<PAGE>
                                                                   Exhibit 10.18


                                    FORM OF
                                COAL MINING LEASE

THIS COAL MINING LEASE ("Lease") dated                effective as of by and
between CSTL LLC ("Lessor"), a Delaware limited liability company, and
        a Delaware limited liability company.

SECTION 1. LEASE FOR COAL MINING PURPOSES.

         In consideration of the terms, conditions, and stipulations set forth
to be performed and observed by Lessee, Lessor, acting on its own behalf and
with the intention of exercising any right, option or power held by it on behalf
of any other person or entity, does, to the extent that it owns or controls
same, hereby demise, lease and let to Lessee, the sole and exclusive right of
mining and removing all of the coal (the "Leased Coal") lying in, on or under
the premises shown on the map attached hereto and made a part hereof as Exhibit
A, and hereinafter referred to as the "Leased Premises", together with such
other rights in or relating to the Leased Premises as may be necessary or
convenient for the mining, preparation, loading, removal, transportation and
shipping of the Leased Coal, Foreign Coal (as hereinafter defined), including
the products and by-products of each and synthetic fuel produced from each, and
the reclamation of the Leased Premises in connection therewith in accordance
with applicable law.

         Without limiting the foregoing, to the extent that Lessor owns or
controls same, Lessee shall have all and exclusive coal and mining rights in, on
and under the Leased Premises and shall also have, subject to the provisions
hereof, the right to use as much of the surface of the Leased Premises, and the
right to take and use stone, soil and water thereon, as may be necessary for, or
incident to, (a) the mining, preparation, loading, removal, transportation and
shipping of Leased Coal and Foreign Coal; (b) the construction, maintenance and
use of all structures, fixtures, equipment, plant or facilities deemed necessary
or convenient by Lessee, including without limitation, preparation facilities,
synthetic fuel facilities, buildings, offices, impoundments, valley fills,
tipples, roads, railroads, utilities, pipelines, conveyors and other structures,
facilities and improvements necessary for, or incident to, the purposes of this
Lease; (c) storage of all such coal, any mine refuse and any equipment,
materials and supplies; (d) the dumping of rock, slate, overburden, fill
material and other refuse (including refuse from preparation of Foreign Coal);
(e) the pumping, discharge, deposit, treatment, diversion and draining of water;
and (f) the unrestricted right of ingress and egress to and from the Leased
Premises for any purposes incidental to the above.

         Lessee shall have the right to mine the Leased Coal by all mining
methods now existing or hereafter developed, including surface mining methods
(including contour strip mining, mountaintop removal, area mining, and highwall
mining), and underground mining methods (including room and pillar and longwall
mining methods); provided, however, that Lessee shall not mine any Leased Coal
by the auger mining method without first obtaining the prior written consent of
Lessor, which consent shall not be unreasonably withheld, delayed or
conditioned. Lessor hereby waives the right to lateral and subjacent support and
any claim or liability for damages to the surface or subsurface, and grants
Lessee the right to subside the surface and overlying strata without liability
therefor.

         Lessee is hereby granted the right to store upon and transport through,
over, across or under the Leased Premises Foreign Coal (as hereinafter defined),
and men, materials, supplies and equipment in connection with mining on the
Leased Premises or any other lands.



                                       1
<PAGE>

SECTION 2. RESERVATIONS AND EXCEPTIONS.

         All rights, title and interest in the Leased Premises vested in Lessor
and not herein granted to Lessee are reserved to Lessor, its successors and
assigns.

         Without limiting the generality of this reservation, there are hereby
expressly excepted from this Lease and reserved to Lessor, its successors and
assigns:

         (1) all existing licenses, easements and rights-of-way to third parties
             for railroad or other purposes heretofore granted by or otherwise
             lawfully acquired from Lessor or its predecessors in title;

         (2) all oil, gas (including gas and/or methane in the Leased Coal,
             provided, however, that Lessee shall have the right to vent,
             liberate or otherwise remove such gas or methane in the course of
             mining operations pursuant hereto without liability or payment
             therefor), timber, and minerals other than coal;

         (3) the following rights and privileges in and respecting the Leased
             Premises:

                  a. the right at all reasonable times to enter upon the Leased
                     Premises, and to drill, bore, excavate, cut, remove,
                     develop, store, and market (or to lease or license to
                     others said rights), all such oil, gas, timber and other
                     minerals hereinabove excepted;

                  b. the right to construct and operate railroads, roads,
                     structures, and appliances which may be necessary for the
                     removal or processing of such oil, gas, timber and other
                     minerals, or to serve other properties of the Lessor;

                  c. the right and privilege of leasing to tenants the surface
                     of the Leased Premises for the purposes of occupying and
                     farming said surface or of constructing thereon such
                     facilities as may be needed for the removal or processing
                     of said oil, gas, timber and other minerals; provided,
                     however that, notwithstanding anything in this Lease to the
                     contrary, Lessor shall not without Lessee's consent, which
                     consent shall not be unreasonably withheld, enter into
                     leases for surface occupation, residential purposes,
                     farming or business development on property (i) within the
                     Permitted Areas or (ii) within areas reasonably designated
                     by Lessee as likely to be affected by Lessee's operations;
                     and

                  d. the right to grant and convey from time to time to any
                     electric or other power company, pipeline, gas, oil, mining
                     or railroad company, so much of the surface of the Leased
                     Premises as may be required for rights-of-way by such
                     company or companies; provided that Lessor shall use its
                     commercially reasonable efforts to ensure that such rights
                     of way shall include, for the benefit of Lessor and Lessee,
                     the right to demand relocation thereof at no cost in
                     connection with operations pursuant to this Lease.

