8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): April 2, 2008

Patriot Coal Corporation

(Exact name of registrant as specified in its charter)

Delaware	001-33466	20-5622045
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

12312 Olive Boulevard, Suite 400	63141
St. Louis, Missouri	(Zip Code)
(Address of principal executive offices)

Registrant’s telephone number, including area code: (314) 275-3600

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

x	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
x	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01. Entry into a Material Definitive Agreement.

On April 2, 2008, Patriot Coal Corporation (“Patriot”), Magnum Coal Company ( “Magnum”), Colt Merger Corporation (“Merger Subsidiary”), and ArcLight Energy Partners Fund I, L.P. and ArcLight Energy Partners Fund II, L.P., acting jointly as the Stockholder Representative (the “Stockholder Representative”), entered into an Agreement and Plan of Merger (the “Merger Agreement”).  Magnum is a privately held company whose majority stockholders are ArcLight Energy Partners Fund I, L.P. and ArcLight Energy Partners Fund II, L.P. (the “ArcLight Funds”).  The Merger Agreement provides that, upon the terms and subject to the conditions set forth in the Merger Agreement, Merger Subsidiary will merge with and into Magnum (the “Merger”), and as a result, Magnum will become a wholly owned subsidiary of Patriot.

At the effective time of the Merger (the “Effective Time”), the issued and outstanding shares of the common stock, par value $0.01 per share, of Magnum (“Magnum Common Stock”), including restricted stock (whether vested or unvested) and shares of Magnum Common Stock issued upon conversion of the issued and outstanding convertible indebtedness of Magnum, originally issued in an aggregate principal amount of $100,000,000, will be converted into the right to receive 11,901,729 shares of the common stock, par value $0.01 per share, of Patriot (“Patriot Common Stock”), subject to downward adjustment in limited circumstances.  The Patriot Common Stock issuable pursuant to the Merger Agreement represents approximately 31% of Patriot’s outstanding common stock as of the date hereof on a pro forma basis for the issuance in the Merger (and further assuming no downward adjustment of the number of shares of Patriot Common Stock issued in the Merger).  Pursuant to the rules of the New York Stock Exchange, because the issuance of Patriot Common Stock in the Merger (the “Patriot Stock Issuance”) exceeds 20% of the number of shares of Patriot Common Stock outstanding prior to such issuance, the Patriot Stock Issuance will require approval of Patriot’s stockholders, as further described below.

The Merger Agreement contains representations, warranties and covenants by Patriot and Magnum that are customary for a transaction of this nature.  Subject to certain limitations, Patriot and Magnum have agreed to use their respective commercially reasonable efforts to do all things necessary, proper or advisable under applicable law to consummate the transactions contemplated by the Merger Agreement.  In addition, Patriot has agreed to cause a meeting of the stockholders of Patriot to be held to approve the Patriot Stock Issuance.  Patriot’s Board of Directors will, except as required by applicable law, recommend that Patriot’s stockholders approve the Patriot Stock Issuance.  The Merger Agreement also provides for indemnification by each party for breaches of its representations, warranties and covenants.  Ten percent of the shares issuable in the Patriot Stock Issuance will be placed in escrow for one year to secure the indemnification obligations of Magnum’s primary stockholders.

Consummation of the Merger is subject to customary conditions, including approval of the Patriot Stock Issuance by the stockholders of Patriot, absence of certain legal prohibitions on consummation of the Merger, expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, obtaining certain third-party consents, the accuracy of each party’s representations and warranties (subject generally to a material adverse effect standard), material performance of each party’s covenants and the absence of certain mining catastrophes.  In addition, subject to certain limitations, consummation of the Merger is subject to the consummation of the ArcLight Financing or the receipt by Patriot of financing from an alternate source in an amount not less than the amount of the ArcLight Financing.

The Merger Agreement contains certain termination rights for both Patriot and Magnum, and further provides that upon termination of the Merger Agreement under specified circumstances, including termination as a result of Patriot’s stockholders failing to approve the Patriot Stock Issuance or as a result of a change in the recommendation of the Patriot Board of Directors to the Patriot stockholders, or in certain limited circumstances following the failure of the financing condition discussed above, Patriot may be required to reimburse Magnum for its expenses incurred in connection with the transaction, but not to exceed $5,000,000.

The foregoing description of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the Merger Agreement, which is filed as Exhibit 2.1 hereto, and is incorporated into this report by reference.

The Merger Agreement has been included to provide investors with information regarding its terms.  Except for its status as the contractual document that establishes and governs the legal relations among the parties thereto with respect to the transactions described above, the Merger Agreement is not intended to be a source of factual, business or operational information about the parties.  The representations, warranties and covenants made by the parties in the Merger Agreement are qualified, including by information in disclosure schedules that the parties exchanged in connection with the execution of the Merger Agreement.  Representations and warranties may be used as a tool to allocate risks between the parties, including where the parties do not have complete knowledge of all facts.  Investors are not third party beneficiaries under the Merger Agreement and should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of Patriot, Magnum or any of their respective affiliates.

In addition, Patriot has agreed to provide the ArcLight Funds with customary registration rights with respect to the shares of Patriot Common Stock issuable to the ArcLight Funds in the Merger pursuant to a Registration Rights Agreement that will be entered into at the Effective Time.  The foregoing description of the Registration Rights Agreement does not purport to be complete and is qualified in its entirety by reference to the form of Registration Rights Agreement, which is filed as Exhibit 10.1 hereto, and is incorporated into this report by reference.

In connection with the Merger Agreement, Patriot and the ArcLight Funds have entered into a Bridge Facility Commitment Letter dated as of April 2, 2008, pursuant to which the ArcLight Funds will provide Patriot with up to $150,000,000 of financing (the “ArcLight Financing”) at closing of the Merger to be used to repay existing indebtedness of Magnum.  The foregoing description of the Bridge Facility Commitment Letter does not purport to be complete and is qualified in its entirety by reference to the Bridge Facility Commitment Letter filed as Exhibit 10.2 hereto and incorporated into this report by reference.

In connection with the Merger Agreement, Patriot entered into Support Agreements (the “Support Agreements”) dated as of April 2, 2008, with certain stockholders of Magnum who own approximately 98.9% of the outstanding common stock of Magnum.  Pursuant to the Support Agreements, immediately after the execution and delivery of the Merger Agreement, such stockholders executed and delivered irrevocable written consents approving the Merger Agreement.  As a result of obtaining such written consents, no further action on the part of Magnum’s stockholders is required in connection with the approval of the Merger.  The foregoing description of the Support Agreements does not purport to be complete and is qualified in its entirety by reference to the form of Support Agreement, which is filed as Exhibit 10.3 hereto, and is incorporated into this report by reference.

In connection with the Merger Agreement, Patriot, the Stockholder Representative, and certain stockholders of Magnum entered into a Voting and Standstill Agreement (the “Voting Agreement”), dated as of April 2, 2008.  The Voting Agreement will be effective upon consummation of the Merger and provides, among other things, that, subject to the limitations set forth therein (i) the Stockholder Representative will be entitled to nominate up to two members to the Board of Directors of Patriot, (ii) certain Magnum stockholders (who will receive Patriot Common Stock in the Patriot Stock Issuance), representing approximately 24.4% of the Patriot Common Stock outstanding immediately after the Effective Time, will vote in favor of all directors recommended for election by the Board of Directors of Patriot and will vote as directed by the Patriot Board of Directors with respect to stockholder proposals and certain routine proposals, and (iii) certain Magnum stockholders (who will receive Patriot Common Stock in the Patriot Stock Issuance), representing approximately 27.8% of the Patriot Common Stock outstanding immediately after the Effective Time, will be subject to certain “standstill” restrictions limiting their ability (in varying degrees depending on the particular Magnum stockholder at issue) to acquire additional shares of Patriot or take certain other actions.  In addition, the Voting Agreement provides that certain Magnum stockholders (who will receive Patriot Common Stock in the Patriot Stock Issuance), representing approximately 30.5% of the Patriot Common Stock outstanding immediately after the Effective Time, will be subject to restrictions on their ability to transfer shares of Patriot as follows: (i) no transfers will be permitted for 180 days following the Effective Time, (ii) between 180 days after the Effective Time and 270 days after the Effective Time, up to fifty percent of the shares may be transferred, (iii) between 270 days after the Effective Time and 360 days after the Effective Time, up to seventy-five percent of the shares may be transferred and (iv) no restrictions will apply after 360 days after the Effective Time.  The foregoing description of the Voting Agreement does not purport to be complete and is qualified in its entirety by reference to the Voting Agreement, which is filed as Exhibit 10.4 hereto, and is incorporated into this report by reference.

Prior to the execution of the Merger Agreement, Patriot and American Stock Transfer & Trust Company, as Rights Agent (the “Rights Agent”), entered into a First Amendment to Rights Agreement (the “Rights Agreement Amendment”) which amends the Rights Agreement (the “Rights Agreement”) dated as of October 22, 2007, between Patriot and the Rights Agent.  The Rights Agreement Amendment provides, among other things, that the separation of rights from the shares of Patriot Common Stock under the Rights Agreement will not be triggered as a result of the transactions contemplated by the Merger Agreement, including the Patriot Stock Issuance.  The Rights Agreement Amendment also provides that no stockholder of Magnum or any of its affiliates or associates will be deemed to be an “Acquiring Person” solely as a result of the entry into the Merger Agreement or the consummation of the transactions contemplated by the Merger Agreement, including the Patriot Stock Issuance.  The foregoing description of the Rights Agreement Amendment does not purport to be complete and is qualified in its entirety by reference to the Rights Agreement Amendment, which is filed as Exhibit 4.1 hereto, and is incorporated into this report by reference.

In connection with the Merger Agreement, Patriot entered into an Amendment (the “Credit Agreement Amendment”) dated as of April 2, 2008 to the Credit Agreement (the “Credit Agreement”) dated as of October 31, 2007, among Patriot, Bank of America, N.A., as administrative agent, L/C Issuer and Swing Line Lender, and the lenders party thereto.  The Credit Agreement Amendment amends the Credit Agreement to, among other things, (i) permit the Merger and the transactions contemplated by the Merger Agreement, (ii) increase the rates of interest applicable to loans thereunder and (iii) modify certain covenants and related definitions to allow for changes in permitted indebtedness, permitted liens, permitted capital expenditures and other changes in respect of Patriot and its subsidiaries in connection with the Merger.  The foregoing description of the Credit Agreement Amendment does not purport to be complete and is qualified in its entirety by reference to the Credit Agreement Amendment, which is filed as Exhibit 10.5 hereto, and is incorporated into this report by reference.

Patriot will file a proxy statement/prospectus with the Securities and Exchange Commission (the “SEC”) in connection with the Patriot Stock Issuance.  Investors and stockholders are urged to read the proxy statement/prospectus when it becomes available and any other relevant documents filed with the SEC because they will contain important information about the proposed issuance.  Investors and stockholders may obtain these documents free of charge at the website maintained by the SEC at www.sec.gov.  In addition, documents filed with the SEC by Patriot are available free of charge by contacting Janine Orf, Director, Investor Relations, at (314) 275-3680.  The final proxy statement/prospectus will be mailed to stockholders.

Patriot, Magnum and certain of their respective directors, executive officers and other members of management and employees may be deemed to be participants in the solicitation of proxies from the stockholders of Patriot in connection with the proposed issuance.  Information about Patriot’s directors and executive officers is set forth in Patriot’s Annual Report on Form 10-K for the year ended December 31, 2007 filed with the SEC on March 14, 2008 and in the Information Statement filed as Exhibit 99.1 to the Report on Form 8-K filed by Patriot with the SEC on October 24, 2007.  Additional information regarding the potential participants in the proxy solicitation and information regarding the interests of such potential participants will be included in the proxy statement/prospectus and the other relevant documents filed with the SEC when they become available.

Item 3.03. Material Modification to Rights of Security Holders.

See Item 1.01 above.

 Item 9.01. Financial Statements and Exhibits.

(c) Exhibits

Exhibit No.	Description
2.1	Agreement and Plan of Merger, dated as of April 2, 2008, by and among Magnum Coal Company, Patriot Coal Corporation, Colt Merger Corporation, and ArcLight Energy Partners Fund I, L.P. and ArcLight Energy Partners Fund II, L.P., acting jointly, as Stockholder Representative (the schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K; the registrant will furnish supplementally a copy of any omitted schedule or exhibit to the SEC upon request).
4.1	First Amendment to Rights Agreement, dated as of April 2, 2008, to the Rights Agreement, dated as of October 22, 2007 between Patriot Coal Corporation and American Stock Transfer & Trust Company, as Rights Agent.
10.1	Form of Registration Rights Agreement among Patriot Coal Corporation, ArcLight Energy Partners Fund I, L.P. and ArcLight Energy Partners Fund II, L.P.
10.2	Bridge Facility Commitment Letter dated April 2, 2008, among Patriot Coal Corporation, ArcLight Energy Partners Fund I, L.P. and ArcLight Energy Partners Fund II, L.P.
10.3	Form of Support Agreement, dated as of April 2, 2008, between Patriot Coal Corporation and certain stockholders of Magnum Coal Company.
10.4	Voting and Standstill Agreement, dated as of April 2, 2008, among Patriot Coal Corporation, the stockholders whose names appears on the signature page thereto, ArcLight Energy Partners Fund I, L.P. and ArcLight Energy Partners Fund II, L.P., acting jointly, as stockholder representative.
10.5	Amendment, dated as of April 2, 2008, to the Credit Agreement dated as of October 31, 2007, among Patriot Coal Corporation, Bank of America, N.A., as administrative agent, L/C Issuer and Swing Line Lender, and the lenders party thereto.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated: April8, 2008

PATRIOT COAL CORPORATION
By:	/s/ Joseph W. Bean
	Joseph W. Bean
	Senior Vice President, General Counsel & Corporate Secretary

EX-2.1

Exhibit 2.1

EXECUTION COPY

AGREEMENT AND PLAN OF MERGER

dated as of

April 2, 2008

among

MAGNUM COAL COMPANY,

PATRIOT COAL CORPORATION

COLT MERGER CORPORATION,

and

ARCLIGHT ENERGY PARTNERS FUND I, L.P.

AND

ARCLIGHT ENERGY PARTNERS FUND II, L.P., acting jointly, as Stockholder Representative

TABLE OF CONTENTS

		PAGE
ARTICLE 1 DEFINITIONS
Section 1.01.	Definitions	2
Section 1.02.	Other Definitional and Interpretative Provisions	17
ARTICLE 2 THE MERGER
Section 2.01.	The Merger	17
Section 2.02.	Conversion of Shares	18
Section 2.03.	Surrender and Payment	18
Section 2.04.	Certain Adjustments	20
Section 2.05.	Fractional Shares	21
Section 2.06.	Withholding Rights	21
Section 2.07.	Lost Certificates	21
Section 2.08.	Escrow Account	22
Section 2.09.	Dissenting Shares	22
ARTICLE 3 THE SURVIVING CORPORATION
Section 3.01.	Certificate of Incorporation	23
Section 3.02.	Bylaws	23
Section 3.03.	Directors and Officers	23
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 4.01.	Corporate Existence and Power	24
Section 4.02.	Corporate Authorization	24
Section 4.03.	Governmental Authorization	25
Section 4.04.	Non-contravention	25
Section 4.05.	Capitalization; Ownership of Shares	26
Section 4.06.	Subsidiaries	27
Section 4.07.	Financial Statements	28
Section 4.08.	Absence of Certain Changes	29
Section 4.09.	No Undisclosed Material Liabilities	29
Section 4.10.	Compliance with Laws; Mining Compliance Matters	30
Section 4.11.	Litigation	31
Section 4.12.	Investment Banker and Finders’ Fees	31
Section 4.13.	Opinion of Financial Advisor	31
Section 4.14.	Taxes	32

i

Section 4.15.	Tax Treatment	34
Section 4.16.	Employee Benefit Plans	34
Section 4.17.	Employees	36
Section 4.18.	Labor Matters	37
Section 4.19.	Environmental Matters	37
Section 4.20.	Antitakeover Statutes; Company Stockholders Agreement; Absence of Dissenters Rights	39
Section 4.21.	Material Contracts	39
Section 4.22.	Properties	42
Section 4.23.	Intellectual Property	46
Section 4.24.	Insurance Coverage	47
Section 4.25.	Licenses and Permits	47
Section 4.26.	Affiliate Transactions	48
Section 4.27.	Customers and Suppliers	48
Section 4.28.	Absence of Certain Business Practices	49
Section 4.29.	Disclosure	49
Section 4.30.	No Company Material Adverse Effect	49
Section 4.31.	No Other Representations or Warranties	49
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF PARENT
Section 5.01.	Corporate Existence and Power	50
Section 5.02.	Corporate Authorization	50
Section 5.03.	Governmental Authorization	51
Section 5.04.	Non-contravention	51
Section 5.05.	Capitalization	52
Section 5.06.	Subsidiaries	53
Section 5.07.	SEC Filings	53
Section 5.08.	Financial Statements	54
Section 5.09.	Absence of Certain Changes	54
Section 5.10.	No Undisclosed Material Liabilities	55
Section 5.11.	Compliance with Laws; Mining Compliance Matters	55
Section 5.12.	Litigation	56
Section 5.13.	Investment Banker and Finders’ Fees	57
Section 5.14.	Opinion of Financial Advisor	57
Section 5.15.	Taxes	57
Section 5.16.	Tax Treatment	58
Section 5.17.	Employee Benefit Plans	58
Section 5.18.	Labor Matters	59
Section 5.19.	Environmental Matters	60
Section 5.20.	Antitakeover Statutes and Rights Agreement	61
Section 5.21.	Material Contracts; Affiliate Transactions	62
Section 5.22.	Properties	63
Section 5.23.	Intellectual Property	65
Section 5.24.	Licenses and Permits	65

ii

Section 5.25.	Absence of Certain Business Practices	66
Section 5.26.	Financing	66
Section 5.27.	No Parent Material Adverse Effect	67
Section 5.28.	No Other Representations and Warranties	67
ARTICLE 6 COVENANTS OF THE COMPANY
Section 6.01.	Conduct of the Company	67
Section 6.02.	Notice of Stockholder Consents; Company Information Statement	70
Section 6.03.	No Solicitation	71
Section 6.04.	Tax Matters	73
Section 6.05.	Transaction Expenses	73
Section 6.06.	Company Convertible Debt	74
Section 6.07.	280G Approval	74
ARTICLE 7 COVENANTS OF PARENT
Section 7.01.	Conduct of Parent	74
Section 7.02.	Obligations of Merger Subsidiary	75
Section 7.03.	Stock Exchange Listing	75
Section 7.04.	Employee Matters	75
Section 7.05.	Board Appointments	75
Section 7.06.	Director and Officer Indemnification	76
Section 7.07.	Books and Records	77
ARTICLE 8 COVENANTS OF PARENT AND THE COMPANY
Section 8.01.	Commercially Reasonable Efforts	77
Section 8.02.	Certain Filings	78
Section 8.03.	Public Announcements	79
Section 8.04.	Further Assurances	79
Section 8.05.	Notices of Certain Events	79
Section 8.06.	Confidentiality	80
Section 8.07.	Tax-free Reorganization	81
Section 8.08.	Access to Information	81
Section 8.09.	Registration Statement; Parent Stockholder Meeting	82
Section 8.10.	Financing	84
ARTICLE 9 CONDITIONS TO THE MERGER
Section 9.01.	Conditions to the Obligations of Each Party	86
Section 9.02.	Conditions to the Obligations of Parent and Merger Subsidiary	87

iii

Section 9.03.	Conditions to the Obligations of the Company	89
ARTICLE 10 TERMINATION
Section 10.01.	Termination	90
Section 10.02.	Effect of Termination	92
ARTICLE 11 SURVIVAL; INDEMNIFICATION; STOCKHOLDER REPRESENTATIVE MATTERS
Section 11.01.	Survival	93
Section 11.02.	Indemnification	94
Section 11.03.	Procedures	98
Section 11.04.	Adjustment to Consideration for Tax Purposes	100
Section 11.05.	Stockholder Representative	101
ARTICLE 12 MISCELLANEOUS
Section 12.01.	Notices	103
Section 12.02.	Amendments and Waivers	105
Section 12.03.	Expenses	105
Section 12.04.	Disclosure Schedule References	105
Section 12.05.	Binding Effect; Benefit; Assignment	106
Section 12.06.	Governing Law	106
Section 12.07.	Jurisdiction	106
Section 12.08.	WAIVER OF JURY TRIAL	107
Section 12.09.	Counterparts; Effectiveness	107
Section 12.10.	Entire Agreement	107
Section 12.11.	Severability	107
Section 12.12.	Specific Performance	107
Section 12.13.	Representation of the Company and its Stockholders	107

iv

AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER (this “Agreement”) dated as of April 2, 2008 by and among Magnum Coal Company, a Delaware corporation (the “Company”), Patriot Coal Corporation, a Delaware corporation (“Parent”), Colt Merger Corporation, a Delaware corporation and a wholly-owned subsidiary of Parent (“Merger Subsidiary”), and ArcLight Energy Partners Fund I, L.P., a Delaware limited partnership, and ArcLight Energy Partners Fund II, L.P., a Delaware limited partnership, acting jointly, as Stockholder Representative for the Designated Stockholders in accordance with Section 11.05 and for certain other purposes as set forth herein (the “Stockholder Representative”).

