Document:

Exhibit 10.4

 

 

CONTRACT
MINING

AGREEMENT

BETWEEN

CAM-COLORADO LLC

AND

CAM MINING LLC

 

 

CAM-COLORADO
LLC

AND

CAM MINING LLC

CONTRACT MINING AGREEMENT

TABLE OF CONTENTS

 

	
   

  	
   

  	
  PAGE

  
	
  1.

  	
  Term

  	
  1

  
	
  2.

  	
  Scope of Work

  	
  1

  
	
  3.

  	
  Tonnage

  	
  3

  
	
  4.

  	
  Sale of Tonnage

  	
  3

  
	
  5.

  	
  Compensation to CAM-Colorado

  	
  3

  
	
  6.

  	
  Payments by Contractor

  	
  4

  
	
  7.

  	
  Permits and Licenses

  	
  4

  
	
  8.

  	
  Mine Plan Coordination and
  Inspection

  	
  5

  
	
  9.

  	
  Sediment Control Structures

  	
  5

  
	
  10.

  	
  Use of Surface

  	
  6

  
	
  11.

  	
  Power and Water

  	
  6

  
	
  12.

  	
  Unexpected Market Conditions

  	
  6

  
	
  13.

  	
  Records

  	
  6

  
	
  14.

  	
  Independent Contractor

  	
  7

  
	
  15.

  	
  No Liens

  	
  7

  
	
  16.

  	
  Subcontracts

  	
  7

  
	
  17.

  	
  Contractor’s Employees

  	
  8

  
	
  18.

  	
  Workers’ Compensation and Black
  Lung Obligations

  	
  8

  
	
  19.

  	
  Indemnification Agreement

  	
  9

  
	
  20.

  	
  Insurance

  	
  9

  
	
  21.

  	
  Government Agency and Other
  Reports

  	
  10

  
	
  22.

  	
  Compliance with Laws

  	
  10

  
	
  23.

  	
  Labor Practices

  	
  12

  
	
  24.

  	
  Force Majeure

  	
  13

  
	
  25.

  	
  Taxes or Fees

  	
  14

  
	
  26.

  	
  Default

  	
  14

  
	
  27.

  	
  Setoff, and Recoupment

  	
  16

  
	
  28.

  	
  Economic Interest

  	
  16

  
	
  29.

  	
  Royalties and Wheelage

  	
  17

  
	
  30.

  	
  Acceptance of Premises

  	
  17

  
	
  31.

  	
  Termination

  	
  18

  
	
  32.

  	
  Assignment

  	
  19

  
	
  33.

  	
  Notices

  	
  19

  
	
  34.

  	
  No Waiver

  	
  19

  
	
  35.

  	
  Severability of Provisions

  	
  20

  
	
  36.

  	
  Governing Law

  	
  20

  
	
  37.

  	
  Headings

  	
  20

  
	
  38.

  	
  Survival of Obligations

  	
  20

  
	
  39.

  	
  Entire Agreement

  	
  20

  

 

i

 

Exhibits:

 

Exhibit A -
Map of Premises

 

Exhibit B -
Legal Description

 

Exhibit C -
Minimum Insurance Requirements

 

ii

 

CONTRACT
MINING AGREEMENT

 

THIS AGREEMENT (“Agreement”) is
made and effective as of the 1st day of April, 2006, between CAM-COLORADO LLC
(“CAM-Colorado”), and CAM MINING LLC (“Contractor”).

 

RECITALS

 

CAM-Colorado
has coal mining rights in certain lands in Garfield County, Colorado, which are
generally identified on the map at Exhibit A attached hereto
(“Premises,” “Mine Site,” “Property,” or “McClane Mine”). CAM-Colorado desires
to have certain coal reserves within the Premises mined and sold as herein set
forth (“Contract Tonnage”), which reserves are more specifically identified on Exhibit
B attached hereto. Contractor is an independent contractor and desires to
mine and sell such Contract Tonnage. Contractor has inspected and is familiar
with the Mine Site.

 

NOW, THEREFORE, in consideration of
the mutual promises and covenants herein, the parties agree as follows:

 

Section 1.                    Term

 

1.1         Subject to the termination
provisions herein and the limitations regarding “non-exclusive rights” under
Section 2.2 below, the term of this Agreement shall commence on the effective
date of this Agreement and shall continue (i) until One Million Five Hundred
Thousand (1,500,000) tons of the Contract Tonnage have been mined and sold, or
(ii) until March 31, 2011, whichever shall occur first.

 

1.2         Notwithstanding the foregoing, if
Contractor is in default of any of its obligations under this Agreement
pursuant to Section 26 below, CAM-Colorado shall have the unilateral right to
suspend Contractor’s obligations hereunder or to terminate this Agreement by
giving Contractor notice thereof.

 

Section 2.                    Scope
of Work

 

2.1         Pursuant to the terms and conditions
set out herein, by underground mining methods, Contractor shall mine and sell
the Contract Tonnage from the Cameo Seam located on, within, and under the
Premises.

 

 

2.2         Neither the designation by
CAM-Colorado of any particular place or area from which Contractor is to mine
the coal hereunder nor the supplying of a plan of mining and projections for
mining operations at such place or in such area shall imply or give rise to any
exclusive or vested right in Contractor to mine all of the coal at such place
or in such area.

 

2.3         In order to secure the greatest
possible recovery of minable coal, Contractor shall promptly commence and
diligently prosecute its mining operations in a careful, skillful, and workmanlike
manner, in accordance with approved methods and practices of modern mining, in compliance
with all applicable state and Federal laws, regulations, and permits.

 

2.4         Upon request by CAM-Colorado, on or
by the first day of each twelve (12) month-period during the term hereof (each
such date, a “Mine Plan Date”), CAM-Colorado and Contractor shall meet to agree
upon Contractor’s mine plan for the next twelve (12) month-period. Not less
than 60 days prior to each such Mine Plan Date, Contractor shall provide
CAM-Colorado with its mine plan for the twelve (12) months commencing on the
next Mine Plan Date.

 

2.5         Contractor shall provide, repair,
replace, and maintain everything necessary to perform its operations hereunder,
including without limitation, all equipment, tools, supplies, material, and
related equipment. Contractor shall use recognized modern mining methods and
practices, employ capable management, expend reasonable and necessary funds for
proper health and safety measures, and take all other actions necessary to
enable it to achieve maximum recovery of coal.

 

2.6         Contractor shall be responsible for
providing security for its own equipment, tools, and material, or the
equipment, tools, and material used by its employees, agents, or
subcontractors.

 

2.7         The parties acknowledge that any
and all mining-related permits required for this Agreement shall be obtained by
Contractor and shall be in the name of Contractor. In that regard, Contractor
is responsible for any on-going reclamation and other permit related
obligations, as well as all final mine closure reclamation obligations.

 

2

 

Section 3.                    Tonnage

 

3.1         Contractor may commence production
on April 1, 2006, and shall have the right to mine and sell up to, but not more
than, One Million Five Hundred Thousand tons of the Contract Tonnage.

 

3.2         Within two months from the date
Contractor begins work, Contractor shall produce a minimum of 15,000 tons of
clean coal per month. Any tonnage rejected by a buyer thereof is not considered
as part of this monthly production rate.

