<PAGE>

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                            DESIGN-BUILD AGREEMENT
              AND GENERAL CONDITIONS BETWEEN OWNER AND CONTRACTOR
               (WHERE THE BASIS OF COMPENSATION FOR DESIGN AND
               ENGINEERING IS FIXED RATE NOT TO EXCEED A MAXIMUM
                  AND COMPENSATION FOR THE WORK IS COST-PLUS,
                        NOT TO EXCEED A MAXIMUM AMOUNT)

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OWNER: KFX FUEL PARTNERS II, L.P.

CONTRACTOR: YANKE ENERGY, INC.


DATE: DECEMBER 30, 1996

                                     - 1 -
<PAGE>

                               TABLE OF CONTENTS

                                    ARTICLES


ARTICLE 1..................................................................
     The Construction, Approved Contractors, Extent of Agreement and Definitions

ARTICLE 2..................................................................
     Contractor's Responsibilities

ARTICLE 3..................................................................
     Owner's Responsibilities

ARTICLE 4..................................................................
     Subcontracts

ARTICLE 5..................................................................
     Contract Time Schedule

ARTICLE 6..................................................................
     Fees for Development and Detailed Engineering
     Cost-plus Percentage Basis Price for Construction

ARTICLE 7..................................................................
     Changes in the Project

ARTICLE 8..................................................................
     Payments to the Contractor

ARTICLE 9..................................................................
     Indemnity, Insurance, Performance Bond

ARTICLE 10..................................................................
     Termination of the Agreement and Owner's
     Right to Perform Contractor's Obligations

ARTICLE 11..................................................................
     Assignment and Governing Law

ARTICLE 12..................................................................
     Proprietary Information; Inventions and Licenses

ARTICLE 13..................................................................
     Arbitration

ARTICLE 14..................................................................
     Definitions

ARTICLE 15..................................................................


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          Miscellaneous


EXHIBITS

A.        Work Scope
B.        Project Schedule (Date: 11/05/96)
C.        Design and Engineering Fee Schedule
D.        Estimated Drawdown Schedule
E.        Permits, Licenses and Government Approvals
F.        Form of Progress Report
G.        Form of Lien Waivers
H.        Schedule of Approved Contractors/Subcontractors
I.        Insurance Requirements
J.        Requirements for Drawings, Specifications, and Operation and
           Maintenance Manuals
K.        Performance Guarantees and Performance Tests
L.        Warranty Procedures

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<PAGE>

          AGREEMENT made as of this 30th day of December, 1996 by and between
KFX Fuel Partners II, L.P., a Delaware limited partnership with its principal
offices at 1999 Broadway, Suite 3200, Denver, Colorado  80202 (hereinafter
"Owner"), and Yanke Energy, Inc., an Idaho corporation with its principal
offices at 4414 S. Gekeler Lane, Boise, Idaho  83705 (hereinafter "Contractor")
for the design, procurement, construction and start-up, pursuant to the Work
Scope (attached hereto and incorporated by reference as  Exhibit A) of the
following described Project: a Series "C" K-Fuel Plant to produce 640,000
(nominal) tons per year, at the Site in Section 32, Township 51 North, Range 71
West, 6th P. M., Campbell County, Wyoming (as more specifically located on
Drawing No. 1001-2, "Proposed Site Plan", KFX Fuel Partners II, L.P. (Yanke
Energy, Inc. 10/25/96)).

                                    RECITALS
                                    --------
          A.   Owner desires to engage Contractor to design, procure, construct,
start-up and test on a design-build basis, the Project on the Site.

          B.   (i) Owner will provide to Contractor, and Contractor will review
the conceptual drawings, designs and specifications and all other documents
relating to the design, procurement, construction, start-up and testing of the
nearly-completed Series "C" K-Fuel facility (hereinafter "Existing Facility")
constructed pursuant to that certain Turnkey Design and Construction Agreement
entered into as of August 21, 1995 between KFX Fuel Partners, L.P. and Walsh
Construction Company, a division of Guy F. Atkinson Company.  (ii) Contractor
has been provided and reviewed all other documents relating to the Project which
Contractor and Owner have deemed necessary in connection with this Agreement.
(iii) Contractor has inspected the real property on which the Project is to be
constructed, and performed or reviewed such other investigations, studies and
analyses which Contractor has determined to be necessary or prudent in
connection with entering into this Agreement.

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          C.   Owner and Contractor desire to develop and incorporate into the
Project design improvements and efficiencies resulting from the testing and
operation of the Existing Facility and concepts identified in the CRA Parametric
test program.

          D.   Contractor desires to design, procure, construct, start-up and
test, on a design-build basis, the Project for Owner.

          NOW, THEREFORE, in consideration of the sums to be paid to Contractor
by Owner and of the covenants and agreements set forth herein, and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto, intending to be legally bound, here agree as
follows:

                                   ARTICLE 1

         THE CONSTRUCTION, APPROVED CONTRACTORS AND EXTENT OF AGREEMENT

1.1  The Contractor, and such persons on the Schedule of Approved Contractors,
attached hereto and incorporated by reference as Exhibit H, that Contractor may
subcontract with from time to time constitutes the "Construction Team" which
shall work from the beginning of design through construction completion.

1.2  This Agreement represents the entire agreement between the Owner and the
Contractor and supersedes all prior negotiations, representations or agreements.
When the Drawings and Specifications are complete, they shall be identified by
amendment to Exhibit A to this Agreement.  This Agreement shall not be
superseded by any provisions of the documents for construction and may be
amended only by written instrument signed by both Owner and Contractor.

1.3  The Project is the total construction to be designed and constructed of
which the work is a part.  The Work comprises the completed construction
required by the Drawings and Specifications.  The term day shall mean calendar
day unless otherwise specifically designated.

1.4   DEFINITIONS.  For all purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires, the following terms
shall have the following meanings:

1.4.1     Agreement:  The term "Agreement" has the meaning set forth in the
          ----------
preamble.

1.4.2     Approved Subcontractor:  Any Subcontractor listed on Schedule H or
          -----------------------
otherwise approved by Owner in writing.

1.4.3     Business Day:  Any Day on which commercial banks are not authorized or
          -------------
required to close in the State of Wyoming or the State of Idaho.

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1.4.4     Contractor:  The term "Contractor" has the meaning set forth in the
          -----------
preamble.

1.4.5     Day:  A "Day" or "day" is a calendar day.
          ----

1.4.6     Dollar or "$":  United States dollars.
          --------------

1.4.7     Drawings and Specifications:  Drawings and Specifications either (i)
          ----------------------------
prepared by the Contractor or its Subcontractors with respect to the work as
submitted to Owner under this Agreement, or (ii) included as part of Exhibit A.

1.4.8     Equipment:  All materials, supplies, apparatus, machinery, parts,
          ----------
special maintenance tools, components, appliances and appurtenances thereto (a)
required for prudent construction, Start-up and testing of and operation of the
Facility in accordance with this agreement, or (b) to the extent they are
described in or required by the Work or the Drawings and Specifications.

1.4.9    Existing Facility:  The Series "C" K-Fuel facility constructed
         ------------------
pursuant to that certain Turnkey Design and Construction Agreement entered into
as of August 21, 1995 between KFX Fuel Partners, L.P. and Walsh Construction
Company, a division of Guy F. Atkinson Company.

1.4.10   Facility:  The complete 640,000 ton per year (design capacity)
         ---------
subbituminous coal benefication plant which is expected to have an annual
throughput capacity of 750,000 tons and is to be designed, procured,
constructed, tested and started-up under this Agreement, together with all
supporting improvements and interconnections, as more fully described in Exhibit
A.

1.4.11    Good Engineering Practices:  Those practices, methods, equipment,
          ---------------------------
specifications and standards of safety and performance utilizing good, safe and
prudent engineering practices in connection with the design, construction,
operation, maintenance, repair and use in similar facilities.

1.4.12    Government Approval: Any authorization, consent, approval, license,
          ---------------------
lease, ruling, permit, tariff, rate, certification, exemption, filing, variance,
order, judgment, decree, publication, notices to, declarations of or with or
registration by or with any Government Authority relating to the acquisition,
ownership, construction, operation or maintenance of the Facility or to the
execution, delivery or performance of this Agreement.