WHEREAS, the Boards of Directors of each of Parent, the Company and Merger Subsidiary have determined that the merger of Merger Subsidiary with and into the Company, with the Company being the surviving corporation (the “Merger”) is advisable and in the best interests of Parent, the Company and Merger Subsidiary and their respective stockholders;

WHEREAS, for U.S. federal income tax purposes, it is intended that the Merger shall qualify as a “reorganization” within the meaning of Section 368(a) of the Code, and that this Agreement constitute a “plan of reorganization” within the meaning of Section 1.368-2(g) of the Treasury regulations promulgated under the Code;

WHEREAS, in order to induce Parent and Merger Subsidiary to enter into this Agreement, concurrently with the execution and delivery of this Agreement, Parent and the holders of shares of Company Stock representing approximately 98.955% of the issued and outstanding Company Stock, have executed and delivered support agreements (collectively, the “Support Agreements”) pursuant to which, among other things, each such holder agreed to execute and deliver an irrevocable written consent approving this Agreement and the Merger (the “Stockholder Consents”) immediately after the execution and delivery of this Agreement; and

WHEREAS, in order to induce Parent and Merger Subsidiary to enter into this Agreement, concurrently with the execution and delivery of this Agreement, Parent, the Designated Stockholders and the Stockholder Representative have executed and delivered a Voting and Standstill Agreement (the “Voting Agreement”).

NOW, THEREFORE, in consideration of the foregoing and the representations, warranties and covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto intending to be legally bound do hereby agree as follows:

1

ARTICLE 1

Definitions

Section 1.01.  Definitions. (a) As used herein, the following terms have the following meanings:

“Acquisition Proposal” means, other than the transactions contemplated by this Agreement, any offer, proposal or inquiry relating to, or any Third Party indication of interest in, (A) any acquisition or purchase, direct or indirect, of 20% or more of the consolidated assets of the Company and its Subsidiaries or over 20% or more of any class of equity or voting securities of the Company or any of its Subsidiaries whose assets, individually or in the aggregate, constitute more than 20% of the consolidated assets of the Company and its Subsidiaries, (B) a merger, consolidation, share exchange, business combination, sale of substantially all the assets, reorganization, recapitalization, liquidation, dissolution or other similar transaction involving the Company or any of its Subsidiaries whose assets, individually or in the aggregate, constitute more than 20% of the consolidated assets of the Company and its Subsidiaries, (C) any other transaction that, if consummated, would result in one or more Third Parties beneficially owning 20% or more of any class of equity or voting securities of the Company or any of its Subsidiaries whose assets, individually or in the aggregate, constitute more than 20% of the consolidated assets of the Company and its Subsidiaries, or (D) any other transaction the consummation of which would reasonably be expected to impede, interfere with, prevent or materially delay the Merger.  Notwithstanding the foregoing, any action taken by the Company that is expressly consented to by Parent pursuant to the consent provision of Section 6.01, shall not be deemed an Acquisition Proposal hereunder.

“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such Person, and, for the purposes hereof, the term “control” means the power to direct the management and policies of such Person (directly or indirectly), whether through ownership of securities, by contract or otherwise (and the terms controlling and controlled have the meanings correlative to the foregoing).

“Applicable Law” means, with respect to any Person, any federal, state, local or foreign law (statutory, common or otherwise), constitution, treaty, convention, ordinance, code, rule, regulation, order, injunction, judgment, decree, ruling or other similar requirement enacted, adopted, promulgated or applied by a Governmental Authority that is binding upon or applicable to such Person, as amended unless expressly specified otherwise.

“ArcLight Funds” means ArcLight Energy Partners Fund I, L.P. and ArcLight Energy Partners Fund II, L.P., and when so referred to herein as an ArcLight Fund, not acting in their capacity as Stockholder Representative.

2

“Business Day” means a day, other than Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by Applicable Law to close.

“CERCLA” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980.

“Code” means the Internal Revenue Code of 1986.

“Company Balance Sheet” means the audited consolidated balance sheet of the Company and its Subsidiaries as of December 31, 2007 and the notes (other than (i) the first paragraph under the caption “Off-Balance Sheet Arrangements” in note 2, (ii) the first and second sentences under note 10, (iii) the first, second and third sentences under the caption “Other Postretirement Benefits” in note 11, (iv) the first sentence in the first paragraph of note 16, (v) the first and second sentences in the second paragraph of note 16 and (vi) the first and fifth paragraphs of note 18) to the financial statements referred to in Section 4.07(b).

“Company Balance Sheet Date” means December 31, 2007.

“Company Convertible Debt” means the Company’s issued and outstanding convertible indebtedness, originally issued in an aggregate principal amount of $100,000,000.

“Company Convertible Debt Notes” means the promissory notes issued to the holders of Company Convertible Debt in connection with the issuance of the Company Convertible Debt.

“Company Convertible Debt NPA” means the Note Purchase Agreement dated as of March 26, 2008 (as it may be amended consistent with Section 6.06) relating to the Company Convertible Debt.

“Company Credit Agreement” means the Credit Agreement dated as of March 21, 2006 among the Company, the Lenders party thereto, Lehman Brothers Inc., as sole lead arranger and book runner, Lehman Commercial Paper Inc., as administrative agent and collateral agent and Bank of Montreal, as syndication agent, as amended or modified from time to time.

“Company Disclosure Schedule” means the disclosure schedule dated the date hereof regarding this Agreement that has been provided by the Company to Parent and Merger Subsidiary.

“Company Material Adverse Effect” means a material adverse effect on (a) the ability of the Company to consummate the transactions contemplated by this Agreement without material delay or (b) the condition (financial or otherwise), business, assets, liabilities or results of operations of the Company and its Subsidiaries, taken as a whole; provided that for purposes of this clause (b),

3

none of the following shall be deemed, either alone or in combination, to constitute, and none of the following shall be taken into account in determining whether there has been or will be a Company Material Adverse Effect: (i) any adverse change, effect, event, occurrence, state of facts or development attributable to conditions affecting the industry in which the Company or its Subsidiaries participates, the U.S. economy as a whole or the capital or financial markets (including public and private debt markets) in general or the markets in which the Company or its Subsidiaries operate, except to the extent, in any such case, disproportionately impacting the Company or its Subsidiaries, taken as a whole, as compared to the other entities operating in such industries or markets, respectively (and in any such case, only such disproportionate impact shall be taken into account in determining if a Company Material Adverse Effect has occurred); (ii) any adverse change, effect, event, occurrence, state of facts or development arising from or relating to any change in accounting requirements or principles or any change in Applicable Law (or the interpretation thereof) except to the extent, in either case, disproportionately impacting the Company or its Subsidiaries, taken as a whole, as compared to the other entities operating in the industries in which the Company and its Subsidiaries operate (and in any such case, only such disproportionate impact shall be taken into account in determining if a Company Material Adverse Effect has occurred) (provided that any such adverse change, effect, event, occurrence, state of facts or development to the extent arising from or relating to the failure by the Company or any of its Subsidiaries to comply with any change in Applicable Law shall not be disregarded under this clause (ii)); (iii) any adverse change, effect, event, occurrence, state of facts or development arising from or relating to compliance with the Company’s obligations under this Agreement or any other Transaction Document or (iv) the breach of this Agreement or any other Transaction Document by Parent or Merger Subsidiary (or any of their Affiliates party to any other Transaction Document).  The term “Company Material Adverse Effect” as used in any representation or warranty in Article 4 shall include (A) in the context of Article 11 (other than to the extent relating to Section 4.30) an adverse effect of $20,000,000 or more and (B) in the context of Article 11 to the extent relating to Section 4.30 and in the context of Section 9.02, an adverse effect of $60,000,000 or more.

“Company Restricted Stock” means any and all shares of the Company Stock that have been awarded in the form of restricted stock (whether vested or unvested) to employees and directors of, and consultants to, the Company under the Stock Plan.

“Company Stock” means the common stock, $0.01 par value, of the Company.

“Company Stockholders Agreement” means the Stockholders Agreement dated as of March 21, 2006 among the Company and the investors party thereto.

4

“Confidentiality Agreements” means (i) the Confidentiality Agreement dated as of November 7, 2007 between Parent and the Company relating to confidential information of Parent and (ii) the Confidentiality Agreement dated as of November 7, 2007 between Parent and the Company relating to confidential information of the Company.

“Covered Contract” means  (in each case, other than agreements solely between or among the Company and its wholly-owned Subsidiaries and not containing any rights of or obligations to any Third Party):

(i)any agreement or series of related agreements for the purchase, sale (other than coal supply or coal product sales agreements), receipt, lease or use of materials, supplies, goods, services, equipment or other assets providing for (A) annual payments by or to the Company or any of its Subsidiaries of $5,000,000 or more, (B) aggregate payments by or to the Company or any of its Subsidiaries of $10,000,000 or more or (C) a term in excess of three years;

(ii)any partnership, joint venture, limited liability company, operating, shareholder, investor rights or other similar agreement or arrangement with any Person (other than any limited liability company or operating agreement of any wholly-owned Subsidiary of the Company);

(iii)any distributor, dealer, sales agency, sales representative, marketing or similar contracts providing for (A) annual payments by or to the Company or any of its Subsidiaries of $100,000 or more, (B) aggregate payments by or to the Company or any of its Subsidiaries of $250,000 or more or (C) a term in excess of three years;

(iv)any agreement or series of related agreements relating to, or entered into in connection with, the acquisition or disposition of the equity securities of any Person, any business or any material amount of assets outside the ordinary course of business (in each case, whether by merger, sale of stock, sale of assets or otherwise);

(v)any agreement relating to indebtedness for borrowed money, the deferred purchase price of property or the prepaid sale of goods or products (in any such case, whether incurred, assumed, guaranteed or secured by any asset and, in the case of agreements relating to the deferred purchase price of property, with a value in excess of $5,000,000 per asset or $10,000,000 in the aggregate for all such assets), including indentures, mortgages, loan agreements, capital leases, security agreements or other agreements for the incurrence of indebtedness, other than trade accounts payable incurred in the ordinary course of business;

5

(vi)any agreement relating to any interest rate, currency or commodity derivative or hedging transaction (excluding any agreements for the purchase of diesel fuel where physical delivery is intended);

(vii)any agreement (including any keepwell agreement) under which (A) any Person has directly or indirectly guaranteed any liabilities or obligations of the Company or any of its Subsidiaries (other than any such guarantees by the Company and its wholly-owned Subsidiaries) or (B) the Company or any of its Subsidiaries has, directly or indirectly, guaranteed any liabilities or obligations of any other Person (other than the Company or any wholly-owned Subsidiary);

(viii)any agreement that (A) limits the freedom of the Company or any of its Subsidiaries to compete in any line of business or with any Person or in any area or which would so limit the freedom of Parent, the Company or any of their respective Affiliates after the Effective Time or (B) contains exclusivity or “most favored nation” obligations or restrictions binding on the Company or any of its Subsidiaries or that would be binding on Parent or its Affiliates after the Effective Time;

(ix)any employment, consultancy, deferred compensation, loan, retention, bonus, severance, retirement or other similar agreement or arrangement (including any amendment to any such existing agreement or arrangement) with any director, officer or employee of the Company or any of its Subsidiaries (other than loans to non-executive employees not in excess of $10,000 individually or $100,000 in the aggregate);

(x)to the extent not otherwise included in the definition of “Covered Contract” hereunder, any consulting agreement or similar arrangement with an independent contractor (i) providing for annual payments by the Company or any of its Subsidiaries of $250,000 or more, (ii) providing for aggregate payments by the Company or any of its Subsidiaries of $500,000 or more, (iii) providing for a term in excess of three years or (iv) to the extent that, after entry into such agreement or arrangement, the Company and its Subsidiaries shall have entered into consulting agreements or similar arrangements with independent contractors providing for aggregate payments by the Company or any of its Subsidiaries in excess of $1,000,000 pursuant to all of such agreements or arrangements;

(xi)any collective bargaining agreement;

(xii)any contracts or agreements relating to the provision of contract mining (excluding any agreement solely with respect to the provision of contract labor) by or to the Company or any of its Subsidiaries providing for (i) annual payments by or to the Company or

6

any of its Subsidiaries of $5,000,000 or more, (ii) aggregate payments by or to the Company or any of its Subsidiaries of $10,000,000 or more or (iii) a term in excess of three years;

(xiii)any lease or sublease of or relating to (A) real property leased to others, (B) tangible personal property leased to others or (C) mining or exploration rights leased to others, in each case providing for (i) annual payments to the Company or any of its Subsidiaries of $500,000 or more, (ii) aggregate payments to the Company or any of its Subsidiaries of $1,000,000 or more or (iii) a term in excess of three years;

(xiv)any lease or sublease of or relating to (A) real property to be leased by the Company or any of its Subsidiaries, or (B) mining or exploration rights to be leased by the Company or any of its Subsidiaries, in each case providing for (i) annual payments by the Company or any of its Subsidiaries of $1,000,000 or more, (ii) aggregate payments by the Company or any of its Subsidiaries of $5,000,000 or more or (iii) a term in excess of three years;

(xv)any contracts or agreements related to the storage, transportation or processing of the Company’s or its Subsidiaries’ coal (including stock piling and loading agreements) providing for either (i) annual payments by the Company or any of its Subsidiaries of $5,000,000 or more, (ii) aggregate payments by the Company or any of its Subsidiaries of $10,000,000 or more or (iii) a term in excess of three years;

(xvi)any (A) coal supply agreement or coal product sales agreement providing for sales in excess of $250,000,000 in the aggregate or a term in excess of three years or (B) any coal purchase agreement providing for purchases in excess of $10,000,000 individually or $100,000,000 in the aggregate or a term in excess of three years; or

(xvii)any other agreement, commitment, arrangement or plan not of a type described above but with a value in excess of $2,500,000 (provided that the aggregate value of all such agreements, commitments, arrangements or plans with a value in excess of $1,000,000 shall not exceed $5,000,000).

“Damages” means any and all damage, loss, diminution in value, liability, fines, penalties and expenses (including reasonable expenses of investigation and reasonable attorneys’ fees and expenses in connection with any action, suit or proceeding whether involving a Third Party claim or a claim to enforce the provisions hereof).

“Delaware Law” means the General Corporation Law of the State of Delaware.

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“Designated Stockholders” means the Stockholders set forth on Section 1.01(a) of the Company Disclosure Schedule.

“Environmental Claim” means any notice, notification, demand, request for information, citation, summons, order, complaint, investigation, action, claim, suit, proceeding or review (or any basis therefor) of any nature, civil, criminal, regulatory or otherwise, by any Person alleging liability or potential liability (including liability or potential liability for investigatory costs, cleanup costs, governmental response costs, natural resource damages, fines or penalties) relating to or arising out of any Environmental Laws or any Hazardous Materials.

“Environmental Laws” means any Applicable Laws or any agreement with any Governmental Authority or other third party, relating to human health or to remediation, restoration or protection of the environment or natural resources or other environmental matters, including Applicable Laws relating to storage, treatment, management, generation or transportation of Hazardous Materials, land use, development, pollution, waste disposal, toxic materials, conservation of natural resources and resource allocation (including any Applicable Law relating to development or exploitation of any natural resource) or use or disposal of Hazardous Materials, including, without limitation, the following statutes:  (a) CERCLA, (b) the federal Resource Conservation and Recovery Act of 1976, (c) the federal Hazardous Materials Transportation Act, (d) the federal Toxic Substances Control Act, (e) the federal Clean Water Act, (f) the federal Clean Air Act, (g) the federal Safe Drinking Water Act, (h) the federal National Environmental Policy Act of 1969, (i) the federal Emergency Planning and Community Right-to-Know Act, (j) the federal Mine Safety Act of 1977, (k) the federal Surface Coal Mining Land Conservation and Reclamation Act, (l) the federal Abandoned Mined Lands and Water Reclamation Act and (m) the federal Coal Mine Health and Safety Act, and, in each case, any comparable state or local statutes.

“Environmental Permits” means all permits, licenses, franchises, certificates, approvals and other similar authorizations of Governmental Authorities relating to or required by Environmental Laws and affecting, or relating to, as applicable, the business of the Company and its Subsidiaries as currently (unless expressly specified otherwise) conducted or the business of Parent and its Subsidiaries as currently (unless expressly specified otherwise) conducted.

“ERISA” means the Employee Retirement Income Security Act of 1974.

“ERISA Affiliate” of any entity means any other entity that, together with such entity, would be treated as a single employer under Section 414 of the Code.

“Escrow Agent” means an escrow agent mutually agreed by Parent and the Company prior to Closing.

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“Escrow Agreement” means the Escrow Agreement among Parent, the Stockholder Representative and the Escrow Agent, substantially in the form of Exhibit A hereto.

“GAAP” means generally accepted accounting principles in the United States.

“Governmental Authority” means any transnational, domestic or foreign federal, state or local, governmental authority, department, court, agency or official, including any political subdivision thereof.

“Hazardous Materials” means any material or substance defined as a “hazardous substance,” “toxic substance,” “hazardous waste,” “solid waste,” “pollutant” or “contaminant” or any other term of similar import under any Environmental Law, or any other materials which are regulated or give rise to liability under Environmental Laws, including petroleum (including crude oil or any fraction thereof), asbestos and asbestos-containing materials, acidic mine drainage, radiation and radioactive materials, lead-containing paints, molds and other harmful biologic agents, and polychlorinated biphenyls.

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

“Identified Mining Laws” means (a) the federal Mine Safety Act of 1977, (b) the federal Surface Coal Mining Land Conservation and Reclamation Act, (c) the West Virginia Surface Coal Mining and Reclamation Act, (d) the federal Abandoned Mined Lands and Water Reclamation Act, (e) the federal Coal Mine Health and Safety Act (as amended by the Mine Improvement and New Emergency Response Act of 2006), (f) with respect to any Person, any state or local statutes comparable to the statutes referred to in the preceding clauses (a)-(e) that are binding upon or applicable to such Person, (g) any other Applicable Laws similar to any of the items in the preceding clauses (a)-(f) and relating primarily to mining, miner health and safety, reclamation, land use and development and exploitation or restoration of natural resources and (h) any written agreements with any Governmental Authority relating to any of the foregoing.

“Intellectual Property Rights” means (i) trademarks, service marks, brand names, certification marks, trade dress, domain names and other indications of origin, the goodwill associated with the foregoing and registrations in any jurisdiction of, and applications in any jurisdiction to register, the foregoing, including any extension, modification or renewal of any such registration or application; (ii) inventions and discoveries, whether patentable or not, in any jurisdiction; patents, applications for patents (including, without limitation, divisions, continuations, continuations in part and renewal applications), and any renewals, extensions or reissues thereof, in any jurisdiction; (iii) trade secrets and confidential information and rights in any jurisdiction to limit the use or

9

disclosure thereof by any person (the “Trade Secrets”); (iv) writings and other works, whether copyrightable or not, in any jurisdiction, and any and all copyright rights, whether registered or not; and registrations or applications for registration of copyrights in any jurisdiction, and any renewals or extensions thereof; (v) moral rights, database rights, design rights, industrial property rights, publicity rights and privacy rights; and (vi) any similar intellectual property or proprietary rights.

