Document:

Document

Exhibit 10.4

SECURITY AGREEMENT
THIS SECURITY AGREEMENT (“Security Agreement”) dated as of June 30, 2021, is by and between The Falkirk Mining Company, an Ohio corporation (“Debtor”), and Rainbow Energy Center, LLC, a North Dakota limited liability company (“Secured Party”).
RECITALS:
A.    Debtor and Secured Party are parties to that certain Coal Sales Agreement dated June __, 2021 (“Coal Sales Agreement”) and that certain Funding Agreement dated June 30, 2021 (“Funding Agreement,” and collectively with the Coal Sales Agreement, and as each may be amended, modified, supplemented, restated or replaced from time to time, the “Transaction Agreements”) pursuant to which Secured Party is providing financial accommodations to Debtor. All capitalized terms not defined herein shall have the meanings specified in the Transaction Agreements.
B.    Debtor desires to grant to Secured Party a first priority security interest in all of Debtor’s property, all as provided herein.
AGREEMENTS:
IN CONSIDERATION of one dollar and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
1.    Grant of Security Interest and Collateral. In order to secure payment and performance of each and every debt, liability and obligation of every type and description which Debtor may now or at any time hereafter owe to Secured Party under the Transaction Agreements, whether such debt, liability or obligation now exists or is hereafter created or incurred (all such debts, liabilities and obligations and any amendments, extensions, renewals or replacements thereof are herein collectively referred to as the “Obligations”), Debtor hereby, effective as of the Effective Date, grants to Secured Party a first priority, subject to liens provided for or permitted pursuant to the Coal Sales Agreement, security interest (the “Security Interest”) in all of Debtor’s personal property and assets (collectively, the “Collateral”), including without limitation the following:

