carry-out its obligations under this Agreement, or as a result of a failure by SWEPCO to approve any Loan or Lease Obligation which SABINE proposes to enter into pursuant to Article VIII;

(b)as a result of any failure by SWEPCO to pay to SABINE any sum due SABINE from SWEPCO pursuant to this Agreement; provided, however, that if SWEPCO's obligation to pay any such sum (or any part thereof) is disputed by SWEPCO and payment of such sum is necessary to enable SABINE to comply with the terms of any Loan or Lease Obligation entered into pursuant to Article VIII hereof or to enable SABINE to prevent the occurrence of a SABINE Default of the nature described in Section 1 of this Article XIX, then SWEPCO shall pay SABINE the full sum claimed by SABINE, and such payment shall be without prejudice to SWEPCO's position in such dispute and its right to obtain reimbursement thereof;

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(c)as a result of SABINE's compliance with any directions and/or prohibitions of SWEPCO to SABINE contrary to SABINE's recommendations and advice as to the design, construction, development and operation of the Mine; or

(d) because of a reasonable difference with governmental authorities as to the interpretation of applicable governmental laws, rules or regulations, impossibility of compliance therewith, or SWEPCO's consent to non-compliance therewith.

ARTICLE XX

Termination of Relationship

Section 1. Events of Termination

This Agreement shall terminate and SWEPCO and SABINE shall be released, except as provided in this Article XX, Section 1, from their respective obligations thereafter accruing hereunder upon the occurrence of either of the following events:

(a)if SWEPCO takes the action specified in Section 2 of Article XIX hereof, in which event SWEPCO shall be and become obligated to make payments to SABINE from time to time sufficient to permit SABINE to satisfy Loan and Lease Obligations in accordance with their terms; or

(b)if at any time all economically surface mineable lignite reserves in SWEPCO's Reserves have been depleted or SWEPCO's Plant has reached the end of its useful life (estimated to be 2035), in which event SWEPCO shall be and become obligated to make payments to SABINE from time to time sufficient to permit SABINE to satisfy Loan and Lease Obligations in accordance with their terms.

Section 2. Additional Right of Termination

In addition to the events of termination specified in Section 1 of this Article XX and notwithstanding any other provision of this Agreement, SWEPCO and SABINE each shall have the right, in their respective unqualified and unrestricted discretion and without requirement of cause,

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to terminate the relationship created by this Agreement by giving notice of termination (which notice shall specify the effective date of such termination (“Termination Effective Date”), which shall not be earlier than one year from the date of such notice), in which event SWEPCO shall (i) be and become obligated to make payments to SABINE from time to time sufficient to permit SABINE to satisfy Loan and Lease Obligations in accordance with their terms as the same become due and payable, and (ii) exercise its rights, options and powers under the Option Agreement. If SWEPCO terminates this Agreement pursuant to this Section 2 and the reason therefor is not because of a SABINE Default, or is not due to a shutdown of the Mine because of economic reasons, including, but not limited to, the purchase of fuel from a more cost effective source, governmental requirements or restrictions or otherwise, and SWEPCO mines, or causes to be mined, within two (2) years after the Termination Effective Date lignite from said SWEPCO's Reserves, then North American Coal shall be entitled to, and SWEPCO shall cause the successor mining company to pay, and SWEPCO shall guarantee the payment, to North American Coal or its nominee an amount (the “Termination Fee”) calculated in accordance with the methodology set forth in Exhibit “G,” which is attached hereto and made part hereof.

Such Termination Fee, if payable under this Article XX, Section 2, (a) shall be due within sixty (60) days following the recommencement of mining in the event that SWEPCO commences or causes another person to commence the mining of lignite from SWEPCO's Reserves within said two (2) years, and (b) shall be determined as of the first day of the calendar quarter in which the recommencement of mining occurs, based on the Termination Fee for the year in which the Termination Effective Date occurs and on the percentage change in the value of the IPD-GDP Index on the base 2000 = 100 from the fourth calendar quarter of 2008 to the value of such Index for the calendar quarter immediately preceding the calendar quarter in which the recommencement of mining occurs. If the value of the IPD-GDP Index on the base 2000 = 100 for such immediately preceding calendar quarter is not available when the Termination Fee is due and payable, the most

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current quarterly value of such Index shall be used for making payment of the Termination Fee, and such payment shall be subject to true-up at the time the final published value of the IPD-GDP Index on the base 2000 = 100 for such immediately preceding calendar quarter is available.

