Unassociated Document


    


    CONTRACT
      MINING AGREEMENT

    


    THIS
      CONTRACT MINING
      AGREEMENT (this "Agreement"), is made and entered into on
      this 31st day of July,
      2007 (the "Effective Date"), by and between ONE WORLD ENERGY
      CORPORATION, a Nevada corporation ("OWEC"), and RALPH SMITH & SON,
      INC., a Pennsylvania corporation ("Independent
      Contractor").

    


    WHEREAS,
      OWEC owns
      the mineral rights and currently operates a surface coal mining operation and
      related surface facilities in Conemaugh Township, Indiana County, Pennsylvania,
      known as the “Nowrytown No.1 Mine”;

    


    WHEREAS,
      OWEC
      desires to engage Independent Contractor as a contract miner to perform Work
      (as
      defined herein) in accordance with and subject to the terms and conditions
      set
      forth herein; and

    


    WHEREAS,
      OWEC and
      Independent Contractor have agreed that Independent Contractor will begin to
      perform the Work as of the Effective Date.

    


    NOW,
      THEREFORE, in
      consideration of the strict and mutual performance and observance of the terms,
      conditions, covenants, stipulations, guarantees and agreements hereinafter
      set
      forth, and intending to be legally bound, OWEC and Independent Contractor agree
      as follows:

    


    ARTICLE
      I

    DEFINITIONS

    


    As
      used herein, the following terms
      shall have the following meanings (all terms defined in this Article I or in
      other provisions of this Agreement in the singular shall have the same meaning
      when used in the plural and vice versa):

    


    "OWEC
      Property" shall mean
      all structures, facilities, assets and equipment owned by OWEC at the Nowrytown
      No.1 Mine as of the Effective Date.

    


    "Coal"
      shall mean the
      mineable and merchantable coal within and from the seam of coal in, on and
      underlying the Nowrytown No.1 Mine. 

    


    “Equipment”
shall
      have the
      meaning set forth in Section 4.3 of this Agreement.

    


    "Event
      of Default" shall
      have the meaning set forth in Section 11.1 of this Agreement.

    


    "Information"
      shall have the
      meaning set forth in Section 8.7 of this Agreement.

    


    "Lien"
      shall mean any
      mortgage, lien, pledge, charge, security interest or encumbrance of any
      kind.

    


    “Net
      Profit” shall mean
      gross revenues minus all mining costs and related administrative
      costs.

    


    "Records"
      shall have the
      meaning set forth in Section 8.5 of this Agreement.

    


    "Termination
      Notice" shall
      have the meaning set forth in Section 11.9 of this Agreement.

    


    "Work"
      shall have the
      meaning set forth in Section 2.1 of this Agreement.

    


    ARTICLE
      II

    ENGAGEMENT,
      TERM AND NATURE OF MINING

    


    Section
      2.1 -- Engagement of
      Independent Contractor. OWEC hereby engages Independent Contractor as an
      independent contractor in accordance with and subject to the terms and
      conditions hereinafter set forth, and Independent Contractor hereby covenants
      and agrees as follows: (i) to mine and remove the Coal by usual and accepted
      surface mining methods, and as otherwise herein specified, and (ii) to perform
      all of the other duties, responsibilities and obligations required of
      Independent Contractor under this Agreement (all of said work is
      hereinafter collectively referred to as the "Work"). Independent
      Contractor expressly agrees to begin to perform the Work on the
      Effective Date and thereafter to continue to perform the Work in a diligent
      and professional manner and in accordance with the terms and conditions of
      this Agreement and any and all of the permits and governmental approvals now
      or
      hereafter required for the performance of the Work.

    


    Section
      2.2 -- Term. This Agreement
      shall be effective as of the Effective Date and shall continue in full
      force and effect until the Nowrytown No.1 Mine is depleted, unless sooner
      terminated as provided herein or under applicable law.

    


    ARTICLE
      III

    REPRESENTATIONS
      AND WARRANTIES

    


     Section
      3.1 -- Representations
      and Warranties of OWEC. OWEC MAKES NO, AND HEREBY DISCLAIMS ANY,
      REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE QUANTITY, QUALITY
      OR
      CONDITION OF THE COAL LOCATED IN OR RECOVERABLE FROM THE NOWRYTOWN NO.1 MINE
      OR
      THE EQUIPMENT TO BE USED BY INDEPENDENT CONTRACTOR PURSUANT TO THIS AGREEMENT.
      OWEC ALSO MAKES NO, AND HEREBY DISCLAIMS ANY, REPRESENTATION OR WARRANTY,
      EXPRESS OR IMPLIED, AS TO THE DURATION, ECONOMIC FEASIBILITY OR LIKELIHOOD
      OF
      SUCCESS OF THE WORK TO BE PERFORMED BY INDEPENDENT CONTRACTOR UNDER THIS
      AGREEMENT. INDEPENDENT CONTRACTOR HEREBY EXPRESSLY ACKNOWLEDGES AND UNDERSTANDS
      THAT OWEC HAS NOT MADE ANY REPRESENTATION OR WARRANTY WITH
      REGARD TO ANY OF THE FOREGOING MATTERS OR THE CONDITION OR EXISTENCE OF ANY
      SURFACE AREAS, PRIOR WORKINGS, COAL SEAMS, WORK PLACES, STRUCTURES, FACILITIES,
      FIXTURES, EQUIPMENT OR OTHER MATTERS RELATING TO THE COAL, THE EQUIPMENT,
      THE WORK OR THE NOWRYTOWN NO.1 MINE.