1.4.13    Government Authority:  Any Federal, national, state, municipal, local,
          ---------------------
territorial, or other governmental department, commission, board, bureau, agency
regulatory authority, instrumentality, judicial or administrative body, domestic
or foreign.

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1.4.14    Law: The term "Law" shall mean (a) any statute, law, rule, regulation,
          ---
code, ordinance, judgment, decree, writ, order, concession, grant, franchise,
license, agreement, directive, guideline, policy, requirement, or other
governmental restriction or any similar form of decision of or determination by,
or any interpretation or administration of any of the foregoing by, any
Government Authority, whether now or hereafter in effect or (b) any requirements
or conditions on or with respect to the issuance, maintenance or renewal of any
Government Approval or applications therefore whether now or hereafter in
effect.

1.4.15    Lender: Any bank, financial institution or other institutional
          -------
investor providing financing under a Loan Agreement and any trustee or agent
acting on any such Person's behalf.

1.4.16   Loan Agreement: Any credit agreement, note purchase agreement, bond
         ---------------
indenture, lease agreement, equity contribution agreement, or other document or
documents pursuant to which Owner obtains financing for the acquisition,
development, construction, construction loan retirement, modification, repair,
or operation of the Facility or any refinancing of any thereof.

1.4.17    Owner:  The term "Owner" has the meaning set forth in the preamble.
          ------

1.4.18    Permits, Licenses and Government Approvals:  Any authorization,
          -------------------------------------------
consent, approval, license, lease, ruling, permit, tariff, rate, certification,
exemption, filing, variance, order, judgment, decree, publication, notices to,
declarations of or with or registration by or with any Government Authority
relating to the acquisition, ownership, construction, operation or maintenance
of the Facility or to the execution, delivery or performance of this Agreement.

1.4.19    Progress Report: The report submitted by Contractor to Owner in
          ----------------
accordance with Article 8.

1.4.20    Project Schedule: The Project Schedule attached hereto as Exhibit B.
          ----------------

1.4.21    Site:  The term "Site" shall mean the site in Section 32, Township 51
          -----
North, Range 71 West, 6th P. M., Campbell County, Wyoming, as more specifically
located on Drawing No. 1001-2,  "Proposed Site Plan", KFX Fuel Partners II, L.P.
(Yanke Energy, Inc. 10/25/96).

1.4.22    Subcontract: A subcontract entered into between Contractor and any
          ------------
Subcontractor.

1.4.23    Subcontractor: Any person other than Contractor performing any portion
          --------------
of the Work, whether hired directly by Contractor or by a person hired by
Contractor and including every

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tier of subcontractor, sub-subcontractors and so forth, and any person providing
or supplying all or a portion of the Equipment required by any person performing
any portion of the Work to perform the Work, whether or not incorporated into
the Facility, including, without limitation, any materialman or vendor.

1.4.24    Work: All acts or action required for the design, procurement,
          -----
engineering and construction of the Facility to final completion and for the
performance of Contractor's warranty obligations, including, but not limited to,
(i) engineering and construction of the Facility in conformance with applicable
Laws and Government Approvals, (ii) obtaining or assisting owner in acquiring
all Permits, Licenses and Government Approvals for the Facility in accordance
with Exhibit E, (iii) procurement and handling of materials, start-up and
testing of the Facility, (iv) supply and installation of the Equipment, (v)
performance of the purchase order work, (vi) construction management, and (vii)
all other acts as may be necessary to provide Owner with a fully operational
Facility, but excluding the items set forth in Phase 1 and 2 under Section
2.1.1.


                                   ARTICLE 2

                         CONTRACTOR'S RESPONSIBILITIES

2.1       CONTRACTOR'S SERVICES

2.1.1     The Contractor shall be responsible for furnishing the Design,
including the Drawings and Specifications, and construction of the Project.  The
Contractor and Owner have developed a Project Schedule, attached hereto and
incorporated by reference as Exhibit B, and the Owner shall be responsible for
prompt decisions and approvals so as to maintain the Project Schedule.  Any
design, engineering, architectural, other professional service, or construction
service required to be performed under this Agreement shall be performed by duly
licensed personnel or entities.

2.1.2     Contractor's services hereunder shall consist of three phases.  PHASE
1-Development Engineering:  The Contractor shall prepare Design Development
documents to fix the cost, size and character of the Project as to structural,
mechanical and electrical systems, materials and other appropriate essential
items in the Project.  These Development Documents are the basis for the design
and construction of the Project.  PHASE 2-Detailed Engineering:  From approved
Design Development Documents, the Contractor shall prepare working Drawings and
Specifications setting forth in detail the requirements and cost for the
construction of the Project, and based upon codes, laws or regulations in effect
at the time of their preparation.  PHASE 3-Construction: The Contractor shall
engineer, procure and construct the Project pursuant to approved Drawings and
Specifications.

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Contractor shall proceed with each phase only upon receipt from Owner of a
written notice to proceed.

2.1.3     The Contractor and the Owner will work closely together to monitor the
design in accordance with prior approvals so as to ensure that the Project can
be constructed within the Guaranteed Maximum as defined in Article 6.  As these
working Drawings and Specifications are being completed, the Contractor will
keep the Owner advised of the effects of any Owner requested changes on the
Project Schedule and/or the Guaranteed Maximum.  Construction of the Project
shall be in accordance with these Drawings and Specifications as approved by the
Owner.  The Drawings and Specifications are the property of the Owner and are
not to be used by the Contractor on this or other projects without the written
consent of the Owner.

2.1.4     After the completion of each of Phase 1 and 2 as set forth in Article
2.1.2, if the Project is no longer feasible from the standpoint of the Owner,
the Owner may terminate this Agreement and pay the Contractor pursuant to
Article 6 through the date of termination.  The Project is no longer feasible
only if, in the exercise of Owner's prudent business judgment, Owner determines
that: (i) the Permits, Licenses and Governmental Approvals, attached hereto and
incorporated by reference as Exhibit E, necessary to construct the Project will
not be timely granted so as to achieve Start-up by April 1, 1998 and/or
Commercial Operation by June 1, 1998; or (ii) adequate commitments for equity
and/or debt financing have not been received by April 1, 1997.  Owner shall
immediately notify Contractor of termination pursuant to this Article 2.1.4.
Contractor shall not commence work on the next succeeding phase except upon
receipt of a Notice to Proceed from Owner.

2.1.5     The Contractor and the Owner will assist the other in securing
authorizations necessary for the construction of the Project.  Exhibit E is a
preliminary list, and Owner and Contractor will diligently identify and apply
for all applicable permits, licenses and government approvals.  Permits,
Licenses and Government Approvals, Exhibit E, identifies the party responsible
for timely acquiring the same in the column labeled  "Responsible Party":
Contractor is identified as "Yanke" and Owner is identified as "KFP."

2.2       RESPONSIBILITIES WITH RESPECT TO CONSTRUCTION

2.2.1     The Contractor will provide all construction supervision, inspection,
labor, materials, tools, construction equipment and subcontracted items
necessary for the execution and completion of the Project.

2.2.2     The Contractor will pay all sales, use, gross receipts and similar
taxes related to the Work provided by the Contractor

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<PAGE>

which have been legally enacted at the time of execution of this Agreement and
for which the Contractor is liable.

2.2.3     The Project Schedule, attached hereto and incorporated by reference as
Exhibit B, indicates the dates for the starting and completion of the various
stages of the design and construction.  With the Owner's consent, it shall be
revised as required by the conditions of the Work and those conditions and
events which are beyond the Contractor's control; provided, however, that in no
event may the dates for Start-up or Commercial Operation be moved to a later
date.

2.2.4     The Contractor shall at all times keep the premises free from the
accumulation of waste materials or rubbish caused by his operations.  At the
completion of the Work, he shall remove all of his waste material and rubbish
from and around the Project as well as all his tools, construction equipment,
machinery and surplus materials.