         In the event Lessor desires to exercise any of the rights reserved
herein and such exercise shall include operations to be conducted on a portion
of the Leased Premises with regard to which Lessee has posted a reclamation or
performance bond or has received a permit or other authorization


                                       2
<PAGE>

from, or has a pending permit application with, any federal, state, local or
other governmental agency to conduct operations on such portion of the Leased
Premises or on any area within three hundred (300) feet of any exterior permit
boundary that would require Lessee or the operator to obtain a waiver for such
permit or operations (collectively "Permitted Areas"), then Lessor shall give
Lessee at least thirty (30) days prior written notice thereof, and shall not
exercise any such rights with respect to any Permitted Areas without Lessee's
prior written consent, which consent shall not be unreasonably withheld, delayed
or conditioned. Without limiting the above, such consent can be conditioned upon
Lessor or its subsequent lessee or assign agreeing to remove any equipment,
material or fixtures that any of them might have installed that subsequently
interfere with Lessee's mining operations under this Lease. Lessor shall
reimburse Lessee for the reasonable additional costs added by Lessor's
operations to Lessee's costs of compliance with such bonds, permits, and/or
other authorizations or for costs related to accommodation of Lessor's
operations. Any lease, assignment or other transfer of the rights retained by
Lessor hereby shall contain provisions that expressly incorporate the provisions
set forth above.

         Notwithstanding anything herein to the contrary, the rights granted to
Lessee by this Lease are dominant, and the rights and privileges hereby excepted
and reserved in this Section shall be exercised in such manner as to not
unreasonably interfere with Lessee's exercise of its rights hereunder or with
Lessee's mining operations in connection therewith, having due regard for the
requirements, convenience, and safety of said rights and operations; and
provided further, that Lessor shall indemnify Lessee for all direct costs and
liabilities incurred by Lessee resulting from Lessor's exercise of such rights
and privileges (including claims of personal injury or property damage resulting
from the activities of Lessor or any of Lessor's lessees, licensees, invitees,
contractors or subcontractors); provided, further, however, that it is not the
intent of this sentence that Lessee shall be entitled to charge Lessor any usage
fees for the exercise of reserved rights.

SECTION 3. TERM.

         The initial term (the "Initial Term") of this Lease shall be for a
period of ten (10) years from the effective date set forth in the preamble
paragraph hereto (hereinafter, the "anniversary date"), unless sooner terminated
as hereinafter provided This Lease shall be automatically extended upon the
expiration of the Initial Term for consecutive terms of five years each, up to a
maximum of fifty (50) years from the beginning anniversary date of the Initial
Term, subject to the right of Lessee to terminate this Lease on the expiration
of the Initial Term or the expiration of any subsequent five year extension
period by delivering written notice of its desire to do so to Lessor at least
ninety (90) days prior to such termination date For purposes of this Lease,
"Lease Year" shall mean the one year period beginning on the effective date
hereof with respect to the first Lease Year, and thereafter beginning on each
succeeding anniversary date.

         In the event all the merchantable and mineable coal underlying the
Leased Premises shall have been mined and removed from the Leased Premises
pursuant to the provisions of this Lease and mining operations by Lessee have
ceased upon the Leased Premises, then this Lease shall cease and terminate upon
the date when all such coal shall have been mined and removed and such mining
operations have ceased. Notwithstanding anything herein to the contrary, (a) the
term of this Lease may be extended beyond such date by Lessee to the extent
reasonably required by Lessee to continue the operation of any facilities that
are located on the surface of the Leased Premises that are useful for the
handling or processing of any Foreign Coal, provided that Lessee shall pay
Lessor $50,000 in annual rental at the same time and in the same manner that
Minimum Annual Royalty would have been payable hereunder; and (b) Lessee shall
have the right to enter upon the Leased Premises after


                                       3
<PAGE>

the termination or forfeiture of this Lease, without rental, (i) for the purpose
of removing all of Lessee's buildings, structures, machinery, equipment and
other property from any part of the Leased Premises following the termination of
this Lease in accordance with Section 14 hereof; and (ii) for the purpose of
conducting reclamation activities and complying with applicable law, provided
that if Lessee exercises its rights pursuant to subparagraph (b) above, the
provisions of the last four paragraphs of Section 5 shall apply during said
time.

SECTION 4. ROYALTIES.

         (a)      Lessee shall pay to Lessor, CSTL LLC                     or at
such other places as Lessor may from time to time designate in writing, during
the term of this Lease, a Tonnage Royalty in the amount of the greater of
             of the gross selling price for the coal mined film the Leased
Premises and sold during each calendar month of the term hereof or ..
       per ton, to be received by Lessor within twenty (20) days from the end of
the month to which payment applies. In the event Lessor consents to mining on
the Leased Premises by the auger mining method then, and in that event, the
royalty attributable to all coal so mined by the auger mining method shall be
of                     the Gross Selling Price.

         (b)      Beginning January 1, 2003 and thereafter during the Term
                  hereof, as same' may be extended, Lessee shall pay to Lessor a
                  Minimum Annual Royalty in the amount of                 , each
                  payment to be made in advance, in equal quarterly installments
                  with each installment equal to one fourth of the Minimum
                  Annual Royalty on the first day of January, April, July and
                  October of each Lease Year. Each quarterly payment shall
                  hereinafter be referred to as a "Quarterly Payment". Lessee
                  shall have the right to recoup a Quarterly Payment at any time
                  after payment of same during the ten years following the date
                  of payment, from Tonnage Royalty Payments due after the
                  payment date of the Quarterly Payment, but in no event shall
                  any credit be carried forward to any subsequent year for any
                  coal mined in excess of the required minimum during any given
                  year.