    


    Section
      3.2 -- Representations and
      Warranties of Independent Contractor. As a material inducement for OWEC to
      enter into this Agreement, Independent Contractor represents and warrants to
      OWEC as follows:

    


    (a)
      Independent Contractor is a
      corporation duly organized, validly existing and in good standing under the
      laws of the State of Pennsylvania. Independent Contractor has full power and
      authority to execute, deliver and perform this Agreement. This Agreement has
      been duly authorized, executed and delivered by Independent Contractor, is
      a
      valid and binding obligation of Independent Contractor and is enforceable
      against Independent Contractor in accordance with its terms, subject only to
      bankruptcy, insolvency and other laws affecting creditors' rights
      generally. The execution, delivery and performance of this Agreement by
      Independent Contractor will not, with or without the lapse of time or the giving
      of any notice, or both, result in any breach, default or violation by
      Independent Contractor of any law, rule, regulation or agreement or other
      commitment to which Independent Contractor is a party or by which it is
      bound.

    


    (b)
      Neither Independent Contractor
      nor any of its assets are subject to any judgment, order, writ, decree,
      citation or injunction. Independent Contractor is not a party to any judicial,
      administrative, investigative or arbitration proceeding, now pending, or to
      the
      best of its knowledge, threatened, which could have a
      material
      adverse impact on this Agreement or its ability to perform the Work under this
      Agreement.

    


    (c)
      Independent Contractor is in the
      business of surface coal mining, has substantial experience as a surface
      coal mine operator, and has personnel that are knowledgeable regarding and
      have substantial experience in surface mining conditions similar to those in
      the
      Nowrytown No.1 Mine.

    


    (d)
      Independent Contractor has
      carefully inspected and examined and is familiar with the Nowrytown No.1
      Mine, all areas surrounding the Nowrytown No.1 Mine, and the OWEC
      Property.

    


    (f)
      Independent Contractor has fully
      informed itself as to all existing conditions and limitations of the
      Nowrytown No.1 Mine, all areas surrounding the Nowrytown No.1 Mine,
      and  all laws, ordinances, rules, regulations, dangerous conditions,
      prior mining, location of old workings and latent dangers that may affect the
      Work to be performed under this Agreement, and hereby accepts those conditions
      and limitations and the risks associated therewith.

    


    ARTICLE
      IV

    EQUIPMENT;
      MINING OPERATIONS

    


    Section
      4.1 -- OWEC Property. In
      performing the Work, and so long as Independent Contractor is in compliance
      with
      the terms and conditions of this Agreement, Independent Contractor shall have
      the right to use the OWEC Property. Title to the OWEC Property shall, at all
      times, be vested in OWEC. Independent Contractor may not, voluntarily or
      involuntarily, subject the OWEC Property to any Liens, and Independent
      Contractor may not, without the prior written consent of OWEC, remove or permit
      the removal of any of the OWEC Property from the Premises.

    


     Section
      4.2 -- No Warranties;
      Use of Equipment. Independent Contractor hereby acknowledges and agrees
      that the OWEC Property has been or will be furnished to it "as is" and
"where is" without any representations or warranties of any kind
      by or
      on behalf of OWEC. OWEC, not being the manufacturer of any of the OWEC Property,
      nor manufacturer's agent, makes no warranty or representation, either express
      or
      implied, as to the fitness, quality, design, condition, capacity, suitability,
      merchantability or performance thereof or of the material or workmanship with
      respect thereto, it being agreed that all risks, as between OWEC and Independent
      Contractor, are to be borne by Independent Contractor at its sole risk and
      expense. Independent Contractor accordingly agrees not to assert any claim
      whatsoever against OWEC based thereon. Independent Contractor further agrees,
      regardless of cause, not to assert any claim whatsoever against OWEC for loss
      of
      anticipatory profits or consequential damages. Independent Contractor shall
      be solely responsible for developing and training its employees in safe and
      proper use and operating procedures with respect to each item of the OWEC
      Property.

    


    Section
      4.3 -- Maintenance of
      Equipment. Independent Contractor covenants and agrees to at all times keep
      and
      maintain the equipment located on the OWEC Property (the “Equipment”) in good
      and safe working order, condition and repair, ordinary wear and tear excepted,
      and in compliance with all applicable warranties or contractual obligations
      relating thereto and all federal, state, and local laws, rules, regulations
      and
ordinances. Independent Contractor further
      covenants and agrees
      to keep and maintain accurate maintenance programs and schedules with respect
      to
      the Equipment. The obligation of Independent Contractor to maintain and keep
      the
      Equipment in good working order, condition and repair (ordinary wear and tear
      excepted) includes performing, at OWEC's sole cost and expense, all routine
      or
      scheduled maintenance thereof. In order that OWEC may be able to determine
      that
      Independent Contractor is in compliance with the maintenance and repair
      requirements of this Agreement, Independent Contractor shall, upon OWEC's
      request: (i) permit the Equipment to be inspected by OWEC or its designee,
      and
      (ii) permit OWEC or its designee to inspect and copy all maintenance records
      and
      any other records that may pertain to the Equipment.

    


    Section
      4.4 -- Expense of Operations;
      Utilities. Subject to Section 4.1 above, all costs, expenses and liabilities
      accruing or resulting from the Work performed under this Agreement shall be
      borne by OWEC, and Independent Contractor shall have no responsibility
      therefore. OWEC shall, at its sole cost and expense, obtain in its name all
      utilities necessary for the performance of the Work.

    


    Section
      4.5 -- Diligence. Independent
      Contractor agrees to begin to perform the Work on the Effective Date and
      thereafter to diligently prosecute the Work in a skillful and workmanlike
      manner in accordance with the terms and conditions of this Agreement and modern
      and approved mining methods, and Independent Contractor agrees to use only
      competent, skilled personnel and management in performing the Work. Independent
      Contractor shall perform the Work so as to produce and recover
      the maximum quantities of merchantable and mineable coal from the Nowrytown
      No.1
      Mine.

    


    Section
      4.6 -- Notice of Suspended
      Operations. Independent Contractor shall report promptly in writing to OWEC
      any suspension, slowdown or interference with any aspect of the Work, and
      Independent Contractor shall specifically identify the reasons therefore and
      the
      expected duration thereof.