 

3.3         Contractor shall be responsible for
all operations necessary for the production, removal, in-mine movement,
processing, storing, weighing, loading, and other operations attendant to the
sale and shipment of the produced tonnage.

 

Section 4.                    Sale
of Tonnage

 

4.1         Contractor shall also have the
obligation to market and sell the produced coal for the mutual benefit of
CAM-Colorado and Contractor.

 

4.2         To effectuate such sales,
CAM-Colorado hereby authorizes and appoints Contractor to act as agent for
CAM-Colorado, as if CAM-Colorado had undertaken and effectuated such sales in
its own name, and for Contractor to thereby convey ownership and title to the
produced coal to the buyer(s) thereof.

 

4.3         Subject to the other terms and
provisions of this Agreement, Contractor shall be entitled to retain all
proceeds, revenues, and other consideration attendant to the sale by Contractor
of the produced coal.

 

Section 5.                    Compensation
to CAM-Colorado

 

5.1         As full compensation for Contractor
having been granted the right to mine and sell the Contract Tonnage under this
Agreement, Contractor shall pay CAM-Colorado a fixed amount of $0.50 per ton.

 

5.2         The weight of the coal for
compensation purposes shall be determined by the invoices for the Contract Tonnage
sold by Contractor to the buyer(s) thereof.

 

3

 

5.3         Payments to CAM-Colorado shall be
made monthly, within 25 days following each calendar month for all Contract
Tonnage sold by Operator during the proceeding calendar month. Contractor shall
at all times have the right to deduct, setoff, and/or recoup from any payments
or other sums as may become due or payable at any time to CAM-Colorado any
amounts due or payable at any time to Contractor from CAM-Colorado,

 

Section 6.                    Payments
by Contractor

 

6.1         Contractor shall pay all operating
costs, employee costs, fees, taxes, royalties, and all other expenses, charges,
or costs directly or indirectly related to the mining, production, marketing,
and sale of the Contract Tonnage.

 

6.2         It is recognized that Contractor’s
employees may have or claim a statutory lien against CAM-Colorado for any
unpaid wages or fringe benefits due such employees for labor performed on the
Premises. Therefore, solely to protect CAM-Colorado against such liens, it is agreed
that, upon CAM-Colorado’s request, Contractor shall provide CAM-Colorado with
evidence of such payment as of the end of each month if requested by
CAM-Colorado.

 

6.3         The operating costs to be incurred
and discharged by Contractor include and extend to any costs for reclamation
and other remedial or restorative work to be performed by Contractor during
mining operations and on a post-mining basis, to include any and all
reclamation or other necessary work as may now or hereafter be required under
applicable law, regulation, and permit.

 

Section 7.                    Permits
and Licenses

 

7.1         Contractor shall secure all
necessary permits, licenses, and plans for the production of coal under this
Agreement (“Contractor’s Permits and Licenses”), and shall pay all fees in
connection therewith accruing after the date hereof, fulfill all obligations in
relation thereto, and pay any civil or other penalty imposed with respect to
any such alleged violation. CAM-Colorado shall cooperate with Contractor in
obtaining such licenses and permits at no out-of-pocket cost to Contractor. If
Contractor is terminated for any reason or if this Agreement otherwise expires,
Contractor agrees to assign all of Contractor’s Permits and Licenses to
CAM-Colorado to the extent permitted by applicable law.

 

7.2         Contractor shall be responsible for
obtaining all water samples.

 

4

 

7.3         Contractor shall obtain any
applicable waiver or approval for blasting operations within five hundred feet
of the Mine Site. CAM-Colorado shall cooperate with all applicable regulatory
authorities in obtaining such waivers or approvals.

 

7.4         Any citations, notices, violations,
assessment, or penalties issued by any regulatory authority at the Mine Site or
Premises during Contractor’s performance hereunder shall be the responsibility
of Contractor, and Contractor shall promptly perform any abatement actions required
by any regulatory agency. Any costs related thereto shall be Contractor’s
responsibility.

 

Section 8.                    Mine
Plan Coordination and Inspection

 

8.1         It is understood that the Premises
to be mined by Contractor may be adjacent to other areas which will in the
future be mined by other contractors or by CAM-Colorado and, as such, the
Premises may constitute only a portion of a total mining area. Therefore, in
order to allow CAM-Colorado overall coordination of its mining operations,
CAM-Colorado, may, from time to time, provide Contractor with guidelines from
which Contractor shall prepare mining plans and projections, submit the same to
CAM-Colorado, and obtain CAM-Colorado’s written approval thereof prior to
commencing any operations. Any changes to the Mine Plan shall be subject to CAM-Colorado’s
prior written consent,

 

8.2         CAM-Colorado shall have the right
to enter, inspect, examine, survey and measure the mine at all reasonable
times. CAM-Colorado shall at all times have the right to enter the Premises to
exercise all rights it has in, on and to the Premises. CAM-Colorado’s
activities shall not interfere with Contractor’s operations. Contractor shall
provide to CAM-Colorado any consents or other documentation that may be
requested by CAM-Colorado to facilitate CAM-Colorado’s exercise of its rights
on the Premises.

 

8.3         Contractor or its designated
representative shall be responsible for all engineering work, including
mapping, surveying, and other related engineering work.

 

Section 9.                    Sediment
Control Structures

 

9.1         Contractor shall construct and
maintain necessary settlement control structures for runoff as required by
mining permits, NPDES permits, and any other applicable permits.

 

5

 

Section 10.                  Use
of Surface

 

10.1       Subject to CAM-Colorado’s approval,
Contractor may use the surface of the Premises for construction and maintenance
of roads, warehouses and other buildings and structures necessary or convenient
in the carrying out of Contractor’s operations. Such use by Contractor shall
not unreasonably interfere with CAM-Colorado’s use of the surface of its lands
or with such use by other parties. At the termination of this Agreement, all
such rights of Contractor shall terminate; provided, however, that within 90
days after such termination, Contractor shall remove any buildings, structures,
and debris placed by it upon the Premises, unless CAM-Colorado directs
Contractor to leave such structure. At CAM-Colorado’s option, any such
buildings and structures not removed by Contractor within the 90-day period
shall become the property of CAM-Colorado, or CAM-Colorado may effectuate the
removal of such building, structures, and debris and invoice Contractor for the
cost thereof.

 

Section 11.                  Power
and Water

 

11.1       Contractor shall be responsible for
supplying power and a clean, non-potable water source.

 

Section 12.                  Unexpected
Market Conditions

 

12.1       Contractor shall have the right at
any time to suspend Contractor’s operations whenever, because of market
conditions, Contractor is unable to sell coal at a reasonable profit or
whenever Contractor is unable to dispose of or transport coal as a result of
poor market conditions. The existence of any of these conditions shall be
determined by Contractor in its sole discretion.

 

Section 13.                  Records

 

13.1       CAM-Colorado shall have the right,
at all reasonable times or during regular office hours, to enter upon the
Premises to: (a) examine and survey Contractor’s operations; and (b) inspect,
audit, examine, verify, and copy all pertinent accounting and payroll records,
W-2 forms, payments to any health and pension funds, workers’ compensation
records, property tax records and other tax records, cash disbursement records,
insurance records, payments to any subcontractors, blasting records, and maps
and plans of Contractor. Contractor shall keep such records for three (3) years
after this Agreement terminates. It is understood that this audit provision
applies only to Contractor’s operations under this Agreement, and this audit is
not for the purpose of determining Contractor’s profit.