“knowledge” of any Person that is not an individual means the actual knowledge of (i) with respect of the Company, Paul Vining, Keith St. Clair, Dwayne Francisco, Robert Bennett, David Turnbull, Richard Verheij, John Eagan and Mark Cornell, and (ii) with respect to Parent, Richard M. Whiting, Mark N. Schroeder, Jiri Nemec, Charles A. Ebetino, Jr., Joseph W. Bean, Michael V. Altrudo, Gary Halstead and Sara E. Wade.

“Lien” means, with respect to any property or asset, any mortgage, lien, lease, levy, pledge, charge, security interest, restrictive covenant, easement, encroachment, right of way, right to use or acquire, title defect, interest created under any bill of sale, trust or power, encumbrance or other adverse claim of any kind in respect of such property or asset.  For purposes of this Agreement, a Person shall be deemed to own subject to a Lien any property or asset that it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such property or asset.

“1933 Act” means the Securities Act of 1933.

“1934 Act” means the Securities Exchange Act of 1934.

“Market Value” means the average of the closing price of Parent Stock on the New York Stock Exchange (or if Parent Stock is not then traded on the New York Stock Exchange, the principal stock exchange on which Parent Stock is then traded) for the 10 consecutive trading days immediately preceding (i) with respect to a payment of Escrow Shares from the Escrow Account, the applicable date on which shares of Parent Stock are to be released from the Escrow Account, (ii) with respect to the calculation of the Net Per Share Number, the Closing Date and (iii) with respect to a payment made pursuant to the last sentence of Section 11.02(c), the applicable date on which payment is to be made.

“Net Per Share Number” means “X” as determined by the following formula:  X = (11,901,729-(Excess Transaction Expenses Deduction Amount/Market Value))/Company Outstanding Stock Number.

“Parent Balance Sheet” means the audited consolidated balance sheet of Parent and its Subsidiaries as of December 31, 2007 and the notes to the financial statements referred to in Section 5.08(b).

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“Parent Balance Sheet Date” means December 31, 2007.

“Parent Disclosure Schedule” means the disclosure schedule dated the date hereof regarding this Agreement that has been provided by Parent to the Company.

“Parent Employee Plan” means each material “employee benefit plan,” as defined in Section 3(3) of ERISA, and, whether or not subject to ERISA, each material employment, severance, change in control, retention or similar contract, plan, arrangement or policy and each other material plan or arrangement (written or oral) providing for compensation, bonuses, profit-sharing, stock option or other equity-based rights or other forms of incentive or deferred compensation, vacation benefits, insurance (including any self-insured arrangements), health or medical benefits, employee assistance program, disability or sick leave benefits, workers’ compensation, supplemental unemployment benefits, severance benefits, post-employment or retirement benefits (including compensation, pension, health, medical or life insurance benefits) and any other material plan, agreement, program or policy which is maintained, sponsored or contributed to by Parent or any ERISA Affiliate of Parent and covers any current or former director, officer, employee or independent consultant of Parent or any of its Subsidiaries, or with respect to which Parent or any of its Subsidiaries has any liability.

“Parent Material Adverse Effect” means a material adverse effect on (a) the ability of Parent to consummate the transactions contemplated by this Agreement without material delay or (b) the condition (financial or otherwise), business, assets, liabilities or results of operations of Parent and its Subsidiaries, taken as a whole; provided that for purposes of this clause (b), none of the following shall be deemed, either alone or in combination, to constitute, and none of the following shall be taken into account in determining whether there has been or will be a Parent Material Adverse Effect: (i) any adverse change, effect, event, occurrence, state of facts or development attributable to conditions affecting the industry in which Parent or its Subsidiaries participates, the U.S. economy as a whole or the capital or financial markets (including public and private debt markets) in general or the markets in which Parent or its Subsidiaries operate, except to the extent, in any such case, disproportionately impacting Parent or its Subsidiaries, taken as a whole, as compared to the other entities operating in such industries or markets, respectively (and in any such case, only such disproportionate impact shall be taken into account in determining if a Parent Material Adverse Effect has occurred); (ii) any adverse change, effect, event, occurrence, state of facts or development arising from or relating to any change in accounting requirements or principles or any change in Applicable Law (or the interpretation thereof) except to the extent, in either case, disproportionately impacting Parent or its Subsidiaries, taken as a whole, as compared to the other entities operating in the industries in which Parent and its Subsidiaries operate (and in any such case, only such disproportionate impact shall be taken into account in determining if a Parent Material Adverse Effect has occurred)

11

(provided that any such adverse change, effect, event, occurrence, state of facts or development to the extent arising from or relating to the failure by Parent or any of its Subsidiaries to comply with any change in Applicable Law shall not be disregarded under this clause (ii)); (iii) any adverse change, effect, event, occurrence, state of facts or development arising from or relating to compliance with Parent’s obligations under this Agreement or any other Transaction Document; (iv) a decline in the price or trading volume of Parent Stock on the New York Stock Exchange (provided that any underlying cause or causes for any change in the price or trading volume of Parent Stock on the New York Stock Exchange may be considered in determining whether a Parent Material Adverse Effect has occurred); or (v) the breach of this Agreement or any other Transaction Document by the Company (or any of its Affiliates or Stockholders party to any other Transaction Document).  The term “Parent Material Adverse Effect” as used in any representation or warranty in Article 5 shall include (A) in the context of Article 11 (other than to the extent relating to Section 5.27) an adverse effect of $50,000,000 or more and (B) in the context of Article 11 to the extent relating to Section 5.27 and in the context of Section 9.03, an adverse effect of $150,000,000 or more.

“Parent Proxy Statement” means the proxy statement of Parent to be filed by Parent with the SEC in connection with the Parent Stock Issuance (which shall be included in the Registration Statement).

“Parent Stock” means the common stock, $0.01 par value, of Parent.

“PBGC” means the Pension Benefit Guaranty Corporation.

“Permitted Liens” means (i) Liens disclosed on the Company Balance Sheet or Parent Balance Sheet, as applicable, (ii) Liens for taxes not yet due or being contested in good faith (and, in either case, for which adequate accruals or reserves have been established on the Company Balance Sheet or Parent Balance Sheet, as applicable), (iii) deposits made in the ordinary course of business securing the performance of bids, trade contracts, leases, statutory obligations, surety, customs and appeal bonds and other obligations of like nature incurred as or incidental to and in the ordinary course of business, (iv) any statutory Lien arising in the ordinary course of business by operation of Applicable Law with respect to a liability that is not yet due or delinquent or being contested in good faith (and for which adequate accruals or reserves have been established on the Company Balance Sheet or Parent Balance Sheet, as applicable), (v) any imperfection of title or similar Lien, (vi) easements, zoning restrictions, rights-of-way, encroachments and similar encumbrances on real property imposed by law or arising in the ordinary course of business or which are necessary or desirable in connection with the business or the development thereof, (vii) any terms and conditions included in the contracts set forth on Section 1.01(a)(vii) of the Company Disclosure Schedule or the Parent Disclosure Schedule, as applicable, (viii) customary bank setoff rights under the agreements set forth on Section

12

1.01(a)(viii) of the Company Disclosure Schedule or the Parent Disclosure Schedule, as applicable, or to which a bank is entitled with respect to an account with such bank, (ix) any interest or title of a lessor under any lease entered into by the Company or any of its Subsidiaries, or Parent or any of its Subsidiaries, as the case may be, in the ordinary course of business and covering only the assets so leased, (x) Liens disclosed on Section 1.01(a)(x) of the Company Disclosure Schedule or Section 1.01(a)(x) of the Parent Disclosure Schedule, as applicable; provided that (a) the term “Permitted Lien” shall not include any Lien securing indebtedness except as provided in clauses (i) and (x), (b) in the case of clauses (v), (vi), (vii) and (ix) above, such Liens individually or in the aggregate with other such Liens do not materially detract from the value or materially interfere with any present or intended use of the property or assets to which they relate, and (c) in the case of clause (iv) above, such Liens individually or in the aggregate with other such Liens do not materially interfere with any present or intended use of the property or assets to which they relate.

“Person” means an individual, corporation, partnership, limited liability company, association, trust or other entity or organization, including a government or political subdivision or a department, agency or instrumentality thereof.

“Registration Rights Agreement” means the Registration Rights Agreement among Parent and the other parties thereto, in the form attached as Exhibit B hereto.

“Registration Statement” means the Registration Statement of Parent to be filed by Parent with the SEC with respect to the issuance of Parent Stock in connection with the Merger (which shall include the Parent Proxy Statement).

“Release” means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, or disposing of Hazardous Materials into any occupied structure or upon the environment, including surface water, ground water, a drinking water supply, land surface or subsurface strata or ambient air (including the abandonment or discarding of barrels, containers, and other closed receptacles containing any Hazardous Material).

“SEC” means the Securities and Exchange Commission.

“Stockholders” means the holders of shares of Company Stock, including Company Restricted Stock.

“Stock Plan” means the Magnum Coal Company 2006 Stock Incentive Plan, as adopted by the Company on March 21, 2006.

“Subsidiary” means, with respect to any Person, any entity of which securities or other ownership interests having ordinary voting power to elect a

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majority of the board of directors or other persons performing similar functions are at any time directly or indirectly owned by such Person.

“Third Party” means (i) for purposes of this Agreement other than Article 11, any Person, including as defined in Section 13(d) of the 1934 Act, other than Parent or any of its Affiliates and (ii) for purposes of Article 11, any Person other than any Parent Indemnified Party, any Stockholder Indemnified Party or the Stockholder Representative.

“Transaction Documents” means this Agreement, the Escrow Agreement, the Registration Rights Agreement, the Stockholder Consents, the Support Agreements, the Voting Agreement and any and all other agreements, certificates and documents required to be delivered by any party hereto prior to or at the Closing pursuant to the terms of this Agreement.

“Transaction Expenses” means any out-of-pocket amount paid or to be paid, and any payment obligations incurred, by or on behalf of the Company or any of its Subsidiaries in connection with this Agreement, the other Transaction Documents, the Merger and the other transactions contemplated hereby including, but not limited to, professional fees and related expenses for services rendered by counsel, actuaries, auditors, accountants, investment bankers, brokers, finders or other intermediaries, experts, consultants and other advisors, in each case only to the extent incurred since January 1, 2008; provided that “Transaction Expenses” shall not include “change in control”, severance or similar payments to employees that are only payable upon a termination of employment after the Closing.

“Transaction Expenses Cap” means the sum of (i) $4,000,000 and (ii) the amount of fees and expenses payable by the Company to Citigroup Global Markets Inc. in connection with the Merger pursuant to the engagement agreement provided to Parent prior to the date hereof.

(b)Each of the following terms is defined in the Section set forth opposite such term:

Term	Section
Acceptable Parent Financing Terms	8.10(a)
Agreement	Preamble
Alternate Financing Documents	8.10(a)
Books and Records	7.07
Certificates	2.03(a)
Closing	2.01(b)
Closing Date	2.01(b)
Company	Preamble
Company Core Representations	Article 4
Company Covenant Breach	11.02
Company Employee	7.04(a)

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Term Section

Company Employee Plans	4.16(a)
Company Leased Real Property	4.22(a)
Company Leased Tangible Property	4.22(b)
Company Material Environmental Applications	4.19(h)
Company Material Mining Applications	4.10(b)
Company Outstanding Stock Number	9.02(j)
Company Outstanding Stock Number Certificate	9.02(j)
Company Owned Real Property	4.22(d)
Company Owned Tangible Property	4.22(e)
Company Permits	4.25
Company Securities	4.05(b)
Company Stockholder Approval	4.02(a)
Company Subsidiary Securities	4.06(b)
Company Surety Bonds	4.10(c)
Company Warranty Breach	11.02
Continuing Employee	7.04(a)
D&O Insurance	7.06(b)
Deductible Amount	11.02(a)
Deminimis Amount	11.02(a)
Direct Indemnification Claims	11.02(c)
Dissenting Shares	2.09
Effective Time	2.01(b)
e-mail	12.01
End Date	10.01(b)(i)
Escrow Account	2.08(a)
Escrow Availability Amount	11.03(a)
Escrow Property	2.08(a)
Escrow Only Claims	11.02(b)
Escrow Shares	2.08(a)
Excess Transaction Expenses Deduction Amount	9.02(h)
Exchange Agent	2.03(a)
Indemnified Party	11.03
Indemnifying Party	11.03
Information Statement	6.02(b)
Material Contract	4.21(b)
Merger	Preamble
Merger Consideration	2.02(a)
Merger Subsidiary	Preamble
Multiemployer Plan	4.16(c)
Non-Core Cap Availability Amount	11.03(a)
Parent	Preamble
Parent Board Recommendation	8.09(e)
Parent Cap	11.02(d)

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Term Section

Parent Core Claims	11.02(e)
Parent Core Representations	Article 5
Parent Covenant Breach	11.02(d)
Parent Credit Agreement	5.26
Parent Indemnified Parties	11.02(a)
Parent Financing	5.26
Parent Financing Commitment Letter	5.26
Parent Leased Real Property	5.22(b)
Parent Leased Tangible Property	5.22(a)
Parent Material Contract	5.21
Parent Material Mining Applications	5.11(b)
Parent Non-Core Claims	11.02(e)
Parent Owned Real Property	5.22(d)
Parent Owned Tangible Property	5.22(e)
Parent Permits	5.24
Parent SEC Documents	5.07(a)
Parent Securities	5.05(b)
Parent Stock Issuance	5.02(a)
Parent Stockholder Approval	5.02(a)
Parent Stockholder Meeting	8.09(a)
Parent Subsidiary Securities	5.06(b)
Parent Surety Bonds	5.11(c)
Parent Warranty Breach	11.02
Preferred Stock	5.05(a)
Pro Rata Share	2.08(b)
Related Person	4.26
Representatives	6.03(a)
Rights Agreement	5.20(b)
Seller Group	12.13
Stockholder Consents	Preamble
Stockholder Control	Preamble
Stockholder Indemnified Parties	11.02(d)
Stockholder Representative	Preamble
Superior Proposal	6.03(c)
Support Agreements	Recitals
Surviving Corporation	2.01(a)
Tax	4.14(j)
Taxing Authority	4.14(j)
Tax Return	4.14(j)
Tax Sharing Agreements	4.14(j)
Third Party Interests	4.06(b)
TSA	5.16
368 Reorganization	4.15
Voting Agreement	Recitals

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Section 1.02.  Other Definitional and Interpretative Provisions.  The words “hereof”, “herein” and “hereunder” and words of like import used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement.  The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof.  References to Articles, Sections, Exhibits and Schedules are to Articles, Sections, Exhibits and Schedules of this Agreement unless otherwise specified.  All Exhibits and Schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein.  Any capitalized terms used in any Exhibit or Schedule but not otherwise defined therein, shall have the meaning as defined in this Agreement.  Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular.  Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”, whether or not they are in fact followed by those words or words of like import.  “Writing”, “written” and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form.  References to any agreement or contract are to that agreement or contract as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof; provided that with respect to any agreement or contract listed on any schedules hereto, all such amendments, modifications or supplements must also be listed in the appropriate schedule.  References to any Person include the successors and permitted assigns of that Person.  References from or through any date mean, unless otherwise specified, from and including or through and including, respectively.  References to “law” or “laws” shall be deemed also to include any Applicable Law.  References to any particular statute or law shall be to such statute or law as amended from time to time, and to the rules and regulations promulgated thereunder and enforceable interpretations thereof.  Any references in this Agreement to compliance by any Person with any Applicable Law, permit, authorization, agreement or other item shall include compliance by any business, assets or operations of such Person.

ARTICLE 2

The Merger

Section 2.01.  The Merger.  (a) At the Effective Time, Merger Subsidiary shall be merged with and into the Company in accordance with Delaware Law, whereupon the separate existence of Merger Subsidiary shall cease, and the Company shall be the surviving corporation (the “Surviving Corporation”).

(b)The closing of the Merger (the “Closing”) shall take place at the offices of Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017 at 10:00 A.M., three Business Days after the date on which the last of the conditions set forth in Article 9 shall have been satisfied or waived (other than those conditions that (i) by their nature are to be satisfied at Closing and (ii) will

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be satisfied at Closing), or on such other date, time and place as the Company and Parent may mutually agree (the “Closing Date”).  On the Closing Date the Company and Merger Subsidiary shall file a certificate of merger with the Delaware Secretary of State and make all other filings or recordings required by Delaware Law in connection with the Merger.  The Merger shall become effective at such time (the “Effective Time”) as the certificate of merger is duly filed with the Delaware Secretary of State (or at such later time as may be specified in the certificate of merger by agreement of the parties).

(c)From and after the Effective Time, the effect of the Merger shall be as provided in this Agreement and the applicable provisions of Delaware Law.  Without limiting the generality of the foregoing, at the Effective Time, all of the property, rights, privileges, powers and franchises of the Company and Merger Subsidiary shall vest in the Surviving Corporation, and all of the debts, liabilities, obligations and duties of the Company and Merger Subsidiary shall become the debts, liabilities, obligations and duties of the Surviving Corporation.

Section 2.02.  Conversion of Shares.  At the Effective Time:

(a)except as otherwise provided in Section 2.02(b) and Section 2.09, and subject to Section 2.04(b), each share of Company Stock (including Company Restricted Stock and shares of Company Stock issued upon conversion of the Company Convertible Debt Notes) outstanding immediately prior to the Effective Time shall be converted into the right to receive the Net Per Share Number of shares of Parent Stock (together with the cash in lieu of fractional shares of Parent Stock as specified below, the “Merger Consideration”); provided that, notwithstanding the foregoing, the parties acknowledge and agree that the Escrow Shares shall be deducted from the Parent Stock deliverable to each Designated Stockholder based on that Designated Stockholder’s Pro Rata Share of the Escrow Shares as set forth in Section 2.08 and such Escrow Shares shall be deliverable to such Designated Stockholders only as provided in the Escrow Agreement.

(b)each share of Company Stock held by the Company as treasury stock shall be canceled, and no payment shall be made with respect thereto; and

(c)each share of common stock of Merger Subsidiary outstanding immediately prior to the Effective Time shall be converted into and become one share of common stock of the Surviving Corporation with the same rights, powers and privileges as the shares so converted and shall constitute the only outstanding shares of capital stock of the Surviving Corporation.

Section 2.03.  Surrender and Payment.  (a) Parent shall act as agent or prior to the Effective Time Parent shall appoint an agent (Parent or such agent, as applicable, the “Exchange Agent”) for the purpose of exchanging for the Merger Consideration certificates representing shares of Company Stock, including Company Restricted Stock (the “Certificates”).  Parent shall make available to

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the Exchange Agent, as needed, the Merger Consideration to be paid in respect of the Certificates.  Promptly after the Effective Time (but not later than ten Business Days after the Closing), Parent shall send, or shall cause the Exchange Agent to send, to each holder of shares of Company Stock at the Effective Time, a letter of transmittal and instructions (which shall specify that the delivery shall be effected, and risk of loss and title shall pass, only upon proper delivery of the Certificates to the Exchange Agent) for use in such exchange.

(b)Each holder of shares of Company Stock that have been converted into the right to receive the Merger Consideration shall be entitled to receive, upon surrender to the Exchange Agent of a Certificate, together with a properly completed letter of transmittal, the Merger Consideration in respect of the Company Stock represented by such Certificate, but subject to Section 2.08.  The shares of Parent Stock constituting part of such Merger Consideration, at Parent’s option, shall be in uncertificated book-entry form; provided that, except with respect to shares then held in the Escrow Account, if such shares of Parent Stock are in uncertificated book-entry form, upon request by the Stockholder Representative or any Stockholder, Parent shall provide to such Person a certificate of Parent’s transfer agent of the registration of such shares of Parent Stock in the name of the applicable Stockholder.  Until so surrendered or transferred, as the case may be, each such Certificate shall represent after the Effective Time for all purposes only the right to receive such Merger Consideration.