    


    Section
      4.7 -- Engineering Services.
      Independent Contractor shall be solely responsible for obtaining all engineering
      services that are or may be required: (i) to protect OWEC's interest in the
      Coal, and the OWEC Property, and (iii) to perform the Work pursuant to the
      terms
      and conditions of this Agreement.  The cost of such services shall be
      the responsibility of OWEC.

    


    Section
      4.8 -- Water Sampling. During
      the term of this Agreement, OWEC agrees to perform or cause to be performed
      all water sampling and related reporting required by any governmental permits
      on
      or with respect to the OWEC Property

    


    ARTICLE
      V

    PRODUCTION

    


    Section
      5.1 -- Source of Coal.
      Independent Contractor covenants and agrees that: (i) the Coal delivered to
      OWEC pursuant to this Agreement shall be produced solely from the coal seam
      in, on and underlying the Nowrytown No.1 Mine, (ii) it shall not commingle
      any
      coal mined or removed from other properties with the Coal mined and removed
      from
      the Nowrytown No.1 Mine, and (iii) it shall not tender, deliver or sell any
      of
      the Coal mined from the Nowrytown No.1 Mine to any person or entity without
      the
      prior written consent of OWEC.

    


    Section
      5.2 -- No Foreign Material,
      Etc. Independent Contractor agrees

    to
      mine,
      produce and deliver Coal which is free from foreign material, trash, excess
      moisture, slate, rock, excessive out of seam dilution and other impurities
      and
      which is of merchantable and saleable quality.

    


    Section
      5.3 -- Title to Coal,
      Depletion. Independent Contractor acknowledges and agrees that title to all
      Coal mined under this Agreement shall be vested in OWEC and Independent
      Contractor shall have no right to dispose of any of the Coal except as set
      forth
      in Section 5.4 below. Unless otherwise expressly provided herein, Independent
      Contractor shall not acquire and shall not have an economic interest in any
      of
      the Coal and OWEC shall have the full right to claim depletion for income tax
      or
      other purposes with respect to all of the Coal mined, produced and
      delivered hereunder. Independent Contractor expressly acknowledges and agrees
      that it will make no claim whatsoever to depletion for income tax or any other
      purposes with respect to the Coal mined under this Agreement and acknowledge
      that OWEC's exclusive right to depletion for any and all purposes was taken
      into
      account by the parties hereto in fixing the amounts owed Independent
      Contractor under Section 6.1 under this Agreement

    


    Section
      5.4 -- Independent
      Contractor's Right to Sell Coal. In the event OWEC suspends its performance
      of
      this Agreement and refuses to accept Coal pursuant to Section 13.8 (b)(i) for
      more than 30 consecutive days, Independent Contractor shall have the right
      to
      attempt to sell Coal that it has produced but that
      OWEC has not
      accepted pursuant to Section 13.8(b)(i); provided, however, Independent
      Contractor shall not enter into any agreements for the sale of Coal pursuant
      to
      this Section 5.4 without the prior express written consent of OWEC, which
      consent may be withheld by OWEC for any reason.

    


    Section
      5.5 -- Boundaries.
      Independent Contractor shall fully comply with all federal, state and local
      laws, regulations, rules, ordinances and the governmental permits regarding
      any
      matter relating to mining near the boundaries of the Nowrytown No.1 Mine.
      Notwithstanding the foregoing, however, Independent Contractor shall not, except
      with the prior written consent of OWEC, mine any Coal within sixty (60) feet
      of
      the outside boundaries of the Nowrytown No.1 Mine or within two hundred (200)
      feet of any mine workings in or adjacent to the Nowrytown No. 1 Mine, and
      Independent Contractor shall not cut any boundary corner on the Nowrytown No.1
      Mine except with the prior written consent of OWEC. In the event such consent
      is
      given by OWEC, Independent Contractor shall use such precautions as are
      necessary to preserve and monument the location of such boundary corner as
      OWEC
      may require.

    


    ARTICLE
      VI

    NET
      PROFIT; OPERATING CAPITAL

    


    Section
      6.1 Net Profit. In
      consideration for the Work performed by Contractor hereunder, OWEC agrees
      that Independent Contractor shall be entitled to forty percent (40%) of the
      Net
      Profit, including without limitation, expenses incurred under this Agreement,
      debt service expenses and royalties, attributable to the Nowrytown No.1 Mine
      during the term of this Agreement.

    


    Section
      6.2 Operating Capital. OWEC
      further agrees to provide all operating capital and furnish all of the
      Equipment, tools, machinery, parts, supplies and other items that may be required from time to time to perform
      the
      Work.  OWEC shall reimburse Independent Contractor all reasonable
      expenses incurred by Independent Contractor relating to the Nowrytown No.1
      Mine.

    


    ARTICLE
      VII

    RELATIONSHIP
      OF PARTIES

    


    Section
      7.1 -- Independent
      Contractor. It is expressly agreed and understood that Independent
      Contractor shall perform the Work specified in this Agreement as an independent
      contractor. Independent Contractor shall exercise exclusive direction and
      control over its work force and labor relations policies, and subject only
      to
      OWEC's right to designate the areas to be mined, Independent Contractor shall
      direct the manner, method, mode of performance and all other aspects of the
      Work. Independent Contractor expressly agrees that it shall not represent or
      hold itself out as an affiliate, subsidiary, partner, joint venturer,
      representative or agent of OWEC, and Independent Contractor further agrees
      to
      indemnify, hold harmless and defend OWEC against any claims, of whatever kind,
      arising from any act or representation of it contrary to the provisions of
      this
      Section 7.1. This covenant of indemnity shall survive the termination or
      expiration of this Agreement.