         The term "coal" referred to herein shall include any low-coal content
merchantable product that is sometimes sold and shipped under various trade
names including bone, coal, fuel and middlings, and, for purposes of this Lease,
synthetic he1 produced by Lessee from Leased Coal. The term "ton" referred to
herein shall mean 2,000 pounds.

         Subject to the qualification hereinafter stated in this paragraph,
"gross selling price" of coal shall, for all purposes under this Lease, be the
amount received, by Lessee, upon sale thereof after preparation and/or tippling,
to an unaffiliated third party purchaser f.o.b. railroad cars, trucks or other
transport at the loading point at which Leased Coal mined hereunder has been
prepared and loaded for shipment to such unaffiliated third party purchaser,
without any deduction for selling expense or sale commission. It is this
section's intent that the gross selling price be the price received by Lessee or
its affiliates, in the last arm's length transaction between an unaffiliated
third party purchaser and Lessee or its affiliates for such Leased Coal. If
Lessee or any affiliate of Lessee shall consume any of the Leased Coal, the
price of the Leased Coal as consumed shall be considered equal to (1) the
average sales price of Leased Coal of comparable quality and as is then being
sold to unaffiliated third party purchasers, or (2) if there are no unaffiliated
third party purchasers, the average sales price of comparable coal in the open
market.



                                       4
<PAGE>

         Lessee shall furnish to Lessor on or before the 20th day of each
calendar month the railroad and truck scale weights showing the quantity of
Leased Coal shipped from the Leased Premises and weights of Leased Coal, if any,
consumed on the Leased Premises or at the preparation plant or tipple during the
preceding calendar month. Lessee shall comply with all reasonable rules and
regulations which may be prescribed by Lessor's engineer for the ascertainment
of and payment of tonnage royalties on the Leased Coal mined and sold or
consumed under this Lease. Lessee shall keep accurate and correct books of
account showing all coal mined, and all coal consumed on, transported, or
shipped from the Leased Premises or elsewhere, together with the correct weights
and gross selling price thereof, to which books and records Lessor shall at all
reasonable times have access for verification of statements to be furnished by
Lessee for a period of five (5) years from the date of payment.

         Lessor, for like purposes, is hereby authorized to demand and require
of any railroad company or other agents transporting the products of the Leased
Premises, inspection of its books and records, showing the weight and quantity
of such products and pertinent information in relation thereto. Lessee hereby
authorizes and requests such carriers and other agents to show Lessor, or its
agents, all such books and records and to furnish all such information when
requested.

         In the event it shall be necessary or reasonably convenient in mining
Leased Coal to load the same over a tipple or tipples over which other coal is
loaded, thereby mixing the Leased Coal with other coal, Lessee shall keep a
strict account of the tonnage of Leased Coal as well as a strict account of the
tonnage of other coal being loaded over the same tipple or tipples. Before other
coal may be mixed with Leased Coal, the method of determining these respective
tonnages shall be approved in writing by the Engineer of Lessor consistent with
standard industry practice, which approval shall not be unreasonably withheld,
delayed or conditioned.

         In the event Leased Coal is so commingled, then the Gross Selling
Price, as set forth in Section 4 hereof, shall be the average sales price for
all coal with which such Leased Coal is commingled, to the end that unless the
Leased Coal is mined, processed, stored and sold separately from all other
coals, then the Gross Selling Price' shall be the Average Gross Selling Price
for all coal sold from the Lessee's facility with which Leased Coal is
commingled.

SECTION 5. TAXES AND INSURANCE.

         Lessor will, in the 6rst instance, pay all the taxes, levies and
assessments on or in respect of Lessor's ownership of the Leased Premises and,
during the continuance of this Lease, Lessee shall reimburse to Lessor the
amount of such taxes, levies, and assessments attributable to the Leased Coal
and the Leased Premises, but excluding taxes attributable to all rights excepted
and reserved, if separately assessed, including taxes attributable to timber,
oil, gas and other minerals, promptly upon receipt of Lessor's statement
therefor, such amounts to constitute and be treated as additional rental
hereunder; provided that the obligation of Lessee shall be prorated for any
partial calendar years for the first year and the last year of this Lease.
Lessee shall promptly pay at the several times they become due and payable all
taxes levied or assessed upon coal mined from or products manufactured from coal
upon the Leased Premises. Lessee shall also pay any and all taxes due to the
state and/or its subdivision for severing, removing, processing, or preparing of
said coal, except for taxes on gross or net income of Lessor on receipt of
royalties, and Lessee shall also pay all royalties for removal of coal required
by any existing or future labor agreements of lessee, its agents, operators or
affiliates. If Lessor fails to pay the taxes, levies and assessments set forth
above or if there are any taxes or encumbrances due on the Leased Premises, then
Lessee may pay the same and any penalties, or



                                       5
<PAGE>

redeem the Leased Premises from a tax sale, and deduct the amount expended
attributable to taxes attributable to all rights excepted or reserved, if
separately assessed, as well as penalties and interest assessed due to Lessor's
failure to timely pay any taxes, levies and assessments, from any rents and
royalties subsequently accruing.

         Lessee may, at any time during the continuance of this Lease, at its
own cost and expense, and after reasonable notice to Lessor of its intention so
to do, contest any of the taxes, levies, or assessments to be borne by Lessee as
above provided. In the event of any such contest, Lessee is authorized to
proceed in the name of Lessor with respect to the reversionary interest of
Lessor in the Leased Premises, but Lessee shall indemnify Lessor against any
costs, penalties, expenses, or interest charges arising out of such contest.