If at any time during the term of this Agreement it is reasonably believed by either party that neither the IPD-GDP Index nor any index substituted therefor in accordance with the following provisions reflects the true change in purchasing power of the United States dollar, then upon the written request of either party SWEPCO and SABINE shall undertake good faith negotiations to determine and agree upon a substituted index or method whereby such change in purchasing power of the United States dollar can be determined. When and if such substituted index or method has been determined and mutually agreed upon, the same shall be substituted and put into effect commencing at a time mutually agreed upon. In the event the IPD-GDP Index or any substitute index is changed in the future to use some base other than the base of 2000=100, for the purposes hereof, the IPD-GDP Index or any substitute index, as the case may be, shall be adjusted so as to be in correct relationship to the base of 2000=100, or some other alternative base which is mutually agreeable to SWEPCO and SABINE. If publication of the IPD-GDP Index or any substituted index is no longer made by any Federal agency, the index to be used as aforesaid shall be that index agreed to by the parties which after necessary adjustment, if any, provides the most reasonable substitute for said index. If within ninety (90) days the parties hereto cannot agree upon a substitute index which will accomplish the purposes of this Article XX, Section 2, the matter shall be resolved by arbitration pursuant to Article XVIII hereof.

Section 3. Procedures on Termination

Upon the termination of this Agreement as provided in Section 1 or 2 of this Article XX, the provisions of Article XII shall govern the procedures for such payments by SWEPCO and the nature of SWEPCO's obligations in respect thereof.

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Section 4. Nature of Termination Rights

The rights of termination set forth in this Article XX shall not be subject to arbitration, and neither party shall have any right in law or equity against the other solely because of any such termination.

ARTICLE XXI

Notices and Other Communications;

Designated Representatives

SWEPCO and SABINE each shall appoint a representative ("Designated Representative") to receive and give on behalf of SWEPCO and SABINE all notices, approvals, disapprovals and other communications required or permitted under this Agreement.

Except as otherwise expressly stated in this Agreement, any such notice or approval, disapproval or other communication shall be in writing to the other party and shall be deemed to have been duly given when delivered in person or by facsimile transmission (as evidenced by confirmation of facsimile transmission) to the Designated Representative or when actually received (as evidenced by return receipt after posting by United States certified mail, return receipt requested), with postage prepaid, addressed to the Designated Representatives of SWEPCO and SABINE, as follows:

(a) to SWEPCO:

Southwestern Electric Power Company

Attn: Manager, Lignite & Business Services

2396 Farm Road 3251

Hallsville, Texas 75650-7723

Telephone: 903/938-0321

Facsimile: 903/927-5820

With copy to:

American Electric Power

Attn: Director of Mining Operations

155 W. Nationwide Blvd.

Columbus, OH 43215

Telephone:(614) 583-6400

Facsimile:(614) 583-1602

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(b)to SABINE:

The Sabine Mining Company

Attn: President

6501 Farm Road 968 West

Hallsville, Texas 75650

Telephone:903/660-4200

Facsimile:903/660-3665

With copy to:

The North American Coal Corporation

Attn: President and Chief Executive Officer

14785 Preston Road, Suite 1100

Dallas, Texas 75254-7891

Telephone:(972) 239-2625

Facsimile:(972) 387-1031

(c)To such other address or addresses as the respective parties hereto may from time to time designate in writing.

It is agreed that wherever this Agreement provides for notice to be given within twenty-four (24) hours of certain occurrences, such notice shall be given verbally and shall subsequently be confirmed in writing in the manner provided for above in this Article XXI.

ARTICLE XXII

Right of Inspection

SWEPCO (upon first giving reasonable notice to the office of SABINE's Designated Representative) at all times and for any purpose shall be afforded complete access to the Mine, Mine records, accounting and financial records, installations, tax returns and operations of SABINE and the right to inspect the Mine, provided that the exercise of such rights does not interfere with the operation of the Mine and that the exercise of such rights shall be at the sole risk, cost and expense of SWEPCO. It is agreed that the personnel and employees of SABINE engaged in the mining are solely the employees of SABINE and that SWEPCO, in the exercise of its right of access

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and inspection or otherwise, shall have no right to issue instructions to, make demand of, or direct in any way the daily work and daily activities of SABINE's employees.