    


    Section
      7.2 -- Employees. The
      employees of Independent Contractor shall be its employees and not the
      employees of OWEC. Independent Contractor shall exercise complete and exclusive
      control over and responsibility for all aspects of hiring, employment,
      supervision, direction, hours, working conditions, compensation, discipline
      and
      discharge for all individuals engaged to perform the Work under this Agreement.
      Independent Contractor shall comply with all present and future federal, state
      and local laws, ordinances, rules and regulations pertaining to the duties
      and
      obligations arising out of the employer-employee relationship, including,
      without limitation, unemployment compensation, Social Security, withholding
      taxes, State Workers' Compensation (including the Black Lung component),
      wage and hour laws, wage payment and collection laws, federal and state safety
      laws, occupational disease compensation and all other applicable rules and
      regulations promulgated thereunder. Independent Contractor shall maintain
      accurate supporting records showing evidence of its compliance with the
      requirements set out in this Section 7.2 and shall make these records
      available to OWEC for inspection upon request, and Independent Contractor
      shall certify to OWEC, on a quarterly basis, in writing, Independent
      Contractor's compliance therewith on all Coal produced and tendered under this
      Agreement. Any expense incurred by Independent Contractor under this Section
      7.2
      shall be reimbursed by OWEC.

    


    ARTICLE
      VIII

    INSPECTION,
      RECORD KEEPING AND REPORTING REQUIREMENTS

    


    Section
      8.1 -- Contemporaneous Access
      to the OWEC Property. Independent

    Contractor
      acknowledges and agrees that OWEC or its designee may place and install or
      cause
      to be placed and installed on the OWEC Property various structures, equipment
      and materials, and OWEC may carry on, either directly or through its designee,
      such other operations on the OWEC Property as OWEC may deem necessary or
      desirable for its own purposes as long as it does not interfere with
      Independent Contractor's ability to perform the Work under this Agreement.
      OWEC shall ensure that all activity on the OWEC Property by OWEC or its designee
      shall be conducted in accordance with all applicable laws, rules and
      regulations, including, without limitation, all Mine Safety and Health
      Administration (“MSHA”) requirements.

    


    Section
      8.2 -- Inspection of the OWEC
      Property and Equipment. Independent Contractor acknowledges and agrees that
      OWEC and its designees may, upon notice to Independent Contractor, enter
      upon, inspect, map, sample, test and survey the OWEC Property, the Nowrytown
      No.1 Mine, the Equipment, the Coal and the Work being performed under this
      Agreement, and any other aspect of Independent Contractor's operations relating
      to this Agreement. Independent Contractor shall provide OWEC and its designees
      with safe access to the OWEC Property, the Nowrytown No.1 Mine and the
      Equipment, and cooperate with OWEC and its designees in carrying out such
      inspection.

    


    Section
      8.3 -- Safety. OWEC and
      Independent Contractor recognize the importance of safety procedures and
      safe working conditions. Before commencing any Work under this Agreement,
      Independent Contractor must obtain an MSHA identification number. Independent
      Contractor agrees to comply with all present and future federal, state and
      local
      safety laws, ordinances, rules and regulations, and Independent Contractor
      shall
      ensure that its employees are trained in safe working procedures and shall
      cause
      its employees to abide by all safety and security rules in force on the
      OWEC Property. OWEC and its designees shall have the right (but not the
      obligation) to review the safety records of Independent Contractor on a
      quarterly basis. Independent Contractor agrees to indemnify, hold harmless
      and
      defend OWEC against any claims, of whatever kind, arising from any act or
      omission to act by Independent Contractor contrary to the provisions of this
      Section 8.3. This covenant of indemnity shall survive the termination or
      expiration of this Agreement.

    


    Section
      8.4 -- Testing and Reports.
      Independent Contractor shall maintain accurate records regarding the mining
      conditions encountered, drill cores, tests and sampling with respect to the
      Premises, the Coal and the Work (the "Records"), and Independent
      Contractor shall provide OWEC or its designee with copies thereof. Upon the
      termination or expiration of this Agreement, Independent Contractor shall
      promptly deliver to OWEC or its designee all of such records.

    


    Section
      8.5 -- Books of Account and
      Records. Independent Contractor shall at all times maintain accurate books
      and records of account covering the Work performed under this Agreement in
      accordance with generally accepted accounting principles. OWEC shall have the
      right to inspect, audit and copy Independent Contractor's books and records
      for
      the purpose of verifying compliance with all terms, conditions and provisions
      of
      this Agreement.  Independent Contractor shall keep and preserve such
      books and records for at least five years after the termination or expiration
      of
      this Agreement.

    


    Section
      8.6 -- Confidentiality of
      Information. Independent Contractor acknowledges that in performing the
      Work under this Agreement it may have access to proprietary information and
      trade secrets of a confidential nature pertaining to OWEC, its affiliates
      and their businesses, the OWEC Property, the Coal and the Nowrytown No.1 Mine.
      Independent Contractor agrees that it shall treat all maps, plans, data,
      reports, drilling logs, core samples, leases and other information relating
      to
      OWEC and its business, the OWEC Property, the Coal or the Nowrytown No.1
      Mine (the "Information") as confidential, and it shall not
      divulge, transmit or otherwise disclose any of the Information to any
      person, firm, corporation or other entity unless at the time of disclosure
      to
      Independent Contractor, the information was public knowledge or becomes public
      knowledge through no act of Independent Contractor. Upon the termination or
      expiration of this Agreement for any cause whatsoever, Independent Contractor
      shall promptly deliver to OWEC all of the Information given to Independent
      Contractor.

    


    ARTICLE
      IX

    OBSERVANCE
      OF LAWS, REGULATIONS AND OTHER LEGAL REQUIREMENTS

    


    Section
      9.1 -- Conformity with Laws.
      Independent Contractor agrees that in performing the Work under this
      Agreement, particularly in the actual mining process and in regard to its
      responsibility for the construction, installation, inspection, maintenance
      and
      removal, if necessary, of all facilities, structures, and equipment used in
      or
      about the OWEC Property, it shall be familiar with and shall fully obey and
      comply with all applicable federal, state and local laws and ordinances, and
      with all applicable rules, regulations, orders and directives of any federal,
      state or local official, agency or department relating to such mining operations
      and activities or to such facilities, structures, land areas, utilities,
      equipment and including, without limitation, all such laws, ordinances, rules,
      regulations, orders, directives, permits and bonds now in effect or hereafter
      made, promulgated, enacted or issued.

