K-FUEL PROJECTS PARTICIPATION AND DEVELOPMENT AGREEMENT

                        (a)   “Affiliate” means, with respect to any Person at any particular time, any other Person controlling, controlled by or under common control with such first Person.  For purposes of this definition, “control” (and the correlative terms “controlling”, “controlled by” and “under common control with”) means the possession, directly or indirectly through one or more other Persons, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract (except a commercial contract for goods or non-management services) or otherwise, unless the power is solely the result of an official position with or corporate office held in such Person. Control is presumed to exist if any Person, directly or indirectly, owns, controls or holds with the power to vote in the aggregate ten percent (10%) or more of the voting securities of any other Person.  A pension plan shall be deemed to be controlled by, and an Affiliate of, its sponsor for the purposes of this Agreement.

                        (b)   “Binding Agreement” means any written contract or agreement binding on and Enforceable against the parties thereto, including any binding and Enforceable letter of intent or term sheet.

                        (c)   “Broker Investor” means that certain participant of an Investor who on March 28, 2002 (the date of the Original Investors’ Rights Agreement) had a demonstrated capability and capacity to broker coal such as K‑Fuel Products.

                        (d)   “Capacity” means (i) with respect to any Commercial Project, the designed (or if not designed, the projected) annual output capacity for the production of K‑Fuel Products determined, based on reasonable estimates by the applicable Commercial Project developer and operator which take into account expected downtime due to regularly scheduled maintenance and cleaning, at the time that Binding Agreements are entered into for the development or expansion of such Commercial Project, or (ii) with respect to multiple Commercial Projects, the aggregate Capacity of all such Commercial Projects.  After the determination thereof for purposes of this Agreement, the Capacity of a Commercial Project shall not be adjusted to reflect its actual annual production of K‑Fuel Products, absent a bona fide, designed (A) expansion of such Commercial Project, or (B) prior to the commencement of operations, contraction of such Commercial Project.

                        (e)   “Capital Recovery Point” means, with respect to any Commercial Project, the point at which (i) the difference of (A) the sum of (1) cumulative Gross Operating Profits, plus (2) any financing or refinancing proceeds, plus (3) any Tax Credit Monetization Proceeds, less (B) the amount paid to the applicable Commercial Project Licensor by the applicable Commercial Project Licensee for such Commercial Project designated as royalties (for the avoidance of uncertainty, excluding amounts designated as fees) under the applicable License Agreement, equals (ii) the aggregate initial equity investment in such Commercial Project.

                        (f)   “Carried Interest” means, with respect to any Commercial Project, the Company’s right to participate in profits, net income or other distributions of such Commercial Project in a proportion greater than its proportionate capital contribution to such Commercial

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Project, whether or not such right begins only after specified returns to the other investors in such Commercial Project.

                        (g)   “Commercial Project” means a project which involves a plant or facility to produce K‑Fuel Products on a commercial basis.

                        (h)   “Commercial Project Licensee” means, with respect to any Commercial Project, the Person or Persons holding the rights pursuant to a License Agreement to Exploit the K‑Fuel Technology in connection therewith.

                        (i)   “Commercial Project Licensor” means, with respect to any Commercial Project, the Licensor who has granted a license to the applicable Commercial Project Licensee pursuant to a License Agreement to Exploit the K‑Fuel Technology in connection therewith.

                        (j)   “Commercial Project Notice” shall have the meaning ascribed to such term in Section 4.1(a).

                        (k)   “Company Commercial Projects” means Commercial Projects, other than Investors Commercial Projects, (i) in which the Company or any of its Subsidiaries participates through an equity interest, and (ii) that the Company or any of its Subsidiaries constructs, develops or operates.

                        (l)   “Company Participation Capacity” means, with respect to any Investors Capped Project in which the Company participates pursuant to Section 2.3, the product of (x) the Participation Percentage of the Company in such Investors Capped Project, times (y) the Capacity of such Investors Capped Project.

                        (m)   “Company Project Investors” shall have the meaning ascribed to such term in Section 9.2.

                        (n)   “Comparable Licensees” means, as of any date of determination, third-party licensees of the K‑Fuel Technology similarly situated to the Commercial Project Licensees for Investors Capped Projects, provided that such third-party licensees have paid, or do pay, license fees in respect of the K‑Fuel Technology at any time preceding, or within the twelve (12) month period immediately succeeding, such date of determination.