ARTICLE XXIII

Limitations of SABINE Functions

Until this Agreement expires or is terminated, SABINE shall be chartered as a single purpose corporation to perform, pursuant to this Agreement, the duties and obligations hereof and shall not perform any work or services, enter into any employment contracts, enter into any agreements with third-parties without SWEPCO's advance approval, undertake any obligations or liabilities, or expend any funds, or engage in any activities, except those which are pursuant this Agreement.

Without first obtaining SWEPCO's approval, SABINE shall not purchase or otherwise acquire any real property interests including lignite or other mineral leases and land that would in any way conflict with the interests of SWEPCO.

ARTICLE XXIV

Assignment

Either party may assign this Agreement and its rights hereunder to its parent company or any Affiliate or subsidiary of its parent company or of itself, and only to such a party, without the consent of the other party. Otherwise, this Agreement may not be assigned wholly or in part by either party without the written consent of the other party, which consent shall not be unreasonably withheld. No assignment shall release the assignor from its financial responsibility hereunder, unless expressly agreed to in writing by the other party and its assignees. Subject to the foregoing limitations, all of the provisions of this Agreement shall inure to the benefit of and be binding upon the parties hereto, and their successors and assigns.

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ARTICLE XXV

Interpretation

This Agreement shall be governed by, and construed and interpreted in accordance with, the internal laws of the State of Texas without giving effect to the conflict of laws and principles thereof. The topical headings used in this Agreement have been inserted as a matter of convenience of reference only and shall not control or affect the meaning or construction of any of the terms and provisions of this Agreement. As used herein, any gender shall include any other gender, the singular shall include the plural, and the plural shall include the singular, wherever appropriate.

ARTICLE XXVI

Severability

The invalidity or unenforceability of any particular provision of this Agreement shall not affect the other provisions hereof unless it substantially and adversely affects the value of this Agreement to one of the parties; and in the absence of any such substantial and adverse effect, this Agreement shall be construed in all respects as if such invalid or unenforceable provision were omitted.

ARTICLE XXVII

Entire Agreement

This Agreement constitutes the entire agreement between SWEPCO and SABINE and supersedes all other prior negotiations, undertakings, notices, memoranda and agreements between SWEPCO and SABINE, whether oral or written, with respect to the subject matter hereof; provided, however, the parties recognize that the performance of this Agreement is subject to all necessary regulatory approvals, and that in the event regulatory approval is required for the performance by SWEPCO of its payment obligations hereunder, SABINE shall not be required to incur any Loan or Lease Obligation until such approval is obtained, and further provided, however, that all liabilities and obligations of SWEPCO and SABINE which have accrued prior to the effective

52

date of this Agreement shall survive until satisfied or discharged or until the responsible party has been released therefrom.

ARTICLE XXVIIl

Amendments

Any modification or amendment of the terms and provisions of this Agreement shall be valid and effective only if and when made in writing and duly executed on behalf of the parties hereto.

ARTICLE XXIX

Counterparts

The Agreement may be executed in any number of counterparts, each of which, when executed and delivered, shall be an original, but all of which shall collectively constitute one and the same instrument.

ARTICLE XXX

Waiver of Remedies

The failure of either SWEPCO or SABINE to insist in any one or more instances upon strict performance of any of the provisions of this Agreement or to take advantage of any of its rights hereunder shall not be construed as a waiver of any such provisions or the relinquishment of any such rights, but the same shall continue and remain in full force and effect.

ARTICLE XXXI

Representations, Warranties and Covenants

(a)Representations and Warranties of SABINE. SABINE represents and warrants that:

(i)it is a corporation duly organized and validly existing in good standing under the laws of the State of Nevada, is duly qualified to do business in the State of Texas and has all requisite corporate power and authority to enter into this Agreement and to perform its obligations hereunder;

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(ii)there is no action, proceeding or investigation pending, or, to the best knowledge of SABINE, threatened against it, and there is no term of its charter, by-laws, or any mortgage, indenture, contract, agreement, instrument, judgment, decree, order, statute, rule or regulation to which SABINE or any of its affiliates is a party or by which it is bound, which in any way prevents or interferes with or adversely affects the entering into by it of this Agreement, or the validity of this Agreement as to it, or the carrying out by it of the terms or provisions of this Agreement;

(iii)no approval, action, waiver or consent of any governmental body is required for the execution and delivery of this Agreement by SABINE (or, if required, all of the same have been obtained), and SABINE will use its best efforts to obtain any governmental approvals, actions, waivers or consents of any governmental body which are or may be required for the performance by SABINE of this Agreement; and

(iv) this Agreement has been duly and validly authorized by all necessary corporate action and when executed and delivered will constitute a valid and binding agreement of SABINE.