 

6

 

13.2       Upon request from CAM-Colorado,
Contractor shall provide a written certification with supporting documentation,
statements, and written evidence verifying that all taxes, premiums, fees,
benefit payments, workers’ compensation, and any and all other liabilities have
been paid in a timely manner pursuant to Contractor’s obligations under this
Agreement. It is understood that CAM-Colorado may request this written
certification and any supporting documentation on a bi-weekly, monthly, or quarterly
basis as designated by CAM-Colorado from time to time.

 

Section 14.                  Independent
Contractor

 

14.1       Contractor shall perform the work
as an independent contractor according to its own manner and methods consistent
with the provisions hereof, and without direction or control by CAM-Colorado,
except as may be necessary for CAM-Colorado to protect its property or ensure
conformity with its mining plans and projections.

 

Section 15.                  No
Liens

 

15.1       Contractor may not file any
mechanic’s or materialman’s lien against or affecting any real or personal
property owned or leased by CAM-Colorado, its parent corporation or any of
CAM-Colorado’s affiliates, for or on account of any work done, labor performed,
or material furnished under this Agreement. Contractor waives any such lien
rights whether statutory or otherwise.

 

15.2       Contractor shall hold CAM-Colorado
harmless from and against any and all loss and expense due to liens filed
against CAM-Colorado arising out of or in any manner connected with the
performance of this Agreement.

 

Section 16.                  Subcontracts

 

16.1       Contractor shall obtain
CAM-Colorado’s permission before subcontracting any portion of the work at the
Mine Site. Contractor shall bind every subcontractor in writing to the same
terms and conditions that are applicable to Contractor hereunder. No
subcontract relieves Contractor from its obligations to CAM-Colorado or binds
CAM-Colorado, unless specifically agreed to in writing by CAM-Colorado. Nothing
contained in this Agreement shall create or be deemed to create any contractual
relationship between any subcontractor and CAM-Colorado. Contractor shall be
solely responsible to CAM-Colorado for all acts and omissions of any
subcontractor.

 

7

 

Section 17.                  Contractor’s
Employees

 

17.1       Contractor shall employ, direct,
supervise, discharge, and fix the compensation and working conditions and
practices of its employees, shall be solely responsible for their compensation,
and shall comply with all laws pertaining to payment of employees.

 

17.2       Contractor shall be responsible
for, and, at its sole cost and expense, shall pay for and maintain any and all
private and group life, accidental death and dismemberment, health, sickness,
and accident insurance which may be required for its employees. Contractor
shall be responsible for any and all withdrawal liability under ERISA and with
regard thereto shall indemnify and save harmless CAM-Colorado from any and all
claims and liability.

 

17.3       If Contractor has any contractual
obligations to contribute to any pension or welfare fund, at CAM-Colorado’s
request and within 10 days of such contributions, Contractor shall provide
CAM-Colorado with documents to verify that these contributions or payments have
been made.

 

17.4       Contractor shall be responsible
for, and shall exercise complete control of its employees in all matters,
disputes, or grievances arising out of or in any way connected with Contractor’s
operations.

 

Section 18.                  Workers’
Compensation and Black Lung Obligations

 

18.1       Contractor shall provide workers’
compensation coverage or self-insurance for its employees and shall maintain
insurance for the payment of Federal Black Lung benefits to its employees in
accordance with applicable state and Federal laws. Prior to beginning work
under this Agreement, Contractor shall furnish to CAM-Colorado evidence of the
required coverage or evidence of Contractor’s qualified self-insured status.

 

18.2       If at any time Contractor allows
such insurance to lapse or if Contractor’s self- insured status is revoked,
CAM-Colorado may, at its option, terminate this Agreement immediately without
regard for any of the notice, default, or termination provisions of this
Agreement. In the event of such termination, an equitable settlement of accounts
shall be made through the date of termination, and CAM-Colorado shall have no
further obligations hereunder.

 

8

 

Section 19.                  Indemnification
Agreement

 

19.1       Contractor shall, to the extent
permitted by law, indemnify, defend, and save harmless, CAM-Colorado, its
parent, subsidiaries and affiliates and their officers, directors, employees,
agents, and invitees from and against any and all claims, demands, or suits
(including, but not limited to, claims, demands, or suits for bodily injury,
illness, disease, death or for loss of services, property, wages, or profits)
which may be brought against them (individually or jointly) or in which they
may be named a party defendant, in any way arising out of or incident to the
performance of this Agreement or in any way arising out of the use by
Contractor of common operational areas or common areas of ingress or egress to
operating areas regardless of whether such claims, demands, or suits are
occasioned by the negligence of CAM-Colorado, its parent or affiliates.

 

Contractor shall not be held responsible for claims or suits
attributable to the sole negligence of CAM-Colorado, its parent, subsidiaries,
and affiliates.

 

19.2       Contractor shall, to the extent
permitted by law, indemnify, defend, and save harmless CAM-Colorado, its
parent, subsidiaries, and affiliates from and against any and all claims,
demands, or suits (including, but not limited to claims, demands, or suits for
bodily injury, illness, disease, death, or for loss of services, property, or
wages) by any employee of Contractor or its subcontractors arising out of or in
consequence of performance hereunder regardless of whether such claims,
demands, or suits are actually or allegedly caused by the negligence of
CAM-Colorado, its parent, affiliates, or any other person or entity and
regardless of whether such negligence precedes the execution of this Agreement.

 

19.3       Except for the willful or malicious
acts of CAM-Colorado’s employees or the employees of its parent, subsidiaries,
and affiliates, Contractor releases CAM-Colorado, its parent, subsidiaries, and
affiliates from liability for damage to any of its material, machinery,
equipment, or other property.

 

19.4       These covenants of indemnity shall
survive cancellation, termination, or expiration of this Agreement.

 

Section 20.                  Insurance

 

20.1       Contractor shall maintain insurance
of the type and in the amounts set out in Exhibit C attached hereto. At
CAM-Colorado’s option, no work shall begin until certificates of insurance with
companies acceptable to CAM-Colorado are received by CAM-Colorado.

 

9

 

20.2       Contractor shall report to
CAM-Colorado as soon as possible, in writing, details of all accidents or
occurrences resulting in injuries to persons or property arising out of or during
the course of Contractor’s operations.

 

20.3       The insurance limits and coverages
specified in the attached Insurance Exhibit are minimum requirements and shall
not be construed in any way to limit Contractor’s liability.

 

20.4       It is understood that the use of
any subcontractor is subject to CAM- Colorado’s prior written consent. If
Contractor uses any subcontractor, Contractor agrees that any subcontractor
shall be required to maintain indemnity and insurance provisions equivalent to
those required hereunder and provide written confirmation thereof, including
certificates of insurance.

 

20.5       Contractor shall immediately
provide notice to CAM-Colorado of any accidents or occurrences resulting from
injuries to persons or property in any way arising out of the operations of any
of its subcontractors.