    


    Section
      9.2 -- Permits and Bonds.
      Following the execution of this Agreement, OWEC shall diligently seek to
      obtain all approvals and consents from any federal, state or local governmental
      for the performance of the Work on the OWEC Property. OWEC shall secure,
      maintain and comply with all permits required to perform the Work, and OWEC
      shall perform all remedial or abatement work and pay all fines and assessments
      related to its failure to comply therewith.

    


    Section
      9.3 -- Citations or
      Penalties. Subject to Section 9.2 above, Independent Contractor shall be solely
      responsible and liable for the complete and timely payment of any and all
      citations, assessments, penalties or fines imposed by any federal, state or
      local agency for the violation of any federal, state or local law, ordinance,
      rule or regulation arising out of or relating, directly or indirectly, to the
      Work performed under the Agreement. Independent Contractor shall not jeopardize
      any of the governmental permits held, if any, by OWEC, Independent Contractor,
      or its and their affiliates, contractors or lessees. Independent Contractor
      shall be totally and solely responsible for and shall hold harmless, indemnify
      and defend OWEC from and against any and all liability for any citations,
      assessments, fines, damages, withdrawal orders or civil and criminal penalties
      assessed against either Independent Contractor or OWEC which are caused,
      directly or indirectly, in whole or in part, by the actions or omissions of
      Independent Contractor, its employees, agents, contractors or representatives.
      In the event that OWEC or Independent Contractor is assessed, fined or penalized
      for any violation arising out of Independent Contractor's conduct, or the
      conduct of its agents, contractors or representatives, OWEC may, in its sole
      direction, settle or pay such assessment, fine or penalty without Independent
      Contractor's prior approval, and OWEC may deduct and withhold from any monies
      due or which shall become due in the future to Independent Contractor for Work
      performed under the Agreement an amount sufficient to cover any such
      assessments, fines and penalties, together with expenses, including reasonable
      attorneys' fees, incurred. If, regardless of the reason, such citations or
      assessments should go unresolved and any of OWEC's mining related permits are
      canceled, revoked, suspended, terminated or withdrawn, Independent Contractor
      shall be liable to OWEC for all costs, expenses, losses and damages, including,
      without limitation, attorneys' fees, directly or indirectly, incurred by such
      permit cancellation, revocation, suspension, termination or withdrawal.
      Independent Contractor reserves the right to lawfully contest any such fine
      or assessment provided it does not jeopardize the mining operations contemplated
      under this Agreement.

    


    Section
      9.4 --Haulroads, Drainage and
      Grading. Independent Contractor shall be solely responsible for the maintenance
      and upkeep of the haulroads on the OWEC Property and for draining and grading
      all surface areas and for controlling all surface run-off on or with respect
      to
      the OWEC Property as required by any federal, state or local law, rule,
      regulation or permit, or as reasonably required by OWEC.

    


    Section
      9.5 -- Fees and
      Taxes. OWEC shall make complete and timely payment of all federal, state
      and local fees and taxes which may be imposed or assessed against it, its
      operations hereunder, the Equipment, or the Nowrytown No.1 Mine in connection
      with the Work performed under this Agreement, including, without limitation,
      all
      payments or benefits arising from the Black Lung Benefits Reform Act of 1977,
      as amended, the workers' compensation fund or similar benefit program under
      the laws of the State of Pennsylvania, personal property taxes, employment
      taxes, and income taxes.

    


    Section
      9.6 -- Excise, Reclamation
      and Severance Taxes. In addition to the amounts set forth in Section 6.1
      above, OWEC shall pay real property taxes assessed against the Premises,
      the federal excise tax payable under 26 U.S.C. Section 4121 with respect to
      the
      Black Lung Disability Trust Fund, and the federal reclamation fees payable
      to
      the Office of Surface Mining.

    


    Section
      9.7 -- Liens. In the event
      any employee of Independent Contractor or any other third party files a
      notice of intent to claim a Lien upon any asset of OWEC or any other property
      or
      interest of OWEC as the result of Independent Contractor's non-payment of
      wages or other monies due to such employee or other third party, and in the
      event such Lien or filing is in OWEC's reasonable opinion legally valid or
      enforceable, then OWEC may, at its option, pay such employees or third parties
      directly and deduct the amount of such payment from any monies due or to become
      due to Independent Contractor under this Agreement. This provision shall not
      be
      construed as a promise for the benefit of any employee of Independent
      Contractor or any third party and shall not constitute an agreement by OWEC
      to pay any such employee or third party.

    


    Section
      9.8 -- Reclamation. OWEC
      shall be responsible, at its sole cost and expense, for performing all
      reclamation of the OWEC Property as required by any applicable federal, state
      and local laws, rules, regulations and permits. OWEC shall indemnify, hold
      harmless and defend Independent Contractor from and against all claims, cost
      and
      expenses, including reasonable attorney's fees, incurred by Independent
      Contractor in connection with the reclamation of the OWEC Property. This
      covenant of indemnity shall survive the expiration or termination of this
      Agreement.