2.2.5     The Contractor will give all notices and comply with all laws and
ordinances legally enacted at the date of execution of the Agreement, which
govern the proper execution of the Work.

2.2.6     The Contractor shall take necessary precautions for the safety of his
employees and the employees of all of Contractor's employees on the Work, and
shall comply with all applicable provisions of federal, state and municipal
safety laws to prevent accidents or injury to persons on, about or adjacent to
the Project site.  He shall erect and properly maintain, at all times, as
required by the conditions and progress of Work, necessary safeguards for the
protection of workmen and the public. It is understood and agreed, however, that
the Contractor shall have no responsibility for the elimination or abatement of
safety hazards created or otherwise resulting from Work at the job site carried
on by other persons or firms directly employed by the Owner as separate
contractors, and the Owner agrees to cause any such separate contractors to
abide by and fully adhere to all applicable provisions of federal, state and
municipal safety laws and regulations and to comply with all reasonable
requests and directions of the Contractor for the elimination or abatement of
any such safety hazards at the job site.

2.2.7     The Contractor shall keep such full and detailed accounts as may be
necessary for proper financial management under this Agreement.  The system
shall be satisfactory to the Owner, who shall be afforded access to all the
Contractor's records, books, correspondence, instructions, drawings, receipts,
vouchers, memoranda and similar data relating to this Agreement.  The Contractor
shall preserve all such records for a period of three years after the final
payment or longer where required by law.

2.3.      ROYALTIES AND PATENTS

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<PAGE>

2.3.1     The Contractor shall pay all royalties and license fees for materials,
methods and systems incorporated in the work.  He shall defend all suits or
claims for infringement of any patent rights and shall save the Owner harmless
from loss on account thereof except when a particular design, process or product
is specified by the Owner.  In such case the Contractor shall be responsible for
such loss only if he has reason to believe that the design, process or product
so specified is an infringement of a patent, and fails to give such information
promptly to the Owner.  Provided, however, that the Owner, at its cost, shall
acquire the right to use the Koppleman Series "C" K-Fuel technology for the
Project.

2.4       WARRANTIES AND COMPLETION

2.4.1     The Contractor warrants to the Owner that all materials and equipment
furnished under this Agreement will be new, unless otherwise specified and
agreed to by Owner and Contractor, and that all Work will be of good quality,
free from improper workmanship and defective materials and in conformance with
the Drawings and Specifications.  The Contractor agrees to correct all Work
performed by him under this Agreement which proves to be defective in material
and workmanship within a period of one year from the Date of Substantial
Completion as defined in Paragraph 5.2, or for such longer periods of times as
may be set forth with respect to specific warranties contained in the
Specifications.  This warranty is expressly in lieu of all other rights and
remedies at law or in equity.

2.4.2     The Contractor will secure required certificates of inspection,
testing or approval and deliver them to the Owner.

2.4.3     The Contractor will collect all written warranties and equipment
manuals and deliver them to the Owner.

2.4.4     The Contractor, with the assistance of the Owner's maintenance
personnel, will direct the checkout of utilities and  operations of systems and
equipment for readiness, and will assist in their initial start-up and testing.

2.4.5     The Contractor shall provide the insurance for the Project as provided
in Paragraph 9.4

2.4.6     Except for the performance bond as provided for in article 9.3.1, the
Contractor shall bear the costs of any bonds that may be required.

2.4.7     Services related to investigation, appraisals or evaluations of
existing conditions, facilities or equipment, or

                                     - 11 -
<PAGE>

verification of the accuracy of existing drawings or other Owner-furnished
information.


2.5       ADDITIONAL SERVICES

2.5.1     The Contractor will provide the following additional services upon the
request of the Owner.  A written agreement between the Owner and Contractor
shall define the extent of such additional services and the amount and manner in
which the Contractor will be compensated for such additional services.

2.5.2     Obtaining and training maintenance personnel or negotiating
maintenance service contracts.

                                   ARTICLE 3

                            OWNER'S RESPONSIBILITIES

3.1       The Owner shall provide full information regarding his requirements
for the Project.

3.2       The Owner shall designate a representative who shall be fully
acquainted with the Project, and has authority to approve changes in the scope
of the Project, render decisions promptly and furnish information expeditiously
and in time to meet the dates set forth in Subparagraph 2.2.3.

3.3       The Owner shall furnish for the site of the Project all necessary
surveys describing the physical characteristics, soils reports and subsurface
investigations, legal limitations, utility locations, and a legal description.

3.4       The Owner shall secure and pay for all necessary approvals, easements,
assessments and charges required for the construction, use, or occupancy of
permanent structures or for permanent changes in existing facilities.

3.5       The Owner shall furnish such legal services as may be necessary for
providing the items set forth in Paragraph 3.4, and such auditing services as he
may require.

3.6       If the Owner becomes aware of any fault or defect in the Project or
non-conformance with the Drawings or Specifications, he shall give prompt
written notice thereof to the Contractor.

3.7       The services and information required by the above paragraphs shall be
furnished with reasonable promptness at the Owner's expense and the Contractor
shall be entitled to rely upon the accuracy and the completeness thereof.

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<PAGE>

3.8       The Owner shall have no contractual obligation to the Contractor's
Subcontractors and shall communicate with such Subcontractors only through the
Contractor.

                                   ARTICLE 4

                                  SUBCONTRACTS

4.1       All portions of the Project that the Contractor does not perform with
his own forces shall be performed under subcontracts.  Contractor shall not
subcontract any design or engineering portion of the Project without the
express, prior written approval of the Owner.

4.2       A Subcontractor is a person or entity who has a direct contract with
the Contractor to perform any Work in connection with the Project; except it is
understood and agreed that the Owner is an intended third party beneficiary of
all contracts with design professionals, construction and other subcontractors,
purchase orders, and other agreements between the Contractor and third parties.
The Contractor shall incorporate the obligations of this Agreement with the
Owner in its respective contracts with design professionals, construction and
other subcontractors, supply agreements, purchase orders and other agreements.
The term Subcontractor does not include any separate contractor employed by the
Owner.

4.3       No contractual relationship shall exist between the Owner and any
Subcontractor.  The Contractor shall be responsible for the management of the
Subcontractors in the performance of their Work.

                                   ARTICLE 5

                             CONTRACT TIME SCHEDULE

5.1       The Project to be designed and constructed and the Work to be
performed under this Agreement shall be commenced on or about December 30, 1996
and shall be substantially completed no later than April 1, 1998 ("Date of
Substantial Completion" or "Start-up").  The Project and Work to be performed
under this Agreement shall be completed so as to allow Owner to commence
commercial operation of the Project on or before June 1, 1998 ("Final Completion
Date").

5.2       The portion of the Project to be performed under Phase 1 of this
Agreement is anticipated to commence on December 30, 1996 and be completed on or
before February 28, 1997.  The portion of the Project to be performed under
Phase 2 of this Agreement is anticipated to commence on or about March 1, 1997
and to be completed on or about May 30, 1997.  In order to meet the Date of
Substantial Completion and the Final Completion Date, the Work to be performed
under Phase 3 of this Agreement relating to procurement and site work is
anticipated to commence on or about

                                     - 13 -
<PAGE>

April 1, 1997, and relating to erection-civil to commence on or about June 1,
1997. For that purpose and with respect to Phase 3, Owner may give Contractor a
limited Notice to Proceed with all or part of procurement, site work and
erection-civil, provided that Owner's power to terminate this Agreement pursuant
to Article 2.1.4 shall continue until completion of Phase 2.

5.2       The Date of Substantial Completion of  Phase 3 of the Project is the
date when construction is sufficiently complete in accordance with the Drawings
and Specifications so the Owner can occupy or utilize the Project for the use
for which it is intended.  Warranties called for by this agreement or by the
Drawings and Specifications shall commence on the Date of Substantial Completion
of the Project.  This date shall be established by a Certificate of Substantial
Completion signed by the Owner and Contractor and shall state their respective
responsibilities for security, maintenance, heat, utilities, damage to the Work
and insurance.  This Certificate shall also list the items to be completed or
corrected and fix the time for their completion and correction.