 

Section 21.                  Government
Agency and Other Reports

 

21.1       Contractor shall file any required
reports or other documents with the applicable government agencies in order to
properly establish and serve notice of Contractor’s sole and exclusive
responsibility for its operations and for the health and safety of its
employees, agents, and subcontractors. Contractor shall inform CAM-Colorado of
any violations received from any agency as a result of work under this
Agreement and shall provide CAM-Colorado with copies of all regulatory agency
inspection reports and copies of any such violations. Upon CAM-Colorado’s
request, Contractor shall also provide CAM-Colorado with copies of any routine
reports which Contractor may be required to file with any government agency.

 

Section 22.                  Compliance
with Laws

 

22.1       The parties shall comply with all
laws, orders, rules, regulations, and requirements of every duly constituted
governmental authority, agency, or instrumentality, which may be applicable to
this Agreement or its subject matter, including but not limited to, mandatory
drug testing regulations promulgated by the Department of Transportation
(Federal Highway Administration, 49 CFR Parts 40 and 391), the Federal Coal
Mine Health and Safety Act, the Fair Labor Standards Act of 1938, the
Rehabilitation Act of 1973, the Americans with Disabilities Act of 1990, the
Vietnam Era Veterans Readjustment and Assistance Act of 1974, Executive Order
11625 (October 13, 1971), the

 

10

 

Family and Medical
Leave Act of 1994, and U.S. Government policies concerning Affirmative Action
Compliance Programs (41 CFR 60-741.4 (Handicapped Workers)), Minority Business
Enterprises Subcontracting Programs, the Utilization of Minority Business
Enterprises, Utilization of Small Business Concerns and Small Disadvantaged
Concerns, and the Utilization of Labor Surplus Area Concerns, all as amended.

 

22.2       The parties to this Agreement are Equal
Opportunity Employers, and in the performance of this Agreement, shall not
engage in any conduct or practice which violates any applicable law, order, or
regulation prohibiting discrimination against any person by reason of his or her
race, color, religion, national origin, sex, or age. The parties shall comply
with the requirements of Section 202 of the Executive Order 11246, entitled
“Equal Employment Opportunity,” and the regulations promulgated thereunder by
the Federal Contract Compliance Office of the Department of Labor, and all
other government agencies authorized to issue regulations under Executive Order
11246, the Civil Rights Act and the Age Discrimination in Employment Act.

 

22.3       If CAM-Colorado does not have on
file a current Non-Segregated Facilities Certificate signed by Contractor, at
CAM-Colorado’s request, within 10 days after signing this Agreement, Contractor
shall furnish to CAM-Colorado a statement that it does not maintain any
segregated facilities or permit his employees to work at any location under his
control where segregated facilities are maintained. Contractor agrees to
provide such information from time to time thereafter as CAM-Colorado may
request and as required by law. This statement (certification) is required by
the U.S. Code of Federal Regulations (see 41 CFR 60-1.8(b)).

 

22.4       CAM-Colorado is required by law to
include certain provisions of Federal laws in contracts and purchase orders.
Therefore, the provisions of this subsection are required by law. If Contractor
has 50 or more employees and this Agreement is for $50,000 or more, then, Contractor
agrees to establish a written Affirmative Action Compliance Program in
accordance with 41 CFR 60-1.40.

 

22.5       Contractor shall reasonably comply
with rules and regulations of CAM- Colorado relating to security, health, and
safety.

 

22.6       Contractor recognizes that
CAM-Colorado is subject to the regulatory requirements of the Mine Safety and
Health Administration (“MSHA”) and that certain vendors and

 

11

 

contractors who
perform work on mine property are subject to safety training requirements of MSHA.
These requirements are set out in 30 CFR (Code of Federal Regulations) Parts 45
and 48. Upon CAM-Colorado’s request, Contractor shall certify to CAM-Colorado
that Contractor, and agents, employees, or subcontractors of Contractor have
received the required MSHA training and shall present to CAM-Colorado a current
MSHA Form 5000-23 verifying the completion of safety training. If CAM-Colorado
is required to pay any MSHA assessment resulting from Contractor’s failure to
accurately certify the completion of training, CAM-Colorado shall be entitled
to reimbursement from Contractor for any amount paid to MSHA. Contractor shall
obtain its own MSHA l.D. Number before commencing any work.

 

22.7       Contractor shall provide hazard
training at the Mine Site.

 

Section 23.                  Labor
Practices

 

23.1       Contractor shall comply with all
applicable labor laws and regulations. Before commencing any work under this
Agreement and before permitting any of its hourly employees to enter on the
Mine Site or Premises of CAM-Colorado, Contractor shall give reasonable written
notice to CAM-Colorado of Contractor’s labor arrangements, and if CAM-Colorado
determines that such labor arrangements would threaten to obstruct or interrupt
any of CAM-Colorado’s operations or the operations of its affiliates, then,
CAM-Colorado shall so notify Contractor and, if CAM- Colorado so elects,
CAM-Colorado may terminate this Agreement immediately without regard for the
notice provisions in the Termination or Default Sections below or any other
condition.

 

23.2       If Contractor’s operations obstruct
or interrupt or threaten to interrupt or obstruct CAM-Colorado’s operations or
the operations of its affiliates, because of any labor dispute, CAM-Colorado
may, in its discretion, immediately suspend Contractor’s operations hereunder
until the actual or threatened obstruction or interruption has been removed. If
Contractor fails to remove any actual or threatened obstruction or interruption
after a reasonable period of time, CAM-Colorado may exercise its right to
terminate this Agreement immediately. In the event of such termination, CAM-Colorado
is relieved of any obligations to pay Contractor for work done and materials
supplied on or after the date of termination, and Contractor shall indemnify
and hold CAM-Colorado harmless from any claims by material suppliers or
employees. It is understood that an equitable settlement of accounts through
the date of termination shall be made.

 

12

 

23.3       CAM-Colorado has the exclusive
right to determine whether Contractor’s operations obstruct or interrupt the
operations of CAM-Colorado, its parent, affiliates, or subsidiaries, or
threaten to obstruct or interrupt such operations.

 

Section 24.                  Force
Majeure

 

24.1       (a)     If, because of Force Majeure (as
hereinafter defined), either party is unable to carry out any of its
obligations under this Agreement, either in whole or in part, and if such party
gives to the other party the required written notice of such Force Majeure,
setting forth the effects and probable duration of such Force Majeure, in
accordance with the notice provisions of this Section, then, such obligations
shall be excused to the extent made necessary by such Force Majeure during its
continuance; provided, however, that as much of the Force Majeure conditions or
its effects as can be eliminated by commercially reasonable means shall be
eliminated with all reasonable dispatch; and provided further that neither
party shall be obligated to undertake expenditures to comply with its
obligations to eliminate a Force Majeure condition or its effects, if in that
party’s sole judgment, such expenditures would be economically unjustifiable.

 

(b)           Any delay in or failure of performance by either
party of any obligations hereunder does not constitute a default hereunder or
give rise to any claim by the other party for damage if caused by an event or
circumstance beyond the reasonable control of such party, including, without
limitation, an act of God, geologic conditions, labor disputes, strike or other
concerted action of workmen, lockout, fire, flood, explosion, war or civil
insurrection, sabotage, changes in laws, or any act or failure to act on the
part of any government, or any other cause or event of a similar or dissimilar
nature. Any such event or circumstance is defined as “Force Majeure.” Excuses
of Force Majeure or commercial impracticability shall not include a change in
the cost of performance under this Agreement.