(a)Inventory and Goods: All inventory of Debtor, whether now owned or hereafter acquired and wherever located and other tangible personal property held for sale or lease or furnished or to be furnished under contracts of service or consumed in Debtor’s business, and all goods of Debtor, whether now owned or hereafter acquired and wherever located, including without limitation, all as-extracted gravel, sand, coal, stone, aggregates, rock and similar as-extracted products and materials, computer programs embedded in goods, and all other Inventory and Goods, as each such term may be defined in the Uniform Commercial Code as in effect in the state of North Dakota from time to time (the “UCC”), of Debtor, whether now owned or hereafter acquired;
(b)Equipment: All equipment of Debtor, whether now owned or hereafter acquired and wherever located, including but not limited to all present and future equipment, machinery, tools, motor vehicles, trade fixtures, furniture, furnishings, office and recordkeeping equipment and all goods for use in Debtor’s business, and all other Equipment (as such term 
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may be defined in the UCC) of Debtor, whether now owned or hereafter acquired, together with all parts, equipment and attachments relating to any of the foregoing;
(c)Accounts, Contract Rights and Other Rights to Payment: Each and every right of Debtor to the payment of money, whether such right to payment now exists or hereafter arises, whether such right to payment arises out of a sale, lease, license, assignment or other disposition of goods or other property by Debtor, out of a rendering of services by Debtor, out of a loan by Debtor, out of the overpayment of taxes or other liabilities of Debtor, or otherwise arises under any contract or agreement, whether such right to payment is or is not already earned by performance, and howsoever such right to payment may be evidenced, together with all other rights and interests (including all liens and security interests) which Debtor may at any time have by law or agreement against any account debtor or other obligor obligated to make any such payment or against any of the property of such account debtor or other obligor; all including but not limited to all present and future debt instruments, chattel paper, accounts, license fees, contract rights, loans and obligations receivable and tax refunds, and all other Accounts (as such term may be defined in the UCC) of Debtor, whether now owned or hereafter acquired; 
(d)Instruments: All instruments, chattel paper, letters of credit or other documents of Debtor, whether now owned or hereafter acquired, including but not limited to promissory notes, drafts, bills of exchange and trade acceptances; all rights and interests of Debtor, whether now existing or hereafter created or arising, under leases, licenses or other contracts, and all other Instruments (as such term may be defined in the UCC) of Debtor, whether now owned or hereafter acquired;
(e)Deposit Accounts and Investment Property: All right, title and interest of Debtor in all deposit and investment accounts maintained with any bank, savings and loan association, broker, brokerage, or any other financial institution, together with all monies and other property deposited or held therein, including without limitation, any checking account, savings account, escrow account, savings certificate and margin account, and all securities, whether certificated or uncertificated, security entitlements, securities accounts, commodity contracts, and commodity accounts, and all other Deposit Accounts and Investment Property (as each such term may be defined in the UCC) of Debtor, whether now owned or hereafter acquired;
(f)General Intangibles: All general intangibles of Debtor, whether now owned or hereafter acquired, including but not limited to, applications for patents, patents, copyrights, trademarks, trade secrets, good will, tradenames, customer lists, permits and franchises, software, and the right to use Debtor’s name, and any and all membership interests, governance rights, and financial rights in each and every corporation, and all payment intangibles, and all other General Intangibles (as such term may be defined in the UCC) of Debtor, whether now owned or hereafter acquired;
(g)Chattel Paper: All Chattel Paper (as such term may be defined in the UCC) of Debtor, whether tangible or electronic, and whether now owned or hereafter acquired; and
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(h)Documents, Embedded Software, Etc.: All of Debtor’s rights in promissory notes, documents, embedded software, letter of credit rights and supporting obligations (and security interests and liens securing them) (as any such term may be defined in the UCC) whether now owned or hereafter acquired;
together with all substitutions and replacements for and products of any of the foregoing property and proceeds of any and all of the foregoing property and, in the case of all tangible Collateral, together with all (i) accessories, attachments, parts, equipment, accessions, repairs and embedded software, now or hereafter attached or affixed to or used in connection with any such goods, (ii) warehouse receipts, bills of lading and other documents of title now or hereafter covering such goods, (iii) insurance proceeds, and (iv) books and records of Debtor; provided, that notwithstanding anything in this Agreement or any other Transaction Document to the contrary, “Collateral” shall not include (a) any Excluded Funds (as defined in the Funding Agreement), (b) any gravel, sand, coal, stone, aggregates, rock and similar products and materials at any time on or after the date of termination of the Coal Sales Agreement by Secured Party for any reason other than pursuant to Section 9.2(b), (c), (d) or (e) thereof, and (c) assets and property (including accounts receivable, general intangibles, payment intangibles and other rights to payment) to the extent security interests therein are prohibited by enforceable provisions of contracts or applicable law or require governmental consent, approval, license or authorization that has not been obtained or, in the case of assets consisting of licenses, permits, agreements or similar contracts, to the extent the grant of security interest therein or in the Debtor’s rights thereunder would violate the terms of such license, permit, agreement or similar contract relating to such asset, in each case, subject to and after giving effect to any applicable anti-assignment provisions of the UCC (including, without limitation, Sections 9-406, 9-407, 9-408 or 9-409 of the UCC) or other applicable Laws that would have the effect of limiting or rendering ineffective any applicable anti-assignment provision or equivalent.
2.    Representations, Warranties and Agreements. Debtor represents, warrants and agrees as of the Effective Date that:
(a)Debtor is a corporation duly organized, validly existing and in good standing under the laws of the state of Ohio. This Security Agreement has been duly and validly authorized by all necessary corporate action. Debtor has the requisite power and authority to execute this Security Agreement, to perform Debtor’s obligations hereunder and to subject the Collateral to the Security Interest. Debtor will give at least 30 days’ advance written notice to Secured Party of any change in Debtor’s name or jurisdiction of organization.
(b)The Collateral will be used primarily for business purposes.
(c)Debtor’s chief place of business is located at the address set forth on Exhibit A attached hereto.  Debtor’s records concerning the Collateral are kept at such address.  The Collateral is located at the addresses set forth on Exhibit A attached hereto. Debtor will give at least 30 days’ advance written notice to Secured Party of any change in Debtor’s chief place of business and any change in or addition of any Collateral location or any change in the location of Debtor’s records concerning the Collateral.
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(d)Debtor has (or will have at the time Debtor acquires rights in Collateral hereafter arising) and will maintain absolute title to each item of Collateral free and clear of all security interests, liens and encumbrances, except the Security Interest or other liens that arise by operation of law, and will defend the Collateral against all claims or demands of all persons other than Secured Party.