                                   ARTICLE 6

                 FEES FOR DEVELOPMENT AND DETAILED ENGINEERING
               COST-PLUS PERCENTAGE BASIS PRICE FOR CONSTRUCTION

6.1  Owner shall pay to Contractor for the services that Contractor is to
perform under Phases 1 and 2 of this Agreement pursuant to the Design and
Engineering Fee Schedule, attached hereto and incorporated by reference as
Exhibit C.  Such payments shall be due and payable on the request of Contractor,
as evidenced by statements of Contractor, submitted pursuant to and subject to
the provisions of Article 8 of this Agreement.  Contractor agrees that the total
payments to be billed and payable under this Article 6.1 for Phase 1 shall not
exceed One Hundred and Fifty Thousand Dollars ($150,000.00), and for Phase 2
shall not exceed Six Hundred Thousand Dollars ($600,000.00).

6.2  Owner shall pay to Contractor for the services that Contractor is to
perform under Phase 3 of this Agreement, a fee equal to ten percent (10%) of the
total gross cost of the Work that, with such total gross cost, shall be due and
payable on the request of Contractor, as evidenced by statements of Contractor,
submitted pursuant to and subject to the provisions of Article 8 of this
Agreement.

6.3  Contractor guarantees that the total cost of the Project under Articles 6.1
and 6.2 shall not exceed the sum of Sixty Million Dollars ($60,000,000.00)
(hereinafter "Guaranteed Maximum"). Should the total cost of the Project exceed
the Guaranteed Maximum, all such excess shall be borne by the Contractor.

                                     - 14 -
<PAGE>

6.3       Upon the completion of Phase 2, Contractor shall submit in writing to
Owner a fixed, lump-sum price to complete the Project. Within ten business days
of receipt of the fixed, lump-sum price from Contractor, Owner shall notify
Contractor in writing of its acceptance or rejection of the fixed, lump-sum
price. If the Owner rejects the fixed, lump-sum price, the Contractor shall
complete the Project under the cost-plus subject to a maximum price provisions
of this Agreement. If the Owner accepts the fixed, lump-sum price, Contractor
and Owner shall adjust such price to reflect the Work completed to the date of
acceptance, and Contractor shall complete the Project pursuant to the terms of
this Agreement for the fixed, lump-sum price.

6.4       The Guaranteed Maximum will be modified for Changes in the Project
pursuant to Article 7.

6.5       For purposes of Article 6.2, the total gross cost of the Work shall
consist of the entire actual cost to Contractor of accomplishing the Work and
shall include the following:

6.5.1     Salaries and wages of all labor, including services of superintendent,
assistant superintendents, field engineers, job supervisors, clerks, security
personnel, truck drivers, mechanics, laborers, and all others necessary for the
proper conduct of the work and for the time employed on the work, together with
any social security and unemployment insurance taxes in connection with such
labor.

6.5.2     Disbursements made and obligations incurred for, or in connection
with, the furnishing, delivery, and installation of all materials, structural
accessories, machinery, equipment, and other items required to be furnished and
done under and pursuant to this Agreement; also, for and in connection with the
construction equipment and maintenance of temporary office or other work
structures for Contractor and Owner, at the Site of the Work and elsewhere as
required; for providing storage facilities away from the Site, if required; and
for or in connection with all insurance, bonds, fees, royalties, and permits.

6.5.3     Disbursements made and obligations incurred pursuant to subcontracts
made and entered into under and pursuant to this Agreement, less all
countercharges collected or due from subcontractors.

6.5.4     All loading and unloading, demurrage, express, freight, and delivery
charges, including those on construction equipment and tools to and from the
Site; cost of assembling, directing, moving, and dismantling construction
equipment; cost of fuel, power, power, light, and water used during
construction; custom duties on materials, drawings or Contractor's equipment;
cost of all telephone, telecopy, and similar charges incurred by Contractor at
the Site in connection with the Work; cost of progress photographs

                                     - 15 -
<PAGE>

and negatives; cost of temporary fences, guardrails, and scaffolds; rental
charges of necessary machinery and equipment, whether such machinery and
equipment is owned by Contractor or shall be rented from others, for such time
as it is in actual use on the Work. The rate of such rentals including freight
and delivery costs, and all operating expenses, except labor, shall be approved
by Owner before commitments are made and shall in no event be higher than the
standard of rates paid in the locality for similar equipment.

6.5.5  Disbursements for materials or supplies furnished from Contractor's stock
which shall be charged to the Work at a fair market price as determined by
Contractor and approved in advance in writing by Owner.

6.5.6  Such travel and living expenses of Contractor's employees as may be
necessary and approved in advance in writing by Owner.

6.6       For purposes of Article 6.2, the term "total gross cost of the Work"
shall not include:

6.6.1  Salaries of Contractor's executive officers.

6.6.2  Salaries of any person employed during the execution of the Work in the
main or any branch office of Contractor whose time is devoted to the general
conduct of Contractor's business, such as supervisors, secretaries, plan clerks,
file clerks, checkers, drafter, and other such persons.

6.6.3  Cost of capital employed or money borrowed.

6.6.4  Overhead or general expense of any kind, except any such specifically
mentioned elsewhere in this Agreement.

6.6.5  Services and expenses of Contractor's home office estimating, purchasing,
and cost and accounting departments.

6.6.5  Costs incurred by Contractor due to any error, fault, or negligence on
the part of Contractor, its subcontractors, agents, or employees, or due to
their failure to comply in all respects with the provisions of this Agreement
and with the Drawings and Specifications.

6.6.6  Materials or supplies furnished from Owner's stock.

6.6.7  Overtime work of Contractor's employees or employees of Contractor's
subcontractors unless specifically agreed upon by Owner prior to the performance
of the overtime work.

6.7  For purposes of Article 6.2, the following items shall be credited to the
"total gross cost of the Work":

                                     - 16 -
<PAGE>

6.7.1  Proceeds of sale of all surplus materials, construction equipment, and
temporary structures that have been charged to the Work otherwise than by way of
rental, and remaining after completion, whether such sale is made to Owner,
Contractor or some other party.  All such materials shall be sold by Contractor,
at prices approved by Owner.

6.7.2  Discounts earned by Contractor through advance or prompt payments,
Contractor to obtain all possible trade and time discounts on bills for
materials furnished and pay such bills within the discount periods; Contractor
to purchase in such quantities as will provide the most advantageous price to
Owner.

6.7.3  Reasonable market value, as certified by Owner at the time of removal, of
all material, tools, and equipment actually used on the Work and on completion
of the Work retained by Contractor.

6.7.4  The full amount of deposits made and charged against the Work.

6.7.5  Rebates, discounts, or commissions allowed to or collected by Contractor
from suppliers of materials, together with all other refunds, returns, or
credits received for return of materials or any bond premiums, insurance, state
of local taxes, or otherwise.  Any insurance dividends or other credits to be
received after settlement shall be assigned to Owner.

                                   ARTICLE 7

                             CHANGES IN THE PROJECT

7.1    The Owner, without invalidating this Agreement, may order Changes in
the Project within the general scope of this Agreement consisting of additions,
deletions or other revisions.  Owner and  Contractor specifically acknowledge
that design and operating experience with the Existing Facility are expected and
anticipated to result in Changes in the Project.  The Guaranteed Maximum shall
be adjusted accordingly.  All such Changes in the Project shall be authorized by
Change Order.

7.1.1  A Change Order is a written order to the Contractor signed by the Owner
or his authorized agent and issued after the execution of this Agreement,
authorizing a Change in the Project and/or an adjustment in the Guaranteed
Maximum or the Project Schedule.