(c)If any portion of the Merger Consideration is to be paid to a Person other than the Person in whose name the surrendered Certificate, is registered, it shall be a condition to such payment that (i) such Certificate shall be properly endorsed or shall otherwise be in proper form for transfer and (ii) the Person requesting such payment shall pay to the Exchange Agent any transfer or other taxes required as a result of such payment to a Person other than the registered holder of such Certificate or establish to the reasonable satisfaction of the Exchange Agent that such tax has been paid or is not payable.

(d)After the Effective Time, there shall be no further registration of transfers of shares of Company Stock.  If, after the Effective Time, Certificates are presented to the Surviving Corporation, they shall be canceled and exchanged for the Merger Consideration provided for, and in accordance with the procedures set forth, in this Article 2.

(e)Any portion of the Merger Consideration made available to the Exchange Agent pursuant to Section 2.03(a) that remains unclaimed by the holders of shares of Company Stock twelve months after the Effective Time shall be returned to Parent, upon demand, and any such holder who has not exchanged shares of Company Stock for the Merger Consideration in accordance with this Section 2.03 prior to that time shall thereafter look only to Parent for payment of the Merger Consideration, and any dividends and distributions with respect

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thereto, in respect of such shares without any interest thereon.  Notwithstanding the foregoing, Parent shall not be liable to any holder of shares of Company Stock for any amounts paid to a public official pursuant to applicable abandoned property, escheat or similar laws.  Any amounts remaining unclaimed by holders of shares of Company Stock two years after the Effective Time (or such earlier date, immediately prior to such time when the amounts would otherwise escheat to or become property of any Governmental Authority) shall become, to the extent permitted by Applicable Law, the property of Parent free and clear of any claims or interest of any Person previously entitled thereto.

(f)No dividends or other distributions with respect to Parent Stock constituting part of the Merger Consideration, and no cash payment in lieu of fractional shares as provided in Section 2.05, shall be paid to the holder of any Certificates not surrendered until such Certificates are surrendered as provided in this Section.  Following such surrender, there shall be paid, without interest, to the Person in whose name the shares of Parent Stock have been registered, at the time of such surrender or transfer, the amount of any cash payable in lieu of fractional shares to which such Person is entitled pursuant to Section 2.05 and the amount of all dividends or other distributions, if any, with a record date after the Effective Time previously paid or payable on the date of such surrender with respect to such shares of Parent Stock; provided that all dividends and distributions with respect to the Escrow Shares shall be held in the Escrow Account together with the associated Escrow Shares.

Section 2.04.  Certain Adjustments.

(a)If, during the period between the date of this Agreement and the Effective Time, any change in the outstanding shares of capital stock of the Company (except for the issuance of the shares of Company Stock on conversion of the Company Convertible Debt Notes) or Parent shall occur, including by reason of any reclassification, recapitalization, stock split or combination, exchange or readjustment of shares, the Merger Consideration shall be appropriately adjusted; provided that no adjustment to the Merger Consideration shall be made for any change in the outstanding shares of capital stock of Parent that results from (i) any exercise of options to purchase shares of Parent Stock granted under Parent’s stock option or compensation plans or arrangements, which plans or arrangements have been disclosed in the Parent SEC Documents, and any issuance of shares pursuant to any such plans or arrangements or (ii) any bona fide issuance of shares in which Parent receives fair value (as determined in good faith by Parent’s Board of Directors) for such shares.

(b)Subject to any adjustments required by Section 2.04(a), Parent shall not be obligated to issue in excess of 11,901,729 shares of Parent Stock (less (i) a number of shares, if any, equal to the Excess Transaction Expenses Deduction Amount divided by the Market Value as calculated for purposes of determining the Net Per Share Number and (ii) any fractional shares to the extent provided in

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Section 2.05) as Merger Consideration (including, for the avoidance of doubt, the Escrow Shares).

Section 2.05.  Fractional Shares.  No fractional shares of Parent Stock shall be issued in the Merger.  All fractional shares of Parent Stock that a holder of shares of Company Stock would otherwise be entitled to receive as a result of the Merger shall be aggregated and if a fractional share results from such aggregation, such holder shall be entitled to receive, in lieu thereof, an amount in cash without interest determined by multiplying the closing sale price of a share of Parent Stock on the New York Stock Exchange on the trading day immediately preceding the Effective Time by the fraction of a share of Parent Stock to which such holder would otherwise have been entitled.

Section 2.06.  Withholding Rights.

(a)Each of the Surviving Corporation and Parent shall be entitled to deduct and withhold from the consideration otherwise payable to any Person pursuant to this Article 2 such amounts as it is required to deduct and withhold with respect to the making of such payment under any provision of federal, state, local or foreign tax law.  Any withheld amounts shall be timely remitted to the appropriate Taxing Authority and a receipt therefor shall be delivered to the Stockholder Representative.  If the Surviving Corporation or Parent, as the case may be, so withholds amounts, such amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the shares of Company Stock in respect of which the Surviving Corporation or Parent, as the case may be, made such deduction and withholding.

(b)Without limiting the generality of Section 2.06(a), Parent shall be entitled to treat the Company as a United States Real Property Holding Corporation, as defined in Section 897 of the Code.  Accordingly, Parent shall be entitled to deduct and withhold from payments to each Stockholder pursuant to Section 1445 of the Code, unless such Stockholder provides certification of non-foreign status or other evidence of exemption from 1445 withholding (in the forms attached hereto as Exhibit 2.06(b)).

Section 2.07.  Lost Certificates.  If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by the Surviving Corporation, the posting by such Person of a bond, in such reasonable amount as the Surviving Corporation may direct, as indemnity against any claim that may be made against it with respect to such Certificate the Exchange Agent will issue, in exchange for such lost, stolen or destroyed Certificate the Merger Consideration to be paid in respect of the shares of Company Stock or Company Restricted Stock represented by such Certificate, as contemplated by this Article 2.

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Section 2.08.  Escrow Account.  

(a)The Company agrees that at the Closing a number of shares of Parent Stock equal to 10% of the aggregate number of shares of Parent Stock to be issued to the Stockholders in the Merger pursuant to Section 2.02 (the “Escrow Shares”) shall (in lieu of being delivered to the Designated Stockholders, and with the portion of such Escrow Shares attributable to each Designated Stockholder being such Designated Stockholder’s Pro Rata Share) be delivered by Parent to the Escrow Agent for deposit into a separate account (the “Escrow Account”) in accordance with the terms of the Escrow Agreement.  The Escrow Shares deposited with the Escrow Agent shall be applied by the Escrow Agent in accordance with the terms of the Escrow Agreement to pay amounts (if any) owing under Article 11 (with such Escrow Shares valued at Market Value in accordance with the definition thereof), with all remaining property in the Escrow Account to be distributed to the Designated Stockholders in accordance with Section 2.08(b).  For the purposes of the definition of “Escrow Shares”, any dividends or distributions paid on an Escrow Share and the interest earned thereon shall also be deemed to be part of such “Escrow Share”.  For the purposes of this Agreement, “Escrow Property” means, at any given time, the Escrow Shares and any other funds or property contained in the Escrow Account at such time.

(b)On the first Business Day after the first anniversary of the Closing Date, an amount of Escrow Property equal to (x) the amount of Escrow Property remaining in the Escrow Account at such time less (y) such amount of Escrow Property with an aggregate value (calculated, to the extent any Escrow Shares are held in the Escrow Account, based on the Market Value of such Escrow Shares at such time) equal to the aggregate amount of bona fide claims for indemnification submitted in good faith and outstanding at such time (plus applicable interest on such claims), shall be released from the Escrow Account for distribution to the Persons who were Designated Stockholders immediately prior to the Effective Time in accordance with their Pro Rata Shares.  Any remaining Escrow Property in the Escrow Account at the time all such claims for indemnification are resolved shall be released from the Escrow Account for distribution to the Persons who were Designated Stockholders immediately prior to the Effective Time in accordance with their Pro Rata Shares.  For these purposes, “Pro Rata Share” means, with respect to each Designated Stockholder the quotient of (i) the number of shares of Parent Stock to be issued to such Designated Stockholder in the Merger pursuant to Section 2.02, divided by (y) the aggregate number of shares of Parent Stock to be issued to all Designated Stockholders in the Merger pursuant to Section 2.02. The Escrow Agent shall hold the Escrow Property in escrow pursuant to the Escrow Agreement.  Distributions of any Escrow Property from the Escrow Account shall be governed by the terms and conditions of the Escrow Agreement.

Section 2.09.  Dissenting Shares.  Notwithstanding any provision of this Agreement to the contrary, if required by Delaware Law (but only to the extent

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required thereby), shares of Company Stock that are issued and outstanding immediately prior to the Effective Time (other than shares of Company Stock to be canceled pursuant to Section 2.02(b)) and that are held by holders of such shares who have not voted in favor of the adoption of this Agreement or consented thereto in writing and who have properly exercised appraisal rights with respect thereto in accordance with, and who have complied with, Section 262 of Delaware Law (the “Dissenting Shares”) will not be convertible into the right to receive the Merger Consideration, and holders of such Dissenting Shares will be entitled to receive payment of the fair value of such Dissenting Shares in accordance with the provisions of such Section 262 unless and until any such holder fails to perfect or effectively withdraws or loses its rights to appraisal and payment under Delaware Law.  If, after the Effective Time, any such holder fails to perfect or effectively withdraws or loses such right, such Dissenting Shares will thereupon be treated as if they had been converted into and have become exchangeable for, at the Effective Time, the right to receive the Merger Consideration, without any interest thereon, and the Surviving Corporation shall remain liable for payment of the Merger Consideration for such shares, subject to Section 2.08.  At the Effective Time, any holder of Dissenting Shares shall cease to have any rights with respect thereto, except the rights provided in Section 262 of Delaware Law and as provided in the previous sentence.  The Company will give Parent prompt notice of any demands received by the Company for appraisals of shares of Company Stock.

ARTICLE 3

The Surviving Corporation

Section 3.01.  Certificate of Incorporation.  At the Effective Time, the certificate of incorporation of the Company, as in effect immediately prior to the Effective Time, shall be amended in the Merger to read in its entirety as set forth in Exhibit 3.01 hereto, and, as so amended, shall be the certificate of incorporation of the Surviving Corporation, until thereafter changed or amended as provided therein or by Applicable Law.

Section 3.02.  Bylaws.  At the Effective Time, the bylaws of the Company, as in effect immediately prior to the Effective Time, shall be amended and restated in their entirety as set forth in Exhibit 3.02 hereto, and as so amended and restated, shall be the bylaws of the Surviving Corporation, until thereafter changed or amended as provided therein or by Applicable Law.

Section 3.03.  Directors and Officers.  From and after the Effective Time, until successors are duly elected or appointed and qualified in accordance with Applicable Law, (i) the directors of Merger Subsidiary at the Effective Time shall be the directors of the Surviving Corporation and (ii) the officers of Merger Subsidiary at the Effective Time shall be the officers of the Surviving Corporation.

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ARTICLE 4

Representations and Warranties of the Company

Subject to Section 12.04, except as set forth in the Company Disclosure Schedule, the Company represents and warrants to Parent, on and as of the date of this Agreement and, solely with respect to the representations and warranties in Sections 4.01, 4.02, 4.03, 4.04, 4.05, 4.06, 4.12, 4.13, 4.20, 4.26 (such representations and warranties, the “Company Core Representations”) and Section 4.30, as of the Effective Time, that:

Section 4.01.  Corporate Existence and Power.  The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has all corporate powers required to carry on its business as currently conducted.  In all material respects, the Company is duly qualified to do business as a foreign corporation and, as applicable in the relevant jurisdiction, is in good standing in all jurisdictions where such qualification is necessary.  The Company has heretofore delivered or made available to Parent prior to the date hereof true and complete copies of the certificate of incorporation and bylaws of the Company as currently in effect.

Section 4.02.  Corporate Authorization.  (a) The execution, delivery and performance by each of the Company and the Stockholder Representative of this Agreement and each other Transaction Document to which the Company or the Stockholder Representative is or will be a party and the consummation of the transactions contemplated hereby and thereby are within its corporate or limited partnership powers, as applicable, and, except for the affirmative vote in connection with the consummation of the Merger of the holders of at least 66.67% of the Company Stock held by the Investors (as such term is defined in the Company Stockholders Agreement) (the “Company Stockholder Approval”), have been duly authorized by all necessary corporate action on the part of the Company and all necessary limited partnership action on the part of the Stockholder Representative and no other corporate, shareholder, partner or other similar proceedings on the part of the Company or the Stockholder Representative are necessary to authorize this Agreement or any other Transaction Document or to consummate the transactions contemplated hereby or thereby.  This Agreement and each of the other Transaction Documents to which the Company or the Stockholder Representative is or will be a party constitutes, or will when executed and delivered constitute, a valid and binding agreement of the Company and the Stockholder Representative, as applicable, enforceable against the Company and the Stockholder Representative, as applicable, in accordance with its terms, except to the extent that enforceability may be limited by (i) applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar laws from time to time in effect affecting generally the enforcement of creditors’ rights and remedies and (ii) general principles of equity, whether in a proceeding at law or in equity.

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(b)The Company’s Board of Directors has (i) unanimously determined that this Agreement and the other Transaction Documents to which the Company is a party, and the transactions contemplated hereby and thereby (including the Merger), are advisable, fair to and in the best interests of the Company’s stockholders, (ii) unanimously approved and adopted this Agreement and the other Transaction Documents to which the Company is a party, and the transactions contemplated hereby and thereby (including the Merger), and (iii) unanimously recommended adoption of this Agreement by its stockholders.  The members of the Company’s Board of Directors who are not Affiliates of the ArcLight Funds have (although not a committee of the Company’s Board of Directors) (i) unanimously determined that this Agreement and the other Transaction Documents to which the Company is a party, and the transactions contemplated hereby and thereby (including the Merger), are advisable, fair to and in the best interests of the Company’s stockholders and (ii) unanimously approved this Agreement and the other Transaction Documents to which the Company is a party, and the transactions contemplated hereby and thereby (including the Merger)

(c)The Stockholder Consents will be executed and delivered by the Stockholders identified on Section 4.02(c) of the Company Disclosure Schedule immediately after the execution and delivery of this Agreement, and when so executed and delivered will constitute a valid, effective and irrevocable Company Stockholder Approval and no other vote or action of the holders of any class or series of the capital stock of the Company will be necessary under Delaware Law, the Company Stockholders Agreement or otherwise to consummate the Merger or the transactions provided for herein.

Section 4.03.  Governmental Authorization.  The execution, delivery and performance by each of the Company and the Stockholder Representative of this Agreement and each other Transaction Document to which the Company or the Stockholder Representative is or will be a party and the consummation of the transactions contemplated hereby and thereby require no action by or in respect of, or filing with, any Governmental Authority other than (i) the filing of a certificate of merger with respect to the Merger with the Delaware Secretary of State, (ii) compliance with any applicable requirements of the HSR Act, (iii) compliance with any applicable requirements of the 1933 Act, the 1934 Act and any other U.S. state or federal securities laws and (iv) any other immaterial actions or filings.

Section 4.04.  Non-contravention.  The execution, delivery and performance by each of the Company and the Stockholder Representative of this Agreement and each other Transaction Document to which the Company or the Stockholder Representative is or will be a party and the consummation of the transactions contemplated hereby and thereby do not and will not (i) contravene, conflict with, or result in any violation or breach of any provision of the certificate of incorporation or bylaws (or similar organizational documents) of the

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Company or any of its Subsidiaries, or the certificate of limited partnership or the limited partnership agreement of either Stockholder Representative, (ii) assuming compliance with the matters referred to in Section 4.03, contravene, conflict with or result in a violation or breach of any provision of any Applicable Law, (iii) require any consent or other action by any Person under, constitute a default, or an event that, with or without notice or lapse of time or both, would constitute a default, under, or cause or permit the termination, cancellation, acceleration or other change of any right or obligation or the loss of any benefit to which the Company or any of its Subsidiaries or the Stockholder Representative is entitled under any provision of any agreement or other instrument binding upon the Company, any of its Subsidiaries, the Stockholder Representative or any of their respective properties or assets or any license, franchise, permit, approval or other authorization of, or any deposit, letter of credit, trust fund or bond posted by, the Company or any of its Subsidiaries or (iv) result in the creation or imposition of any Lien on any asset of the Company or any of its Subsidiaries,  with such exceptions, in the case of (a) clause (ii) as would not, individually or in the aggregate, reasonably be expected to be material or (b) clauses (iii) and (iv), as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.

Section 4.05.  Capitalization; Ownership of Shares.  (a) The authorized capital stock of the Company consists of 101,000,000 shares of capital stock par value $0.01 per share, of which 100,000,000 shares are Company Stock (of which 3,000,000 shares are Company Restricted Stock) and 1,000,000 are shares of the Company’s undesignated preferred stock.  As of the date hereof, there are issued and outstanding:  (i) 51,670,642 shares of Company Stock, of which 519,306 shares are vested Company Restricted Stock and 1,951,336 shares are unvested Company Restricted Stock and (ii) no shares of the Company’s preferred stock.  All outstanding shares of capital stock of the Company have been duly authorized and validly issued and are fully paid and nonassessable.  No Subsidiary or Affiliate of the Company owns any shares of capital stock of the Company.

(b)Except as set forth in this Section 4.05, there are no outstanding (i) shares of capital stock or voting securities of the Company, (ii) securities of the Company or any of its Subsidiaries convertible into or exchangeable for shares of capital stock or voting securities of the Company or Error! Bookmark not defined. options or other rights to acquire from the Company or any of its Subsidiaries, or other obligation of the Company or any of its Subsidiaries to issue, any capital stock, voting securities or securities convertible into or exchangeable for capital stock or voting securities of the Company (the items in clauses (i), (ii), and (iii) being referred to collectively as the “Company Securities”).  Other than pursuant to the Stock Plan, there are no outstanding obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any of the Company Securities.

(c)Section 4.05(c) of the Company Disclosure Schedule contains a complete and correct list of the Company’s Stockholders and specifies the number

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of shares of Company Stock (including Company Restricted Stock) owned by each such Stockholder.  Section 4.05(c) of the Company Disclosure Schedule sets forth each shareholders agreement or similar agreement with or among any of the Company’s Stockholders, including any agreement that provides for preemptive rights or imposes any limitation or restriction on Company Stock, including any restriction on the right of a holder to vote, sell or otherwise dispose of such Company Stock.  Other than the Stock Plan, neither the Company nor any Subsidiary of the Company has adopted, maintains or has maintained any stock option plan or other plan providing for equity compensation to any Person.  There are no outstanding or authorized stock appreciation, phantom stock, profit participation or other similar rights with respect to the Company or any of its Subsidiaries.

(d)The information set forth in the Company Outstanding Stock Number Certificate delivered pursuant to Section 9.02(j) will be true and correct in all respects.

(e)No interest will be paid in cash on the Company Convertible Debt at or prior to the Closing.  Immediately prior to the Effective Time, in accordance with Section 7 of the Company Convertible Debt NPA, (i) the Company Convertible Debt Notes (including any interest on the Company Convertible Debt Notes that has been added to the principal thereof, and any accrued and unpaid interest on the Company Convertible Debt Notes) will be converted into the right to receive a number of shares of Company Stock in accordance with Section 7 of the Company Convertible Debt NPA and will be cancelled and cease to be issued and outstanding and (ii) the Company Convertible Debt Notes will be surrendered and exchanged for Company Stock.  From the date of the Company Convertible Debt NPA through the date hereof, the Company has not taken any action that would have violated Section 6.06 if it had been in effect at that time.

(f)Prior to the date hereof, the Company has issued $100,000,000 in aggregate principal amount of Company Convertible Debt Notes pursuant to the Company Convertible Debt NPA and has repaid $100,000,000 of existing indebtedness of the Company and its Subsidiaries under the Company Credit Agreement without the payment of any penalty or premium.  The Company has not incurred, and will not incur, any fees or expenses in respect of any underwriter, finder or broker (or any similar fee or expense) in connection with the issuance of the Company Convertible Debt Notes.