(b)Representations and Warranties of SWEPCO. SWEPCO represents and warrants that:

(i)it is a corporation duly organized and validly existing in good standing under the laws of the State of Delaware, is duly qualified to do business in the State of Texas and has all requisite corporate power and authority to enter into this Agreement and to perform its obligations hereunder;

(ii)there is no action, proceeding or investigation pending, or to the best knowledge of SWEPCO threatened against it, and there is no term of its charter, by-laws, or any mortgage, indenture, contract, Agreement, instrument, judgment, decree, order, statute, rule or regulation to which SWEPCO or any of its affiliates is a party or by which it

54

is bound, which in any way prevents or interferes with or adversely affects the entering into by it of this Agreement, or the validity of this Agreement as to it, or the carrying out by it of any of the terms or provisions of this Agreement;

(iii)no approval, action, waiver or consent of any governmental body is required for the execution and delivery of this Agreement by SWEPCO (or, if required, all of the same have been obtained), and SWEPCO will use its best efforts to obtain any governmental approvals, actions, waivers or consents of any governmental body which are or may be required for the performance by SWEPCO of this Agreement;

(iv)this Agreement has been duly and validly authorized by all necessary corporate action and when executed and delivered will constitute a valid and binding agreement of SWEPCO;

(v)that to the best of its knowledge it owns, leases or otherwise controls the lignite, including surface mining rights, which will be mined and delivered by SABINE hereunder. SWEPCO agrees to use its best efforts to maintain in effect during the term of this Agreement all ownership, leasehold or other rights with respect to such lignite which are necessary for SABINE to mine and deliver the lignite covered by this Agreement, and shall indemnify and hold SABINE harmless from and against any and all claims, demands, actions, causes of action by and liability to third parties, excluding North American Coal, arising out of SWEPCO's failure to maintain such rights.

(c)Covenants of SWEPCO. SWEPCO hereby covenants and agrees that in the event any Loan or Lease Obligation is determined or declared void or unenforceable by any court or regulatory authority due to the fact that SABINE is determined to be a public utility within the meaning of any Federal or Texas, Louisiana or Arkansas statute, or because of the failure of SWEPCO to obtain any regulatory approval necessary to permit the performance by it of its obligations hereunder, SWEPCO shall nevertheless continue to

55

make payments in respect thereof as if such determination, declaration or failure had not occurred.

ARTICLE XXXII

Short Form Supplement

If needed or requested by either party for purposes of recording, permitting, filing or any other valid reason, the parties hereto shall execute a short form supplement to this Agreement which shall contain the pertinent provisions hereof in mutually satisfactory detail.

ARTICLE XXXIII

Equal Employment Opportunity

There is attached hereto as "Supplement A" and made a part hereof that certain instrument entitled "CERTIFICATION FOR EMPLOYMENT OPPORTUNITIES PROGRAMS FOR MINORITIES AND VETERANS". SABINE agrees to fully comply with said Supplement A, and throughout said Supplement A, whenever reference is made to "Contractor" it is understood that same refers to SABINE.

IN WITNESS WHEREOF, the parties hereto, with intent to be legally bound hereby, have caused this instrument to be executed by their duly authorized officers on the date first above written.

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WITNESSES:	SOUTHWESTERN ELECTRIC POWER COMPANY by AMERICAN ELECTRIC POWER SERVICE CORPORATION, its agent
/s/ Signature Illegible	By:	/s/ Signature Illegible
	Title:	Vice President
	Date:	12/31/2008
WITNESSES:	THE SABINE MINING COMPANY
/s/ Linda Campbell	By:	/s/ Rick J. Ziegler
	Rick J. Ziegler, President
	Date:	12/31/2008

ACKNOWLEDGMENTS

THE STATE OF OHIO

COUNTY OF Franklin

BEFORE ME, the undersigned authority, on this day personally appeared /s/ Timothy K Light, known to me to be the person and agent whose name is subscribed to the foregoing instrument and acknowledged to me that the same was the act of the said AMERICAN ELECTRIC POWER SERVICE CORPORATION, a corporation, as agent for SOUTHWESTERN ELECTRIC POWER COMPANY, and that he executed the same as the act of such corporation for the purposes and consideration therein expressed, and in the capacity therein stated.

GIVEN UNDER MY HAND AND SEAL OF OFFICE this 31st day of December, 2008.