7.1.2  In the event that Owner contemplates making a Change in the Project,
Owner shall advise Contractor of same and Owner and Contractor shall then
promptly consult (at Owner's expense) concerning the price and impact on the
Project Schedule of implementing the proposed change.  In the event Owner has
notified Contractor of a contemplated change in the Project, Contractor shall
use its reasonable efforts to perform the Project in a manner

                                     - 17 -
<PAGE>

that does not materially alter the scope or cost of or have a potential effect
on the schedule resulting from, any contemplated change in the Project during
the period of consultation regarding, and preparation of estimates relating to,
such contemplated change. Following such consultation, Owner may request and
Contractor shall thereupon promptly and as soon as is reasonably practicable
prepare (at Owner's expense) a detailed written estimate relating to the
contemplated change, including (i) solely with respect to a change requiring a
modification to the Project, the price of such change, (ii) the effect such
change could be expected to have on the Project Schedule (including, but not
limited to, the Substantial Completion Date and Final Completion Date) or any
other schedule, and (iii) the potential effect of such change on Contractor's
ability to comply with any of its obligations hereunder. Owner shall review this
estimate with Contractor for the purpose of determining whether to proceed with
such change in the Project and, if so, for the purpose of agreeing on the
matters set forth therein, including a mutually acceptable adjustment to the
Guaranteed Maximum and/or the Project Schedule, if any, if the proposed change
requires a modification of the Project. If the parties reach agreement on the
matters listed in the estimate, Owner shall issue a Change Order which reflects
the nature of such agreement. Contractor shall promptly adjust (subject to
Owner's approval) any affected portion of the Estimated Drawdown Schedule,
attached hereto and incorporated by reference as Exhibit D, and any other
schedules requiring adjustment to reflect the change agreed upon. In no event
shall Contractor undertake or be obliged to undertake a change in the Project
until it has received a Change Order signed by Owner.

7.1.3  Except as otherwise set forth herein, no change in the Project or request
relating to a contemplated change in the  Project pursuant to this Article 7
shall affect the Substantial Completion Date or the Final Completion Date unless
specifically agreed to in writing by Owner.  In the event Owner and Contractor
fail to agree on the impact of a proposed change in the Project on the
Substantial Completion Date or Final Completion Date, Owner may nevertheless
require Contractor to make such change, subject to Contractor's right to dispute
the impact of such change on such deadlines.

7.1.4  Owner shall have the right, upon written notice to Contractor, to require
that the Project be accelerated by means of overtime, additional crews or
additional shifts or resequencing, of the Project notwithstanding that the
Project is progressing without delay in accordance with the established Project
Schedule.  Contractor agrees to use all reasonable efforts to perform such
acceleration, and Contractor shall be entitled to reimbursement of increased
cost (premium portion of overtime pay, additional crew, shift or equipment cost
and such other items of cost requested by Contractor and approved by Owner in
advance of any acceleration (which approval will not be unreasonably withheld).
Contractor

                                     - 18 -
<PAGE>

shall promptly provide a plan for such acceleration, including his
recommendations for the most effective and economical acceleration.

7.1.5  If the Owner and the Contractor are unable to mutually agree on the
increase or decrease in the Guaranteed Maximum under 7.1.2 resulting from a
Change in the Project, the Contractor shall promptly proceed with the Work
required by the Change in the Project provided the Contractor receives a written
order to proceed signed by the Owner, and the change in the Guaranteed Maximum
shall be determined as follows:  the change in the Guaranteed Maximum shall then
be determined on the basis of the reasonable costs of such Work and savings of
those performing the Work attributed to the Changes in the Project including the
percentage fee due Contractor.  The amount of decrease in the Guaranteed Maximum
to be allowed by Contractor to the Owner for any deletion or Change in the
Project which results in a net decrease in cost will be the amount of the actual
net decrease only.  When both increases and decreases in costs of the Work are
involved in any one Change in the Project, the increase in the percentage fee
due Contractor shall be figured on the basis of the net increase in costs, if
any.  Under this Article 7, the Contractor shall keep and present, in such form
as the Owner may prescribe, an itemized accounting together with appropriate
supporting data of the effect on the Guaranteed Maximum.  The increase or
decrease in the Guaranteed Maximum under this Article 7 shall be authorized by
Change Order signed by the Owner or its authorized agent.

7.1.6  Should concealed conditions encountered in the performance of the Work
below the surface of the ground or should concealed  or unknown conditions in an
existing structure be at variance with the conditions indicated by the Drawings,
Specifications, or Owner-furnished information or should unknown physical
conditions below the surface of the ground or should concealed or unknown
conditions in an existing structure of an unusual nature, differing materially
from those ordinarily encountered and generally recognized as inherent in work
of the character provided for in this Agreement, be encountered, the Guaranteed
Maximum shall be equitably adjusted by Change Order upon claim by either party
made within a reasonable time after the first observance of the conditions.

7.2       MINOR CHANGES IN THE PROJECT

7.2.1     The Owner will have authority to order minor changes in the Project
not involving an adjustment in the Guaranteed Maximum or an extension of the
Project Schedule and not inconsistent with the intent of the Drawings and
Specifications.  Such changes may be effected by written order and shall be
binding on the Owner and the Contractor.

7.3       EMERGENCIES

                                     - 19 -
<PAGE>

7.3.1     In any emergency affecting the safety of persons or property, the
Contractor shall act, at its discretion to prevent threatened damage, injury or
loss.  Any increase in the Guaranteed Maximum claimed by the Contractor on
account of emergency work shall be determined as provided in this Article.

                                   ARTICLE 8

                           PAYMENTS TO THE CONTRACTOR

8.1       Payments shall be made by the Owner to the Contractor according to the
following procedure:

8.1.1  On or before the tenth (10th) day of each month, Contractor shall submit
to Owner for its approval a Request for Payment.  Each Request for Payment shall
set forth (a) Work performed, (b) equipment purchased by the Contractor and
delivered to the Site, or stored during the previous month, (c) progress
payments to equipment vendors for off-site engineering and fabrication; and (d)
the percentage fee due Contractor.  Each such application shall be for an amount
equal to the total cost of the Work performed and equipment delivered to the
Site as of the date of such Request for Payment (or, in the case of such portion
of the Request for Payment related to progress payments to subcontractors, an
estimate of the total cost of the Work per formed and equipment delivered
relating to such progress payments), less all previous payments, and shall
include such supportive documentation as Owner may reasonably require.  Each
Request for Payment shall be accompanied by partial lien waivers  of the
Contractor, and for each subcontractor attributable to the Work covered by the
previous payment.

8.1.2  No progress payment, nor any partial or entire use of the Work by Owner,
shall constitute an acceptance of any Work.    Title to all equipment and
materials shall pass to Owner upon the date payment is made to Contractor
without regard to any retainage withheld by Owner; Contractor, however, shall
retain care, custody and control of the same and exercise due care with respect
thereto until the earlier of the Substantial Completion Date or the termination
of this Agreement.  Said transfer of title shall in no way affect Owner's rights
as set forth in other provisions of this Agreement.

8.1.3  In each Request for Payment, Contractor shall certify that such Request
for Payment represents the amount to which Contractor is entitled pursuant to
the terms of this Agreement and shall also certify as follows:  There are no
known, or, to Contractor's knowledge, pending or threatened mechanics, or
materialmen's liens or other such claims or encumbrances outstanding at the date
of this Request for Payment (except as described below), all due and payable
bills with respect to the Work have been paid to date or are included in the
amount requested in the current application, and, except for such bills not
paid but so included, there is no

                                     - 20 -
<PAGE>

known basis for the filing of any mechanics, or materialmen's liens on the
Project or the Work (except as described below) and releases from all
subcontractors have been obtained in such form as to constitute an effective
release of lien (corresponding to payments received by them) under the laws of
the State of Wyoming.

8.1.4  Contractor shall furnish with each Request for Payment a waiver and
release of liens and security interest to the extent of the payment received by
Contractor in respect of the immediately preceding Request for Payment in the
form of Exhibit G hereto for itself and, beginning with the second Request for
Payment, for each of its subcontractors together with any other such forms or
documents as required by Owner or Owner's title insurer in order to assure an
effective release of mechanics' or materialmen's liens and all other claims or
encumbrances, legal or equitable for such previous payments, or for any Work
performed under this Agreement, in compliance with the laws of the State of
Wyoming.

8.1.5  Contractor shall submit as part of each Request for Payment a monthly
progress report (a "Progress Report") in the form set forth in Exhibit F.