(e)Except as otherwise provided in the Coal Sales Agreement, Debtor will not sell or otherwise transfer or dispose of the Collateral or any interest therein.
(f)Debtor will not permit any tangible Collateral to be located in any jurisdiction in which a financing statement or similar instrument covering such Collateral is required to be, but has not in fact been, filed.
(g)Debtor will, in all material respects, keep all tangible Collateral in good repair, working order and condition, normal depreciation excepted, and will, from time to time, replace any worn, broken or defective parts thereof to the extent necessary for the operation and maintenance of its business and subject to Secured Party’s compliance with its obligations under the Coal Sales Agreement.
(h)Debtor will promptly pay all taxes and other governmental charges levied or assessed upon or against any Collateral or upon or against the creation, perfection or continuance of the Security Interest.
(i)Debtor will promptly notify Secured Party of any material loss of or damage to any Collateral.
(j)Debtor hereby authorizes the filing of such financing statements as Secured Party may deem necessary or useful to be filed in order to perfect the Security Interest and, if any Collateral is covered by a certificate of title, Debtor will from time to time upon request of any collateral assignee of Secured Party execute such documents as may be required to have the Security Interest properly noted on a certificate of title.. In addition, Debtor authorizes Secured Party to file from time to time such financing statements against the Collateral described as “all personal property” or “all assets” or the like as Secured Party deems necessary or useful to perfect the Security Interest.
(k)Debtor will take all such actions as Secured Party may reasonably request that are necessary to establish, perfect and maintain the Security Interest in all necessary jurisdictions. In connection with the foregoing, Debtor will execute, deliver or endorse any and all instruments, documents, assignments, security agreements and other agreements and writings which Secured Party may at any time reasonably request in order to secure, protect, perfect or enforce the Security Interest and Secured Party’s rights under this Security Agreement.
(l)Debtor will not use or keep any Collateral, or permit it to be used or kept, for any unlawful purpose or in violation of any federal, state or local law, statute or ordinance.
If Debtor at any time fails to perform or observe any of the foregoing agreements, immediately upon the occurrence of such failure, without notice or lapse of time, Secured Party may (but need not) perform or observe such agreement on behalf and in the name, place and stead of Debtor (or at Secured Party’s option, in Secured Party’s own name) and may (but need not) take any and all other 
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actions which Secured Party may reasonably deem necessary to cure or correct such failure (including without limitation, the payment of taxes, the satisfaction of security interests, liens, or encumbrances, the performance of obligations under contracts or agreements with account debtors or other obligors, the procurement and maintenance of insurance, the execution of financing statements, the endorsement of instruments, and the procurement of repairs, transportation or insurance); and, except to the extent that the effect of such payment would be to render any loan or forbearance of money usurious or otherwise illegal under any applicable law. To facilitate the performance or observance by Secured Party of such agreements of Debtor, Debtor hereby irrevocably appoints (which appointment is coupled with an interest) Secured Party, or its delegate, as the attorney-in-fact of Debtor with the right (but not the duty) from time to time to create, prepare, complete, execute, deliver, endorse or file, in the name and on behalf of Debtor, any and all instruments, documents, financing statements, applications for insurance and other agreements and writings required to be obtained, executed, delivered or endorsed by Debtor under this Section 2.
3.    Lock Box; Collateral Account. If Secured Party so requests at any time after the Effective Date and during the continuance of an Event of Default (as defined in the Funding Agreement), Debtor will direct each of its account debtors to make payments due under the relevant account or chattel paper directly to a special lock box to be under the control of Secured Party (the “Lock Box”). Debtor hereby authorizes and directs Secured Party to deposit into a special collateral account to be established and maintained by Secured Party (the “Collateral Account”) all checks, drafts, and cash payments received in the Lock Box. All deposits in the Collateral Account shall constitute proceeds of Collateral and shall not constitute payment of any Obligation. At its option, Secured Party shall, at any time, apply finally collected funds on deposit in the Collateral Account to the payment of the Obligations in such order of application as Secured Party may determine, or permit Debtor to withdraw all or any part of the balance. If a Lock Box is so established, Debtor agrees that it will promptly deliver to Secured Party, for deposit into the Lock Box, all payments on accounts and chattel paper received by it. All such payments shall be delivered to Secured Party in the form received (except for Debtor’s endorsement where necessary). Until so deposited, all such payments on accounts and chattel paper received by Debtor shall be held in trust by Debtor for and as the property of Secured Party and shall not be commingled with any funds or property of Debtor.
4.    Assignment of Insurance. Debtor hereby assigns to Secured Party, as additional security for the payment of the Obligations, any and all moneys (including but not limited to proceeds of insurance and refunds of unearned premiums) due or to become due under, and all other rights of Debtor under or with respect to, any and all policies of insurance covering the Collateral. Debtor hereby directs the issuer of any such policy to pay any such moneys directly to Secured Party. Secured Party may (but need not), in Secured Party’s own name or in Debtor’s name, execute and deliver proofs of claim, receive all such moneys, endorse checks and other instruments representing payment of such moneys, and adjust, litigate, compromise or release any claim against the issuer of any such policy. Notwithstanding the foregoing, Debtor shall be entitled to use any such insurance proceeds to repair or replace any Collateral so long as no Event of Default (as defined in the Funding Agreement) then exists.
5.    Remedies Upon Event of Default. After the Effective Date and upon the occurrence and during the continuance of an Event of Default, Secured Party may exercise any one or more of 
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the rights or remedies set forth in the Transaction Agreements; and without in any way limiting the generality of the foregoing, Secured Party may exercise all rights and remedies under any other Transaction Document, and enforce all rights and remedies under any applicable law, including without limitation the rights and remedies available upon default to a secured party under the UCC, including without limitation, the right to take possession of the Collateral, or any evidence thereof, proceeding without judicial process or by judicial process (without a prior hearing or notice thereof, which Debtor hereby expressly waives) and the right to sell, lease or otherwise dispose of any or all of the Collateral, and in connection therewith, Debtor will on demand assemble the Collateral and make it available to Secured Party at a place to be designated by Secured Party which is reasonably convenient to both parties. All rights and remedies of Secured Party shall be cumulative and may be exercised singularly or concurrently, at Secured Party’s option, and the exercise or enforcement of any one such right or remedy shall neither be a condition to nor bar the exercise or enforcement of any other.