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/s/ David M. Cohen

NOTARY PUBLIC

My Commission Expires:

THE STATE OF TEXAS

COUNTY OF HARRISON

BEFORE ME, the undersigned authority, on this day personally appeared Rick J. Ziegler, known to me to be the person and officer whose name is subscribed to the foregoing instrument and acknowledged to me that the same was the act of the said THE SABINE MINING COMPANY, a corporation, and that he executed the same as the act of such corporation for the purposes and consideration therein expressed, and in the capacity therein stated.

GIVEN UNDER MY HAND AND SEAL OF OFFICE this 22nd day of December, 2008.

/s/ Catherine L. Pierce

NOTARY PUBLIC

My Commission Expires:

SUPPLEMENT "A"

CERTIFICATION FOR EMPLOYMENT OPPORTUNITIES PROGRAMS

FOR MINORITIES AND VETERANS

I. EQUAL OPPORTUNITY CLAUSE SUPPLEMENT TO CONTRACTS AND PURCHASE ORDERS

A.The Sabine Mining Company (hereinafter called "Contractor") is aware of and is fully informed of Contractor's responsibilities under Executive Order 11246 and shall file

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compliance reports as required by Section 203 of Executive Order 11246 and otherwise comply with the requirements of such order.

B.Contractor agrees to the following provisions of Section 202 of Executive Order 11246:

1.Contractor will not discriminate against any employee or applicant for employment because of race, color, religion, sex or national origin. Contractor will take affirmative action to ensure that applicants are employed, and that employees are treated during employment without regard to their race, color, religion, sex or national origin. Such action shall include but not be limited to the following: Employment, upgrading, demotion or transfer; recruit or recruitment advertising; layoff or termination; rates of pay or other forms of compensation; and selection for training, including apprenticeship. Contractor agrees to post in conspicuous places, available to employees and applicants for employment, notices to be provided by the contracting officer setting forth the provisions of this nondiscrimination clause.

2.Contractor will, in all solicitations or advertisements for employees placed by or on behalf of the Contractor, state that all qualified applicants will receive consideration for employment without regard to race, color, religion, sex or national origin.

3.Contractor will send to each labor union or representative of workers with which it has a collective bargaining agreement or other contract or understanding, a notice, to be provided by the agency contracting officer, advising the labor union or workers' representative of the Contractor's commitments under Section 202 of Executive Order No. 11246 of September 24, 1965, and shall post copies of the notice in conspicuous places available to employees and applicants for employment.

4.Contractor will comply with all provisions of Executive Order No. 11246 and of the rules, regulations and relevant orders of the Secretary of Labor.

5.Contractor will furnish all information and reports required by Executive Order No. 11246 of September 24, 1965 and by the rules, regulations and orders of the Secretary of Labor, or pursuant thereto, and will permit access to its books, records and accounts by the contracting agency and the Secretary of Labor for purposes of investigation to ascertain compliance with such rules, regulations and orders.

6.In the event of the Contractor's noncompliance with the nondiscrimination clauses of Executive Order No. 11246 or with any of such rules, regulations or orders, contracts issued subject thereto may be canceled, terminated or suspended, in whole or in part, and the Contractor may be declared ineligible for further Government contracts in accordance with procedures authorized in Executive Order No. 11246 of September 24, 1965, and such other sanctions may be imposed and remedies invoked as provided in Executive Order No. 11246 of September 24, 1965 or by rule, regulation or order of the Secretary of Labor or as otherwise provided by law.

7.Contractor will include the provisions of Paragraphs 1 through 7 in every subcontract or purchase order unless exempted by rules, regulations or orders of the

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Secretary of Labor, issued pursuant to Section 204 of Executive Order No. 11246 of September 24, 1965, so that such provisions will be binding upon each subcontractor or vendor. Contractor will take such action with respect to any subcontract or purchase order as the contracting agency may direct as a means of enforcing such provisions, including sanctions for noncompliance; provided, however, that in the event Contractor becomes involved in or is threatened with litigation with a subcontractor or vendor as a result of such direction by the contracting agency, the Contractor may request the United States to enter into such litigation to protect the interests of the United States.