         Lessee shall submit to Lessor, for its review, a copy of annual coal
appraisal reports or returns prepared pursuant to laws or regulations in the
State of                with respect to Lessor's ownership prior to the filing
with any governmental agency. It is understood and agreed that the taxes levied
or assessed from such reports are based, in part, upon the permitting and/or
production of Lessee and for that reason, Lessee's payments to Lessor as
provided for in this section shall continue and survive any termination of this
Lease until the earlier of such time as (a) said taxes levied or assessed are
not based on the designation of the Leased Coal as "permitted" under said coal
appraisal reports or returns, (b) the Leased Coal is leased to any third parties
(or if partially leased, to the extent so leased); or (c) five years following
termination of this Lease. Notwithstanding the foregoing, after termination of
the Lease, Lessee's responsibilities for payment of taxes shall be limited to
the incremental difference between the amount of taxes due based on the
designation of coal reserves as permitted on such coal appraisal reports or
returns and the amount of taxes that would be due if such reserves were
designated as unpermitted on such coal appraisal reports and returns. Lessor
shall use its commercially reasonable efforts to minimize all taxes payable by
Lessee under this Lease.

         Lessee agrees that it shall comply with all of the terms and provisions
of the black lung laws (defined below) and will secure the payment of black lung
benefits (defined below) as hereinafter provided. "Black lung laws" mean the
Black Lung Benefits Act, Title N of the Federal Mine Safety and Health Act of
1977, 30 U.S.C. 901 et seq., and the Internal Revenue Code, 26 U.S.C. 1 et seq.,
Black Lung Benefits Reform Act of 1977 (P.L. 95-239), Black Lung Benefits
Revenue Act of 1977 (P.L. 75-227), Black Lung Benefits Revenue Act of 1981 (P.L.
97-1 19), as now or hereafter amended, and all rules and regulations adopted
pursuant thereto. "Black lung benefits" means any and all benefits payable
pursuant to the black lung laws. Lessee acknowledges that, as between itself and
Lessor, it is, and shall be deemed to be, the operator of any coal mine or coal
preparation facility or facility used for the extraction, preparation or
transportation of Leased Coal and of all related activities, including, but not
limited to, coal mine construction or maintenance, engaged in by Lessee pursuant
to the terms of this Lease with respect to any claim for black lung benefits
filed by or on account of any of its employees or former employees. To the
extent required under the black lung laws, Lessee shall secure and shall require
any other person or entity who operates, controls or supervises a coal mine or
coal preparation facility on the Leased Premises or performs services of
construction, maintenance, transportation, or other activities related to coal
mining or preparation associated with this Lease, and who otherwise is liable
for the payment of black lung benefits, to secure the payment of such black lung
benefits to or on account of employees or former employees in accordance with
the black lung laws and shall provide Lessor, upon request, with appropriate
certification that each of them has provided security in compliance with all
black lung laws for the payment of such black lung benefits. Without limiting
the generality of Lessee's obligations to



                                       6
<PAGE>

comply with all other provisions of this Lease, Lessee agrees that it will
secure and guarantee the payment of all black lung benefits required to be paid
under the black lung laws by reason of mining, construction, transportation, and
related activities under this Lease, and Lessee does hereby agree that it will
indemnify and hold Lessor harmless from any liability or expenses, including
reasonable attorney fees and expenses, which Lessor may suffer directly or
indirectly, as a result of or with respect to any claim for black lung benefits
filed by or on account of any of Lessee's employees or former employees, or
employees or former employees of others operating on the Leased Premises
pursuant to this Lease who may be required to secure the payment of black lung
benefits as provided above. Notwithstanding anything in this Lease to the
contrary, this Lease does not empower Lessor to make any decisions and Lessor
hereby expressly waives and disclaims any right to make any decisions with
respect to the terms and conditions under which the leased coal is extracted or
prepared, such as, but not limited to, the manner of extraction or preparation
or the amount of leased coal to be produced at any particular time, all within
the meaning of the black lung laws. The parties hereto acknowledge, however,
that Lessor has reserved certain rights and has imposed certain requirements
under the tams of this Lease solely for the purpose of preventing waste and
protecting the reserved rights of Lessor.

         Lessee further covenants and agrees that all employees of Lessee and/or
any and all other persons performing work on the Leased Premises pursuant to the
rights granted in this Lease will be fully covered by or insured at all times by
Workers' Compensation, and to that end Lessee shall comply with all applicable
Workers' Compensation laws, rules and regulations and shall make all necessary
contributions and/or premium or other payments.

         Lessee covenants and agrees to indemnify and save harmless Lessor, its
owners and its or their partners (general and limited), officers, directors,
agents, employees, successors and assigns from and against (a) any and all
claims, demands, actions or causes of action by or on behalf of any person,
firm, corporation or governmental body for damages, injuries, deaths, penalties,
fines, assessments or otherwise caused by, arising out of, resulting from or as
a consequence of, in whole or in part, (i) any acts or omissions of Lessee, its
officers, directors, employees, sublessees, contractors, subcontractors,
licensees, invitees, engineers, agents, successors, assigns or parent or
affiliated corporations or any other persons or entities acting by direct or
indirect authority of Lessee, or pursuant to any rights granted in this Lease or
(ii) the use and enjoyment of the Leased Premises pursuant to this Lease, or
(iii) the approval by Lessor of any Mine Plans (as hereafter defined) and (b)
any and all costs, counsel fees, expenses and liabilities incurred in or about
any such claim or action brought thereon. Notwithstanding anything herein to the
contrary, Lessee shall not be liable for special, consequential or punitive
damages incurred by Lessor, but as between Lessor and Lessee, Lessee shall be
liable for special, consequential or punitive damages incurred by unaffiliated
third parties as a result of Lessee's actions on the Leased Premises.