Section 4.06.  Subsidiaries.  Error! Bookmark not defined. Each Subsidiary of the Company is a limited liability company duly organized, validly existing and, as applicable in the relevant jurisdiction, in good standing under the laws of its jurisdiction of organization, and has all corporate (or other organizational) powers required to carry on its business as currently conducted.  In all material respects, each such Subsidiary is duly qualified to do business as a foreign company and, as applicable in the relevant jurisdiction, is in good standing in all jurisdictions

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where such qualification is necessary.  Section 4.06(a) of the Company Disclosure Schedule sets forth a complete and correct list of all Subsidiaries of the Company and their respective jurisdictions of organization.

(b)All of the outstanding capital stock of, or other voting securities or ownership interests in, each Subsidiary of the Company, is owned by the Company, directly or indirectly, free and clear of any Lien and free of any other limitation or restriction (including any restriction on the right to vote, sell or otherwise dispose of such capital stock or other voting securities or ownership interests).  There are no outstanding (i) securities of the Company or any of its Subsidiaries convertible into or exchangeable for shares of capital stock or other voting securities or ownership interests in any Subsidiary of the Company or (ii) options or other rights to acquire from the Company or any of its Subsidiaries, or other obligation of the Company or any of its Subsidiaries to issue, any capital stock or other voting securities or ownership interests in, or any securities convertible into or exchangeable for any capital stock or other voting securities or ownership interests in, any Subsidiary of the Company (the items in clauses (i) and (ii) being referred to collectively as the “Company Subsidiary Securities”).  There are no outstanding obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any of the Company Subsidiary Securities.

(c)Other than (i) the Subsidiaries set forth on Section 4.06(a) of the Company Disclosure Schedule and (ii) investments (which, as of the date hereof, are as set forth on Section 4.06(c) of the Company Disclosure Schedule) made with funds held in escrow accounts established to support reclamation obligations of the Company or any of its Subsidiaries, neither the Company nor any Subsidiary of the Company owns, directly or indirectly, any shares of capital stock, securities, ownership interests or investments in any other Person (collectively, “Third Party Interests”).  Neither the Company nor any Subsidiary of the Company has any rights to, or is bound by any commitment or obligation to, acquire by any means, directly or indirectly, any Third Party Interests or to make any investment in, or contribution or (other than pursuant to commercial transactions in the ordinary course of business or to employees in the ordinary course of business) advance to, any Person.

Section 4.07.  Financial Statements.  

(a)The audited consolidated balance sheets as of December 31, 2006 and December 31, 2005 and the related audited consolidated statements of operations, statements of shareholders’ equity and statements of cash flows for each of the years ended December 31, 2006 and December 31, 2005 of the Company and its Subsidiaries fairly present, in all material respects, the consolidated financial position and shareholders’ equity of the Company and its Subsidiaries as of the dates thereof and their consolidated results of operations and cash flows for the periods then ended and have been prepared in compliance

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with GAAP applied on a consistent basis (except as may be indicated in the notes thereto) and in accordance with the books and records of the Company and its Subsidiaries.

(b)The audited balance sheet as of December 31, 2007 and the related audited statement of operations, statement of shareholders’ equity and statement of cash flows for the year then ended of the Company and its Subsidiaries fairly present, in all material respects, the consolidated financial position and shareholders’ equity of the Company and its Subsidiaries as of the date thereof and their consolidated results of operations and cash flows for the period then ended and have been prepared in compliance with GAAP applied on a consistent basis (except as may be indicated in the notes thereto) and in accordance with the books and records of the Company and its Subsidiaries.

Section 4.08.  Absence of Certain Changes.  From the Company Balance Sheet Date to the date hereof, the business of the Company and its Subsidiaries has been conducted in the ordinary course consistent with past practices, and since the Company Balance Sheet Date:

(a)there has not been any event, occurrence, development or state of circumstances or facts which, individually or in the aggregate, has had or would reasonably be expected to have a Company Material Adverse Effect; and

(b)neither the Company nor any of its Subsidiaries has taken any action that would have been prohibited by Section 6.01 (other than Sections 6.01(c), 6.01(i) or 6.01(m)) if this Agreement had been in effect at the time thereof.

Section 4.09.  No Undisclosed Material Liabilities.  There are no liabilities or obligations of the Company or any of its Subsidiaries of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, and to the knowledge of the Company, there is no existing condition, situation or set of circumstances (other than as a result of conducting operations in the coal industry generally, except to the extent disproportionately impacting the Company or its Subsidiaries as compared to other entities operating in the coal industry) that would reasonably be expected to result in such a liability or obligation, other than:

(a)liabilities or obligations to the extent disclosed, reflected or reserved against, in the Company Balance Sheet or the notes thereto;

(b)liabilities or obligations incurred in the ordinary course of business since the Company Balance Sheet Date consistent with past practices;

(c)liabilities that would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect;

(d)liabilities incurred as a result of the performance of the Company’s obligations under this Agreement; and

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(e)liabilities or obligations arising pursuant to the terms (and not as a result of breach or default by the Company or any of its Subsidiaries) of contracts or agreements of the Company or any of its Subsidiaries set forth in Section 4.21(a) of the Company Disclosure Schedule.

Section 4.10.  Compliance with Laws; Mining Compliance Matters.

(a)The Company and each of its Subsidiaries is, and (except as would not reasonably be expected to result in a current or future liability on or adverse consequence to the Company or any of its Subsidiaries) has been, in all material respects in compliance with all Applicable Law, including the Identified Mining Laws but not including any other Environmental Laws, and to the knowledge of the Company is not under investigation with respect to and has not been threatened to be charged with or given written notice from any Governmental Authority, and the Company does not otherwise have knowledge of, any material violation of any Applicable Law, including the Identified Mining Laws but not including any other Environmental Laws.  Neither the Company nor any of its Subsidiaries is subject to any material order, writ, judgment, award, injunction or decree of any arbitrator or Governmental Authority that the Company or any of its Subsidiaries has received in writing or otherwise has knowledge of.

(b)Section 4.10(b) of the Company Disclosure Schedule lists all material applications for permits to be issued by mining authorities to the Company or any of its Subsidiaries (the “Company Material Mining Applications”).  Neither the Company nor any of its Subsidiaries has received any written communication from the applicable permitting authority with respect to any Company Material Mining Application that (i) indicates that such Company Material Mining Application has been denied or (ii) requests the Company or any of its Subsidiaries to provide additional information with respect to such Company Material Mining Application.

(c)Except as set forth on Section 4.10(c) of the Company Disclosure Schedule, the Company and its Subsidiaries have posted all material deposits, letters of credit, trust funds, bid bonds, performance bonds, reclamation bonds and surety bonds (and all such similar undertakings) required to be posted in connection with their operations (the deposits, letters of credit, trust funds, bid bonds, performance bonds, reclamation bonds and surety bonds (and all such similar undertakings) posted in connection with the operations of the Company and its Subsidiaries, collectively, the “Company Surety Bonds”).  The Company Surety Bonds are sufficient to conduct the business of the Company and its Subsidiaries as currently conducted.  The Company and its Subsidiaries are and have been in compliance in all material respects with the Company Surety Bonds, and the operation of the Company’s and its Subsidiaries’ coal mining and processing operations and the state of reclamation with respect to the Company Surety Bonds are “current” or in “deferred status” regarding reclamation obligations and otherwise are and have been in compliance with all applicable

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mining, reclamation and other analogous Applicable Laws, except where noncompliance would not (i) interfere in any material respect with the ability of the Company and its Subsidiaries to continue to operate their assets and conduct their business as currently conducted or otherwise be material or (ii) materially adversely affect or delay the consummation of the transactions contemplated by this Agreement.

(d)Neither the Company nor any of its Subsidiaries (nor any Person “owned or controlled” by any of them) has received written notice from the Federal Office of Surface Mining or the agency of any state administering the Surface Mining Control and Reclamation Act of 1977 (or any comparable state statute) or otherwise has knowledge that it is (i) ineligible to receive additional surface mining permits or other licenses or authorizations or (ii) under investigation to determine whether its eligibility to receive such permits or other licenses or authorizations should be revoked, i.e., “permit blocked.”  As used in this Section 4.10(d), “owned or controlled” shall be defined as set forth in 30 C.F.R. Section 773.5 (2000).

Section 4.11.  Litigation. There is no action, suit, investigation or proceeding pending against, or, to the knowledge of the Company, threatened against or affecting, the Company, any of its Subsidiaries, any present or former officer, director or employee of the Company or any of its Subsidiaries or any Person for whom the Company or any Subsidiary may be liable or any of their respective properties before any court or arbitrator or before or by any Governmental Authority, (i) that if determined adversely to the Company or any of its Subsidiaries, would reasonably be expected to be, individually or in the aggregate, material or (ii) that in any manner challenges or seeks to prevent, enjoin, alter or materially delay the Merger or any of the other transactions contemplated hereby.

Section 4.12.  Investment Banker and Finders’ Fees.  Except for Citigroup Global Markets Inc., a copy of whose engagement agreement has been provided to Parent prior to the date hereof, there is no investment banker, broker, finder or other intermediary that has been retained by, or is authorized to act on behalf of, the Company or any of its Subsidiaries who might be entitled to any fee or commission from Parent, the Company or any of their respective Affiliates in connection with the transactions contemplated by this Agreement.

Section 4.13.  Opinion of Financial Advisor.  The Board of Directors of the Company has received the opinion of Citigroup Global Markets Inc., financial advisor to the Company, to the effect that, as of the date of such opinion and subject to the assumptions, limitations and qualifications reflected therein, the exchange ratio (as defined in such opinion) is fair, from a financial point of view, to the holders of Company Stock (other than the ArcLight Funds and their respective Affiliates).  The Company, solely for informational purposes, will after receipt of such opinion and concurrently with the execution and delivery of this

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Agreement, furnish Parent’s outside legal counsel with a correct and complete copy of such opinion.

Section 4.14.  Taxes.  (a) All material Tax Returns required by Applicable Law to be filed with any Taxing Authority by, or on behalf of, the Company or any of its Subsidiaries have been filed when due in accordance with all Applicable Law, and all such material Tax Returns were at the time of filing, true and complete in all material respects.

(b)The Company and each of its Subsidiaries has paid (or has had paid on its behalf) or has withheld and remitted to the appropriate Taxing Authority all Taxes due and payable, or, where payment is not yet due or being contested in good faith, has established (or has had established on its behalf and for its sole benefit and recourse) in accordance with GAAP an adequate accrual for all Taxes through the end of the last period for which the Company and its Subsidiaries ordinarily record items on their respective books.

(c)Any income and franchise Tax Returns of the Company or its Subsidiaries filed or required to be filed with respect to the Tax years ended on or before December 31, 2003 have been examined and closed or are Tax Returns with respect to which the applicable period for assessment under Applicable Law, after giving effect to extensions or waivers, has expired.

(d)There is no claim, audit, action, suit, proceeding or investigation now pending or, to the Company’s knowledge, threatened against or with respect to the Company or its Subsidiaries in respect of any Tax or Tax asset.

(e)During the five-year period ending on the date hereof, neither the Company nor any of its Subsidiaries was a distributing corporation or a controlled corporation in a transaction intended to be governed by Section 355 of the Code.

(f)Neither the Company nor any of its Subsidiaries owns an interest in real property in any jurisdiction which taxes the transfer of an interest in an entity that owns an interest in real property as a transfer of the interest in real property.

(g)Section 4.14(g) of the Company Disclosure Schedule contains (i) a list of all jurisdictions (whether foreign or domestic) in which the Company or any of its Subsidiaries is qualified to do business and (ii) a list of all jurisdictions (whether foreign or domestic) in which the Company or any of its Subsidiaries currently files Tax Returns, showing in each case the type of Tax Return filed.  No jurisdiction in which the Company does not file Tax Returns has asserted that the Company is or may be liable for Tax, or required to file a Tax Return, in such jurisdiction.

(h)(i) Neither the Company nor any of its Subsidiaries has been a member of an affiliated, consolidated, combined or unitary group other than one of which the Company was the common parent (provided that Apogee Coal

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Company, LLC, Catenary Coal Company, LLC and Hobet Mining, LLC were formerly C corporations that were members of a consolidated group with Arch Coal, Inc., but are not successors to such C corporations under Section 381(a) of the Code); (ii) neither the Company nor any of its Subsidiaries is party to any Tax Sharing Agreement or to any other agreement or arrangement referred to in clause (ii) or (iii) of the definition of “Tax”; (iii) no amount of the type described in clause (ii) or (iii) of the definition of “Tax” is currently payable by either the Company or any of its Subsidiaries, regardless of whether such Tax is imposed on the Company or any of its Subsidiaries; and (iv) neither the Company nor any of its Subsidiaries has entered into any agreement or arrangement with any Taxing Authority with regard to the Tax liability of the Company or any of its Subsidiaries affecting any Tax period for which the applicable statute of limitations, after giving effect to extensions or waivers, has not expired.

(i)Prior to the date hereof, the Company has provided Parent with copies of or access to (i) all Tax Returns of the Company or any of its Subsidiaries that were filed or became due on or after January 1, 2005 and (ii) all material agreements relating to Taxes of the Company or any of its Subsidiaries, including any Tax Sharing Agreements, effective during that period.

(j)“Tax” means (i) any tax, governmental fee or other like assessment or charge of any kind whatsoever (including withholding on amounts paid to or by any Person), together with any interest, penalty, addition to tax or additional amount imposed by any Governmental Authority (a “Taxing Authority”) responsible for the imposition of any such tax (domestic or foreign), and any liability for any of the foregoing as transferee, (ii) liability for the payment of any amount of the type described in clause (i) as a result of being or having been before the Effective Time a member of an affiliated, consolidated, combined or unitary group, or a party to any agreement or arrangement, as a result of which liability of the Company or any of its Subsidiaries, or Parent or any of its Subsidiaries, as the case may be, to a Taxing Authority is determined or taken into account with reference to the activities of any other Person, and (iii) liability of the Company or any of its Subsidiaries, or Parent or any of its Subsidiaries, as the case may be, for the payment of any amount as a result of being party to any Tax Sharing Agreement or with respect to the payment of any amount imposed on any person of the type described in (i) or (ii) as a result of any existing express or implied agreement or arrangement (including an indemnification agreement or arrangement).  “Tax Return” means any report, return, document, declaration or other information or filing required to be supplied to any Taxing Authority with respect to Taxes, including information returns, any documents with respect to or accompanying payments of estimated Taxes, or with respect to or accompanying requests for the extension of time in which to file any such report, return, document, declaration or other information.  “Tax Sharing Agreements” means all existing agreements or arrangements (whether or not written) binding the Company or any of its Subsidiaries, or Parent or any of its Subsidiaries, as the case may be, that provide for the allocation, apportionment, sharing or assignment

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of any Tax liability or benefit, or the transfer or assignment of income, revenues, receipts, or gains for the purpose of determining any Person’s Tax liability (including without limitation any tax sharing agreement currently in effect among the Company and any of its Subsidiaries as well as any indemnification agreement or arrangement pertaining to the sale or lease of assets or subsidiaries).

Section 4.15.  Tax Treatment.  Neither the Company nor any of its Affiliates has taken or agreed to take any action, or is aware of any fact or circumstance, that would prevent the Merger from qualifying as a reorganization within the meaning of Section 368 of the Code (a “368 Reorganization”).

Section 4.16.  Employee Benefit Plans.  (a) Except for items of a de minimis nature, Section 4.16 of the Company Disclosure Schedule contains a correct and complete list identifying each “employee benefit plan,” as defined in Section 3(3) of ERISA, and, whether or not subject to ERISA, each employment, severance, change in control, retention or similar contract, plan, arrangement or policy and each other plan or arrangement (written or oral) providing for compensation, bonuses, profit-sharing, stock option or other equity-based rights or other forms of incentive or deferred compensation, vacation benefits, insurance (including any self-insured arrangements), health or medical benefits, employee assistance program, disability or sick leave benefits, workers’ compensation, supplemental unemployment benefits, severance benefits, post-employment or retirement benefits (including compensation, pension, health, medical or life insurance benefits) and any other plan, agreement, program or policy which is maintained, sponsored or contributed to by the Company or any ERISA Affiliate of the Company and covers any current or former director, officer, employee or independent consultant of the Company or any of its Subsidiaries, or with respect to which the Company or any of its Subsidiaries has any liability.  Copies (which copies are correct and complete in all material respects) of such plans (and, if applicable, related trust or funding agreements or insurance policies) and all amendments thereto, most recent summary plan descriptions and written interpretations thereof have been furnished to or made available to Parent together with the most recent annual report (Form 5500 including, if applicable, Schedule B thereto) and tax return (Form 990) prepared in connection with any such plan or trust.  Such plans (disregarding the exception for those of a de minimis nature) are referred to collectively herein as the “Company Employee Plans.”

(b)No Company Employee Plan is subject to Title IV of ERISA (other than a “multiemployer plan,” as defined below).

(c)With respect to any multiemployer plan, as defined in Section 3(37) of ERISA (a “Multiemployer Plan”), to which the Company, its Subsidiaries or any of their ERISA Affiliates has any liability or contributes (or has at any time contributed or had an obligation to contribute):  (i) none of the Company, its Subsidiaries or any of their ERISA Affiliates has incurred any withdrawal liability under Title IV of ERISA that remains unsatisfied or would be subject to such

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liability if, as of the Closing Date, the Company, its Subsidiaries or any of their ERISA Affiliates were to engage in a complete withdrawal (as defined in Section 4203 of ERISA) or partial withdrawal (as defined in Section 4205 of ERISA) from any such multiemployer plan; and (ii) to the knowledge of the Company, no such multiemployer plan is in reorganization or insolvent (as those terms are defined in Sections 4241 and 4245 of ERISA, respectively).

(d)Each Company Employee Plan which is intended to be qualified under Section 401(a) of the Code has received a favorable determination letter, or has pending or has time remaining in which to file under the applicable remedial amendment period, an application for such determination from the Internal Revenue Service, and the Company is not aware of any reason why any such determination letter would not be issued.  Each Company Employee Plan has been maintained in material compliance with its terms and with the requirements prescribed by any and all statutes, orders, rules and regulations, including ERISA and the Code, which are applicable to such Company Employee Plan.  No material events have occurred with respect to any Company Employee Plan that would result in payment or assessment by or against the Company of any material excise taxes under Sections 4972, 4975, 4976, 4977, 4979, 4980B, 4980D, 4980E or 5000 of the Code.

(e)The consummation of the transactions contemplated by this Agreement will not (either alone or together with any other event) entitle any employee or independent contractor of the Company or any of its Subsidiaries to severance pay or accelerate the time of payment or vesting (except as otherwise may be required under Section 411(d)(3) of the Code) or trigger any payment of funding (through a grantor trust or otherwise) of compensation or benefits under, increase the amount payable or trigger any other material obligation pursuant to, any Company Employee Plan.  There is no contract, plan or arrangement (written or otherwise) covering any current or former director, officer, employee or independent contractor of the Company or any of its Subsidiaries that, individually or collectively, would entitle any such individual to any severance or other payment solely as a result of the transactions contemplated hereby, or would give rise to the payment of any amount that would not be deductible pursuant to the terms of Section 280G or 162(m) of the Code.  Section 4.16(e) of the Company Disclosure Schedule lists (i) all the agreements, arrangements and other instruments which give rise to an obligation to make or set aside amounts payable to or on behalf of the officers of the Company and its Subsidiaries as a result of the transactions contemplated by this Agreement and/or any subsequent employment termination (whether by the Company or the officer), true and complete copies of which have been previously provided to Parent and (ii) the maximum aggregate amounts so payable to each such individual as a result of the transactions contemplated by this Agreement and/or any subsequent employment termination (whether by the Company or the officer).

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(f)Except to the extent set forth in the Company Balance Sheet, neither the Company nor any of its Subsidiaries has any liability in respect of post-retirement health, medical, disability or life insurance benefits for retired, former or current employees of the Company or its Subsidiaries except as required to avoid excise tax under Section 4980B of the Code.