8.1.6  Owner shall review each such Request for Payment and may make such
exceptions as it deems necessary or appropriate under the circumstances.  Owner
shall not be required to make payment in respect of any portion of the Request
for Payment which Owner  reasonably believes has not been properly submitted in
accordance with this Agreement.  In no event shall Owner be required to make
payment for items reasonably disallowed by Owner pursuant to the terms of this
Agreement.  Twenty-five (25) Days after receipt of a Request for Payment and
supporting documentation in the manner and detail and at the time herein
required, either Owner shall make payment to Contractor of undisputed amounts,
subject to Section 8.1.10 hereof, or Owner shall notify Contractor that it
disputes all or a portion of such Request for Payment.  Owner shall have a right
of set off against any undisputed amounts payable to Contractor.  The payment of
any Request for Payment by owner, including the Final Request for Payment (as
hereinafter defined), does not constitute approval or acceptance of any item of
cost in such Request for Payment.  If Owner improperly withholds any amount,
payment of such amount shall be made by Owner no later than ten (10) days after
determination that such amount was improperly withheld, together with interest
on such amount at the "prime rate" as described in the Wall Street Journal from
the date such payment should have been made.

8.1.7  Each payment made pursuant to this Article 8 shall be paid directly to
Contractor.  Such payment shall be wire-transferred to the following account for
the Contractor:

                                   U.S. Bank
                                ABA # 123103729

                                     - 21 -
<PAGE>

                               Yanke Energy, Inc.
                             Account No. 5707802343

or such other account as may be designated in writing by Contractor.

8.1.8  Contractor agrees that seven and one-half percent (72%) of the Cost of
the Work shall be retained (the "Retainage") by owner retaining from the last
payment(s) an amount sufficient to equal seven and one-half percent (72%) of the
Cost of the Work payable to Contractor.  The Retainage will be held by Owner
until final payment ("Final Payment") is due from Owner to Contractor.

8.1.9  Within 25 days after the Final Completion Date and receipt by Owner of a
final Progress Report and a final request for payment ("Final Request for
Payment") which shall set forth all amounts due and remaining unpaid to
Contractor, and approval thereof by Owner, Owner shall pay to Contractor the
amount due under such Final Request for Payment.  Final Payment shall include
release of the remaining Retainage.  The Final Request for Payment shall not be
made until Contractor delivers to Owner a complete release of all liens arising
out of this Agreement and an affidavit that so far as Contractor has knowledge
or information the release includes and covers all portions of the Work for
which a lien could be filed, but Contractor may instead  furnish a bond
satisfactory to owner to indemnify owner against any lien.

8.1.10  Any provision hereof to the contrary notwithstanding, upon the
occurrence and continuance of any of the following events, Owner, upon notice to
Contractor, may withhold or retain such portion (including all) of any payment
due to Contractor under this Agreement as reasonably necessary to insure the
performance of the work or to protect fully Owner's rights hereunder:

         8.1.10.1 A default by Contractor has occurred and the grace period
         applicable thereto, if any, shall have expired;

         8.1.10.2 Contractor has failed to make prompt payments to its
         subcontractors for material or labor used in the Work for which Owner
         has made payment to Contractor and such failure is not the subject of a
         bona fide dispute;

         8.1.10.3 Any lien shall be filed against the Project, the Work or any
         portion thereof or any equipment or any materials encompassed therein
         for which the Contractor is responsible and such lien shall remain
         undischarged (and Contractor shall not have provided a bond); or

                                     - 22 -
<PAGE>

         8.1.10.4 Owner in good faith determines that Contractor cannot with
         prompt and reasonable acceleration of the Work meet the Substantial
         Completion Date.

8.1.11  Acceptance by Contractor of the Final Payment shall constitute a release
of Owner, its successors and assigns and every officer and agent thereof from
all liens (whether statutory or otherwise and including mechanics, or suppliers,
liens), claims and liability hereunder with respect to the Project or any Work
performed or furnished in connection with this Agreement, or for any act or
omission of Owner or of any person relating to or affecting this Agreement,
except for any claims which are (i) the subject of an action filed by Contractor
or (ii) the subject of a written request for resolution delivered by Contractor
prior to the Final Payment containing reasonable details regarding such dispute.
No payment by Owner shall be deemed a waiver by Owner of any obligation of
Contractor under this Agreement.

8.1.12  Contractor shall use the sums paid to it pursuant to this Article 8
solely for the purpose of the Project and performing the Work.  No provision
hereof shall be construed, however, to require or permit Owner to see to the
proper disposition or application of the monies so paid to Contractor.

8.1.13  It is understood and agreed by Contractor and Owner that any Request for
Payment which is nonconforming, incomplete or inaccurate or which lacks the
detail, specificity or supporting documentation required by this shall not, to
the extent of such deficiency, constitute a valid and proper Request for
Payment, and Owner shall not have any obligation to make payment of amounts in
respect of which such Request for Payment was deficient until Contractor shall
have resubmitted said Request for Payment, to the extent of such deficiency, in
proper form.

8.2  Contractor, for itself and other parties acting through or under it does
hereby agree with Owner that no mechanics, lien or other claim or encumbrance in
the nature of a lien shall be maintained against the Work or the Project or any
part or parts thereof or the appurtenances thereto, by Contractor or by any
subcontractor, for work done or for any tools, equipment, materials or
supervision or other services furnished under this Agreement for which Owner has
made payment to Contractor.

8.3  To the extent Contractor has received payment with respect to the Work or
the Project, Contractor shall indemnify and hold harmless Owner and defend Owner
from any and all liens filed in connection therewith (other than liens filed due
to Owner's wrongful failure to make undisputed payments under this Agreement),
including all expenses and attorneys' fees incurred in discharging any liens or
similar encumbrances filed by Contractor or any of its subcontractors.  If
Contractor shall default in discharging any lien upon the Project, the Work or
any portion thereof, or any

                                     - 23 -
<PAGE>

equipment or materials encompassed therein, Contractor shall promptly notify
Owner in writing and Contractor shall then satisfy or discharge any such lien(s)
(provided that Contractor shall have the right to submit a bond reasonably
satisfactory to Owner, in the amount required by law, if Contractor, despite its
reasonable efforts, has been unable to obtain discharge thereof). If Contractor
either does not promptly satisfy or commence reasonable efforts to discharge
such lien(s) (or, where permitted, fails to provide Owner with a bond in lieu
thereof), Owner shall have the right, at its option, after prior written
notification to Contractor, to pay or discharge such lien(s) and Contractor
shall, within ten (10) days of request by Owner, reimburse Owner for all
reasonable out of pocket costs actually incurred by Owner to discharge such
lien(s), including administrative costs, attorneys' fees and other expenses.

8.4  In order to give Owner and each of its successors and assigns full power
and authority to protect itself and the Project against any and all claims filed
by Contractor, or by any subcontractor or anyone acting under or through
Contractor in violation of the foregoing covenant, Contractor, for itself, its
successors and assigns, and all such persons, hereby covenants to  execute or
reexecute any agreement or instrument as Owner or its successors and assigns
shall reasonably request at no cost or expense to Owner or its successors and
assigns to evidence this waiver of liens and the agreements contained herein.


                                   ARTICLE 9

                     INDEMNITY, INSURANCE, PERFORMANCE BOND

9.1       INDEMNITY

9.1.1     The Contractor agrees to indemnify and hold the Owner harmless from
all claims for bodily injury and property damage that may arise from the
Contractor's operations under this Agreement.

9.1.2     The Owner shall cause any other contractor who may have a contract
with the Owner to perform work in the areas where Work  will be performed under
this Agreement, to agree to indemnify the Owner and the Contractor and hold them
harmless from all claims for bodily injury and property damage that may arise
from that contractor's operations.  Such provisions shall be in a form
satisfactory to the Contractor.

9.2       INSURANCE

9.2.1  Owner and Contractor agree to obtain and maintain insurance as provided
in Insurance Requirements, attached hereto and incorporated by reference as
Exhibit I.

                                     - 24 -
<PAGE>

9.3  PERFORMANCE BOND

9.3.1  If requested by Owner, Contractor shall furnish to Owner an unconditional
performance bond issued by a surety acceptable to Owner, and Contractor shall
furnish Owner legal opinions of Counsel to Contractor and certificates of
authorized officers of Contractor addressing matters reasonably requested by
Owner.  The cost of the performance bond shall be reimbursed to Contractor by
Owner.