         During the term of this Lease, Lessee shall carry, with a limit of $1
million per person and $5 million per occurrence, coal mine liability and
contractual liability insurance. Lessor shall be named as an additional insured
and provided a certificate of insurance reflecting such coverage, which shall
not be cancelable except after thirty (30) days' notice to Lessor. Such
insurance shall be written on an "occurrence" basis unless the policy is
available only on a "claims made" basis, in which case such "claims made"
insurance coverage shall be maintained in effect for a period of at least five
(5) years after the termination of this Lease, or until final release of
Lessee's environmental reclamation bonds required by any regulatory authority,
whichever shall last occur



                                       7
<PAGE>

SECTION 6. METHOD OF OPERATION.

         Upon termination of this Lease for any reason, Lessee shall, at
Lessor's option, to be exercised within thirty (30) days if at all, sell and
convey to Lessor, at fair market value, any real property owned by Lessee or its
affiliates within the Controlled Properties boundary as defined by the bold
green outline on Exhibit A.

         Lessee covenants and agrees that when it commences operation in any of
the seams leased herein it will thereafter prosecute its operations hereunder
utilizing modern mining equipment and to conduct such operations in a careful,
skillful, and workmanlike manner, and in compliance with the present and any
future laws of the State of a d of the United States, and also according to the
rules and practices of good mining and with due regard for the value of the
Leased Premises as a coal producing property. Minimum Annual Royalty paid
hereunder shall be in lieu of any implied covenant of diligent development.

         Lessee shall be responsible for complying with all present and future
laws and governmental regulations, including environmental laws and regulations,
related to or controlling mining and related operations by Lessee, its
sublessees and contractors, on the Leased Premises, which responsibility shall
survive termination of this Lease. If Lessee violates, or is claimed to have
violated, laws or governmental regulations, then Lessee shall indemnify Lessor
and hold it harmless from any penalties, fines, costs, and expenses, including
legal fees and court costs, imposed upon or incurred by Lessor as a result of
said claim, violation or violations.

         Notwithstanding Lessee's obligation to comply with all laws, rules,
regulations and orders as set forth above, Lessor shall not declare a default
hereunder solely as a result of one or more operational violations which Lessee
cures or abates as promptly as practical. Lessee shall be solely responsible for
treatment of any water discharge caused by its operations, if required by
present or future law or regulation, which responsibility shall survive
termination of this Lease. Lessor shall consent to Lessee's election of
post-mining land uses (including post-mining retention of roads and ponds in
place to the extent allowed by applicable law) and shall execute all consents,
waivers and authorizations reasonably requested by Lessee with respect thereto.

         Lessee agrees that it will work and mine the coal in accordance with
general and detail maps and plans of mining and descriptions to be prepared by
Lessee (hereinafter collectively called "Mine Plans") and will submit a copy of
same to the Lessor. Said Mine Plans shall take into consideration the entire
area proposed to be developed by Lessee, and shall make suitable provisions for
(I) the proper protection of overlying and underlying seams consistent with the
terms of this Lease and (2) the reasonable and proper removal of all the
mineable and merchantable coal within such Mine Plans. No Mine Plan shall be
proposed which, if adopted, and Lessor may refuse to approve any Mine Plan that,
would render any substantial portion of otherwise mineable and merchantable coal
unmineable or unmerchantable or substantially more difficult or expensive to
mine. The Mine Plans shall be submitted to the Lessor at least thirty (30) days
prior to the commencement of any operation on the Leased Premises. In the event
Lessor determines that the Mine Plans submitted by Lessee fail to comply with
any of the terms of this Lease, Lessor shall so notify Lessee, in which event
Lessee will make reasonable attempts to modify the Mine Plans to comply with the
terms and conditions hereof. No material change in, modification of, or
departures from any Mine Plans so approved shall be made in the development or
operation of the mine or mines except pursuant to modified Mine Plans submitted
by Lessee to Lessor for the purpose of allowing Lessor to determine that said
modification complies with the terms of this Lease. Lessor's right to notify
Lessee that proposed



                                       8
<PAGE>

mining plans fail to comply with this Lease is a right reserved solely to
protect Lessor's interest in the Leased Premises and to prevent waste and is not
intended to give and shall not be construed to give Lessor any control over
Lessee's operations. Lessor shall have no authority to determine the manner in
which or the methods by which any of Lessee's mining operations are to be
conducted, all of which shall be solely determined by Lessee. Lessor
acknowledges its approval of all Mine Plans of Lessee prepared prior to the date
hereof and made available to Lessor during Lessor's due diligence review related
to the transaction described in that certain Purchase and Sale Agreement of even
date herewith between Lessee and Lessor.

         "Foreign Coal" is any coal mined from any lands other than the Leased
Premises, and "foreign coal refuse" is refuse resulting from the processing of
Foreign Coal.

         Anything contained in this Lease to the contrary notwithstanding, the
Lessee shall give notice in writing to the Lessor at least six (6) months prior
to the start of any operations authorized herein which would require or result
in the displacement or removal of trees or timber on the surface of the Leased
Premises where said surface is owned by Lessor. The Lessor may, at its election,
remove such trees or timber. Lessor shall make all reasonable efforts to
complete any harvesting operations for trees or timber sold "on the stump" prior
to start-up operations by Lessee, but it is understood that both activities may
continue simultaneously, provided such continuance does not unreasonably
interfere with Lessee's operations. Notwithstanding the foregoing, if Lessor has
not removed timber within such six (6) month period, Lessee may remove or
destroy such timber without liability or payment therefor. As an additional
option, Lessee may give written notice to Lessor and elect to reimburse Lessor
for such trees and timber at the fair market value and dispose of such trees or
timber in any manner it shall deem appropriate or necessary and upon making
payment in full, the Lessee shall not have any further obligation to the Lessor
with respect to such trees and timber or the disposition thereof.