 

24.2       In the event that, in the
reasonable opinion of either party, the performance of this Agreement is
rendered impossible by Force Majeure, such party shall notify the other party
in writing within 48 hours of the occurrence of such Force Majeure event. The
obligations of the parties shall remain suspended as set forth above until the
parties have agreed to either terminate the Agreement or resume operating
pursuant to a mutually agreed work schedule.

 

13

 

Section 25.                  Taxes
or Fees

 

25.1       Contractor shall pay any applicable
state severance tax now existing or hereinafter imposed on it on account of
coal produced or sold hereunder. Contractor shall also pay all other taxes
which may be imposed or assessed against it or its operations hereunder or upon
its equipment or improvements placed upon the Premises by it. Upon request by
CAM-Colorado and within ten (10) days of the payment of any taxes imposed upon
Contractor, Contractor shall furnish CAM-Colorado with documents reflecting the
payment of such taxes.

 

25.2       Contractor shall be responsible for
the reclamation fee imposed pursuant to § 402 of the Surface Mining Control and
Reclamation Act of 1977 (30 USC §§ 1231-1232) and any similar tax or fee
imposed under a state statute or regulation.

 

25.3       Contractor shall be responsible for
all Federal Black Lung Excise Taxes.

 

Section 26.                  Default

 

26.1       Contractor shall be deemed to be in
default under this Agreement if one or more of the following events occur:

 

(1)           Contractor fails
to promptly and diligently perform its operations in a careful, skillful, and
workmanlike manner;

 

(2)           Contractor fails
to conduct its operations in strict compliance with all applicable state and
Federal laws, regulations and permits. Contractor shall not be in default while
contesting in good faith any violations issued against the operation. The event
of default shall be deemed to have occurred only upon final adjudication of
such violations;

 

(3)           Contractor fails
to obtain all permits, licenses and identification numbers required under this
Agreement and provide copies to CAM-Colorado or fails to pay all fees and
perform all obligations related thereto;

 

(4)           Contractor fails
to file necessary reports or documents with applicable government agencies to
serve notice of Contractor’s sole and exclusive responsibility for the health
and safety of its employees and agents;

 

(5)           Contractor fails
to diligently follow mining plans and projections;

 

(6)           Contractor fails
to permit CAM-Colorado access to the Premises or Mine Site;

 

(7)           Contractor fails
to provide CAM-Colorado any consent, waivers, or other documentation that may
be reasonably requested of CAM- Colorado or third parties;

 

(8)           Contractor fails
to keep accurate records concerning its operations;

 

14

 

(9)           Contractor fails
to permit CAM-Colorado to examine and survey Contractor’s operations, books,
accounts, statements, maps, or plans related hereto;

 

(10)         Contractor fails
to provide all tools, supplies, material, or equipment required hereunder;

 

(11)         Contractor fails
to use recognized modern mining methods and practices or fails to employ
capable management;

 

(12)         Contractor fails
to spend the reasonable and necessary funds for proper health and safety
measures, and equipment maintenance;

 

(13)         Contractor fails
to employ, direct, supervise, or discharge employees in accordance with prudent
business practices and good personnel policies or fails to provide adequate
compensation and working conditions for its employees;

 

(14)         Contractor fails
to pay its employees;

 

(15)         Contractor fails
to pay for and maintain all private and group life, accidental death and dismemberment,
health, sickness, and accident insurance which may be required for its
employees;

 

(16)         Contractor fails
to exercise complete control of its employees in all matters, including
disputes or grievances arising out of or in any way connected with its
operations;

 

(17)         Contractor fails
to become and remain a subscriber to any applicable workers’ compensation fund
or otherwise fails to provide workers’ compensation coverage for its employees,
or fails to provide insurance for the payment of Federal black lung Benefits
for its employees in accordance with applicable laws;

 

(18)         Contractor fails
to carry and maintain the insurance coverage required under this Agreement or
fails to provide the required certificate of insurance;

 

(19)         Contractor fails
to pay all taxes imposed or assessed against it;

 

(20)         Contractor
becomes bankrupt, is adjudicated a bankrupt, makes a general assignment for the
benefit of its creditors, or files a petition under any bankruptcy, insolvency,
or similar proceeding;

 

(21)         Contractor fails
to comply with any of the terms or provisions of this Agreement.

 

26.2       In the event of termination under
this subsection, CAM -Colorado is not required to give the 30 days prior
written notice pursuant to Section 3 1 hereof. Contractor shall be required to
comply with its obligations to windup its operations pursuant to Section 30
hereof. If CAM-Colorado declares Contractor in default hereunder, CAM-Colorado
shall notify Contractor in writing. Contractor shall be given 10 calendar days
to make good faith efforts to cure a default on payment

 

15

 

and 30 days on
covenants. If Contractor remains in default after such 10-day or 30-day period,
then, CAM-Colorado may terminate this Agreement immediately without further
obligation.

 

26.3       If Contractor is compelled to
suspend mining or loading of coal as a result of Force Majeure events, then,
such event shall not be deemed a default.

 

Section 27.                  Setoff,
and Recoupment

 

27.1       Contractor hereby irrevocably agrees
to permit CAM-Colorado, its parent(s), subsidiaries, or affiliates thereof, to
counterclaim or setoff from any sums which may be or become due Contractor, any
amounts owed to CAM-Colorado, its parent, subsidiaries, or affiliates thereof, any
cash advances which CAM-Colorado, its parent, subsidiaries, or affiliates
thereof, may have made to Contractor as well as any amounts which CAM-Colorado,
its parent, subsidiaries, or affiliates thereof, may have paid for Contractor,
including, but not limited to, taxes, black lung payments, workers’
compensation, engineering work, equipment lease payments, or any other state or
Federal statutory or regulatory assessment or other contractual payment, or
obligation, whether related or unrelated hereto.

 

27.2       CAM-Colorado shall have the right
to recoup monies, costs, or expenditures made by CAM-Colorado where Contractor
has either failed to perform any of its obligations, including general
performance obligations or payment obligations, or where CAM-Colorado has had to
make expenditures or has incurred costs resulting therefrom. This right of
recoupment may be exercised at any time during the term of this Agreement or
upon termination hereof. When exercising this right of recoupment, CAM-Colorado
shall provide supporting documentation or invoices. This recoupment shall not
be deemed to be liquidated damages and shall be in addition to any other
remedies to which CAM-Colorado may be entitled.

 

Section 28.                  Economic
Interest

 

28.1       CAM-Colorado and Contractor shall
each be deemed to have an economic interest in the coal. Contractor shall have
the full right of percentage depletion or other depletion with respect thereto
for income tax purposes.

 

16

 

Section 29.                  Royalties
and Wheelage

 

29.1       Contractor shall pay landowners
royalty and wheelage which may become due as a result of coal mined hereunder.

 

Section 30.                  Acceptance
of Premises

 

30.1       Contractor accepts the Premises in
its existing condition and acknowledges that Contractor has made an
investigation to determine existing conditions, limitations of the areas
involved, equipment necessary to conduct and complete operations, laws
affecting performance hereunder, CAM-Colorado’s knowledge of prior mining
location of old works, and latent dangers and dangerous conditions.