C.Certification of Nonsegregated Facilities

Contractor certifies that (1) segregated facilities are not and will not be maintained or provided for its employees at any of its establishments, (2) such employees are not and will not be permitted to perform their services at any location under its control where segregated facilities are maintained, and (3) Contractor is aware of and understands that any breach of the foregoing is a violation of the Equal Opportunity Clause of Executive Order 11246. "Segregated Facilities" as used herein means any waiting rooms, work areas, rest rooms and wash rooms, restaurants and other eating rooms, time clocks, locker rooms and other storage or dressing areas, parking lots, drinking fountains, recreation or entertainment areas, transportation and housing facilities provided for employees which are segregated by explicit directive or are in fact segregated on the basis of race, religion, color or national origin, because of habit, local customs or otherwise.

Contractor further agree, except where it has obtained identical certifications from proposed subcontractors for specific time periods, that it will (1) obtain identical certifications from proposed subcontractors for specific time periods, (2) obtain identical certification from proposed subcontractors prior to the award of subcontracts exceeding $10,000, which are not exempt from the provisions of the Equal Opportunity Clause, (3) retain such certifications in its files, and (4) forward the following notice to prospective subcontractors:

"NOTICE TO PROSPECTIVE SUBCONTRACTORS OF REQUIREMENT FOR CERTIFICATION OF NONSEGREGATED FACILITIES. A Certificate of Nonsegregated Facilities, as required by Section 60-1.8 of Title 41 of the Code of Federal Regulations, must be submitted prior to the award of a subcontract exceeding $10,000 which is not exempt from the provisions of the Equal Opportunity Clause. The certification may be submitted either for each subcontract or for all subcontracts during a specified period, i.e., quarterly, semi-annually or annually.

NOTE: The penalty for making false statements in offers is prescribed in 18 U.S.C. 1001."

II.STANDARD FORM 100 (EEO-1) AND AFFIRMATIVE ACTION PROGRAM

Contractor agrees as follows:

1.To file a complete and accurate report on Standard Form 100 (EEO-1) within thirty (30) days of the date of contract or purchase order award unless such a report has

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been filed in the last twelve (12) months and agrees to file such reports annually, as required by Section 60-1.7 of Title 41 of the Code of Federal Regulations; and

2.Affirms that it has developed and is maintaining currently an affirmative action program at each of its establishments, as prescribed in Section 60-1.40 of Title 41 of the Code of Federal Regulations, or that it will be within 120 days of receipt of any contract or purchase order of $50,000 or more.

III.THE VIETNAM ERA VETERAN'S READJUSTMENT ASSISTANCE ACT OF 1974

If the value of any contract or purchase order is $10,000 or more, the Contractor agrees and certifies that it is and will remain in compliance with the affirmative action in the employment and advancement of qualified disabled veterans of the Vietnam era. The contract clause is incorporated herein by reference.

IV.THE REHABILITATION ACT OF 1973

If the value of any contract or purchase order is $2,500 or more, Contractor agrees and certifies that it is and will remain in compliance with the affirmative action clause set forth in 41 CFR 60-741.4 (to employ and advance in employment qualified handicapped individuals) and incorporated herein by reference.

Dated this ___31__ day of __December_____,2008.

THE SABINE MINING COMPANY

By:_/s/ Rick J. Ziegler________________

Rick J. Ziegler

President

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Exhibit A

EX-31.1

Exhibit 31(i)(1)

Certifications

I, Alfred M. Rankin, Jr., certify that:

1. I have reviewed this Amendment No. 2 to the quarterlyreport on Form 10-Q of NACCO Industries, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in thisreport, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	March 20, 2013	/s/ Alfred M. Rankin, Jr.
		Alfred M. Rankin, Jr.
		Chairman, President and Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31(i)(2)

Certifications

I, J.C. Butler, Jr., certify that:

1. I have reviewed this Amendment No. 2 to the quarterlyreport on Form 10-Q of NACCO Industries, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in thisreport, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	March 20, 2013	/s/ J.C. Butler, Jr.
		J.C. Butler, Jr.
		Senior Vice President - Finance, Treasurer and Chief Administrative Officer (Principal Financial Officer)

EX-32.2

Exhibit 32

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with Amendment No. 2 to the Quarterly Report of NACCO Industries, Inc. (the "Company") on Form 10-Q for the quarter ended September 30, 2012, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), each of the undersigned officers of the Company certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to such officer's knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.

Date:	March 20, 2013	/s/ Alfred M. Rankin, Jr.
		Alfred M. Rankin, Jr.
		Chairman, President and Chief Executive Officer (Principal Executive Officer)

Date:	March 20, 2013	/s/ J.C. Butler, Jr.
		J.C. Butler, Jr.
		Senior Vice President - Finance, Treasurer and Chief Administrative Officer (Principal Financial Officer)