                        (o)   “Confidential Information” means all notices and other information of any kind or nature whatsoever delivered by the Company or any of its Subsidiaries or their respective Representatives to the Investor Representative or any Investor pursuant to this Agreement to evaluate and carry out discussions or negotiations regarding potential participations in Commercial Projects, whether orally or in writing and regardless of whether marked or designated as “confidential” or proprietary at the time of disclosure.

                        (p)   “Cook Inlet Project” means that certain coal processing project, currently being developed by Cook Inlet Coal, LLC, near the Cook Inlet estuary in the State of Alaska.

                        (q)   “CPI Adjustment” means an increase or decrease to a fee based on a change to the level of the Consumer Price Index for Urban Consumers All Items – Less Shelter – Index (1967 = 100%), as published with respect to the United States by the Bureau of Labor Statistics for the United States Department of Labor, or, if such index is no longer published, a substantially similar price index reasonably selected by the Company.

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                        (r)   “Deliverables” means the deliverables to be provided by a Commercial Project Licensor to the applicable Commercial Project Licensee under the applicable License Agreement, as generally described in Exhibit A.

                        (s)   “Development Costs” means, with respect to any Commercial Project, all costs and expenses incurred in connection with the development thereof, including the costs of identifying the opportunity, performing feasibility and impact studies, negotiating definitive agreements, obtaining permits and regulatory approvals, engaging engineers and contractors to design and build the project and, as reasonably determined by the Company, the amortized value of the Company’s general development costs which are of direct benefit or value to such Commercial Project.

                        (t)   “Discretion” means, with respect to any Person, such Person’s absolute, sole and unfettered discretion, which need not be (i) exercised wisely, reasonably or in good faith, or (ii) explained or justified to any other Person.

                        (u)   “Enforceable” means, with respect to any party to an agreement, instrument or other undertaking, that such agreement, instrument or other undertaking is enforceable against such party in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles.

                        (v)  “Equipment” means the proprietary and patented equipment and certain related equipment necessary to implement the K-Fuel Technology.

                        (w)   “Exchange Act” means the United States Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder, each as amended from time to time, or any successor statute or statutes or rules and regulations, as the case may be, thereto (it being understood that any reference to any specific section or definition of the Exchange Act or such rules and regulations shall be deemed to include a reference to any similar sections or definitions, as the case may be, of any successor statutes or rules and regulations, as the case may be).

                        (x)   “Exempt Capacity” means the first twenty-five (25) million tons of aggregate Capacity of Company Commercial Projects in operation or subject to Binding Agreements.

                        (y)   “Exploit” means provide, manufacture, use, employ, practice, distribute, reproduce, disseminate, make, sell, research, design, develop, market or otherwise exploit.

                        (z)   “First Amendment” has the meaning ascribed to such term in the recitals hereto.

                        (aa)   “Governmental Authority” means any legislative, judicial, executive or other governmental court, tribunal, legislature, council, authority, office, branch, department, agency, commission, body, corporation or instrumentality, whether foreign, federal, state or local.

                        (bb)   “Gross Operating Profits” means, with respect to any Commercial Project, the gross operating revenues of  such Commercial Project for the sale of K‑Fuel Products or other fuel products produced at such Commercial Project in arm’s length transactions with third parties, net of:

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                        (1)   deductions for third party expenses not otherwise reimbursed, including (i) normal and customary trade, quantity and cash discounts and sales returns and allowances, including (A) those granted on account of price adjustments, billing errors, rejected goods, returns and rebates, (B) administrative and other fees and reim­burse­ments and similar payments to wholesalers and other distributors, buying groups and other institutions, (C) allowances, rebates and fees paid to distributors, and (D) chargebacks, (ii) customs and excise duties and other duties related to the sales to the extent that such items are included in the gross amount invoiced, (iii) rebates and similar payments made with respect to sales paid for by any Governmental Authority, (iv) sales and other taxes and duties directly related to the sale or delivery of such K‑Fuel Products (but excluding any foreign, federal, state or local taxes, duties, assessments or charges assessed against or based upon any income of such Commercial Project generally or derived from such sale);

                        (2)   the cost of goods sold based on (i) the cost to such Commercial Project of acquiring feedstock and the actual production of such K‑Fuel Products, and (ii) operation and maintenance costs for operating such Commercial Project;

                        (3)   reasonable sales, general and administrative costs and expenses directly related to the operation of such Commercial Project or sale of such K‑Fuel Products, including (i) advertising, (ii) bad debt expense, (iii) bank charges, (iv) commissions, (v) contract labor, (vi) transportation and delivery expenses, (vii) dues and subscriptions, (viii) insurance, (ix) office expenses, (x) operating supplies, (xi) payroll taxes, (xii) permits and licenses, (xiii) legal, accounting, engineering, consulting and other professional fees, (xiv) property taxes, (xv) lease or rent expense, (xvi) repairs, (xvii) telephone, (xviii) travel and entertainment, (xix) fuel and utility expense, (xx) vehicle expenses, and (xxi) salaries and wages; and

                        (4)  interest and administrative costs associated with indebtedness of the applicable Commercial Project Licensee that are directly allocable to such Commercial Project.