(g)There has been no amendment to, written interpretation or announcement (whether or not written) by the Company or any of its Affiliates relating to, or change in employee participation or coverage under, any Company Employee Plan which would increase materially the expense of maintaining such Company Employee Plan above the level of the expense incurred in respect thereof for the fiscal year ended December 31, 2007.

(h)Neither the Company nor any of its Subsidiaries is a party to or subject to, or is currently negotiating in connection with entering into, any collective bargaining agreement or other contract or understanding with a labor union or organization.

(i)All contributions and payments accrued under each Company Employee Plan, determined in accordance with prior funding and accrual practices, as adjusted to include proportional accruals for the period ending as of the date hereof, have been discharged and paid on or prior to the date hereof except to the extent set forth in the Company Balance Sheet.

(j)There is no action, suit, investigation, audit or proceeding pending against or involving or, to the knowledge of the Company, threatened against or involving, any Company Employee Plan before any Governmental Authority.

(k)No Company Employee Plan is maintained outside the jurisdiction of the United States or covers any employee residing or working outside the United States.

(l)No current or former director, officer, employee or independent contractor of the Company or any of its Subsidiaries will become entitled to any bonus, retirement, severance, job security or similar benefit or enhanced such benefit (including acceleration of vesting or exercise of an incentive award) as a result of the transactions contemplated hereby.

(m)The Company Balance Sheet fairly and accurately reflects as of the date thereof all liabilities and obligations related to any black lung disease claims and benefits arising under any state or federal law, claims and benefits arising under any state workers’ compensation laws, and post-retirement health or pension claims and benefits.

Section 4.17.  Employees.The Company has provided or made available to Parent prior to the date hereof a true and complete list, as of March 27, 2008, of (i) the names, titles and annual salaries of all officers of the Company and its Subsidiaries and all other employees of the Company and its

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Subsidiaries with base annual salaries equal to or in excess of $100,000 (such list to be updated by the Company as of immediately prior to the Closing to reflect any terminations and new hires) and (ii) the wage rates for non-salaried employees of the Company and its Subsidiaries (by classification).  The Company has disclosed to Parent prior to the date hereof the name of any employee referred to in clause (a) who, to the knowledge of the Company, has indicated to the Company or any of its Subsidiaries that he or she intends to resign or retire as a result of the transactions contemplated by this Agreement or otherwise within one year after the Closing.

Section 4.18.  Labor Matters.  The Company and its Subsidiaries are not engaged in any material respect in any unfair labor practice which would reasonably be expected to be, individually or in the aggregate, material.  There is no unfair labor practice charge or material grievance arising out of a collective bargaining agreement, other current labor agreement with any labor union or organization, or other material grievance proceeding against the Company or any of its Subsidiaries pending, or, to the knowledge of the Company, threatened.  Since two years prior to the date of this Agreement there has been no unfair labor practice charge or complaint filed against the Company or any of its Subsidiaries, or to the knowledge of the Company, pending or threatened, before (A) the National Labor Relations Board or any similar state agency, or (B) the Equal Employment Opportunity Commission or any similar state agency responsible for the prevention of unlawful employment practices.  There is no strike or lockout or material slowdown, work stoppage or other labor dispute pending, or to the knowledge of the Company, threatened against, involving or otherwise materially affecting the Company or any of its Subsidiaries.  Since two years prior to the date of this Agreement, any and all reductions of workforce have been carried out in all material respects in accordance with all Applicable Law.

Section 4.19.  Environmental Matters.  Except as does not and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect:

(a)The Company and its Subsidiaries are and have been in compliance with all Environmental Laws and all Environmental Permits; such Environmental Permits are valid and in full force and effect and will not be terminated or impaired or become terminable, in whole or in part, as a result of this Agreement and the other Transaction Documents or the consummation of the transactions contemplated herein or therein.

(b)None of the Company nor any of its Subsidiaries has received any Environmental Claim or written notice of any threatened Environmental Claim, or has any knowledge of any threat of such an Environmental Claim, regarding or resulting from the activities or business of the Company or any of its Subsidiaries, or any property or assets currently or formerly owned, operated or used by the Company or any of its Subsidiaries, in each case that (i) has been outstanding for

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more than 30 days, (ii) would reasonably be expected to result in (A) an action by a Governmental Authority, (B) a determination that there is a pattern of violations or (C) the closure of any operations of the Company or any of its Subsidiaries or (iii) results in or would reasonably be expected to result in liability to the Company or any of its Subsidiaries.

(c)None of the Company nor any of its Subsidiaries has entered into, has agreed to, has been issued or to the knowledge of the Company is otherwise subject to, any material order, writ, judgment, award, injunction or decree of any arbitrator or Governmental Authority under any Environmental Law regarding the Company or any of its Subsidiaries or any property or assets currently or formerly owned, operated or used by the Company or any of its Subsidiaries, in any such case that would interfere with the respective ability of the Company or any of its Subsidiaries to continue to operate their respective assets and conduct their respective businesses as currently conducted or would result in liability to the Company or any of its Subsidiaries.

(d)None of the Company nor any of its Subsidiaries has Released any Hazardous Materials in violation of Environmental Law or in a manner that would reasonably be expected to result in liability under Environmental Laws or Environmental Permits, and, to the knowledge of the Company, no other Person has Released any Hazardous Materials, and Hazardous Materials are not otherwise present, at any property currently or formerly owned or operated by the Company or any of its Subsidiaries in violation of any Environmental Law or Environmental Permits or in a manner that would reasonably be expected to result in liability to the Company or any of its Subsidiaries.

(e)No property currently owned or operated by the Company or any of its Subsidiaries (i) is listed or, to the knowledge of the Company or any of its Subsidiaries, proposed for listing on the CERCLA National Priorities List or CERCLIS list or any similar Governmental Authority’s list of sites at which remedial action is or may be necessary or (ii) contains asbestos or asbestos-containing materials, in either case in a condition constituting a violation of Environmental Law or as would reasonably be expected to result in liability to the Company or any of its Subsidiaries.

(f)None of the Company nor any of its Subsidiaries has disposed of, transported or arranged for the disposal or transportation of, any Hazardous Materials in a manner or to a location that would reasonably be expected to result in liability to the Company or any of its Subsidiaries under Environmental Law.

(g)Neither the Company nor any Subsidiary of the Company is in default under, and no condition exists that with notice or lapse of time or both would constitute a default under, any of the Environmental Permits.Neither the Company nor any of its Subsidiaries has received written notice that the Person

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issuing or authorizing any such Environmental Permit intends to terminate or will refuse to renew or reissue any such Environmental Permit upon its expiration.

(h)To the knowledge of the Company, (A) there are no material applications for Environmental Permits in the name of the Company or any of its Subsidiaries other than those set forth on Section 4.19(h) of the Company Disclosure Schedule (the “Company Material Environmental Applications”); and (B) the Company or one of its Subsidiaries will, on any grant of any of such applications, hold legal or beneficial title to the interest in each such application as set forth on Section 4.19(h) of the Company Disclosure Schedule.  Each of the Company Material Environmental Applications has been made in accordance with Applicable Laws.  Neither the Company nor any of its Subsidiaries has received any written communication from any Governmental Authority that indicates that any of the Company Material Environmental Applications will not be timely granted or will be subject to any material restrictions, limitations or unusual requirements.

(i)There has been no environmental investigation, study, audit, test, review or other analysis conducted of which the Company has knowledge in relation to the current or prior business of the Company or any of its Subsidiaries or any property or facility now or previously owned or leased by the Company or any of its Subsidiaries that has not been delivered or made available to Parent at least five Business Days prior to the date hereof.

Section 4.20.  Antitakeover Statutes; Company Stockholders Agreement; Absence of Dissenters Rights.  (a) The Company has taken all action necessary to exempt the Merger, this Agreement and the transactions contemplated hereby from Section 203 of Delaware Law, and, accordingly, neither such Section nor any other antitakeover or similar statute or regulation applies or purports to apply to any such transactions.  No other “control share acquisition,” “fair price,” “moratorium” or other antitakeover laws enacted under U.S. state or federal laws apply to this Agreement or any of the transactions contemplated hereby.

(b)The execution, delivery or performance of this Agreement and the other Transaction Documents, and the consummation of the transactions contemplated hereby and thereby, including the Merger, complies and will comply in all material respects with any applicable provisions of the Company Stockholders Agreement.

Section 4.21.  Material Contracts.

(a)Except as set forth on Section 4.21(a) of the Company Disclosure Schedule, as of the date hereof, neither the Company nor any of its Subsidiaries is a party to or bound by, whether in writing or not, any of the following (other than agreements solely between or among the Company and its wholly-owned Subsidiaries and not containing any rights of or obligations to any third party)

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(any item set forth in one sub-section of Section 4.21(a) of the Company Disclosure Schedule need not be repeated in another sub-section of Section 4.21(a) if applicability to such other sub-section is reasonably apparent from the disclosure set forth in the first such sub-section):

(i)any agreement or series of related agreements for the purchase, sale (other than coal supply or coal product sales agreements), receipt, lease or use of materials, supplies, goods, services, equipment or other assets providing for either (A) annual payments by or to the Company or any of its Subsidiaries of $500,000 or more or (B) aggregate payments by or to the Company or any of its Subsidiaries of $2,500,000 or more;

(ii)any partnership, joint venture, limited liability company, operating, shareholder, investor rights or other similar agreement or arrangement with any Person;

(iii)any distributor, dealer, sales agency, sales representative, marketing or similar contracts;

(iv)any agreement or series of related agreements relating to, or entered into in connection with, the acquisition or disposition of the equity securities of any Person (other than in respect of the investments with funds held in escrow accounts established to support reclamation obligations of the Company or any of its Subsidiaries), any business or any material amount of assets outside the ordinary course of business (in each case, whether by merger, sale of stock, sale of assets or otherwise);

(v)any agreement relating to indebtedness for borrowed money, the deferred purchase price of property or the prepaid sale of goods or products (in any such case, whether incurred, assumed, guaranteed or secured by any asset and, in the case of agreements relating to the deferred purchase price of property, with a value in excess of $100,000), including indentures, mortgages, loan agreements, capital leases, security agreements or other agreements for the incurrence of indebtedness, other than trade accounts payable incurred in the ordinary course of business;

(vi)any agreement relating to any interest rate, currency or commodity derivative or hedging transaction (excluding any agreements for the purchase of diesel fuel where physical delivery is intended);

(vii)any agreement (including any keepwell agreement) under which (A) to the knowledge of the Company any Person has directly or indirectly guaranteed any liabilities or obligations of the Company or any of its Subsidiaries (other than any such guarantees by the Company and its wholly-owned Subsidiaries), in case of each such liability or obligation, in

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an amount in excess of $1,000,000 or (B) the Company or any of its Subsidiaries has, directly or indirectly, guaranteed any liabilities or obligations of any other Person (other than the Company or any wholly-owned Subsidiary);

(viii)any agreement that (A) limits the freedom of the Company or any of its Subsidiaries to compete in any line of business or with any Person or in any area or which would so limit the freedom of Parent, the Company or any of their respective Affiliates after the Effective Time or (B) contains exclusivity or “most favored nation” obligations or restrictions binding on the Company or any of its Subsidiaries or that would be binding on Parent or its Affiliates after the Effective Time;

(ix)any employment, consultancy, deferred compensation, loan, retention, bonus, severance, retirement or other similar agreement or arrangement (including any amendment to any such existing agreement or arrangement) with any director, officer or employee of the Company or any of its Subsidiaries (other than loans to non-executive employees not in excess of $10,000 individually or $100,000 in the aggregate);

(x)any consulting agreement or similar arrangement with an independent contractor providing for (i) annual payments by the Company or any of its Subsidiaries of $100,000 or more, (ii) aggregate payments by the Company or any of its Subsidiaries of $250,000 or more or (iii) a term in excess of three years;

(xi)any collective bargaining agreement;

(xii)any contracts or agreements relating to the provision of contract mining (excluding any agreement solely with respect to the provision of contract labor) by or to the Company or any of its Subsidiaries;

(xiii)any lease or sublease of or relating to (A) real property leased to others, (B) tangible personal property leased to others or (C) mining or exploration rights leased to others;

(xiv)any contracts or agreements related to the Company’s or its Subsidiaries storage or transportation of coal (including stock piling and loading agreements) providing for either (i) annual payments by the Company or any of its Subsidiaries of $250,000 or more or (ii) aggregate payments by the Company or any of its Subsidiaries of $1,000,000 or more;

(xv)any coal supply agreement or coal product sales agreement; or

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(xvi)any other agreement, commitment, arrangement or plan not of a type described above but with a value in excess of $1,000,000.

(b)Each agreement, contract, plan, lease, arrangement or commitment disclosed or required to be disclosed pursuant to Section 4.21(a) (and, for purposes of (A) the making of this representation and warranty as of the Effective Time solely for purposes of Section 4.30 and (B) the satisfaction or failure of the condition set forth in Section 9.02(a)(iv), each agreement, contract, plan, lease, arrangement or commitment entered into between the date hereof and the Closing Date that would have been required to be disclosed pursuant to Section 4.21(a) if it had been in effect as of the date hereof) is referred to as a “Material Contract”.  Each Material Contract is, to the Company’s knowledge, a valid and binding agreement of the parties thereto (other than the Company and its Subsidiaries), and, to the Company’s knowledge, is in full force and effect and in all material respects enforceable against such other parties, in accordance with its terms (except to the extent that enforceability may be limited by (i) applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar laws from time to time in effect affecting generally the enforcement of creditors’ rights and remedies and (ii) general principles of equity, whether in a proceeding at law or in equity) and prior to the date hereof the Company or any of its Subsidiaries has not received any written notice to terminate, in whole or material part, any of the same.  None of the Company, any of its Subsidiaries or, to the knowledge of the Company, any other party thereto is in default or breach in any material respect under the material terms of any such Material Contract, and, to the knowledge of the Company, no event or circumstance has occurred that, with notice or lapse of time or both, is reasonably likely to constitute any event of default thereunder that would be reasonably expected to result in the termination of such Material Contract.  True and complete copies of each Material Contract (including all modifications and amendments thereto) in effect as of the date hereof have been made available to Parent prior to the date hereof.

Section 4.22.  Properties.

(a)“Company Leased Tangible Property” means all items of machinery, equipment, vehicles, and other tangible personal property leased or subleased by the Company or any of its Subsidiaries.  Section 4.22(a) of the Company Disclosure Schedule sets forth a list that is accurate and complete in all material respects of the leases and subleases to which the Company or any of its Subsidiaries is a party or is bound, of or relating to Company Leased Tangible Property (other than agreements solely between or among the Company and its wholly-owned Subsidiaries and not containing any rights of or obligations to any Third Party).

(b)“Company Leased Real Property” means all real property and other interests in land, including coal, mining, exploration and surface rights, easements, rights of way, options, surface estates, coal and other mineral estates

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leased or subleased by the Company or any of its Subsidiaries.  Section 4.22(b) of the Company Disclosure Schedule sets forth a list that is accurate and complete in all material respects of the leases and subleases to which the Company or any of its Subsidiaries is a party or is bound, of or relating to Company Leased Real Property (other than agreements solely between or among the Company and its wholly-owned Subsidiaries and not containing any rights of or obligations to any Third Party).

(c)The Company has delivered or made available to Parent prior to the date hereof copies (which copies are true and complete in all material respects) of the leases and subleases set forth on Section 4.22(a) of the Company Disclosure Schedule and Section 4.22(b) of the Company Disclosure Schedule (in each case as amended to the date of this Agreement).  With respect to each such lease or sublease of Company Leased Tangible Property and Company Leased Real Property, except where the failure of any of the following to be true and correct would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect:

(i)such lease or sublease is in full force and effect in all respects and enforceable in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally and general equitable principles whether in a proceeding at law or in equity;

(ii)(A) neither the Company nor any of its Subsidiaries is in default under any such lease or sublease and, no event has occurred which, with the passage of time or expiration of any grace period would constitute a default of the Company’s or its Subsidiaries’ obligations under such lease or sublease, (B) to the knowledge of the Company no other party to any such lease or sublease is in default thereunder and (C) neither the Company nor any of its Subsidiaries has received a written or other notice of default with respect to such lease or sublease;

(iii)no such lease or sublease has been mortgaged, deeded in trust or subjected to a Lien (other than Permitted Liens) by the Company or any of its Subsidiaries;

(iv)with regard to the Company Leased Real Property, the Company or one of its Subsidiaries has adequate rights of ingress and egress to such Company Leased Property and all buildings, structures, facilities, fixtures and other improvements thereon;

(v)with regard to the Company Leased Real Property, neither the Company nor any of its Subsidiaries owes any brokerage or other commissions with respect to any such lease or sublease for which

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adequate reserves have not been established on the Company Balance Sheet;

(vi)neither the Company nor any of its Subsidiaries has received written notice of or has knowledge of a claim or dispute under any lease or sublease regarding any of the Company Leased Real Property or the Company Leased Personal Property; and

(vii)other than Permitted Liens, there are no other matters that, to the knowledge of the Company, would adversely affect the rights of the Company or any of its Subsidiaries to the Company Leased Real Property or the Company Leased Tangible Property.

(d)“Company Owned Real Property” means all real property, and other interests in land, including coal, mining, exploration and surface rights, easements, rights of way, options, surface estates and other mineral estates owned by the Company or any of its Subsidiaries.  Section 4.22(d) of the Company Disclosure Schedule sets forth a list of the Company Owned Real Property and the record title owner of the Company Owned Real Property.  Copies (which copies are true and complete in all material respects) of all deeds, and all title insurance policies, title insurance, abstracts and other evidence of title (if any) in the possession of the Company or any of its Subsidiaries relating to the Company Owned Real Property set forth on Section 4.22(d) of the Company Disclosure Schedule have been delivered or made available to Parent prior to the date hereof.  With respect to each such parcel of the Company Owned Real Property, except where the failure of any of the following to be true and correct would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect:  (i) the identified owner has possession of, adequate rights of ingress and egress with respect to, and good and marketable fee simple title to each Company Owned Real Property, free and clear of any Liens, except for Permitted Liens; (ii) there are no pending or, to the Company’s knowledge, threatened condemnation proceedings and no tenant or other party in possession of any of the Company Owned Real Property has any right to purchase, or holds any right of first refusal to purchase, any of such properties; and (iii) other than Permitted Liens, there are no other matters that would adversely affect the title of the Company or any of its Subsidiaries.

(e)“Company Owned Tangible Property” means all items of machinery, equipment, vehicles, and other tangible personal property owned by the Company or any of its Subsidiaries.  Section 4.22(e) of the Company Disclosure Schedule sets forth a list that is accurate and complete in all material respects of the Company Owned Tangible Property.  The Company or one of its Subsidiaries is in possession of and, except for such spare parts as are held on consignment, owns and has good title to all Company Owned Tangible Property as operated as of the date hereof.  All such Company Owned Tangible Property is free and clear of all Liens, other than Permitted Liens.

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(f)The Company has delivered or made available to Parent prior to the date hereof copies (which copies are true and correct in all material respects) of all of the following relating to the Company Leased Real Property, Company Owned Real Property, Company Leased Tangible Property, Company Owned Tangible Property, or any of the mining complexes or reserves of the Company or any of its Subsidiaries, in each case to the extent material and in the possession of the Company or any of its Subsidiaries:  engineering, geological, operational, coal measurement, feasibility and coal data and analyses, surveys, aerial surveys, tract maps, parcel maps, plans, drawings, drilling logs, reserve reports, permit applications, and tax appraisals.

(g)Section 4.22(g) of the Company Disclosure Schedule lists all of the Company’s and its Subsidiaries’ owned or operated underground storage tanks, aboveground storage tanks, dikes or impoundments in, on, under or about the Company Leased Real Property or Company Owned Real Property.

(h)Except with respect to real property leased to others, the plants, buildings, structures, mines and equipment owned or leased by the Company or any of its Subsidiaries are in all material respects in good operating condition and repair and have been reasonably maintained consistent with past practice and are adequate and suitable for the purpose for which they are currently being used.

(i)The maps listed on Section 4.22(i) of the Company Disclosure Schedule accurately reflect, in all material respects, the Company Leased Real Property and the Company Owned Real Property.