6.    Power of Attorney.  Debtor hereby irrevocably appoints Secured Party (and any of Secured Party’s partners, managers, officers, agents or employees) as its lawful attorney-in-fact, with full power of substitution, exercisable upon the occurrence and during the continuance of an Event of Default, to: (a) send requests for verification of accounts or notify account debtors of Secured Party’s security interests and liens in the Collateral; (b) endorse Debtor’s name on any checks or other forms of payment or security; (c) sign Debtor’s name on any invoice or bill of lading for any account or drafts against account debtors, schedules and assignments of accounts, verifications of accounts, and notices to account debtors; (d) settle and adjust disputes and claims about accounts directly with account debtors, for amounts and on terms Secured Party determines reasonable; (e) make, settle, and adjust all claims under Debtor’s insurance policies; (f) pay, contest or settle any lien, charge, encumbrance, security interest, and adverse claim in or to the Collateral, or any judgment based thereon, or otherwise take any action to terminate or discharge the same; (g) transfer the Collateral into the name of Secured Party or a third party as the Code permits; and (h) dispose of the Collateral. Debtor further hereby appoints Secured Party (and any of Secured Party’s partners, managers, officers, agents or employees) as its lawful attorney-in-fact, with full power of substitution, regardless of whether or not an Event of Default has occurred or is continuing to: (i) sign Debtor’s name on any documents and other security instruments necessary to perfect or continue the perfection of, or maintain the priority of, Secured Party’s security interest in the Collateral, (ii) execute and do all such assurances, acts and things which Debtor is required, but fails to do under the covenants and provisions of any Transaction Document; (iii) take any and all such actions as Secured Party may reasonably determine to be necessary or advisable for the purpose of maintaining, preserving or protecting the Collateral or any of the rights, remedies, powers or privileges of Secured Party under this Agreement. Secured Party’s foregoing appointment as Debtor’s attorney in fact, and all of Secured Party’s rights and powers, coupled with an interest, are irrevocable until all Obligations (other than contingent indemnification obligations as to which no claim has been asserted or is known to exist) have been fully repaid, in cash, and otherwise fully performed and Secured Party is under no further obligation to make advances hereunder.
7.    Protective Payments.  If Debtor fails to obtain the insurance called for by the Coal Sales Agreement or fails to pay any premium thereon or fails to pay any other amount which Debtor is obligated to pay under this Agreement or any other Transaction Document or which may 
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be required to preserve the Collateral, Secured Party may obtain such insurance or make such payment, and all amounts so paid by Secured Party shall be included in the Obligations and secured by this Security Agreement.  Secured Party will make reasonable efforts to provide Debtor with notice of Secured Party obtaining such insurance at the time it is obtained or within a reasonable time thereafter.  No payments by Secured Party are deemed an agreement to make similar payments in the future or Secured Party’s waiver of any Event of Default.
8.    Application of Payments and Proceeds Upon Default.  If an Event of Default has occurred and is continuing, Secured Party will have the right to apply in any order any funds in its possession, whether payments, proceeds realized as the result of any collection of accounts or other disposition of the Collateral, or otherwise, to the Obligations. Secured Party will pay any surplus to Debtor by credit to the deposit account designated by Debtor or to other persons legally entitled thereto. Debtor will remain liable to Secured Party for any deficiency. If Secured Party, directly or indirectly, enters into a deferred payment or other credit transaction with any purchaser at any sale of Collateral, Secured Party will have the option, exercisable at any time, of either reducing the Obligations by the principal amount of the purchase price or deferring the reduction of the Obligations until the actual receipt by Secured Party of cash therefor.
9.    Right to Offset. Nothing in this Security Agreement shall be deemed a waiver or prohibition of any collateral assignee of Secured Party’s right of banker’s lien, offset, or counterclaim during the existence of an Event of Default, which right Debtor hereby grants to such collateral assignee Secured Party.
10.    Amendment; Waivers. This Security Agreement can be waived, modified, amended, terminated or discharged, and the Security Interest can be released, only explicitly in a writing signed by Secured Party and Debtor. A waiver shall be effective only in the specific instance and for the specific purpose given. Mere delay or failure to act shall not preclude the exercise or enforcement of any of Secured Party’s rights or remedies.
11.    Notices.  All notices to be given to Debtor shall be deemed sufficiently given if given in the manner specified in the Coal Sales Agreement.
12.    General Terms. Secured Party’s duty of care with respect to Collateral in its possession (as imposed by law) shall be deemed fulfilled if Secured Party exercises reasonable care in physically safekeeping such Collateral or, in the case of Collateral in the custody or possession of a bailee or other third person, exercises reasonable care in the selection of the bailee or other third person, and Secured Party need not otherwise preserve, protect, insure or care for any Collateral. Secured Party shall not be obligated to preserve any rights Debtor may have against prior parties, to realize on the Collateral at all or in any particular manner or order, or to apply any cash proceeds of Collateral in any particular order of application.  
13.    Benefit and Assignment.  This Security Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their permitted successors and assigns.  Debtor may not voluntarily or involuntarily assign its interest under this Security Agreement without the prior written consent of Secured Party.  Notwithstanding any provision of this Security Agreement or any of the Transaction Agreements to the contrary, Secured Party may, in Secured Party’s sole discretion, assign or collaterally assign, all or any portion of its rights and obligations hereunder to any lender of Secured Party for the benefit of any such lender.  All covenants, agreements, 
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statements, representations, warranties and indemnities in this Security Agreement by and on behalf of any of the parties hereto shall bind and inure to the benefit of the permitted successors and assigns of the parties hereto.
14.    Counterparts. This Security Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any of the parties hereto may execute this Security Agreement by signing any such counterpart. Any executed counterpart of this Security Agreement delivered by facsimile or other electronic transmission shall constitute an original counterpart of this Security Agreement.
15.    Governing Law. The validity, construction and enforceability of this Security Agreement shall be governed by the internal laws of the State of North Dakota, without giving effect to the conflicts of laws principles thereof.
16.    Consent to Jurisdiction. AT THE OPTION OF SECURED PARTY, THIS SECURITY AGREEMENT MAY BE ENFORCED IN ANY STATE OR FEDERAL COURT SITTING IN NORTH DAKOTA; AND DEBTOR CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT. IF DEBTOR COMMENCES ANY ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT THEORY ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS SECURITY AGREEMENT, SECURED PARTY AT ITS OPTION SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE OF THE JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF SUCH TRANSFER CANNOT BE ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT PREJUDICE.
17.    Waiver of Jury Trial. EACH OF DEBTOR AND SECURED PARTY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
(Signature page follows)