Notwithstanding the foregoing, “Gross Operating Profits” shall not be reduced by (i) the principal portion of any debt service, (ii) capital improvements for expanding the Capacity of such Commercial Project, (iii) any payments, rebates, fees, reimbursements, costs, expenses, overhead or other allocations to or from any Affiliate or related party of such Commercial Project Licensee, or (iv) depreciation, depletion or amortization costs of such Commercial Project Licensee.

                        (cc)   “Improvements” means the Investors Improvements and the Licensor Improvements.

                        (dd)   “India Exclusive Sales Right” means the exclusive rights of the Investors to sell K‑Fuel Products for consumption in India as contemplated by Section 2.10.

                        (ee)   “Initial Fee Date” means (i) with respect to each Commercial Project governed by a License Agreement specific to such Commercial Project, the date the License Agreement for such Commercial Project is executed and delivered by the applicable Licensor, and (ii) with respect to each other Commercial Project, the first date on which ground is broken on such Commercial Project.

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                        (ff)   “Institutional Accredited Investor” means a non-natural Person that is an “accredited investor” as defined in Rule 501(a)(1), (2), (3) or (7) promulgated under the Securities Act.

                        (gg)   “Investors” means the Investors listed on Schedule A to this Agreement, together with their successors and permitted assigns pursuant to ARTICLE VI.

                        (hh)   “Investors Capped Projects” means all Commercial Projects constructed, developed or operated by Investors as contemplated by Section 2.3.

                        (ii)   “Investors Commercial Projects” means all Investors Capped Projects and all Investors India Projects.

                        (jj)   “Investors Company Participation Rights” means the rights of the Investors to participate in Company Commercial Projects pursuant to Section 2.1.

                        (kk)   “Investors Improvements” means any and all Technology Improvements in respect of the K‑Fuel Technology or the Deliverables, to the production of K‑Fuel Products or to the construction, development or operation of Commercial Projects which are conceived, developed or reduced to practice in connection with any Investors Commercial Project.

                        (ll)   “Investors India Projects” means all Investors India Market Projects and all Investors India Site Projects.

                        (mm)   “Investors India Market Projects” means all Commercial Projects whose K‑Fuel Products may only be marketed and sold within India as contemplated by Section 2.4.

                        (nn)   “Investors India Site Projects” means all Commercial Projects which must be constructed, developed and operated within India as contemplated by Section 2.5.

                        (oo)   “Investors Licensor” has the meaning ascribed to such term in Section 2.5.

                        (pp)   “Investors Participation Capacity” means, with respect to any Commercial Project in which any Investors participate pursuant to Section 2.1 or Section 2.2, the product of (x) the aggregate Participation Percentage of such Investors in such Commercial Project, times (y) the Capacity of such Commercial Project.

                        (qq)   “Investors Project Rights” means the Investors’ rights to (i) participate in Commercial Projects pursuant to Section 2.1 and  Section 2.2, and (ii) construct, develop or operate Investors Commercial Projects pursuant to Section 2.3, Section 2.4 and Section 2.5.

                        (rr)   “Investors Representative” means Westcliff Capital Management, together with its successors as Investors Representative hereunder pursuant to Section 5.4.

                        (ss)  “Investors Rights” means the participation, development, sales, brokerage and other rights of the Investors, including the Investors Project Rights, the India Exclusive Sales Right and the Right of First Refusal, contemplated by ARTICLE II, including the rights to the transactions contemplated thereby.

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                        (tt)   “Investors Third-Party Participation Rights” means the rights of the Investors to be assigned the right to participate in third-party Commercial Projects pursuant to Section 2.2.

                        (uu)   “K‑Fuel Agreement” has the meaning ascribed to such term in the recitals hereto.

                        (vv)   “K‑Fuel LLC” has the meaning ascribed to such term in the recitals hereto.

                        (ww)   “K‑Fuel Products” means any fuel products which are produced using the K‑Fuel Technology.

                        (xx)   “K‑Fuel Provisions” means Sections 3.2 through Section 3.8, inclusive, and Section 3.10 of the Investors’ Rights Agreement, as such Sections were constituted immediately prior to giving effect to the First Amendment.