         Lessee may conduct its operations under this Lease through its
contractors or agents, provided in any case Lessee shall be and remain liable to
Lessor for all obligations of the Lessee under this Lease authority.

         If it is found and reported to Lessee in writing by an agent of Lessor
that in the progress of the work any areas of merchantable and mineable coal
have been passed by or abandoned with the result that coal has not been mined
and removed, which in accordance with good mining practice should have been
mined and removed, it shall be the duty of Lessee to return as soon as
reasonably practicable to such areas and mine and remove the coal therefrom, or
failing so to do, Lessee shall account for the coal contained therein and pay
the royalty therefor the same as though it had been mined. If Lessee
subsequently mines and removes any coal which has been bypassed and paid for
within the contemplation of this Section, Lessee shall not be liable for any
additional royalty for such coal.

         Lessee shall employ a competent mining engineer, duly registered in the
State of whose duty it shall be to keep up the mine surveys and make accurate
maps thereof, which maps shall at all reasonable times and upon reasonable
notice be subject to the inspection of Lessor, or its duly authorized agents,
and copies furnished to the Engineer of Lessor on or before February 1 and
August 1 of each year. Such maps shall show the location of the coal section
numbers obtained by Lessor during mine inspections in a form convenient to
Lessee and acceptable to the Engineer of Lessor.



                                       9
<PAGE>

         Lessee shall furnish Lessor copies of data derived from any and all
future coal exploration activities within the Leased Premises, including, but
not limited to, driller's logs, geophysical logs, and coal laboratory analyses
of core holes and associated geological maps.

         Upon request of Lessor, Lessee shall make available for Lessor's
inspection and copying any and all laboratory analyses made of coal mined from
the Leased Premises.

         Upon request of Lessor, Lessee shall make available for Lessor's
inspection and copying any and all Lessee's correspondence with government
agencies or departments which pertain to the Leased Premises, or to operations
undertaken or to be undertaken thereon.

         Lessor, through its duly authorized agents, shall at all reasonable
times and its own risk have the right to enter said mines, inspect the same, and
have surveys made thereof to determine if all the terms and conditions of this
Lease are fully complied with, and for these purposes to use freely the means of
access to said mines and the workings thereof without hindrance, but in such
manner as not unreasonably to interfere with the operation thereof.

         Lessor shall maintain all records furnished or made available pursuant
hereto in confidence.

SECTION 7. REMEDIES OF LESSOR.

         All payments hereunder required to be made by Lessee to Lessor shall be
deemed and considered as rent reserved upon contract, and all remedies now or
hereafter given by the laws of the State of                   for the collection
of rent are reserved to Lessor in respect of the sums so payable, and a lien is
hereby reserved upon this Lease and the leasehold estate hereby created, to
secure the payment of any and all sums.

         If default be made by Lessee in the payment of the rentals and
royalties herein reserved, or in the performance of any of the other terms or
conditions hereof required to be kept or performed by Lessee, and such default
shall continue for a period of ten (10) days with respect to payment of rentals
and royalties&, or thirty (30) days with respect to performance of any of the
other terms or conditions, after written notification thereof has been posted to
Lessee, then in such event and as often as the same occurs, Lessor may, at its
option, terminate this Lease without any M e r notice and re-enter upon and take
possession of the Leased Premises and hold and possess the same as its absolute
property free and clear of any claims of, by, or through Lessee, and pursue any
and all other remedies available under the laws of the State of
for violation of any covenant or condition hereof, and all such remedies shall
be deemed cumulative and not exclusive. Notwithstanding the foregoing, should
physical conditions on the Leased Premises prohibit cure of any default (other
than payment of rental or royalty) by Lessee within the prescribed thirty (30)
day period, then Lessee shall be required to have diligently and in good faith
commenced curative measures and shall within ten (10) days of notice of default
advise Lessor in detail in writing as to what physical conditions are
prohibiting completion of such cure and setting forth a timetable for such cure.
Such notice by Lessee to Lessor shall toll the thirty (30) day curative time
until physical conditions on the Leased Premises permit completion of curative
work in a diligent good faith fashion. No action by Lessor pursuant to this
Section 7 shall impair the right to rental and royalties due or accrued up to
the time of termination and re-entry hereunder, but none shall be charged for
any period thereafter



                                       10
<PAGE>

         Lessee further agrees that if the interest of Lessee in the Leased
Premises shall be sold on execution or judicial sale, or if bankruptcy
proceedings be begun by Lessee, or if Lessee be adjudged a bankrupt, or it makes
an assignment for the benefit of creditors, or a receiver be appointed for it or
for the Leased Premises, or if an assignment occurs by operation of law, then,
and in any such event, this Lease shall forthwith terminate and be forfeited and
the Leased Premises and all improvements thereon shall forthwith become the
property of Lessor, without compensation to Lessee, and without refund of any
royalties paid hereunder.

SECTION 8. ASSIGNMENT OR SUBLETTING.

         Lessee covenants and agrees that it will not sell, assign, sublease,
mortgage, pledge or otherwise transfer or encumber (collectively "transfer")
this Lease or any rights, interests or estates created by this Lease or all or
any portion of the Leased Premises, either voluntarily or by operation of law,
without having first obtained the written consent of Lessor (which consent shall
not be unreasonably withheld or delayed , and in the case of an assignment,
without obtaining and presenting to Lessor a covenant of assumption by the
assignee, wherein such assignee expressly agrees to and with Lessor ,to assume
and be bound by all of the covenants, terms, conditions and provisions hereof to
the same extent as if said assignee had been named as the original Lessee.
Notwithstanding anything herein to the contrary, Lessee may transfer this Lease,
or any rights, interests or estates created by this Lease or all or any portion
of the Leased Premises to an entity affiliated with Lessee, its permitted
successors or assigns, without consent.