                                   ARTICLE 10

                    TERMINATION OF THE AGREEMENT AND OWNER'S
                   RIGHT TO PERFORM CONTRACTOR'S OBLIGATIONS

10.1      TERMINATION BY THE CONTRACTOR

10.1.1    If the Project is stopped for a period of thirty (30) days under an
order of any court or other public authority having jurisdiction, or as a result
of an act of government, such as a declaration of a national emergency making
materials unavailable, through no act or fault of the Contractor or if the
Project should be stopped for a period of thirty (30) days by the Contractor for
the Owner's failure to make payment thereon, then the Contractor may, upon seven
days' written notice to the Owner, terminate this Agreement and recover from the
Owner payment for all Work executed, the percentage fee due Contractor earned to
date, and for any proven loss sustained upon any materials, equipment, tools,
construction equipment and machinery.

10.1.1    If the Owner is adjudged a bankrupt, or if it makes a general
assignment for the benefit of its creditors, or if a receiver is appointed on
account of its insolvency, then the Contractor may, upon seven days' written
notice to the Owner, terminate this Agreement and recover from the Owner payment
for all Work executed, the percentage fee due Contractor earned to date, and for
any proven loss sustained upon any materials, equipment, tools, construction
equipment and machinery.

10.2      OWNER'S RIGHT TO PERFORM CONTRACTOR'S OBLIGATIONS AND TERMINATION BY
          THE OWNER FOR CAUSE

10.2.1    If the Contractor fails to perform any of its obligations under this
Agreement, including any obligation it assumes to perform Work with its own
forces, the Owner may, after seven days' written notice, during which period the
Contractor fails to perform such obligation, make good such deficiencies.  The
Guaranteed Maximum shall be reduced by the cost to the Owner of making good such
deficiencies.

10.2.2    If the Contractor is adjudged a bankrupt, or if it makes a general
assignment for the benefit of its creditors, or if a receiver is appointed on
account of its insolvency, or if it

                                     - 25 -
<PAGE>

persistently or repeatedly refuses or fails, except in cases for which extension
of time is provided, to supply enough properly skilled workmen or proper
materials, or if it fails to make proper payment to subcontractors or for
materials or labor, or persistently disregards laws, ordinances, rules,
regulations or orders of any public authority having jurisdiction, or otherwise
is guilty of a substantial violation of a provision of this Agreement, then the
Owner may, without prejudice to any right or remedy and after giving the
Contractor and its surety, if any, seven (7) days' written notice, during which
period the Contractor fails to cure the violation, terminate the employment of
the Contractor and take possession of the Site and of all materials, equipment,
tools, construction equipment and machinery thereon owned by the Contractor and
may finish the Work by whatever reasonable method Owner may deem expedient. In
such case, the Contractor shall not be entitled to receive any further payment
until the Work is finished nor shall Contractor be relieved from its obligations
assumed under Article 6.

10.3      TERMINATION BY OWNER UPON CHANGE IN CONTROL OF CONTRACTOR

10.3.1    If, during the term of this Agreement, the ownership of Contractor
significantly changes (more than twenty percent of voting control or rights to
distribution upon liquidation, or any combination thereof),  Owner has the right
at its sole option to terminate this Agreement.  If the Owner terminates the
Agreement pursuant to this paragraph, Owner shall pay the Contractor the total
of (a) Costs incurred by the Contractor in performing the Project, including
initial costs and preparatory expenses; (b) Costs incurred in settling and
paying termination claims under terminated subcontracts; (c) Accounting, legal,
clerical and other expenses incurred as a result of the termination; (d)
Storage, transportation, demobilization and other costs incurred for the
preservation, protection or disposition of material and equipment on the
Project; and (e) Any other necessary and reasonable costs incurred by the
Contractor as a result of the Owner's termination of this Agreement.  In
calculating the amount due the Contractor under this clause, a deduction shall
be made for all payments to the Contractor under this Agreement.

                                   ARTICLE 11

                          ASSIGNMENT AND GOVERNING LAW

11.1        Neither the Owner nor the Contractor shall assign its interest in
this Agreement without the written consent of the other except as to the
assignment of proceeds.

11.2      This Agreement shall be governed by the law of the State of Wyoming.

                                     - 26 -
<PAGE>

                PROPRIETARY INFORMATION; INVENTIONS AND LICENSES

12.1  CONFIDENTIAL TREATMENT OF PROPRIETARY INFORMATION

12.1.1  Any information concerning the parties hereto which is designated in
writing as proprietary and disclosed to the other party incident to the
performance of Work pursuant to this Agreement is disclosed in confidence, and
the transferees shall not publish or otherwise disclose such information to
third parties without the prior written approval of the transferor; provided,
                                                                    --------
however, that nothing herein shall limit either party's right to disclose any
information provided by the other party hereunder which (i) was furnished by
such party prior to this Agreement without restrictions; (ii) was in the public
domain without fault or knowledge of the disclosing party prior to such
disclosure; or (iii) is received by either party from a third party without
restriction or breach of any duty of confidentiality and without breach of this
Agreement.  Contractor shall require any subcontractors, employees or
consultants performing any portion of the work under this Agreement also to
comply with this requirement.  Notwithstanding the foregoing, either party may
disclose any such information to the extent that such party is required by any
government authority to make such disclosure.  In addition, Owner may disclose
such information to the extent that such disclosure is required by any lender,
prospective lender, lender's consultant, purchaser of any output from the
Project, supplier of natural gas to the Project, and any person providing any
interconnection services to the project, provided that such persons agree to
reasonable confidentiality restrictions.

12.2  INVENTIONS AND LICENSES

12.2.1  Contractor agrees to disclose promptly to Owner all Inventions.  All
right, title and interest in and to such Inventions shall belong to Owner or its
designee.  Contractor agrees to execute or have executed all documents, and to
perform or have performed all lawful acts that Owner may deem desirable or
necessary to perfect its or its designee's title thereto and to obtain and
maintain patent coverage thereon at the expense of Owner.  Only for purposes of
the Project, Owner agrees to grant and hereby grants to Contractor an
irrevocable, royalty free, unrestricted, non-exclusive license with respect to
all Inventions.

12.2.2  For purposes of this Article 12.2, the term "Invention" means all
inventions which are based on or derived from proprietary information received
from Owner or first reduced to practice during the course of the Work by
Contractor and its employees or by any other subcontractors from whom Contractor
using reasonable efforts is able to obtain an agreement to assign such
inventions to Owner (but excluding inventions of such Persons not related to or
arising out of improvements to the K-Fuel Process).

                                     - 27 -
<PAGE>

12.2.3  Contractor further agrees to grant and hereby grants to owner (and shall
procure for Owner from Subcontractors) an irrevocable, royalty-free,
unrestricted, nonexclusive license, under all patents now or during the term of
this Agreement owned or controlled by Contractor, which are necessary for the
construction, operation, maintenance, repair or alteration (other than
improvements affecting basic design) of the Facility or any unit or component
thereof designed, specified or constructed by Contractor under this Agreement

                                   ARTICLE 13

                                  ARBITRATION

13.1  AGREEMENT TO ARBITRATE:  All claims, disputes and matters in question
arising out of, or relating to this Agreement or the breach thereof, except for
claims which have been waived by the  making or acceptance of final payment, and
the claims described in Article 13.7, shall be decided by arbitration in
accordance with the Construction Industry Arbitration Rules of the American
Arbitration Association then in effect unless the parties mutually agree
otherwise.  This agreement to arbitrate shall be specifically enforceable under
the prevailing arbitration law.

13.2  NOTICE OF DEMAND:  Notice of the demand for arbitration shall be filed in
writing with the other party to this Agreement and with the American Arbitration
Association.  The demand for arbitration shall be made within a reasonable time
after written notice of the claim, dispute or other matter in question has been
given, and in no event shall it be made after the date of final acceptance of
the Work by the Owner or when institution of legal or equitable proceedings
based on such claim, dispute or other matter in question would be barred by the
applicable statute of limitations, whichever shall first occur.  The location of
the arbitration proceedings shall be Denver, Colorado, or such other location as
the parties may mutually agree.