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THE PARTIES have executed this Security Agreement as of the day and year first above written.

Secured Party:    RAINBOW ENERGY CENTER, LLC

    By: /s/ Stacy L. Tschider
           Stacy L. Tschider
Its: President

Debtor:    THE FALKIRK MINING COMPANY

    By: /s/ Carroll L. Dewing
Carroll L. Dewing
           Its: Vice President

(Signature Page to Security Agreement)

Exhibit A
Locations

Debtor’s chief place of business is:
    
    

Debtor’s Collateral locations are:
1.    ____________________
2.    ____________________
3.    ____________________

A-1Document

Exhibit 10.5

OPTION AGREEMENT

THIS OPTION AGREEMENT (“Agreement”) is made and entered into as of June 30, 2021, by and among THE FALKIRK MINING COMPANY, an Ohio corporation (“Seller”), and RAINBOW ENERGY CENTER, LLC, a North Dakota limited liability company (“Buyer”), and the STATE OF NORTH DAKOTA, doing business as THE BANK OF NORTH DAKOTA (“Escrow Agent”).
WITNESSETH:
WHEREAS,  Seller, Buyer and Escrow Agent desire to enter into this Agreement pursuant to which Seller, as of the Effective Date, grants to Buyer the exclusive right to purchase certain surface tracts, property and other interests more particularly described herein and, in certain circumstances, coal tracts; and
WHEREAS, this Agreement is being executed and delivered pursuant to a Coal Sales Agreement, also dated as of the date hereof, by and between Seller and Buyer, and as may be subsequently amended from time to time (hereinafter referred to as the “Coal Sales Agreement”); and
WHEREAS, all of the Seller’s obligations hereunder shall mature on the “Effective Date,” as defined in the Coal Sales Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained herein, the parties hereto agree as follows as of the Effective Date as defined in the Coal Sales Agreement:
SECTION 1.  GRANT OF OPTION
Seller hereby conveys and grants to Buyer the exclusive right, option and privilege, from and after the Effective Date and for the remainder of the term of this Agreement, upon the terms herein contained, to purchase the surface tracts referred to in Section 2(a), the coal tracts referred to in Section 2(b), and the property and other interests referred to in Section 3, subject, however, to the rights of third parties pursuant to “Loans” and/or “Leases” or pursuant to mine reclamation security as those terms are defined and referenced, respectively, in Article 3 of the Coal Sales Agreement.
SECTION 2. DEPOSIT IN ESCROW OF DEEDS
(a)    Seller, within thirty (30) days after the Effective Date, shall deposit with the Escrow  Agent, for the purposes herein specified, duly executed and acknowledged deeds to all surface tracts used in connection with “Falkirk’s Mine” as that term is defined in Section 1.1 of 