    


    ARTICLE
      X

    INDEMNIFICATION
      AND INSURANCE

    


    Section
      10.1 -- Indemnification.
      Independent Contractor shall indemnify, hold harmless and defend OWEC, its
      affiliates and its and their officers, directors, managers and employees from
      and against any and all suits, actions, liabilities, demands, losses, claims,
      awards, damages, fines, penalties, judgments, settlements, costs and expenses
      of
      every kind and nature (including, without limitation, reasonable attorney's
      fees
      and related costs incurred by an indemnified party in connection with its
      efforts to enforce this indemnity), including, without limitation, the injury
      to
      or death of any person or persons, damage to or loss of property, or mining
      outside the OWEC Property or otherwise, arising out of or relating, directly
      or
      indirectly, to (i) the acts or omissions of Independent Contractor, its
      officers, employees, agents or representatives under or in connection with
      this
      Agreement, or (ii) a breach or default by Independent Contractor of any
      covenant, section, representation, warranty or other term or condition of this
      Agreement, or (iii) the use of any of the Equipment by Independent Contractor
      or its employees, agents or representatives, together with any and all
      costs and expenses, including reasonable attorneys' fees, that may be incurred
      by an indemnified party in connection with its defense. Independent Contractor
      shall defend the indemnified party, or, at the option of the indemnified party,
      pay to have the indemnified party defended, against all such suits,
      actions, liabilities, demands, losses, claims, awards, damages, fines,
      penalties, judgments, settlements, costs and expenses, whether groundless or
      not. The foregoing obligations shall be in addition to and not in limitation
      of
      any other specific agreements or obligations in other sections of this
      Agreement, and shall survive the expiration or termination of this
      Agreement.

    


    Section
      10.2 -- Insurance.
      Independent Contractor shall maintain, at OWEC’s sole cost and expense, and
      shall require any subcontractors or other entities or individuals it may engage
      to perform the Work under this Agreement to maintain, at all times while
      performing the Work, and for a period of ninety (90) days after the expiration
      or termination of this Agreement, the insurance coverages set forth below with
      full policy limits applying, but not less than as stated:

    


    a.
      Comprehensive general liability
      insurance with  minimum limits of $5,000,000 per occurrence and $5,000,000
      general aggregate for bodily injury and property damage, which insurance shall
      include coverage for (but not limited to) the following: (i) Premises'
      operations, (ii) contractual liability, (iii) cross-liability,
      (iv) products and completed operation, (v) explosion collapse
      and underground property damage, (vi) subsidence, (vii) waiver
      of subrogation, and (viii) punitive damages.

    


    b.
      Employer's liability insurance protecting against employee claims for bodily
      injury, intentional tort actions and all other employee claims against employers
      with each underlying limit being not less than One Million Dollars per person
      and Five Million Dollars for each occurrence.

    


    c.
      Automobile bodily injury liability insurance  including owned,
      non-owned and hired vehicle coverage with  limits of liability of not
      less than $5,000,000 combined  single limits for bodily injury and
      property damage claims.

    


    d.
      Workers' Compensation insurance, occupational disease insurance, including
      state
      and federal black lung coverage, unemployment compensation and all other
      insurance coverages for occupational injury, disease or hazards as required
      by
      the laws and regulations applicable to and covering employees of Independent
      Contractor engaged in the  performance of Work under this
      Agreement.

    


    e.
      Pollution liability insurance of not less than  $500,000 per incident.
      Independent Contractor's obligation  to obtain the insurance coverages
      as provided in this Section 10.2 shall not in any way be construed so as to
      limit, amend or otherwise modify its indemnity obligations as provided elsewhere
      in this Agreement.

    


    Section
      10.3 -- Form of Insurance.
      All insurance coverages required under Section 10.2 above shall be with a
      reputable insurer, licensed to do business in the State of Pennsylvania, and
      OWEC shall have the right to approve such insurer. All policies or certificates
      of insurance obtained by Independent Contractor under this Agreement shall
      name
      OWEC as an additional insured and shall contain a provision for notice to OWEC
      of any overdue or unpaid insurance premium and thirty (30) days advance notice
      to OWEC of any proposed cancellation or substantial change in coverage. Every
      insurance policy required under Section 10.2 above shall contain a waiver of
      subrogation by the insurer against OWEC, its owners, affiliates and
      subsidiaries. Each policy of insurance shall be written as an "occurrence”
contract unless the policy is available only on a "claims made"
      basis, in which case Independent Contractor shall continue such insurance policy
      for a period of two years after the expiration or termination of this
      Agreement.

    


    Section
      10.4 -- Proof of Insurance
      Coverage. Independent Contractor shall furnish to OWEC copies of all
      certificates and policies which provide the insurance coverages required by
      Section 10.2 above, including, but not limited to, copies of any bonds which
      may
      be required for such coverages, prior to commencing the Work under this
      Agreement and thereafter upon request by OWEC.  Independent Contractor
      shall also provide satisfactory written evidence to OWEC that, if required
      by the laws of the State of Pennsylvania, it has entered into appropriate
      trust or bonding arrangements setting aside or providing sufficient funds to
      assure payments of accrued back wages and fringe benefits
      to  Independent Contractor's employees in the event Independent
      Contractor ceases operations under this Agreement.

    


    


    ARTICLE
      XI

    DEFAULT
      AND TERMINATION

    


    Section
      11.1 -- Default. Independent
      Contractor shall be in default of this Agreement upon the occurrence of any
      of the following events (each an "Event of Default"):

    


    a.
      any
      breach or violation of, or failure to perform, any term, condition, provision,
      representation, warranty, covenant, stipulation or agreement set forth herein
      or in any other written agreement by and between OWEC and Independent
      Contractor which is not cured within ten (10) days of Independent Contractor's
      receipt of written notice thereof from OWEC;

    


    b.
      If any
      action by Independent Contractor in performing the Work under this
      Agreement, complying with any of the terms under this Agreement, or the presence
      of any agent, employee, contractor or representative of Independent Contractor
      upon the OWEC Property, or the execution of this Agreement by it
      shall cause interference with or disrupt or threaten to interfere with or
      disrupt OWEC's operations in any manner or the operations of any of OWEC's
      affiliates, subsidiaries or any other contractor(s), at any location whatsoever,
      for any reason, and if such interference, disruption or threat continues for
      ten
      (10) days after Independent Contractor's receipt of written notice from
      OWEC;

    


    c.
      In the
      event Independent Contractor is adjudicated bankrupt or insolvent, whether
      through involuntary or voluntary proceedings, or if any receiver, trustee,
      assignee or other person or persons are appointed by any court to take charge
      of
      Independent Contractor's assets; or

    


    d.
      If any
      order, decree, judgment or directive is issued by any regulatory authority,
      tribunal or court revoking, suspending, terminating or withdrawing any of its
      mining related permits or bonds, whether secured in connection with mining
      on
      the OWEC Property or not, or requiring Independent Contractor to cease mining
      operations for a period of more than ten (10) days, or if two such directives
      are issued in any calendar year, regardless of their duration.