         Any such transfer shall not relieve Lessee from its obligations to
comply with all the covenants, terms, conditions and provisions of this Lease,
unless otherwise agreed in writing by Lessor. In the event Lessor consents to
any transfer, such consent shall not relieve Lessee and/or any transferee,
assignee, sublessee, etc., from securing Lessor's written consent to any M e r
transfer, nor shall any such consent be construed as a consent to any further
transfer or as a waiver of any portion of this section or of Lessor's rights
hereunder.

         A transfer of control of Lessee's capital stock, either voluntarily or
by operation of law, shall constitute a "transfer" of the Lease under this
section. "Transfer of Control" as used in the foregoing shall include, without
limitation, (a) an outright sale, assignment or transfer of sufficient shares of
Lessee's capital stock to vest 51% or more of Lessee's capital stock in persons
or entities controlled directly or indirectly by persons or entities, some or
all of whom are different than those persons or entities which directly or
indirectly control 51% or more of Lessee's capital stock as of the effective
date of this Lease, or (b) a sale, assignment or other transfer of shares of the
capital stock or ownership interest in any corporation, partnership or other
entity, which, as of the effective date of this Lease, owns, separately or
jointly with others, directly or indirectly, 51% or more of Lessee's capital
stock, where such transfer is sufficient to vest 51% or more of such capital
stock or ownership interest in persons or entities, some or all of whom are
different than those persons or entities owning such shares or ownership
interest as of the effective date of this Lease. Notwithstanding anything herein
to the contrary, the Transfer of Control of a publicly traded entity that
directly or indirectly controls 51% or more of Lessee's capital stock or the
issuance of publicly traded stock by Lessee or any entity directly or indirectly
controlling Lessee shall not constitute a transfer requiring consent hereunder.

         Accordingly, a "transfer of control" shall have occurred whenever 51%
or more of Lessee's capital stock shall become subject to the direct or indirect
control of persons or entities, some or all



                                       11
<PAGE>

of whom are different than those persons or entities which directly or
indirectly control that portion of Lessee's capital stock as of the effective
date of this Lease.

         Lessee shall have the right, without Lessor's consent, to assign,
pledge or mortgage all of Lessee's rights and interests under this Lease to any
provider of construction, interim, or long-term financing (including a leveraged
lease), or any refinancing thereof, and any trustee or agent acting on their
behalf ("Lenders") as security for Lessee's obligations under all documents and
instruments evidencing, guaranteeing or executed by Lessee in connection with
any financing ("Financing Documents"). Such assignment, pledge or mortgage shall
be in writing, and a copy of such assignment, pledge or mortgage shall be
furnished by Lessee to Lessor, In the event of such an assignment, pledge or
mortgage and upon occurrence of an event of default by Lessee under this Lease
or the Financing Documents, as the case may be, the Lenders shall have the right
(but not the obligation) to assume, all of the rights, interests and obligations
of Lessee thereafter arising under this Lease. Lessor or Lessee, upon request of
the other shall promptly execute and deliver to the requesting party, and/or
their Lenders a written consent to any such assignment, pledge or mortgage of
this Lease and such written certificates as to the due authorization, execution
and delivery by the executing party, and enforceability against Lessor or Lessee
of this Lease as Lessor or Lessee and/or their Lenders may reasonably request.
Provided, however, in no event and under no circumstances shall any assignment,
pledge or mortgage of Lessee's rights and interests under this Lease to Lenders
be superior to any pledge or mortgage of the properties leased hereunder by
Lessor to a current or future lender who has or will supply financing or
refinancing (short or long-term) to Lessor or to a pledge or grant of the Lease
to said Lessor's Lender as security for said financing or refinancing, and,
accordingly, Lessee acknowledges that any assignment, pledge or mortgage of this
Lease to Lenders will be subordinate to Lessor's financing and the rights
thereunder, whether entered into now or at any time in the future.

         Upon the occurrence of any such transfer without the prior written
approval of Lessor, Lessor shall have the option to terminate this Lease
pursuant to Section 7 of this Lease.

SECTION 9. WAIVERS AND RELEASES, ETC.

         No waiver, release, modification, or amendment of any of the terms,
conditions, or provisions of this Lease shall be valid or set up or relied upon
by Lessor or Lessee, unless the same is in writing duly exercised by Lessor and
Lessee. The failure to exercise any right upon nonperformance shall not be
construed as a waiver of the right to insist on subsequent performance of the
terms and conditions hereof.

SECTION 10. ARBITRATION.

         In the event of a dispute between the parties hereto with respect to
the terms of or performance under this Lease, such dispute shall be submitted to
three competent and disinterested arbitrators in the following manner. The party
desiring such arbitration shall select its arbitrator and give written notice
thereof to the other party, and shall in such notice state precisely the matter
or matters which it is proposed to bring before the arbitrators, and only the
matters so stated shall be considered and decided by them. If the party
receiving such notice shall fail to name an arbitrator within thirty (30) days
after notice as aforesaid has been given to it, the Chief Judge of the District
Court of the United States for the                    and shall name and appoint
an arbitrator for and in behalf of the party so in default, and the arbitrator
so named and appointed shall have the same power and authority as if he had been
appointed by such party. The arbitrators so