the Coal Sales Agreement, which deeds shall convey such tracts to Buyer or to its successors or assigns.  
(b)    Seller, within thirty (30) days after the Effective Date, shall deposit with the Escrow  Agent, for the purposes herein specified, duly executed  and acknowledged deeds to all coal tracts, together with the mining rights appurtenant thereto, used in connection with “Falkirk’s Mine” as that term is defined in Section 1.1 of the Coal Sales Agreement, which deeds shall convey such tracts to Buyer or to its successors or assigns.
(c)    In addition, Seller, on or before January 31, 2022, and on or before January 31 of each year thereafter, shall deposit with the Escrow Agent necessary replacement deeds such that on said date there shall be on deposit with the Escrow Agent duly executed and acknowledged  deeds from Seller to Buyer, its successors and assigns, to all surface tracts and  coal tracts, together with the mining rights appurtenant thereto, used in connection with Seller’s Mine as of December 31 of the previous year, excluding any Option Property acquired by Buyer from Seller in the previous year pursuant to the Coal Sales Agreement.  Exhibit A contains a legal description of all such surface tracts and separately all such coal tracts, together with the mining rights appurtenant thereto, held by Seller as of June 30, 2021.  Each deposit by Seller with the Escrow Agent pursuant to this Section 2 shall be accompanied by a certificate from an authorized officer of Seller stating that the deposit is in compliance with this Section 2.
SECTION 3.  DEPOSIT IN ESCROW OF ASSIGNMENTS AND BILL OF SALE
Seller, within thirty (30) days after the Effective Date, shall deposit with the Escrow Agent, for the purposes herein specified, (a) duly executed and acknowledged assignments transferring to Buyer all of Seller’s interest in all of the surface leases, subleases, easements and other agreements used in connection with Seller’s Mine, (b) duly executed and acknowledged assignments transferring to Buyer all of Seller’s interest in all of the coal leases, subleases, easements and other agreements used in connection with Seller’s Mine and (c) a duly executed and acknowledged General Bill of Sale and Assignment of Personal Property transferring Seller’s title to all of Seller’s tangible and intangible personal property to Buyer or to its successors and assigns. In  addition, Seller, on or before January 31, 2022, and on or before January 31 of  each year thereafter, shall deposit with the Escrow Agent necessary replacement assignments and a replacement General Bill of Sale and Assignment of Personal Property, such that on said date there shall be on deposit with the Escrow Agent duly executed and acknowledged assignments from Seller to Buyer, its successors and assigns, of all leases, subleases, easements and other agreements used in connection with Seller’s Mine and a General Bill of Sale and Assignment of Personal  Property covering all tangible and intangible personal property and fixtures used in connection with Seller’s Mine as of December 31 of the previous year.  Exhibit B contains a description of all such leases and subleases held by Seller as of June 30, 2021, and Exhibit C contains a description of all such easements and other agreements held by Seller as of June 30, 2021. Each deposit by Seller with the Escrow Agent pursuant to this 
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Section 3 shall be accompanied by a certificate from an authorized officer of Seller stating that the deposit is in compliance with this Section 3.
SECTION 4.  DELIVERY BY ESCROW AGENT 
(a)    The deeds described in Section 2 and the assignments and the General Bill of Sale and Assignment of Personal Property described in Section 3 are collectively referred to herein as “Escrowed Documents of Title”. 
(b)    If Buyer validly terminates the Coal Sales Agreement pursuant to Section 9.2(a) of the Coal Sales Agreement and Escrow Agent has received a certified or cashier’s check payable to Seller in an amount determined in accordance with the provisions of Section 5 and Escrow Agent has provided evidence of Buyer’s assumption, payment, satisfaction or deeming of satisfaction of the Loans and Leases as provided in Section 5, Seller shall surrender possession of the property referred to in (i) Section 2(a), (ii) Section 2(c) but only to the extent related to property referred to in Section 2(a), (iii) Section 3(a) and (iv) Section 3(c) but only to the extent related to property referred to in Section 3(a), and Escrow Agent shall deliver the relevant Escrowed Documents of Title to Buyer.  Seller shall retain ownership and possession of the interests in coal and mining rights referred to in Section 2(b) and Section 3(b) and Escrow Agent shall deliver the Escrowed Documents of Tile related thereto to Seller.
(c)    If Buyer validly terminates the Coal Sales Agreement pursuant to Section 9.2(b), (c), (d) or (e), and Escrow Agent has received a certified or cashier’s check payable to Seller in an amount determined in accordance with the provisions of Section 5 and Escrow Agent has provided evidence of Buyer’s assumption, payment, satisfaction or deeming of satisfaction of the Loans and Leases as provided in Section 5, Seller shall surrender possession of the property referred to in Section 2 and Section 3 and Escrow Agent shall deliver the Escrowed Documents of Title to Buyer.
SECTION 5.  PRICE DETERMINATION, METHOD AND AMOUNT OF PAYMENT
The price to be paid to Seller for all the assets of Seller described in the Escrowed Documents of Title and any additional documents of title as described in Section 4 (collectively, the “Assets”), shall be the payment or assumption of all of Seller’s obligations and the payment to Seller of an amount equal to its shareholders’ equity (including the obligations of Seller under any Loan or Lease referred to in Article 3 of the Coal Sales Agreement and the assumption by Buyer of the overriding lease obligation of Seller to pay ten cents ($0.10) per ton to ANR Western Coal Development Company or its assigns).
Payment of the price shall be made to Seller by Buyer assuming, paying or satisfying in full the outstanding obligations of Seller described above and indemnifying and saving harmless 
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Seller from all liability or claims thereunder and by Buyer paying by certified or cashier’s check to Escrow Agent an amount equal to the Seller’s shareholders’ equity. 
The amount of the certified or cashier’s check to be delivered to Escrow Agent as aforesaid shall be determined by Buyer on the basis of the most recent financial statements of Seller.  Such certified or cashier’s check shall forthwith be delivered to Seller by Escrow Agent.
SECTION 6. SUBSEQUENT PRICE ADJUSTMENT
After the delivery of the Escrowed Documents of Title and any additional documents of title and the certified or cashier’s check in accordance with Sections 4 and 5, Buyer shall pay promptly to Seller any amount by which the certified or cashier’s check delivered to the Escrow Agent is less than the excess of the shareholders’ equity over the amounts assumed, paid, satisfied or deemed satisfied referred to in Section 5 hereof, or Seller shall refund promptly to Buyer any amount by which the certified or cashier’s check aforesaid is greater than the excess of the shareholders’ equity over said amounts, as determined by an audit as of the date of delivery of the certified or cashier’s check as aforesaid.
SECTION 7. OTHER OPTIONS
The grant of option or options provided for in this Agreement are not exclusive and nothing in this Agreement shall preclude, prohibit or restrict the right and option of Rainbow or the Rainbow Entity provided for in Section 10.1 of the Coal Sales Agreement, to purchase after the Effective Date any surface property designated as Option Property as those terms are defined in the Coal Sales Agreement.