(j)The Company Leased Real Property, Company Owned Real Property, Company Leased Tangible Property, and Company Owned Tangible Property constitute all of the property and assets (together with the Company Permits and the Environmental Permits) used or held for use in connection with the businesses of the Company and its Subsidiaries and are adequate to conduct such businesses as currently conducted in all material respects.

(k)The Company has provided to Parent on February 29, 2008 a list of each general reserve area of the Company and its Subsidiaries, and with respect to each such area the following information (which information, to the knowledge of the Company, is accurate and complete in all material respects): (i) whether such mining area is mineable by underground, surface or both methods; (ii) the proven and probable reserves as of January 1, 2008; (iii) a categorization of reserves by heat value as of January 1, 2008; and (iv) a categorization of reserves by sulfur content as of January 1, 2008.  Subject to the terms of any applicable lease and Applicable Law, the Company has the right to extract and sell the coal reserves referred to above and such reserves are not subject to any mining rights of any other Person.  Set forth in Section 4.22(k) of the Company Disclosure Schedule is a list, which list is accurate and complete in all material respects, of each mining complex of the Company and its Subsidiaries and the 2006 and 2007 production

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for each such mining complex.  Prior to the date hereof, the Company has provided to Parent a list of the quantity of reserves currently assigned to each mining area of the Company and its Subsidiaries.

(l)Neither the Company nor any of its Subsidiaries has received written notice or has knowledge of any disputes with any adjoining landowners that would reasonably be expected to result in, individually or in the aggregate, a Company Material Adverse Effect.

Section 4.23.  Intellectual Property.

(a)Section 4.23(a)(i) of the Company Disclosure Schedule contains a true and complete list of all material registrations and applications for registration of any Intellectual Property Right owned by the Company or any of its Subsidiaries.  Section 4.23(a)(ii) of the Company Disclosure Schedule contains a true and complete list of all material agreements (excluding licenses for commercial off the shelf computer software that are generally available on nondiscriminatory pricing terms) to which the Company or any of its Subsidiaries is a party or otherwise bound and pursuant to which the Company or any of its Subsidiaries (A) obtains the right to use, or a covenant not to be sued under, any Intellectual Property Right or (B) grants the right to use, or a covenant not to be sued under, any Intellectual Property Right.

(b)Except as, individually or in the aggregate, would not reasonably be expected to be material:  (i) the Company and each of its Subsidiaries owns, or is licensed to use (in each case, free and clear of any Liens), all Intellectual Property Rights used in or necessary for the conduct of its business as currently conducted; (ii) neither the Company nor its Subsidiaries has infringed, misappropriated or otherwise violated the Intellectual Property Rights of any Person; (iii) to the knowledge of the Company, no Person has challenged, infringed, misappropriated or otherwise violated any Intellectual Property Right owned by and/or licensed to the Company or its Subsidiaries; (iv) neither the Company nor any of its Subsidiaries has received any written notice or otherwise has knowledge of any pending claim, action, suit, order or proceeding with respect to any Intellectual Property Right used by the Company or any of its Subsidiaries or alleging that the any services provided, processes used or products manufactured, used, imported, offered for sale or sold by the Company or any of its Subsidiaries infringes, misappropriates or otherwise violates any Intellectual Property Rights of any Person; (v) the consummation of the transactions contemplated by this Agreement will not alter, encumber, impair or extinguish any Intellectual Property Right of the Company or any of its Subsidiaries or impair the right of Parent and its Subsidiaries to develop, use, sell, license or dispose of, or to bring any action for the infringement of, any Intellectual Property Right of the Company or any of its Subsidiaries; and (vi) the Company and its Subsidiaries have taken reasonable steps to maintain the confidentiality of all material Trade Secrets owned, used or held for use by the Company or any of its Subsidiaries and no such Trade Secrets

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have been disclosed other than to employees, representatives and agents of the Company or any of its Subsidiaries all of whom are bound by written confidentiality agreements.

Section 4.24.  Insurance Coverage.  Section 4.24 of the Company Disclosure Schedule sets forth a list (which list is true and complete in all material respects) of, and the Company has furnished or made available to Parent prior to the date hereof copies (which copies are true and complete in all material respects) of, all insurance policies and bonds (other than surety bonds) relating to the assets, business, operations, employees, officers or directors of the Company and its Subsidiaries.  There is no claim by the Company or any of its Subsidiaries pending under any of such policies or bonds as to which, to the knowledge of the Company, coverage has been questioned, denied or disputed by the underwriters of such policies or bonds or in respect of which such underwriters have reserved their rights.  All premiums payable under all such policies and bonds have been timely paid and the Company and its Subsidiaries have otherwise complied in all material respects with the terms and conditions of all such policies and bonds.  All material policies of insurance and bonds (or other policies and bonds providing substantially similar insurance coverage) have been in effect since January 1, 2006 and remain in full force and effect.  To the knowledge of the Company, the underwriters of such policies and bonds have not threatened any termination of, material premium increase with respect to, or material alteration of coverage under, any of such policies or bonds.  The Company and its Subsidiaries shall immediately after the Effective Time continue to have coverage under such policies and bonds with respect to events occurring prior to the Effective Time.  

Section 4.25.  Licenses and Permits.

(a)“Company Permits” means all licenses, mining leases, mining authorities, franchises, permits, certificates, approvals or other similar authorizations issued to the Company or any of its Subsidiaries by any Governmental Authority, including those relating to the Identified Mining Laws but not including any other Environmental Permits.  Section 4.25(a) of the Company Disclosure Schedule sets forth a list that is accurate and complete in all material respects of the Company Permits and the Environmental Permits.

(b)The Company Permits are in all material respects sufficient permits to conduct the business of the Company and its Subsidiaries as currently conducted.  The Company Permits are in all material respects valid and in full force and effect, neither the Company nor any Subsidiary of the Company is in material default under, and no condition exists that with notice or lapse of time or both would constitute a material default under, any of the Company Permits.  Neither the Company nor any of its Subsidiaries has received written notice that the Person issuing or authorizing any such Permit intends to terminate or will refuse to renew or reissue any such Permit upon its expiration.  The Company and

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its Subsidiaries have complied with the terms and conditions of the Company Permits in all material respects.

Section 4.26.  Affiliate Transactions.  No Stockholder holding more than one percent of the outstanding Company Stock (or member of a group of Affiliated Stockholders holding in the aggregate in excess of one percent of the outstanding Company Stock), director or officer of the Company or any of its Subsidiaries, and none of their respective (a) controlled Affiliates (or in the case of the Stockholder Representative, any Affiliates of the Stockholder Representative) or (b) to the Company’s knowledge, Affiliates of Stockholders (other than the Stockholder Representative) that are not controlled Affiliates or (c) to the Company’s knowledge, “associates” (or, with respect to any of the foregoing, members of any of their “immediate families”) (as such terms are respectively defined in Rule 12b-2 and Rule 16a-1 of the 1934 Act) (each of the foregoing Persons in this sentence, a “Related Person”), (i) is, or has in the past two years been, party to or involved, directly or indirectly, in any material contract, material agreement, material business arrangement or other material relationship with the Company or any of its Subsidiaries (whether written or oral) (other than (A) Stockholder, director, officer or employment relationships, (B) the ownership of Company Stock or (C) any purchase or sale of the Company’s products in the Company’s ordinary course of business and on arms’ length terms), (ii) directly or indirectly owns, or otherwise has any right, title or interest in, to or under, any material property or right, tangible or intangible, that is used by the Company or any of its Subsidiaries (other than (A) in its capacity as a stockholder of the Company or (B) any indirect ownership interest that a Related Person may have as a result of any investment in any Person that is not an Affiliate of such Related Person) or (iii) is, or has in the past two years been, engaged, directly or indirectly, in the conduct of the business of the Company or its Subsidiaries (other than (A) in its capacity as a stockholder or as a director, officer or employee of the Company or any of its Subsidiaries or (B) relating to any indirect ownership interest that a Related Person may have as a result of any investment in any Person that is not an Affiliate of such Related Person).

Section 4.27.  Customers and Suppliers.  Section 4.27 of the Company Disclosure Schedule contains (i) a list of the top ten customers of the Company and its Subsidiaries (determined on the basis of revenues) for each of the last two fiscal years and (ii) a list of the top ten suppliers of the Company and its Subsidiaries (determined on the basis of cost of items purchased) for the last fiscal year.  No customer set forth on Section 4.27 of the Company Disclosure Schedule has ceased or materially reduced its purchases from or use of the services of the Company and its Subsidiaries since the Company Balance Sheet Date, or to the knowledge of the Company, has threatened to cease or materially reduce such purchases or use after the date hereof.  No supplier set forth on Section 4.27 of the Company Disclosure Schedule has ceased or materially reduced its supply of materials or goods or provision of services to the Company and its Subsidiaries since the Company Balance Sheet Date, or to the knowledge of the Company, has

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threatened to cease or materially reduce such supply or provision after the date hereof.  To the knowledge of the Company, no such customer or supplier is currently in, or threatened with, bankruptcy or insolvency.

Section 4.28.  Absence of Certain Business Practices.  Neither the Company nor any of its Subsidiaries, nor any of their respective officers, directors, employees or agents, nor any Person acting on behalf of the Company or any of its Subsidiaries, has, directly or indirectly, within the past two years given or agreed to give any gift or similar benefit to any customer, supplier, governmental employee or other Person who is or may be in a position to help or hinder the respective business of the Company or any of its Subsidiaries (or assist the Company or any of its Subsidiaries in connection with any actual or proposed transaction) that (a) might subject the Company or any of its Subsidiaries to any material damage or material penalty assessed by any Governmental Authority, (b) if not given in the past might have had a material adverse effect, (c) if not continued in the future, might have a material adverse effect or (d) might subject the Company or any of its Subsidiaries to suit by any Governmental Authority.

Section 4.29.  Disclosure.  There is no fact or circumstance known to Company that has not been disclosed to Parent, the existence of which would, individually or in the aggregate with other such facts or circumstances, have a Company Material Adverse Effect.  Subject to such exceptions as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, no representation or warranty made by the Company in this Agreement (as modified by statements contained in the Company Disclosure Schedule) or in any certificate furnished to Parent pursuant to any provision of this Agreement by or on behalf of the Company, contains any untrue statement of a fact or omits to state a fact required to be stated therein or necessary in order to make the statements made herein or therein, in the light of the circumstances in which they were made, not misleading; provided that to the extent a representation or warranty of the Company in this Agreement is qualified by the knowledge of the Company, the representation and warranty set forth in this sentence shall to such extent be deemed to be similarly qualified by the knowledge of the Company.

Section 4.30.  No Company Material Adverse Effect.  The representations and warranties contained in this Article 4, disregarding any qualification contained therein as to materiality or Company Material Adverse Effect, are true and correct, with such exceptions as have not had and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

Section 4.31.  No Other Representations or Warranties.  Except for the representations and warranties contained in this Agreement or any other Transaction Document, neither the Company nor any other Person makes any other express or implied representation or warranty on behalf of the Company and

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its Subsidiaries (and its and their business operations, financial condition, assets and properties) and Parent shall be entitled to rely only on such representations and warranties.  The Company disclaims any representation or warranty, whether made by the Company or any of its Affiliates, officers, directors, employees, agents or representatives, that is not contained in this Agreement, any other Transaction Document or in any certificate delivered pursuant to this Agreement or any other Transaction Document.

ARTICLE 5

Representations and Warranties of Parent

Except as expressly disclosed, and reasonably apparent on the face of the disclosure contained, in the Parent SEC Documents filed before the date of this Agreement, and only as and to the extent so disclosed and apparent (excluding any disclosures included therein (x) under the “Risk Factors” or similar caption, (y) to the extent that such disclosures do not relate to historical or existing facts, events, changes, effects, developments, conditions or occurrences, and (z) to the extent that they are forward-looking in nature) (provided that in no event shall any disclosure in the Parent SEC Documents qualify or limit the representations and warranties of Parent set forth in Sections 5.02, 5.05 and 5.07), and, subject to Section 12.04, except as set forth in the Parent Disclosure Schedule, Parent represents and warrants to the Company on and as of the date of this Agreement and, solely with respect to the representations and warranties in Sections 5.01, 5.02, 5.03, 5.04, 5.05, 5.06, 5.13, 5.14, 5.20 (such representations and warranties, the “Parent Core Representations”) and Section 5.27, as of the Effective Time, that:

Section 5.01.  Corporate Existence and Power.  Each of Parent and Merger Subsidiary is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has all corporate powers required to carry on its business as currently conducted.  In all material respects, each of Parent and Merger Subsidiary is duly qualified to do business as a foreign corporation and, as applicable in the relevant jurisdiction, is in good standing in all jurisdictions where such qualification is necessary.  True and complete copies of the certificate of incorporation and bylaws of the Parent as currently in effect have been made available to the Company prior to the date hereof.  Since the date of its incorporation, Merger Subsidiary has not engaged in any activities other than in connection with or as contemplated by this Agreement.

Section 5.02.  Corporate Authorization.  (a) The execution, delivery and performance by Parent and Merger Subsidiary of this Agreement and each other Transaction Document to which Parent or Merger Subsidiary is or will be a party and the consummation of the transactions contemplated hereby and thereby are within its corporate powers, and, except for the approval of the issuance of the shares of Parent Stock to be issued pursuant to Article 2 (the “Parent Stock

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Issuance”) by a majority of the votes cast at a meeting of stockholders of Parent where the total vote cast with respect to such issuance represents over fifty percent in interest of the Parent Stock entitled to vote on such issuance (the “Parent Stockholder Approval”), have been duly authorized by all necessary corporate action on the part of Parent and Merger Subsidiary and no other corporate, shareholder or other similar proceedings on the part of Parent or Merger Subsidiary are necessary to authorize this Agreement or any other Transaction Document or to consummate the transactions contemplated hereby or thereby.  This Agreement and each of the other Transaction Documents to which Parent or Merger Subsidiary is or will be a party constitutes, or will when executed and delivered constitute, a valid and binding agreement of Parent and Merger Subsidiary, as applicable, enforceable against Parent and Merger Subsidiary, as applicable, in accordance with its terms, except to the extent that enforceability may be limited by (i) applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar laws from time to time in effect affecting generally the enforcement of creditors’ rights and remedies and (ii) general principles of equity, whether in a proceeding at law or in equity.

(b)Parent’s Board of Directors has (i). unanimously determined that this Agreement and the other Transaction Documents to which Parent is a party, and the transactions contemplated hereby and thereby (including the Merger), are advisable, fair to and in the best interests of Parent’s stockholders, (ii). unanimously approved and adopted this Agreement and the other Transaction Documents to which Parent is a party, and the transactions contemplated hereby and thereby (including the Merger), and (iii). unanimously resolved to recommend approval of the Parent Stock Issuance by Parent’s stockholders.

Section 5.03.  Governmental Authorization.  The execution, delivery and performance by each of Parent or Merger Subsidiary of this Agreement and each other Transaction Document to which Parent or Merger Subsidiary is or will be a party and the consummation of the transactions contemplated hereby and thereby require no action by or in respect of, or filing with, any Governmental Authority other than (i) the filing of a certificate of merger with respect to the Merger with the Delaware Secretary of State, (ii) compliance with any applicable requirements of the HSR Act, (iii) compliance with any applicable requirements of the 1933 Act, the 1934 Act and any other U.S. state or federal securities laws and (iv) any other immaterial actions or filings.

Section 5.04.  Non-contravention.  The execution, delivery and performance by each of Parent and Merger Subsidiary of this Agreement and each other Transaction Document to which Parent or Merger Subsidiary is or will be a party and the consummation of the transactions contemplated hereby and thereby do not and will not (i) contravene, conflict with, or result in any violation or breach of any provision of the certificate of incorporation or bylaws (or similar organizational documents) of Parent or any of its Subsidiaries, (ii) assuming compliance with the matters referred to in Section 5.03, contravene, conflict with

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or result in a violation or breach of any provision of any Applicable Law, (iii) require any consent or other action by any Person under, constitute a default, or an event that, with or without notice or lapse of time or both, would constitute a default, under, or cause or permit the termination, cancellation, acceleration or other change of any right or obligation or the loss of any benefit to which Parent or any of its Subsidiaries is entitled under any provision of any agreement or other instrument binding upon the Parent or any of its Subsidiaries or any of their respective properties or assets or any license, franchise, permit, approval or other authorization of, or any deposit, letter of credit, trust fund or bond posted by, Parent or any of its Subsidiaries or (iv) result in the creation or imposition of any Lien on any asset of the Parent or any of its Subsidiaries, with such exceptions, in the case of (a) clause (ii) as would not, individually or in the aggregate, reasonably be expected to be material or (b) clauses (iii) and (iv), as would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect.

Section 5.05.  Capitalization.  (a) The authorized capital stock of the Parent consists of 110,000,000 shares consisting of (i) 100,000,000 shares of Parent Stock and (ii) 10,000,000 shares of Preferred Stock, par value $0.01 per share (“Preferred Stock”), of which 1,000,000 shares have been designated as Series A Junior Participating Preferred Stock, par value $0.01 per share.  As of March 31, 2008, there were outstanding (i) 26,760,377 shares of Parent Stock (including 189,437 shares of restricted Parent Stock), (ii) no shares of Preferred Stock, (iii) employee stock options to purchase an aggregate of 554,673 shares of Parent Stock (none of which were exercisable), (iv) 590,131 restricted stock units and (v) 18,670 deferred stock units.  All outstanding shares of capital stock of Parent have been duly authorized and validly issued and are fully paid and nonassessable.

(b)Except as set forth in this Section 5.05 and for changes since March 31, 2008 resulting from the exercise of stock options or the grant of stock based compensation to directors or employees, as of the date hereof, there are no outstanding (i) shares of capital stock or voting securities of Parent, (ii) securities of the Parent or any of its Subsidiaries convertible into or exchangeable for shares of capital stock or voting securities of Parent or (iii) options or other rights to acquire from Parent or any of its Subsidiaries, or other obligation of Parent or any of its Subsidiaries to issue, any capital stock, voting securities or securities convertible into or exchangeable for capital stock or voting securities of the Parent (the items in clauses (i), (ii), and (iii) being referred to collectively as the “Parent Securities”).  There are no outstanding obligations of Parent or any of its Subsidiaries to repurchase, redeem or otherwise acquire any of the Parent Securities.

(c)The shares of Parent Stock to be issued as Merger Consideration have been duly authorized and, when issued and delivered in accordance with the terms of this Agreement, subject to receipt of the Parent Stockholder Approval,

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will have been validly issued and will be fully paid and nonassessable and the issuance thereof is not subject to any preemptive or other similar right.  The Parent Stockholder Approval is the only vote of the holders of any class or series of Parent Securities or any Parent Subsidiary Securities necessary to approve and adopt this Agreement and the other Transaction Documents and approve the Merger and the other transactions contemplated hereby and thereby.

Section 5.06.  Subsidiaries.  (a) Each Subsidiary of Parent is a corporation or other organization duly organized, validly existing and, as applicable in the relevant jurisdiction, in good standing under the laws of its jurisdiction of organization, and has all corporate (or other organizational) powers required to carry on its business as currently conducted.  In all material respects, each such Subsidiary is duly qualified to do business as a foreign corporation and, as applicable in the relevant jurisdiction, is in good standing in all jurisdictions where such qualification is necessary.  

(b)As of the date hereof, all of the outstanding capital stock of, or other voting securities or ownership interests in, each Subsidiary of the Parent, is owned by the Parent, directly or indirectly, free and clear of any Lien and free of any other limitation or restriction (including any restriction on the right to vote, sell or otherwise dispose of such capital stock or other voting securities or ownership interests).  As of the date hereof, there are no outstanding (i)  securities of the Parent or any of its Subsidiaries convertible into or exchangeable for shares of capital stock or other voting securities or ownership interests in any Subsidiary of the Parent or (ii) options or other rights to acquire from the Parent or any of its Subsidiaries, or other obligation of the Parent or any of its Subsidiaries to issue, any capital stock or other voting securities or ownership interests in, or any securities convertible into or exchangeable for any capital stock or other voting securities or ownership interests in, any Subsidiary of the Parent (the items in clauses (i) and (ii) being referred to collectively as the “Parent Subsidiary Securities”).  As of the date hereof, there are no outstanding obligations of the Parent or any of its Subsidiaries to repurchase, redeem or otherwise acquire any of the Parent Subsidiary Securities.