                        (yy)   “K‑Fuel Technology” means the Licensed Patents, the Deliverables and the Improvements.

                        (zz)  “K‑Fuel Technology” means the Licensed Patents, the Deliverables and the Improvements.

                        (aaa)   “Kennecott” has the meaning ascribed to such term in the recitals hereto.

                        (bbb)   “License Agreement” means, with respect to any Investors Commercial Project, the license agreement for such Commercial Project as contemplated by Section 3.1.

                        (ccc)   “Licensed Patents” means the United States patents and patent applications listed on Exhibit C, all foreign counterparts thereof, any and all patents maturing from a continuation, continuation-in-part, division, reissue, reexamination or any other type of application based on the foregoing, regardless of whether such patent matures from a convention or non-convention application, and any other substitution, renewal, extension, addition, utility model or any other United States or foreign patent based on the foregoing, for the duration of the last to expire of the foregoing patent rights.

                        (ddd)   “Licensor” means the Company or any of its Subsidiaries, including K‑Fuel LLC, that from time to time shall have the right to license the K‑Fuel Technology.

                        (eee)   “Licensor Improvements” means any Technology Improvements to the K‑Fuel Technology or the Deliverables (i) conceived, developed or reduced to practice by (A) the Licensors, or (B) a licensee of the Licensors, including any Commercial Project Licensee for an Investors Commercial Project, provided that such licensee effectively assigns all right, title and interest to such Technology Improvements to the applicable Licensors without restrictions on such Licensors’ ability to license such Technology Improvements to their licensees, and (ii) which are generally commercially released by the Licensors.

                        (fff)   “LSA” means Lurgi South Africa (Pty) Limited, a South Africa company, together with its successors and assigns.

                        (ggg)   “Lurgi Agreement” means that certain Business Development and Intellectual Property Rights Agreement, dated as of January 2, 2003, by and among the Company

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and Lurgi, as modified on January 8, 2004 and amended on May 21, 2004, attached as Exhibit D, and as, amended, extended, restated, superseded, supplemented or otherwise modified from time to time.

                        (hhh)   “Management Rights” means management, executive or voting rights, powers or authorities, including the right, power or authority to determine or make design, construction, operations, hiring, contracting and any other management or business decisions.

                        (iii)   “Maximum Capacity” means an aggregate Capacity of Commercial Projects of fifty (50) million tons per year; provided, however, that if a one-time additional allocation of up to three (3) million additional tons of Capacity is reasonably necessary to support the economic viability of the Investors constructing, developing or operating a final Investors Capped Project pursuant to Section 2.2, the Investors may petition the Company for such an allocation, and, upon the Investors’ submission of supporting information, including alternate economic models, reasonably acceptable to the Company, the Maximum Capacity shall for purposes of such final Investors Capped Project be increased by the petitioned amount.

                        (jjj)   “Net Revenue” means, with respect to the sale or other disposition of K‑Fuel Products produced by any Commercial Project, the excess of (i) gross revenue collected from such sale or other disposition, over (ii) the sum of (A) bona fide price adjustments, billing errors, rejected goods, returns, rebates, chargebacks and third-party commissions on such sale or other disposition, plus (B) sales or use taxes, excise taxes or other governmental or regulatory assessments, duties or charges imposed on such sale or other disposition (excluding any foreign, federal, state or local taxes, duties, assessments or charges assessed against or based upon a Person’s income), all as determined in accordance with the applicable License Agreement; provided that to the extent that such sale or disposition was not in an arm’s length transaction with third parties, the amounts to be calculated as provided in clause (i) and clause (ii)(A) next above shall be adjusted to the amounts the Company reasonably determines would have applied had such sale or disposition been made in an arm’s length transaction with third parties.

                        (kkk)   “Participation Percentage” means, with respect to any Person and any Commercial Project, the aggregate percentage equity interest of such Person in the production of K‑Fuel Products by such Commercial Project; provided that any Carried Interests shall not be considered in determining Participation Percentages.

                        (lll)   “Person” means any individual, trustee, receiver, conservator, administrator, liquidator, custodian, corporation, limited liability company, general or limited partnership, sole proprietorship, association, company, institution, public benefit corporation, firm, joint-stock company, trust, business trust, separate account, estate, joint venture, Governmental Authority or any other legally recognized entity or body, whether domestic or foreign.