    


    Section
      11.2 -- Termination Based
      Upon an Event of Default. In addition to and not in limitation of its right
      to terminate this Agreement as provided in other sections of this
      Agreement, OWEC shall have the right to terminate this Agreement upon the
      occurrence of an Event of Default by giving written notice to Independent
      Contractor of such termination.

    


    Section
      11.3 -- Right to Cure. If
      Independent Contractor is in breach or default of any of the terms or
      conditions of this Agreement, whether or not said breach or default gives rise
      to an Event of Default, OWEC shall have the right, but not the duty, to make
      any
      payment or to perform any act or complete or correct the Work required of
      Independent Contractor under this Agreement and, in exercising such right,
      to incur, for and on behalf of Independent Contractor, necessary or
      incidental costs and expenses, including reasonable attorneys' fees. In
      exercising the foregoing right, OWEC may offset and deduct
      all  payments made and all costs and expenses incurred against such
      sums of money, if any, due or to become due to Independent Contractor under
      this Agreement and proceed against Independent Contractor under the provisions
      of Section 10.1 relating to indemnity. OWEC's right to cure Independent
      Contractor's default or breach as described in this Section 11.3 shall not
      imply any obligation on the part of OWEC to make any payment or to perform
      any act required of Independent Contractor, and the exercise of such right
      by
      OWEC shall not constitute a release or waiver of any default or breach by
      Independent Contractor.

    


    Section
      11.4 -- Waiver of Performance
      or Default. The failure of either OWEC or Independent Contractor to insist
      in any one or more instances upon strict performance of any of the covenants,
      terms or conditions imposed upon or assumed by either party under this
      Agreement, or the failure of OWEC or Independent Contractor to exercise any
      particular option or right granted by the Agreement, shall not be construed
      as a waiver or relinquishment for the future performance of any such covenant,
      term or condition, or as to the exercise of any such option or right.
      Moreover, a waiver by either party of a default or breach hereunder must be
      in
      writing and shall not be deemed to be a waiver of any subsequent default or
      breach, and any delay in asserting a right hereunder shall not be deemed a
      waiver of such right. Nothing contained in this Agreement shall be construed
      as
      a waiver of any applicable statute of limitations.

    


    Section
      11.5 -- Remedies. The rights
      and remedies of OWEC set forth in this Agreement shall not be exclusive,
      but shall be taken and construed as cumulative and in addition to any and all
      other rights and remedies accorded to OWEC at law or equity.

    


    Section
      11.6 -- Removal of Property.
      In the event of an Event of Default, and for so long as the Event of
      Default shall continue, Independent Contractor shall not remove or permit to
      be
      removed or taken from the OWEC Property any of the Equipment.

    


    Section
      11.7 -- Condition of the
      Premises. Upon the expiration or termination of this Agreement, for any
      reason, at the option of OWEC, Independent Contractor shall leave the OWEC
      Property and the Nowrytown No.1 Mine, in the same normal working condition,
      under which the Work was being performed.

    


    Section
      11.8 -- Termination by OWEC
      Without Cause. Beginning on the second anniversary of the Effective Date of
      this
      Agreement, OWEC shall have the right to terminate this Agreement for any reason
      and at any time by providing Independent Contractor with at least 180 days'
      prior written notice (the "Termination Notice").

    


    ARTICLE
      XII

    ASSIGNMENT,
      SUBCONTRACTING AND TRANSFER OF OWNERSHIP

    


    Section
      12.1 -- Rights Personal to
      Independent Contractor. This Agreement is personal to Independent
      Contractor requiring the exercise of its own services, skills and
      judgment.

    


    Section
      12.2 -- Assignment and
      Subcontracting. Independent Contractor may not assign, subcontract or otherwise
      transfer or delegate all or any part of this Agreement, the Work, or any rights,
      duties, obligations or interests herein without obtaining the prior written
      consent of OWEC, which consent may be withheld by OWEC in its sole discretion.
      Independent Contractor may not assign any monies due or to become due to it
      under this Agreement, nor may it pledge, encumber or mortgage all or any part
      of its interests in this Agreement without the prior written consent of
      OWEC,  which consent may not be unreasonably withheld.

    


    Section
      12.3 -- Waiver of Consent. In
      the event OWEC consents to one or more assignments, subcontracts or other
      transfer of all or any part of this Agreement, the Work, or any rights or
      interests herein, or a transfer of any ownership interest in Independent
      Contractor, such consent shall not be construed as waiving the requirement
      of
      obtaining written consent to additional assignments, subcontracts or transfers,
      and no consent to assignment, subcontract or transfer shall relieve Independent
      Contractor of any obligations specified in this Agreement.

    


    Section
      12.4 -- Transfer of OWEC's
      Interest in the OWEC Property. OWEC may not sell or otherwise transfer its
      leasehold interest in the OWEC Property if such sale or other transfer
      would have a material adverse effect on Independent Contractor's interest in
      the
      Agreement unless: (i) Independent Contractor consents to such sale or other
      transfer, or (ii) the buyer or transferee of OWEC's interest in the OWEC
      Property agrees to be bound by the terms of this Agreement as if it were
      OWEC.