13.3  AWARD:  The award rendered by the arbitrator(s) shall be final and
judgment may be entered upon it in accordance with applicable law in any court
having jurisdiction.

13.4  WORK CONTINUATION AND PAYMENT:  Unless otherwise agreed in writing, the
Contractor shall carry on the Work and maintain the Project Schedule pending
arbitration, and, if so, the Owner shall continue to make payments in accordance
with this Agreement.

13.5  NO LIMITATION OF RIGHTS OR REMEDIES:  Nothing in this Article shall limit
any rights or remedies not expressly waived by the Contractor which the
Contractor may have under lien laws or payment bonds.

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<PAGE>

13.6  SAME ARBITRATORS:  To the maximum extent permitted by law, all claims
which are related to or dependent upon each other, shall be heard by the same
arbitrator or arbitrators even though the parties are not the same.

13.7  EXCEPTIONS:  This agreement to arbitrate shall not apply to any claim of
contribution or indemnity asserted by one party to this Agreement against the
other party and arising out of any action brought in a state or federal court or
in arbitration by a person who is under no obligation to arbitrate the subject
matter of such action with either of the parties hereto.  In any dispute arising
over the application of this Article 13.7, the question of arbitrability shall
be decided by the appropriate court and not by arbitration.

                                   ARTICLE 14

                                 MISCELLANEOUS


14.1  Further Assurances.  Each of Owner and Contractor will use its best
      ------------------
efforts to implement the provisions of this Agreement, and for such purpose
each, at the request of the other, will, without further consideration, promptly
execute and deliver or cause to be executed and delivered to the other such
assistance, or assignments, consents or other instruments in addition to those
required by this Agreement, in form and substance satisfactory to the other, as
the other may reasonably deem necessary or desirable to implement any provision
of this Agreement or to arrange financing of the Project.

14.2  Record Retention.  Contractor agrees to retain for a period of three (3)
      ----------------
years from the Final Completion Date all records relating to its performance of
the Work, and to cause all subcontractors engaged in connection with the Work
to retain for the same period all their records relating to the Work.  During
such period, Owner shall have access to such records at reasonable times after
reasonable notice to Contractor.  At the end of such period, Contractor will
offer such records to Owner.

14.3  No Waiver.  No waiver of any of the terms and conditions of this Agreement
      ---------
shall be effective unless in writing and signed by the party against whom such
waiver is sought to be enforced.  Any waiver of the terms hereof shall be
effective only in the specific instance and for the specific purpose given.  The
failure of a party to insist, in any instance, on the strict performance of any
of the terms and conditions hereof shall not be construed as a waiver of such
party's right in the future to insist on such strict performance.

14.4  Severability.  The invalidity or unenforceability, in whole or in part, of
      ------------
any portion or provision of this Agreement will not

                                     - 29 -
<PAGE>

affect the validity and enforceability of any other portion or provision hereof.
Any invalid or unenforceable portion or provision shall be deemed severed from
this Agreement and the balance of the Agreement shall be construed and enforced
as if the Agreement did not contain such invalid or unenforceable portion or
provision.

14.5  Binding on Successors, Etc.  This Agreement shall be binding on the
      --------------------------
parties hereto and on their respective successors, heirs and assigns.


14.6  Survival of Representations, Warranties and Guarantees.  All
      ------------------------------------------- ----------
representations, warranties, guarantees, covenants and agreements of the parties
herein shall survive the execution and delivery of this Agreement, and shall
terminate, if not earlier terminated pursuant to the express provisions of this
Agreement, three (3) years from the Final Completion Date.

14.7  No Oral Modifications.  No oral or written modification of this Agreement
      ---------------------
by any officer, agent or employee of Contractor or Owner, either before or after
execution of this Agreement, shall be of any force or effect unless such
modification is in writing and is signed by the party to be bound thereby.

14.8  Headings for Convenience Only.  The Table of Contents and headings of the
      -----------------------------
various articles contained herein are not part of this Agreement and are
included solely for convenience of the parties.

14.9  Nondiscrimination.  Contractor agrees that in the performance of its Work
      -----------------
under this Agreement it will not knowingly violate any applicable laws
prohibiting discrimination in employment.

14.10  Counterpart Execution.  This Agreement may be executed by the parties
       ---------------------
hereto in any number of counterparts (and by each of the parties hereto on
separate counterparts), each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but one and the
same instrument.

14.11  Third Party Beneficiaries. Except as provided in Article 4.2, this
       --------------------------
Agreement and each and every provision thereof are for the exclusive benefit of
the parties hereto and not for the benefit of any third party other than any
person or entity who purchases, leases, or takes a security interest in the
Project.

14.12  Order of Precedence/Intent of Contract.  This Agreement consists of
       --------------------------------------
Articles 1 through 14 hereof and all Exhibits hereto.  Unless expressly stated
otherwise herein, in case of conflict between portions of this Agreement, the
order of precedence for conflict resolution in descending order shall be as
follows:

                                     - 30 -
<PAGE>

   (1)    Articles 1 through 14, as such sections may be amended in accordance
          with the terms hereof;

   (2)    Exhibits of this Agreement; and

   (3)    Drawings and Specifications.

14.13  INDEPENDENT CONTRACTOR

14.13.1  General.  Contractor is an independent contractor and nothing contained
         -------
herein shall be construed as constituting any relationship with Owner other than
that of Owner and independent contractor, nor shall it be construed as creating
any relationship whatsoever between Owner and Contractor's employees.  Neither
Contractor, nor any of its employees, are or shall be deemed to be employees of
Owner.

14.13.2  Employees.  Contractor has sole authority and responsibility to employ,
         ---------
discharge and otherwise control its employees.

14.13.3  Responsibility for Subcontractors, Etc.  Pursuant to the provisions of
         --------------------------------------
this Agreement, Contractor accepts complete responsibility for the acts of its
agents and subcontractors and all others it hires to perform or assist in the
performance of the Work.

14.14  NOTICES AND COMMUNICATIONS

14.14.1  Requirements.  Any notice, request, proposal for changes, and
         ------------
correspondence (including drawings, lists, schedules, instruction books,
statements or invoices) required or permitted under the terms and conditions of
this Agreement shall be in writing and (i) sent by facsimile, followed by
delivery as provided in any of the following manners; or (ii) delivered
personally; or (iii) sent by registered mail, return receipt requested; or (iv)
sent by a recognized overnight mail or courier service, with delivery receipt
requested, to the following addresses:

     If to Contractor:


                         Yanke Energy, Inc.
                         4414 Gekeler Lane
                         Boise, Idaho 83705
                         Telephone:                  208-338-2200
                         Facsimile:                  208-338-2208
          Attention:     General Manager

If to Owner:             KFX Fuel Partners II, L.P.
                         c/o KFX Wyoming, Inc.
                         1999 Broadway
                         Suite 3200

                                     - 31 -
<PAGE>

                         Denver, Colorado 80202
                         Telephone:                  303-293-2992
                         Facsimile:                  303-293-8430
          Attention:     General Partner


14.14.2  Effective Time.  Notices shall be effective when each of the required
         --------------
copies is received by the intended recipient.

14.14.3  Technical Communications.  Any communications pertaining to routine
         ------------------------
day-to-day matters pertaining to issues on the Site shall be between
Contractor's Representative and the Owner's Site Superintendent or other
representatives appointed by the parties.  Contractor's Representative shall be
satisfactory to Owner, have knowledge of the Work and be available at all
reasonable times for consultation.

          IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
above written.
                              Owner: KFX Fuel Partners II, L.P.

                              By: KFX WYOMING, INC., a general
                                    partner

                                    By:  /s/ R. G. Swenson
                                         -----------------
                                    Its: Secretary-Treasurer
                                         -------------------

                              Contractor:  Yanke Energy, Inc.

                                    By:  /s/ Sheldon Schultz
                                         -------------------
                                    Its: General Manager
                                         ---------------

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