SECTION 8.  CUSTODY OF ESCROWED DOCUMENTS OF TITLE
The Escrow Agent agrees that it shall hold the Escrowed Documents of Title delivered to it by Seller in accordance with the provisions of this Agreement.  It is agreed that Seller’s interest as lessee and beneficial and record owner of the real and personal property represented by said documents of title shall remain in Seller during the escrow period, except to the extent Buyer acquired any such real property as Option Property in accordance with the Coal Sales Agreement, in which event Buyer and Seller shall instruct Escrow Agent to release to Buyer the Escrowed Documents of Title as to such Option Property by joint written instrument.  No assignment, transfer or conveyance of any right, title or interest in or to the subject matter of the escrow may be made by the Escrow Agent except as provided in this Agreement.
SECTION 9.  FEES AND DUTIES OF ESCROW AGENT
(a)    The Escrow Agent shall receive compensation for services at its customary rate as in effect from time to time and for the services and expenses of legal counsel, agents and attorneys-in fact employed by the Escrow Agent in relation to this Agreement; for amounts which it is charged or for which it is held responsible or liable in relation to this Agreement; and 
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for all out-of-pocket expenses in relation to this Agreement, all of which amounts shall be paid by Seller.
(b)    Should any controversy arise, or should the Escrow Agent have a good faith doubt concerning the right of any person to the Escrowed Documents of Title, the Escrow Agent shall have the right, but not the duty, to institute a bill of interpleader in any court of competent jurisdiction in North Dakota to determine the interests of Seller and Buyer to the Escrowed Documents of Title.  In the event that the Escrow Agent attempts to so institute a bill of interpleader and the court denies or dismisses such bill, then the Escrow Agent shall have the right to refuse to comply with any demands made upon it and to refuse to take any other action hereunder, so long as such controversy shall continue or such doubt exists.
(c)    The duties of the Escrow Agent are only those which are specifically provided in this Agreement, and the Escrow Agent is not required to institute legal proceedings of any kind. The Escrow Agent is not required to defend any legal proceedings unless requested to do so by the parties and then only if the parties agree to indemnify the Escrow Agent to its satisfaction.  The Escrow Agent is not liable for any action it may take or fail to take as escrow agent when its conduct is in good faith and in the exercise of its own best judgment or upon the advice of its legal counsel.
(d)    The Escrow Agent shall be protected in acting upon any written notice, request, demand, waiver, consent, certificate, receipt, authorization, power of attorney, demand, letter, judgment, other paper or document which the Escrow Agent believes in good faith to be genuine.
(e)    In case of the merger or consolidation of the Escrow Agent hereunder, the resultant corporation shall be Escrow Agent without notice to any party.  Seller and Buyer may, at any time, mutually designate in writing another person or corporation as a successor Escrow Agent.  The Escrow Agent, upon receipt of such designation of such successor signed by Seller and Buyer, shall promptly deliver to such successor the Escrowed Documents of Title, and thereafter such successor shall be bound by all of the covenants of the Escrow Agent contained herein.
(f)     The Escrow Agent shall have no responsibility for the genuineness or the validity of any document deposited with it or for the identity or legal capacity of any party involved, or for the sufficiency of any agency or for the genuineness of signatures to any papers or documents, or for any delay in or under this Agreement due to any cause beyond its control, and it shall be fully protected in acting in accordance with any written instructions given to it hereunder and believed by it to have been signed by the proper parties.
(g)    The Escrow Agent shall not be liable in the event it shall be prevented from delivering any of the Escrowed Documents of Title or any check from Buyer by operation of law or order of a court of competent jurisdiction.
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(h)    The Escrow Agent shall not withhold performance under this Agreement, unless restrained by order of court or served with some legal proceeding having a similar effect, and in so doing, the Escrow Agent shall not become liable to the undersigned, or to any other person, for its failure or refusal to comply with conflicting or adverse claims or demands.
(i)    In the event of a dispute between the parties, an ambiguity in the provisions hereof or uncertainty on the part of the Escrow Agent as to how to proceed with the terms thereof, such that the Escrow Agent, in its sole and absolute judgment, deems it necessary for its protection to do so, the Escrow Agent may:  (1) refrain from taking any action other than to safely keep  the Escrowed Documents of Title deposited with it until it shall have received joint written instructions from the parties hereto; or (2) deposit the Escrowed Documents of Title with a court of competent jurisdiction and thereupon have no further duties or responsibilities in connection therewith.
(j)    The Escrow Agent may resign at any time by delivering written notice at least thirty (30) days before the date upon which such resignation is to become effective to the parties hereto, who hereby agree to designate, by a written instrument delivered to the Escrow Agent together with the acceptance of such successor on or before such effective date, a successor Escrow Agent.  After the effective date of such resignation, the Escrow Agent shall be under no further obligation to perform any of the duties of Escrow Agent under the terms of this Agreement other than to deliver the Escrowed Documents of Title and any check from Buyer previously delivered to it to a properly designated successor Escrow Agent or to deal with such Escrowed Documents of Title and check as provided in Section 9(i).  Any successor Escrow Agent shall have all of the duties, powers, rights and immunities conferred upon the Escrow Agent hereby.  Any successor Escrow Agent may accept as complete and correct and may rely upon any account made by any prior Escrow Agent and shall not be subject  to any liability or responsibility with respect to the prior administration by any prior Escrow Agent.
SECTION 10.  TERM
This term of this Agreement shall begin on the Effective Date and continue until terminated pursuant to the provisions of the Coal Sales Agreement.
SECTION 11.  EFFECT OF EXERCISE OF OPTION
The exercise by Buyer of the option herein shall have no effect on any claims or controversies with respect to the Coal Sales Agreement except as provided herein.
SECTION 12.  NOTIFICATION
Except as otherwise expressly stated in this Agreement, any notice or other communication required or permitted under this Agreement shall be in writing and shall be deemed to have been duly given  when delivered  in person, or by express  delivery  service  or 
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by United  States  certified mail, return receipt requested, postage prepaid and addressed to the appropriate party as follows:
(a)    To Seller:            The Falkirk Mining Company
PO Box 1087
Underwood, North Dakota 58576-1087
Attention:  President