 

CAM-COLORADO MAKES NO IMPLIED OR
EXPRESS WARRANTY OR REPRESENTATION CONCERNING THE EXISTENCE, QUANTITY, QUALITY,
MINEABILITY, OR MERCHANTABILITY OF THE COAL SEAMS WITHIN THE PREMISES, TITLE
THERETO OR OTHERWISE, AND CONTRACTOR COVENANTS AND AGREES THAT NO
REPRESENTATIONS, STATEMENTS, OR WARRANTIES, EXPRESS OR IMPLIED, HAVE BEEN MADE
BY OR ON BEHALF OF CAM-COLORADO REGARDING THE PREMISES, ITS CONDITION, THE USE
OR OCCUPATION THAT MAY BE MADE THEREOF, OR THE INCOME THEREFROM.

 

GENERAL INFORMATION CONCERNING
MINING CONDITIONS HAS BEEN PROVIDED TO CONTRACTOR. CAM-COLORADO REITERATES THAT
SUCH INFORMATION WAS NOT INTENDED TO BE AN ALL INCLUSIVE STATEMENT OR
COMPREHENSIVE LIST OF MINING CONDITIONS. THE INFORMATION WAS AN INDICATION TO
CONTRACTOR OF CERTAIN PROSPECTIVE CONDITIONS. IT IS INHERENT IN THE MINING OF
COAL THAT CONDITIONS MAY EXIST OR DEVELOP WHICH MAY BE UNFORESEEN. CAM-COLORADO
MAKES NO REPRESENTATIONS OR WARRANTIES REGARDING THE MINING CONDITIONS OR THE
GENERAL INFORMATION PREVIOUSLY PROVIDED. CONTRACTOR, IN ITS ROLE AS A CONTRACT
MINER, AGREES TO CONDUCT ITS OWN INDEPENDENT INVESTIGATION AND DUE DILIGENCE
REVIEW OF THE MINING CONDITIONS RELATED HERETO AND THIS AGREEMENT. ALL
INFORMATION PRESENTED TO THE CONTRACTOR IS AND WAS FOR INFORMATIONAL PURPOSES
ONLY.

 

17

 

CAM-Colorado shall in no event
assume or be liable for any loss incurred by Contractor under this Agreement.
CAM-Colorado does not assume responsibility or liability for the present or
future condition of the Premises, and CAM-Colorado shall not be liable to
Contractor for any damage to or destruction of the Premises or Contractor’s
property or the property of any other person due to fires, floods, or any other
accident or natural catastrophe which occurs on or within the Premises.

 

Section 31.                  Termination

 

31.1       CAM-Colorado or Contractor shall
have the right to terminate this Agreement for cause by giving 30 days notice,
of;

 

(a)   all recoverable coal having been removed, or;

 

(b)   by default as set forth in Section 26 of this
Agreement.

 

It is understood that CAM-Colorado is not
required to exercise its rights under the Default Section of this Agreement
before exercising its rights under the Termination Section. The rights under
the Default Section and Termination Section are separate and distinct from each
other.

 

31.2       Upon termination prior to the time
all of the coal mineable from the existing mine portal and infrastructure has
been mined, Contractor shall, unless otherwise directed by CAM-Colorado, leave
the Premises in such condition that mining by another may begin immediately and
shall do all things reasonably requested by CAM-Colorado to permit immediate
mining by another, including, but not limited to, the transfer or assignment to
CAM-Colorado or its designee of Contractor’s Permits and Licenses. If directed
by CAM-Colorado upon a termination or expiration of this Contract, Contractor
shall remove all equipment and infrastructure, close the mine and reclaim the
mine site in accordance with applicable law. Upon completion of all mining or
upon termination for any reason, Contractor shall be responsible for removing
all equipment from the McClane Mine and Mine Site and shall store the equipment
at the Mine Site. With respect to equipment which is not already owned by
CAM-Colorado, if any, CAM-Colorado shall have the exclusive right, but not the
obligation, to purchase any or all of the equipment and structures in place at
the Mine Site, excluding face equipment. If CAM-Colorado exercises this right,
CAM-Colorado shall give two (2) days written notice. The purchase price of any
equipment and structures shall be based upon the average of two (2) mutually
agreed independent appraisers unless the parties otherwise agree.. If
CAM-Colorado does not purchase any of the equipment or structures in place,
then, Contractor shall be responsible for

 

18

 

removing the
equipment or structures within 30 days from the date CAM- Colorado notifies
Contractor to begin such removal. Any such notice shall be confirmed in writing
within a reasonable period of time.

 

31.3       If either party (1) becomes
bankrupt, (2) makes a general assignment for the benefit of its creditors, or
(3) files a petition under any bankruptcy, insolvency or similar proceeding,
either party may terminate this Agreement by giving 14 days prior written
notice to the other party.

 

Section 32.                  Assignment

 

32.1       Contractor shall not transfer,
assign, or subcontract all of any part of this Agreement or any of its rights
or obligations hereunder without prior written consent of CAM-Colorado. The
sale or transfer, or any attempted sale or transfer, of any of the stock of
Contractor, or of Contractor’s business, shall be considered an assignment for
the purpose of this Section.

 

Section 33.                  Notices

 

33.1       Any notice or communication
provided for in this Agreement shall be in writing and given by either
delivering the same in person or by registered or certified mail, postage prepaid,
or by fax to the address listed below:

 

	
  CAM-COLORADO:

  	
   

  	
  CAM-COLORADO
  LLC

  265 Hambley Blvd

  Pikeville, KY 41501

  
	
   

  	
   

  	
   

  
	
  CONTRACTOR:

  	
   

  	
  CAM
  MINING LLC

  265 Hambley Blvd.

  Pikeville, KY 41501

  

 

Each party may designate in writing a new
mailing address for notices hereunder. Notice by mail is deemed given as of the
time of the postmark on the envelope if sent by first class mail or upon
receipt if sent by certified mail.

 

Section 34.                  No
Waiver

 

34.1       The failure of either party to
insist in any one or more instances upon strict performance of any of the
provisions of this Agreement or to take advantage of any of its rights
hereunder or the failure to object to the nature of performance or lack thereof
shall not be construed as a

 

19

 

waiver of any such
provision or the relinquishment of any such right, but the same shall continue
and remain in effect. If the waiver of any right is made, it shall be done
expressly in writing by the party entitled to the enforcement thereof.

 

Section 35.                  Severability
of Provisions

 

35.1       If any provision in this Agreement
is held invalid, the remaining provisions continue in effect.

 

Section 36.                  Governing
Law

 

36.1       This Agreement is deemed to be made
under the laws of the State of Colorado for all purposes, including
interpretation, performance and enforcement, and shall be construed in
accordance with the laws of that State, without giving effect to the principles
of conflict of laws.

 

Section 37.                  Section
Headings

 

37.1       Section headings have been inserted
in this Agreement for convenience of reference only and do not in any way
affect the meaning of any provision hereof.

 

Section 38.                  Survival
of Obligations

 

38.1       All remediation, indemnification,
and obligations provided in this Agreement shall survive the termination,
cancellation, or expiration of this Agreement.

 

Section 39.                  Entire
Agreement

 

This Agreement and the Exhibits
hereto represent the entire agreement between the parties, and there are no
other covenants, promises, agreements, conditions, or understanding either oral
or written between them. Neither party may modify this Agreement except by
written agreement signed by both parties. Any attempt to waive the requirement
that all modifications must be in writing and must be signed by authorized
representatives of both parties. In the event of any conflict or inconsistency
between the provisions of the main body of this Agreement and any Exhibit
hereto, the provisions of the main body shall govern.