    


    ARTICLE
      XII

    MISCELLANEOUS

    


    Section
      13.1 -- Notices. Any and all
      notices, payments, reports, consents or other communications between the
      parties shall be in writing and deemed given and received on the date delivered
      personally, on the date deposited if sent by registered or certified United
      States mail, postage prepaid, return receipt requested, or on the date
      transmitted by facsimile, provided the same is also mailed on said date by
      registered or certified United States mail, postage prepaid, return receipt
      requested, to the parties at their  respective addresses as set forth
      below, which addresses shall remain in effect until notice of change is given,
      in writing:

    


        If
      to OWEC:

    


    Ashvin
      Mascarenhas

    One
      World Energy
      Corporation

    2501
      North Green Valley Parkway,
      Suite 110

    Henderson,
      NV 89014

    Ph:
      702-317-2300

    Fax:
      702-317-2301

    


        If
      to Independent Contractor:

    


    Ralph
      T. Smith,
      President

    1293
      Route 217

    Derry,
      PA 15627

    Ph:
      724-694-5111

    Fax:
      724-694-9008

    


    Section
      13.2 -- Integration. This
      Agreement contains the entire understanding and agreement of the parties
      with regard to the transactions contemplated hereunder and it supersedes all
      prior agreements, arrangements and understandings between the parties relating
      to the subject matter of this Agreement.

    


    Section
      13.3 -- Modification. This
      Agreement shall not be modified, changed or terminated, in whole or in
      part, except by written agreement, signed by all parties hereto or their
      respective successors-in-interest.

    


    Section
      13.4 -- Choice of Law. This
      Agreement shall be governed and construed in accordance with the laws of
      the State of Pennsylvania.

    


    Section
      13.5 -- Headings. The
      headings appearing in this Agreement are for convenience of reference only
      and shall not be considered or construed as affecting in any way the meaning
      of
      the provisions of this Agreement.

    


    Section
      13.6 -- Counterparts. This
      Agreement may, for convenience, be executed in several counterparts, each
      of which shall be deemed an original and all of which, taken together, shall
      constitute one Agreement.

    


    Section
      13.7 -- Severability. In the
      event that any provision of this Agreement conflicts with the laws of the
      State of Pennsylvania or any other jurisdiction, or is held invalid by a court
      with jurisdiction over the parties to this Agreement, such provision shall
      be
      deleted from the Agreement and the Agreement shall be construed to give effect
      to its remaining provisions.

    


    Section
      13.8 -- Force
      Majeure.

    


    (a)
      If
      OWEC or Independent Contractor is rendered wholly or partly unable to
      perform its obligations under this Agreement by reason of a Force Majeure Event,
      OWEC or Independent Contractor, as the case may be, will be excused from
      whatever performance is affected by the Force Majeure Event to the extent so
      affected, provided that (i) the party relying on the Force Majeure Event
      notifies the other as soon as practicable of the Force Majeure Event and its
      cause; (ii) the suspension of performance is of no longer duration than is
      required by the Force Majeure Event; (iii) no obligations of either party which
      arose before the Force Majeure Event causing the suspension of performance
      are
      excused as a result of the Force Majeure Events; and (iv) the non-performing
      party exercises due diligence to remove the cause of the Force Majeure Event
      or
      to lessen its effect and resumes performance at the earliest practicable
      time.

    


    (b)
      In no
      event will this Section 13.8 be construed to relieve either party of any
      obligations hereunder solely because of increased costs or other adverse
      economic consequences that may be incurred through the performance of such
      obligations of the parties. Notwithstanding the above, adverse economic
      consequences from governmental actions will be considered a Force Majeure Event
      if it results from an item listed in the definition of a Force Majeure
      Event.  For the purposes of this Agreement only, the term "Force
      Majeure Event" shall mean or refer to any act or event that (i) prevents
      OWEC or its coal sales agent from selling any of the Coal at a reasonable profit
      or performing its obligations under any other agreement for the sale or re-sale
      of Coal, and (ii) any other act or event which is beyond the reasonable control
      of OWEC or Independent Contractor and which renders performance of this
      Agreement, in whole or in part impossible. Such acts or events include, without
      limitation, an act of God, nuclear emergency, explosion, fire, epidemic,
      landslide, lightning, earthquake, flood or similar cataclysmic occurrence,
      an
      act of public enemy, war, blockade, insurrection, strike, riot, civil
      disturbance, restrictions or restraints imposed by law or by rule, regulation
      or
      order of governmental authorities, whether federal, state or local, delays
      or
      interruptions in transportation, major breakdown or other restrictions on the
      use of equipment, or any cause, whether of the same of a different nature,
      existing or future, foreseen or unforeseen. Unless resulting from any of the
      events listed in the preceding sentence, economic hardship or failure by
      Independent Contractor to produce Coal as required under this Agreement
      will not constitute a Force Majeure Event.

    


    (c)
      No
      Force Majeure Event will invalidate this Agreement and, on termination of
      the Force Majeure Event, deliveries of Coal will resume pursuant to the terms
      and conditions hereof. Shipments not made or not accepted due to a Force Majeure
      Event will not be made up unless OWEC in its sole discretion elects to do
      so.

    


    (d)
      The
      term of this Agreement shall, in OWEC's sole discretion, be extended for a
      period equal to the sum of all periods during which a Force Majeure prevented
      either party from performing this Agreement.

    


    IN
      WITNESS WHEREOF,
the parties have caused their corporate names to be signed hereto
      by their officers duly authorized.

    


    ONE
      WORLD ENERGY CORPORATION

    


    


    /s/
      Ashvin Mascarenhas

    By:
      ___________________________

    Ashvin
      Mascarenhas, CEO & Director

    


    


    


    RALPH
      SMITH & SON, INC.

    


    


    /s/
      Ralph T. Smith

    By:
      ___________________________

    Ralph
      T.
      Smith, President