                                       12
<PAGE>

chosen shall appoint a third arbitrator, and in the event they are unable to
agree on such appointment, the appointment of the third arbitrator may be made
by the Chief Judge of the District Court of the United States for the
        on the application of either of the parties hereto. The three
arbitrators shall immediately upon their selection hear and decide the question
or questions submitted for arbitration and shall give to each of the parties
hereto reasonable notice of the time and place of their meetings, and reasonable
opportunity for the production of evidence. Each party shall set forth its
position in writing. After hearing both parties, the arbitrators shall promptly
make an award in writing upon the question or questions submitted and shall
serve a copy of such award upon each party hereto. The award of such
arbitrators, or a majority of them, shall be final and binding upon the parties
hereto, and the said arbitrators or a majority of them, shall, in their award
and as a part thereof, decide by whom and in what proportion the costs of such
arbitration shall be borne and paid and the amount of such costs. In its
determination, the arbitrators in their award shall adopt the position of one of
the parties. Neither party hereto shall have or enforce any right or remedy
against the other in respect of any matter herein made the subject of
arbitration, until such matter shall have been submitted to and decided by
arbitration in the manner above provided, and then only in accordance with such
decision in arbitration, Notwithstanding the above, either Party may appeal
manifest errors of law to the District Court of the United States for the

SECTION 11. NOTICES.

         Until written notice of a different address, all notices which are
anywhere in this 1ease provided to be given shall be served upon or mailed to
Lessee at                          and to Lessor at

SECTION 12. WARRANTY.

         The Lessor, for itself, its successors and assigns, does hereby
covenant and agree with the Lessee, subject to the exceptions and reservations
herein set forth, and subject to such limitations, restrictions and defects in
Lessor's title to the Leased Premises as were in existence at the time of
Lessor's acquisition of title to the various tracts comprising the Leased
Premises, that upon the payment of the rentals and royalties and the performance
of all and singular the covenants and agreements aforesaid, said Lessee shall
and may peaceably and quietly have and enjoy said Leased Premises for and during
the term aforesaid, and for the purposes aforesaid, free from any let or
hindrance by the Lessor, its successors and assigns. Lessor does not warrant
generally its title to the Leased Premises but warrants only that it has done no
act to encumber the titles which it acquired to the various tracts comprising
the Leased Premises since its acquisition of said tracts which would
substantially interfere with the operations of the Lessee hereunder. In the
event that Lessee did not have the right to mine coal in any part of the Leased
Premises because of the rights of a holder of an outstanding superior title
antedating Lessor's acquisition of title to the tract or tracts in question, if
the Lessee has mined and removed a part or all of the coal therefrom and paid
the Lessor therefor on the royalty basis, the Lessor agrees to repay to the
Lessee the amount of royalty so paid, without interest, but the Lessor shall not
be otherwise liable for any damage to Lessee on account of the mining and
removing of said coal by the Lessee.

SECTION 13. SUCCESSORS AND ASSIGNS.

         All covenants, agreements, and conditions herein set forth to be
performed by or on behalf of Lessor or Lessee shall bind their respective
successors and assigns, whether so expressed or not, and shall inure to the
benefit not only of Lessor and Lessee, but also the benefit of their respective


                                       13
<PAGE>

successors and assigns; but this Section 13 shall not be construed as in anywise
modifying the provisions of Section 8 hereof.

SECTION 14. REMOVAL OF PROPERTY.

         Lessee, having performed all the terms and conditions of this Lease to
be by it performed, may, for a period of twelve (12) months following
termination or expiration, remove any and all equipment and personal property
owned by Lessee, and may remove from the surface overlying the Leased Premises
any and all improvements, buildings, or other structures placed thereon by
Lessee during the term hereof. If the Lessee shall fail to remove any of the
equipment and personal property described above within said twelve (12) months,
then at Lessor's option the same shall thereupon be and become the absolute
property of Lessor.

SECTION 15. MISCELLANEOUS.

         Unless expressly provided for elsewhere in this Lease, this Lease shall
be interpreted in accordance with the following provisions:

                  (a)      Whenever the context may require, any pronoun used in
                           this Lease shall include the corresponding masculine,
                           feminine, or neuter forms, and the singular form of
                           nouns, pronouns and verbs shall include the plural
                           and vice versa.

                  (b)      If a word or phrase is defined, its other grammatical
                           forms have a corresponding meaning.

                  (c)      A reference to a person, corporation, trust, estate,
                           partnership, or other entity includes any of them.

                  (d)      The headings contained in this Lease are for
                           reference purposes only and shall not affect the
                           meaning or interpretation of this Lease.

                  (e)      A reference to legislation or to a provision of
                           legislation includes a modification or reenactment of
                           it, a legislative provision substituted for it and a
                           regulation or statutory instrument issued under it.

                  (f)      A reference to a writing includes a facsimile
                           transmission of it and any means of reproducing of
                           its words in a tangible and permanently visible form.

                  (g)      The words "hereof," "herein" and "hereunder" and
                           words of similar import when used in this Lease shall
                           refer to this Lease as a whole and not to any
                           particular provision of this Lease, and article,
                           section, subsection, schedule and exhibit references
                           are to this Lease unless otherwise specified.

                  (h)      The word "including" shall mean including without
                           limitation.



                                       14
<PAGE>

                  (i)      The Exhibits identified in this Lease are
                           incorporated herein by reference and made a part of
                           this Lease.

                  (j)      The parties have participated jointly in the
                           negotiation and drafting of this Lease, In the event
                           an ambiguity or question of intent or interpretation
                           arises, this Lease shall be construed as if drafted
                           jointly by the parties and no presumption or burden
                           of proof shall arise favoring or disfavoring any
                           party by virtue of the authorship of any of the
                           provisions of this Lease.

                  (k)      Lessor and Lessee agree to execute and record a
                           short-form or memorandum of lease for the purpose of
                           providing record notice of this Lease.

         IN TESTIMONY WHEREOF, the parties hereto have caused this Lease to be
executed in their respective names by their respective representatives thereunto
duly authorized, all as of the day and year first above written.

         Executed in duplicate.


                                       15