 

20

 

The parties have signed this
Agreement as of the date entered on page one.

 

 

	
  CAM-COLORADO LLC

  	
   

  	
  CAM MINING LLC

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Nicholas R. Glancy

  	
   

  	
  By:

  	
  /s/ James D. Slater

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title: Senior Vice President

  	
   

  	
  Title: President

  

 

21Exhibit 10.7

 

AMENDED AND RESTATED
EMPLOYMENT AGREEMENT

 

THIS
AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “Agreement”)
executed this 9th day of November 2005, between CAM Holdings LLC (“Employer”) and James D. Slater (“Employee”).

 

WITNESSETH:

 

WHEREAS Central
Appalachia Mining LLC, a wholly-owned subsidiary of Employer, (“Central”) and
Employee entered into that certain Employment Agreement dated April 30,
2003 (the “April Employment Agreement”); and

 

WHEREAS Central
and Employee entered into that certain Employment Agreement dated December 16,
2003 (the “December Employment Agreement”) that superseded and replaced
the April Employment Agreement; and

 

WHEREAS,
Employer and Employee entered into that certain Employment
Agreement dated November 30, 2004 (the “November 2004 Employment
Agreement”) that superseded and replaced the December Employment
Agreement; and

 

WHEREAS the
parties hereto desire to enter this Agreement to supersede and replace the November 2004
Employment Agreement; and

 

WHEREAS Employer
desires to employ Employee on the terms hereof, and Employee desires to accept
employment on such terms; and

 

WHEREAS the
parties hereto acknowledge that this Agreement is effective from the date
hereof (the “Effective Date”)

 

In consideration of the
mutual covenants herein contained, the parties agree as follows:

 

1.                                      Terms and
Duties.

 

Commencing as of the
Effective Date hereof and continuing until March 31, 2008, unless sooner
terminated as herein provided or extended by mutual agreement of the parties
(the “Employment Term”), the Employer hereby employs the Employee as its
President and Chief Operating Officer and Employee accepts such employment. On
the Effective Date, this Agreement shall replace and supersede the November 2004
Employment Agreement and the November 2004 Employment Agreement shall be
of no future effect after the Effective Date. Employee’s responsibilities shall
include management of Employer’s operations, as defined by Employer, including
participation in goal development and budgeting, as well as other duties as
defined from time to time by the Employer’s Chairman of the Board of Directors
(the “Chairman”). Employee shall also be an officer of certain Employer’s
subsidiaries and affiliates as determined by Employer. Employee shall report directly
to the Employer’s Chairman. The Employee agrees to devote all of his business
time and his best efforts to the business of Employer as may be necessary
to perform his duties in accordance with the policies and budgets
established from time to time by Employer and its Board of Directors. During
the Employment Term, the Employee will not have any other employment.

 

 

2.                                      Compensation.

 

For Employee’s services
hereunder for the 12 months ended December 31, 2004, Employer shall pay to
Employee (a) a salary at the rate of Two Hundred Fifty Thousand Dollars
($250,000.00), payable periodically in accordance with Employer’s usual
executive payroll payment procedures; plus (b) a bonus equal to the
greater of (i) $150,000 (“Minimum Bonus”) or (ii) a contingent bonus
(“Contingent Bonus”) equal to 2.5% of Employer’s pre tax income for the 12
month period ended December 31, 2004 computed in accordance with GAAP. Monthly
pro rata bonus payments shall be made to Employee based on the Minimum Bonus. The
Contingent Bonus, if any, shall be paid to Employee upon receipt of Employer’s
reviewed statement of income but not later than March 31, 2005.

 

For
the remainder of the Employment Term for Employee’s services hereunder,
Employer shall pay Employee a salary of Four Hundred Thousand Dollars
($400,000.00) per year payable periodically in accordance with Employer’s usual
executive payroll payment procedures; plus a contingent bonus equal to 1.0% of
the Pre-Tax Income of the Employer (the “New Contingent Bonus”). Employer’s
pre-tax net income shall be computed in accordance with GAAP excluding the net
effects of the accounting for below market contracts arising from the asset
purchase transaction with AEP Coal, Inc (“Pre-Tax Income”). The New Contingent
Bonus will be based on the Pre-Tax Income for a fifteen (15) month period
beginning January 1, 2005 and ending on March 31, 2006 and paid upon
the receipt of the audit results for the year ended March 31, 2006. Thereafter,
the New Contingent Bonus will be paid based on the Pre-Tax Income of Employer’s
fiscal year and shall be paid upon the receipt of the audit results for that
fiscal year.

 

In
addition to the above but only upon the completion of a public offering of some
or all of the Employer’s equity or a private sale of a majority of the Employer’s
equity during the Employment Term (“the IPO”), Employee shall be entitled to a
One Million Dollar ($1,000,000) bonus (the “IPO Bonus”). The IPO bonus will be
earned by the Employee upon the fulfillment of the terms of this Agreement
through the Employment Term. However, within thirty (30) days of the completion
of the IPO, Employer shall make an advance payment of the IPO Bonus in the
amount of Five Hundred Thousand Dollars ($500,000) (the “IPO Advance”). The
remainder of the IPO Bonus shall be due and payable within thirty (30) days
after the end of the Employment Term. If Employee voluntarily resigns his
employment or is discharged for cause as defined in paragraph 9, hereof, then
Employee shall refund all of the IPO Advance within thirty (30) days of his
termination of employment with Employer.

 

3.                                      Automobile.

 

Employer shall provide
Employee with the use of a 4-wheel drive vehicle suitable for the intended
duties of the Employee. The cost of the vehicle to be provided shall not exceed
Forty Five Thousand Dollars ($45,000.00).

 

4.                                      Place of
Employment.

 

The Employee’s regular
place of employment during the Employment Term shall be at the office of the
Employer in Pikeville, KY.

 

2

 

5.                                      Travel;
Expenses.

 

The Employee shall engage
in such travel as may reasonably be required in connection with the
performance of his duties. All reasonable travel and other expenses incurred by
the Employee (in accordance with the policies and the budget of the Employer
established from time to time) in carrying out his duties hereunder will be
reimbursed by the Employer on presentation to it of expense accounts and
appropriate documentation in accordance with the customary procedures of the
Employer for reimbursement of executive expenses.

 

6.                                      Confidentiality;
Competition.

 

(a)                                 The
Employer possesses and will continue to possess confidential information that
Employee may gain access to. For the purposes hereof, all confidential
information about the business and affairs of the Employer (including, without
limitation, business plans, real and personal property leases, financial,
engineering and marketing information and information about costs, mining and
processing methods, suppliers and customers, including such information created
by Employee and confidential information of others obtained by Employer
pursuant to confidentiality agreements) constitute “Employer Confidential
Information.” Employee acknowledges that he will have access to and knowledge
of Employer Confidential Information, and that improper use or revelation of
same by the Employee during or after the termination of his employment by the
Employer could cause serious injury to the business of the Employer. Accordingly,
the Employee agrees that he will forever keep secret and inviolate all Employer
Confidential Information which comes into his possession, and that he will not
use the same for his own private benefit, or directly or indirectly for the
benefit of others, and that he will not disclose such Employer Confidential
Information to any other person except as necessary in pursuance of his duties.