with a copy to:             The North American Coal Corporation
5340 Legacy Drive
Suite 300
Plano, Texas 75024
Attention: General Counsel

(b)    To Buyer:            Rainbow Energy Center, LLC
919 South 7th Street
Suite 405
Bismarck, North Dakota 58504
Attention: Chief Executive Officer

(c)    To Escrow Agent:        The Bank of North Dakota
1200 Memorial Highway
Bismarck, North Dakota 58504
Attention: Manager, Trust Department

(d)     To such other address or addresses as the parties may from time to time designate in writing.

[Remainder of page intentionally blank]

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IN WITNESS WHEREOF, the parties hereto have executed this Option Agreement as of the date first above written.
Attest:                        THE FALKIRK MINING COMPANY
/s/ John D. Neumann                    By: /s/ Carroll L. Dewing
Secretary John D. Neumann                Carroll L. Dewing
                            Vice President

Attest:                        RAINBOW ENERGY CENTER, LLC

/s/ Jeffrey Jonson                    By: /s/ Stacy L. Tschider
Secretary Jeffrey Jonson                Stacy L. Tschider
                            Its President

Attest:                        THE BANK OF NORTH DAKOTA

/s/ Cindy Doll                        By: /s/ Carrie Willits
Trust Officer Cindy Doll                Carrie Willits
                            Its Trust Officer

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