                        (mmm)   “Prime Rate” means, with respect to any date of determination, the last variable rate of interest per annum published by the Board of Governors of the United States Federal Reserve System under the heading “Bank Prime Loan” in Federal Reserve statistical release H.15(519), or any successor publication to the Federal Reserve System reporting the Bank Prime Loan rate or its equivalent; provided that if no updated rate can be so determined for a period of six (6) months, the Company shall designate a substantially similar publication of interest rates with the consent of the Investors Representative, such consent not to be unreasonably delayed, withheld or conditioned.

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                        (nnn)   “QIB” means a “qualified institutional buyer”, as defined in Rule 144A promulgated under the Securities Act.

                        (ooo)   “Recipient” means any Person who receives Confidential Information pursuant to or in connection with this Agreement.

                        (ppp)   “Representatives” means, with respect to any Person, its directors, officers, partners, members, managers, employees, agents, consultants or other representatives (including advisers, attorneys, accountants and financial advisers).

                        (qqq)   “Revenue Code” means the United States Internal Revenue Code of 1986 and the rules and regulations promulgated thereunder, each as amended from time to time, or any successor statute or statutes or rules and regulations, as the case may be, thereto (it being understood that any reference to any specific section or definition of the Revenue Code or such rules and regulations shall be deemed to include a reference to any similar sections or definitions, as the case may be, of any successor statutes or rules and regulations, as the case may be).

                        (rrr)   “Right of First Refusal” means the Brokers Investor’s right of first refusal to serve as the Company’s broker pursuant to Section 2.11.

                        (sss)   “Sasol” means Sasol Lurgi Technology Company (Pty) Limited.

                        (ttt)   “Sasol/Lurgi Technology” has the meaning ascribed to such term in the Lurgi Agreement.

                        (uuu)   “Securities Act” means the United States Securities Act of 1933 and the rules and regulations promulgated thereunder, each as amended from time to time, or any successor statute or statutes or rules and regulations, as the case may be, thereto (it being understood that any reference to any specific section or definition of the Securities Act or such rules and regulations shall be deemed to include a reference to any similar sections or definitions, as the case may be, of any successor statutes or rules and regulations, as the case may be).

                        (vvv)   “Subsidiary” means, with respect to any Person, any other Person a majority of the equity ownership or voting stock of which is at the time owned or controlled, directly or indirectly through one or more other Persons, by such first Person and any of its other Subsidiaries.

                        (www)   “Tax Credit Monetization Proceeds” means, with respect to any Commercial Project, all amounts, proceeds, revenues, capital contributions or compensation of any kind or nature paid by any unaffiliated and otherwise unrelated Person to the applicable Commercial Project Licensee or any of its Affiliates in consideration of, incidental to or in connection with the grant, assignment or allocation of tax or similar credits to such unrelated Person.

                        (xxx)   “Technology” means ideas, information, methods, processes or products, regardless of form, physical embodiment or legal status, and the intellectual property rights associated therewith.

                        (yyy)   “Technology Improvements” means any improvements, enhancements, advancements, updates, revisions, changes or modifications, regardless of whether a patent can be obtained therefor.

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                        (zzz)   “Total Production Capacity” means the aggregate Capacity of all Commercial Projects in operation or subject to Binding Agreements.

                        (aaaa)   “Transfer” means, with respect to any right, property or asset, sell, deed, distribute, exchange, convey, gift, devise, bequeath, assign, issue, lease, pledge, hypothecate, grant a lien on, grant a security interest in, or otherwise alienate, transfer, encumber or dispose of such right, property or asset or any interest therein or right thereto, in whole or in part, whether directly or indirectly (through another Person or otherwise), whether voluntarily, involuntarily or by operation of law, and whether with or without consideration.

                        (bbbb)   “Used Capacity” means, subject to Section 2.8, the sum of (a) the aggregate Investors Participation Capacity in (i) all Company Commercial Projects in which the Investors participate pursuant to Section 2.1 (other than Company Commercial Projects in which any Investors participate separately from this Agreement, provided that the Company expressly agrees in writing that such Investor participation (A) is not pursuant to this Agreement, and (B) shall not be included when calculating the Used Capacity), and (ii) all Commercial Projects in which the Investors participate pursuant to Section 2.2, plus (b) the aggregate Capacity of all Investors Capped Projects (net of any Company Participation Capacity therein), in each case whether such Commercial Project is in operation or subject to Binding Agreements.

                        (cccc)   “Westcliff Capital Management” means Westcliff Capital Management, LLC, a California limited liability company.

                        (a)   all references in this Agreement to designated “Articles,” “Sections” and other subdivisions, or to designated “Exhibits”, “Schedules” or “Appendices”, are to the designated Articles, Sections and other subdivisions of, or the designated Exhibits, Schedules or Appendices to, this Agreement;