 

(b)                                 The
Employee agrees that during the Employment Term (or the period of one year
after Employee’s termination as a result of Employee’s voluntary resignation or
Employee’s termination for cause) the Employee will not (whether as an officer,
director, partner, proprietor, investor, associate, employee, consultant,
adviser, public relations or advertising representative or otherwise), directly
or indirectly, be engaged in the business of coal mining or coal marketing in
the Central Appalachian Region or the or the Northern Appalachian Region or the
Illinois Basin or in Western Colorado (which the parties acknowledge is the
Employer’s trading area). For purposes of the preceding sentence, the Employee
shall be deemed to be engaged in any business with any person for whom he shall
be an employee, officer, director, owner, employer, consultant, shareholder, or
partner. Nothing herein contained shall be deemed to prohibit the Employee from
owning, as a passive investment, a security of any issuer up to five percent
(5%) of the voting interest or up to five percent (5%) of the economic interest
of an issuer.

 

(c)                                  The
terms of this Agreement are intended to limit disclosure and competition by the
Employee to the maximum extent permitted by law. If it shall be finally
determined by any court of competent jurisdiction ruling on this Agreement that
the scope or duration of any limitation contained in this paragraph 6 is too
extensive to be legally enforceable, then the parties hereby agree that the
scope and duration (not greater than that provided for herein) of such
limitation shall be the maximum scope and duration which shall be legally
enforceable and the Employee hereby consents to the enforcement of such
limitation as so modified.

 

3

 

(d)                                 The
Employee acknowledges that any violation by him of the provisions of this
paragraph 6 could cause serious and irreparable harm and damage to the Employer.
He further acknowledges that it might not be possible to measure such damages
in money and that Employer’s remedy at law for a breach or threatened reach of
the provisions of Paragraph 6 would be inadequate. Accordingly, the Employee
agrees that, in the event of a breach or threatened breach by him of the
provisions of this paragraph 6, the Employer may seek, in addition to any
other rights or remedies, including money damages, an injunction or restraining
order, restraining the Employee from doing or continuing to do or perform any
acts constituting such breach or threatened breach. In the event Employer seeks
an injunction or restraining order, Employee and Employer agree that Employer
shall not be required to post a bond to obtain the necessary equitable relief.

 

7.                                      Benefits.

 

The Employer agrees to
provide to the Employee the benefits available to all salaried employees. Employee
shall be entitled to two (2) weeks vacation each year during the
Employment Term.

 

8.                                      Employee’s
Representation Regarding Prior and Future Employment.

 

Employee hereby
represents to the Employer that he has full lawful right and power to enter
into this Agreement and carry out his duties hereunder, and that same will not
constitute a breach of or default under any employment, confidentiality,
non-competition or other agreement by which he may be bound. Further,
Employee hereby represents to the Employer that he is not listed in the Office
of Surface Mining’s Applicant Violator System database.

 

Employee further agrees
to provide prompt notice to Employer of Employee’s first subsequent employment
after ceasing to be an employee of Employer.

 

9.                                      Termination
for Cause or Voluntary Resignation by Employee.

 

If Employee shall:

 

(i)                                     commit
an act of dishonesty against the Employer or fraud upon the Employer; or

 

(ii)                                  breach
his obligations under this Agreement and fail to cure such breach within five (5) days
after written notice thereof; or

 

(iii)                               be convicted of a crime
involving moral turpitude; or

 

(iv)                              grossly
fail or neglect to diligently perform his duties hereunder and continue in
his failure after written notice;

 

all such instances being deemed “for cause” under this
Agreement;

 

then, and in any such
case, the Employer may terminate the employment of the Employee “for cause”
hereunder.

 

4

 

In the event of
termination for cause or voluntary resignation by Employee, the Employee shall
no longer have any right to any of the benefits (including future salary or
bonus payments) which would otherwise have accrued after such termination.

 

10.                               Successors.

 

The rights, benefits,
duties and obligations under this Agreement shall inure to and be binding upon
the Employer, its successors and assigns and upon the Employee and his legal
representatives, legatees and heirs. It is specifically understood, however,
that this Agreement may not be transferred or assigned by the Employee. The
Employer may assign any of its rights and obligations hereunder to any
subsidiary or affiliate of the Employer, or to a successor or survivor
resulting from a merger, consolidation, sale of assets or stock or other
corporate reorganization, on condition that the assignee shall assume all of
the Employer’s obligations hereunder and it is agreed that such successor or
surviving corporation shall continue to be obligated to perform the
provisions of this Agreement.

 

11.                               Notices.

 

Notices hereunder shall
be in writing and shall be sent by certified or registered mail, telecopy, or
recognized overnight delivery service (such as Federal Express) prepaid as
follows:

 

	
  To Employee:

  	
  To Employer:

  
	
   

  	
   

  
	
  James Slater

  403 Cedar Creek Road

  Pikeville, KY 
  41501

  	
  CAM Holdings LLC

  P. O. Box 1169

  Pikeville, KY 41502

  Attention: Chairman

  Fax:606-432-0031

  
	
   

  	
   

  
	
   

  	
  With a copy to :

  
	
   

  	
  Wexford Capital LLC

  411 West Putnam Avenue

  Greenwich, CT 06830

  Attn: Mark Zand

  Fax: 203-862-7452

  

 

and shall be deemed to
have been given when telecopied to the addressee or three days after placed in
the mail or the second business day following delivery to a recognized
overnight delivery service (such as Federal Express), prepaid and properly
addressed. Notices to the Employee may also be delivered to him personally.
Notices of change of address shall be given as provided above, but shall be
effective only when actually received.

 

12.                               Waiver of
Breach.

 

The failure of either
party to insist upon the strict performance of any of the terms, conditions,
and provisions of this Agreement shall not be construed as a waiver or
relinquishment of future compliance therewith, and said terms, conditions, and
provisions shall

 

5

 

remain in full
force and effect. No waiver of any term or condition of this Agreement on the part of
the Employer shall be effective for any purposes whatsoever unless such waiver
is in writing and signed by the Chairman.

 

13.                               Amendments.

 

No amendment or
variations of the terms and conditions of this Agreement shall be made unless
the terms of such amendment is in writing and signed by Employee and the
Chairman.

 

14.                               Entire
Agreement.

 

This Agreement
constitutes the complete and entire agreement governing the terms and
conditions of the employment relationship between the parties and supersedes
any and all prior agreements or understandings. Both Employee and Employer
acknowledge and agree that there are no oral or written understandings
concerning the Employee’s employment by Employer outside of this Agreement.

 

15.                               Governing
Law.

 

This Agreement shall be
construed and enforced pursuant to the laws of the Commonwealth of Kentucky,
including matters of law relating to the choice of law.

 

16.                               Counterparts.

 

This Agreement, as
executed separately by the individual parties, shall be deemed to be an
original, but all of which together shall constitute one document.

 

IN
WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement as of the day and year first above written.

 

	
   

  	
  EMPLOYER: CAM Holdings LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Terry N. Coleman

  	
   

  
	
   

  	
   

  	
  Chairman

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  EMPLOYEE:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James D. Slater

  	
   

  
	
   

  	
   

  	
  James D. Slater

  

 

6

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