Section 5.07.  SEC Filings.  (a) Parent has delivered or made available (for purposes of this Agreement, filings that are publicly available prior to the date hereof on the EDGAR system of the SEC are deemed to have been made available to the Company) to the Company (i) Amendment No. 4 to the Form 10 Registration Statement of Parent filed on October 11, 2007, (ii) its annual report on Form 10-K for the year ended December 31, 2007, (iii) the Form S-8 Registration Statement of Parent filed on October 30, 2007 and (iv) each report on Form 8-K filed by Parent from January 1, 2008 and prior to the date hereof (the documents referred to in clauses (i), (ii), (iii) and (iv), collectively, the “Parent SEC Documents”).

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(b)As of its filing date, each Parent SEC Document complied as to form in all material respects with the applicable requirements of the 1933 Act and 1934 Act.

(c)As of its filing date, each Parent SEC Document did not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading; provided that, to the extent a Parent SEC Document addresses a matter that is the same as a matter addressed in a representation or warranty in Article 4 that is qualified by the knowledge of the Company and/or a Company Material Adverse Effect standard, the representation and warranty set forth in this Section 5.07(c) (and only this Section 5.07(c)) shall to such extent be deemed to be similarly qualified by the knowledge of Parent and/or Parent Material Adverse Effect, as applicable.

Section 5.08.  Financial Statements.  

(a)The audited combined balance sheets of Parent and its Subsidiaries as of December 31, 2006 and December 31, 2005, and the related audited combined statements of operations, changes to invested capital (deficit), and cash flows for each of the years ended December 31, 2006 and December 31, 2005, of Parent and its Subsidiaries fairly present, in all material respects, the combined financial position of Parent and its Subsidiaries as of the dates thereof and their combined results of operations, changes to invested capital (deficit), and cash flows for the periods then ended and have been prepared in compliance with GAAP applied on a consistent basis (except as may be indicated in the notes thereto) and in accordance with the books and records of Parent and its Subsidiaries.

(b)The audited consolidated balance sheet as of December 31, 2007 and the related audited consolidated statements of operations, changes in stockholders’ equity (deficit), and cash flows for the year then ended of Parent and its Subsidiaries fairly present, in all material respects, the consolidated financial position of Parent and its Subsidiaries as of the date thereof and their consolidated results of operations, changes in stockholders’ equity (deficit), and cash flows for the year then ended and have been prepared in compliance with GAAP applied on a consistent basis (except as may be indicated in the notes thereto) and in accordance with the books and records of Parent and its Subsidiaries.

Section 5.09.  Absence of Certain Changes.  From the Parent Balance Sheet Date to the date hereof, the business of the Parent and its Subsidiaries has been conducted in the ordinary course consistent with past practices, and since the Parent Balance Sheet Date:

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(a)there has not been any event, occurrence, development or state of circumstances or facts which, individually or in the aggregate, has had or would reasonably be expected to have a Parent Material Adverse Effect; and

(b)neither Parent nor any of its Subsidiaries has taken any action that would have been prohibited by Section 7.01(a) or Section 7.01(b) if this Agreement had been in effect at the time thereof.

Section 5.10.  No Undisclosed Material Liabilities.  There are no liabilities or obligations of the Parent or any of its Subsidiaries of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, and to the knowledge of Parent, there is no existing condition, situation or set of circumstances (other than as a result of conducting operations in the coal industry generally, except to the extent disproportionately impacting Parent or its Subsidiaries as compared to other entities operating in the coal industry) that would reasonably be expected to result in such a liability or obligation, other than:

(a)liabilities or obligations to the extent disclosed, reflected or reserved against in the Parent Balance Sheet or the notes thereto;

(b)liabilities or obligations incurred in the ordinary course of business since the Parent Balance Sheet Date consistent with past practices;

(c)liabilities that would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect;

(d)liabilities incurred as a result of the performance of Parent’s obligations under this Agreement; and

(e)liabilities or obligations arising pursuant to the terms (and not as a result of breach or default by Parent or any of its Subsidiaries) of contracts or agreements of Parent or any of its Subsidiaries.

Section 5.11.  Compliance with Laws; Mining Compliance Matters.

(a)Parent and each of its Subsidiaries is, and (except as would not reasonably be expected to result in a current or future liability on or adverse consequence to Parent or any of its Subsidiaries) has been, in all material respects, in compliance with, all Applicable Law, including the Identified Mining Laws but not including any other Environmental Laws, and to the knowledge of Parent is not under investigation with respect to and has not been threatened to be charged with or given written notice from any Governmental Authority, and Parent does not otherwise have knowledge of, any material violation of any Applicable Law, including the Identified Mining Laws but not including any other Environmental Laws.  Neither Parent nor any of its Subsidiaries is subject to any material order, writ, judgment, award, injunction or decree of any arbitrator or Governmental

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Authority that Parent or any of its Subsidiaries has received in writing or otherwise has knowledge of.

(b)Neither Parent nor any of its Subsidiaries has received any written communication from the applicable permitting authority with respect to any material applications for permits to be issued by mining authorities to Parent or any of its Subsidiaries as of the date hereof (the “Parent Material Mining Applications”) that (i) indicates that such Parent Material Mining Application has been denied or (ii) requests Parent or any of its Subsidiaries to provide additional information with respect to such Parent Material Mining Application.

(c)Parent and its Subsidiaries have posted all material deposits, letters of credit, trust funds, bid bonds, performance bonds, reclamation bonds and surety bonds (and all such similar undertakings) required to be posted in connection with their operations (the deposits, letters of credit, trust funds, bid bonds, performance bonds, reclamation bonds and surety bonds (and all such similar undertakings) posted in connection with the operations of Parent and its Subsidiaries, collectively, the “Parent Surety Bonds”).  The Parent Surety Bonds are sufficient to conduct the business of the Parent and its Subsidiaries as currently conducted.  Parent and its Subsidiaries are and have been in compliance in all material respects with the Parent Surety Bonds, and the operation of Parent’s and its Subsidiaries’ coal mining and processing operations and the state of reclamation with respect to the Parent Surety Bonds are “current” or in “deferred status” regarding reclamation obligations and otherwise are and have been in compliance with all applicable mining, reclamation and other analogous Applicable Laws, except where noncompliance would not (i) interfere in any material respect with the ability of Parent and its Subsidiaries to continue to operate their assets and conduct their business as currently conducted or otherwise be material or (ii) materially adversely affect or delay the consummation of the transactions contemplated by this Agreement.

(d)Neither Parent nor any of its Subsidiaries (nor any Person “owned or controlled” by any of them) has received written notice from the Federal Office of Surface Mining or the agency of any state administering the Surface Mining Control and Reclamation Act of 1977 (or any comparable state statute) or otherwise has knowledge that it is (i) ineligible to receive additional surface mining permits or other licenses or authorizations or (ii) under investigation to determine whether its eligibility to receive such permits or other licenses or authorizations should be revoked, i.e., “permit blocked.”  As used in this Section 5.11(d) “owned or controlled” shall be defined as set forth in 30 C.F.R. Section 773.5 (2000).

Section 5.12.  Litigation.  There is no action, suit, investigation or proceeding pending against, or, to the knowledge of Parent, threatened against or affecting, Parent, any of its Subsidiaries, any present or former officer, director or employee of Parent or any of its Subsidiaries or any Person for whom Parent or

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any Subsidiary may be liable or any of their respective properties before any court or arbitrator or before or by any Governmental Authority, (i) that if determined adversely to Parent or any of its Subsidiaries, would reasonably be expected to be, individually or in the aggregate, material or (ii) that in any manner challenges or seeks to prevent, enjoin, alter or materially delay the Merger or any of the other transactions contemplated hereby.

Section 5.13.  Investment Banker and Finders’ Fees.  There is no investment banker, broker, finder or other intermediary that has been retained by or is authorized to act on behalf of Parent who might be entitled to any fee or commission from any Person other than Parent or any of its Affiliates in connection with the transactions contemplated by this Agreement.

Section 5.14.  Opinion of Financial Advisor.  Parent has received the opinion of Lehman Brothers, financial advisor to Parent, to the effect that, as of the date of such opinion and subject to the procedures followed and the qualifications and limitations set forth therein, from a financial point of view, the Merger Consideration to be paid by Parent in the Merger is fair to Parent.  Parent, solely for informational purposes, will after receipt of such opinion and concurrently with the execution and delivery of this Agreement, furnish the Company’s outside legal counsel with a correct and complete copy of such opinion.  Parent has received the opinion of Duff & Phelps, LLC, financial advisor to Parent, to the effect that, as of the date of such opinion, the Merger Consideration is fair to Parent from a financial point of view.  Parent, solely for informational purposes, will after receipt of such opinion and concurrently with the execution and delivery of this Agreement, furnish the Company’s outside legal counsel with a correct and complete copy of such opinion.

Section 5.15.  Taxes.  (a) All material Tax Returns required by Applicable Law to be filed with any Taxing Authority by, or on behalf of, Parent or any of its Subsidiaries have been filed when due in accordance with all Applicable Law, and all such material Tax Returns were at the time of filing, true and complete in all material respects.

(b)Parent and each of its Subsidiaries has paid (or has had paid on its behalf) or has withheld and remitted to the appropriate Taxing Authority all Taxes due and payable, or, where payment is not yet due or being contested in good faith, has established (or has had established on its behalf and for its sole benefit and recourse) in accordance with GAAP an adequate accrual for all Taxes through the end of the last period for which Parent and its Subsidiaries ordinarily record items on their respective books.

(c)Any income and franchise Tax Returns of Parent or its Subsidiaries filed or required to be filed with respect to the Tax years ended on or before December 31, 2003 have been examined and closed or are Tax Returns with

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respect to which the applicable period for assessment under Applicable Law, after giving effect to extensions or waivers, has expired.

(d)There is no claim, audit, action, suit, proceeding or investigation now pending or, to Parent’s knowledge, threatened against or with respect to Parent or its Subsidiaries in respect of any Tax or Tax asset.

(e)(i) No amount of the type described in clause (ii) or (iii) of the definition of “Tax” is currently payable by either Parent or any of its Subsidiaries, regardless of whether such Tax is imposed on Parent or any of its Subsidiaries or will become payable as a consequence of consummating the Merger and the other transactions contemplated by this Agreement; and (ii) neither Parent nor any of its Subsidiaries has entered into any agreement or arrangement with any Taxing Authority with regard to the Tax liability of Parent or any of its Subsidiaries affecting any Tax period for which the applicable statute of limitations, after giving effect to extensions or waivers, has not expired.

(f)Prior to the date hereof, Parent has provided the Company with copies of or access to (i) all Tax Returns of Parent or any of its Subsidiaries that were filed or became due on or after January 1, 2005, and (ii) all material agreements relating to Taxes of Parent or any of its Subsidiaries, including any Tax Sharing Agreements, effective during that period.

Section 5.16.  Tax Treatment.  Neither Parent nor any of its Affiliates has taken or agreed to take any action or is aware of any fact or circumstance that would prevent the Merger from qualifying as a 368 Reorganization.  None of this Agreement or the other Transaction Documents, or the consummation of the transactions contemplated hereby or thereby (including the Merger) will fail to be in compliance with, and none of the foregoing will violate any of the terms and conditions, or other provisions, of the Tax Separation Agreement (the “TSA”), dated as of October 22, 2007, by and between Parent and Peabody Energy Corporation and will not give rise to any indemnity obligation on the part of Parent or the Surviving Corporation under Section 4.3 of the TSA.

Section 5.17.  Employee Benefit Plans.

(a)No Parent Employee Plan is subject to Title IV of ERISA (other than a Multiemployer Plan).

(b)With respect to any Multiemployer Plan to which Parent, its Subsidiaries or any of their ERISA Affiliates has any liability or contributes (or has at any time contributed or had an obligation to contribute):  (i) none of Parent, its Subsidiaries or any of their ERISA Affiliates has incurred any withdrawal liability under Title IV of ERISA that remains unsatisfied or would be subject to such liability if, as of the Closing Date, Parent, its Subsidiaries or any of their ERISA Affiliates were to engage in a complete withdrawal (as defined in Section 4203 of ERISA) or partial withdrawal (as defined in Section 4205 of ERISA)

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from any such multiemployer plan; and (ii) to the knowledge of Parent, no such multiemployer plan is in reorganization or insolvent (as those terms are defined in Sections 4241 and 4245 of ERISA, respectively).

(c)Each Parent Employee Plan which is intended to be qualified under Section 401(a) of the Code has received a favorable determination letter, or has pending or has time remaining in which to file under the applicable remedial amendment period, an application for such determination from the Internal Revenue Service, and Parent is not aware of any reason why any such determination letter would not be issued.  Each Parent Employee Plan has been maintained in material compliance with its terms and with the requirements prescribed by any and all statutes, orders, rules and regulations, including ERISA and the Code, which are applicable to such Parent Employee Plan.  No material events have occurred with respect to any Parent Employee Plan that would result in payment or assessment by or against Parent of any material excise taxes under Sections 4972, 4975, 4976, 4977, 4979, 4980B, 4980D, 4980E or 5000 of the Code.

(d)All contributions and payments accrued under each Parent Employee Plan, determined in accordance with prior funding and accrual practices, as adjusted to include proportional accruals for the period ending as of the date hereof, have been discharged and paid on or prior to the date hereof except to the extent set forth in the Parent Balance Sheet.

(e)There is no action, suit, investigation, audit or proceeding pending against or involving or, to the knowledge of Parent, threatened against or involving, any Parent Employee Plan before any Governmental Authority.

(f)The consummation of the transactions contemplated by this Agreement will not (either alone or together with any other event) entitle any employee or independent contractor of Parent or any of its Subsidiaries to severance pay or accelerate the time of payment or vesting (except as otherwise may be required under Section 411(d)(3) of the Code) or trigger any payment of funding (through a grantor trust or otherwise) of compensation or benefits under, increase the amount payable or trigger any other material obligation pursuant to, any Parent Employee Plan.  There is no contract, plan or arrangement (written or otherwise) covering any current or former director, officer, employee or independent contractor of Parent or any of its Subsidiaries that, individually or collectively, would entitle any such individual to any severance or other payment solely as a result of the transactions contemplated hereby, or would give rise to the payment of any amount that would not be deductible pursuant to the terms of Section 280G or 162(m) of the Code.

Section 5.18.  Labor Matters.  Parent and its Subsidiaries are not engaged in any material respect in any unfair labor practice which would reasonably be expected to be, individually or in the aggregate, material.  There is no unfair labor

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practice charge or material grievance arising out of a collective bargaining agreement, other current labor agreement with any labor union or organization, or other material grievance proceeding against Parent or any of its Subsidiaries pending, or, to the knowledge of Parent, threatened.  Since two years prior to the date of this Agreement there has been no unfair labor practice charge or complaint filed against Parent or any of its Subsidiaries, or to the knowledge of Parent, pending or threatened, before (A) the National Labor Relations Board or any similar state agency, or (B) the Equal Employment Opportunity Commission or any similar state agency responsible for the prevention of unlawful employment practices.  There is no strike or lockout or material slowdown, work stoppage or other labor dispute pending, or to the knowledge of Parent, threatened against, involving or otherwise materially affecting Parent or any of its Subsidiaries.  Since two years prior to the date of this Agreement, any and all reductions of workforce have been carried out in all material respects in accordance with all Applicable Law.

Section 5.19.  Environmental Matters.Except as does not and would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect:

(a)Parent and its Subsidiaries are and have been in compliance with all Environmental Laws and all Environmental Permits; such Environmental Permits are valid and in full force and effect and will not be terminated or impaired or become terminable, in whole or in part, as a result of this Agreement and the other Transaction Documents or the consummation of the transactions contemplated herein or therein.

(b)None of Parent nor any of its Subsidiaries has received any Environmental Claim or written notice of any threatened Environmental Claim, or has any knowledge of any threat of such an Environmental Claim, regarding or resulting from the activities or business of Parent or any of its Subsidiaries, or any property or assets currently or formerly owned, operated or used by Parent or any of its Subsidiaries, in each case that (i) has been outstanding for more than 30 days, (ii) would reasonably be expected to result in (A) an action by a Governmental Authority, (B) a determination that there is a pattern of violations or (C) the closure of any operations of Parent or any of its Subsidiaries or (iii) results in or would reasonably be expected to result in liability to Parent or any of its Subsidiaries.

(c)None of Parent nor any of its Subsidiaries has entered into, has agreed to, has been issued or, to the knowledge of Parent is otherwise subject to, any material order, writ, judgment, award, injunction or decree of any arbitrator or Governmental Authority under any Environmental Law regarding Parent or any of its Subsidiaries or any property or assets currently or formerly owned, operated or used by Parent or any of its Subsidiaries, in any such case that would interfere with the respective ability of Parent or any of its Subsidiaries to continue to

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operate their respective assets and conduct their respective businesses as currently conducted or would result in liability to Parent or any of its Subsidiaries.

(d)None of Parent nor any of its Subsidiaries has Released any Hazardous Materials in violation of Environmental Law or in a manner that would reasonably be expected to result in liability under Environmental Laws or Environmental Permits, and, to the knowledge of Parent, no other Person has Released any Hazardous Materials, and Hazardous Materials are not otherwise present, at any property currently or formerly owned or operated by Parent or any of its Subsidiaries in violation of any Environmental Law or Environmental Permits or in a manner that would reasonably be expected to result in liability to Parent or any of its Subsidiaries.

(e)No property currently owned or operated by Parent or any of its Subsidiaries (i) is listed or, to the knowledge of the Parent or any of its Subsidiaries, proposed for listing on the CERCLA National Priorities List or CERCLIS list or any similar Governmental Authority's list of sites at which remedial action is or may be necessary or (ii) contains asbestos or asbestos-containing materials, in either case in a condition constituting a violation of Environmental Law or as would reasonably be expected to result in liability to Parent or any of its Subsidiaries.

(f)None of Parent nor any of its Subsidiaries has disposed of, transported or arranged for the disposal or transportation of, any Hazardous Materials in a manner or to a location that would reasonably be expected to result in liability to Parent or any of its Subsidiaries under Environmental Law.

(g)Neither Parent nor any Subsidiary of Parent is in default under, and no condition exists that with notice or lapse of time or both would constitute a default under, any of the Environmental Permits.  Neither Parent nor any of its Subsidiaries has received written notice that the Person issuing or authorizing any such Environmental Permit intends to terminate or will refuse to renew or reissue any such Environmental Permit upon its expiration.

(h)Each of the material applications for Environmental Permits in the name of Parent or any of its Subsidiaries has been made in accordance with Applicable Laws.  Parent or one of its Subsidiaries will, on any grant of any of such applications, hold legal or beneficial title to the interest in each such application.  Neither Parent nor any of its Subsidiaries has received any written communication from any Governmental Authority that indicates that any of such applications for Environmental Permits will not be timely granted or will be subject to any material restrictions, limitations or unusual requirements.

Section 5.20.  Antitakeover Statutes and Rights Agreement.

(a)Parent has taken all action necessary to exempt the Merger, this Agreement and the transactions contemplated hereby from Section 203 of

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Delaware Law, and, accordingly, neither such Section nor any other antitakeover or similar statute or regulation applies or purports to apply to any such transactions.  No other “control share acquisition,” “fair price,” “moratorium” or other antitakeover laws enacted under U.S. state or federal laws apply to this Agreement or any of the transactions contemplated hereby.

(b)By amendment in the form attached as Exhibit 5.20(b), Parent has taken all action necessary to render the rights issued pursuant to the terms of the Rights Agreement (the “Rights Agreement”) dated as of October 22, 2007 by and between Parent and American Stock Transfer & Trust Company, as rights agent, inapplicable to this Agreement and the transactions contemplated hereby, including the Merger and the Parent Stock Issuance.

Section 5.21.  Material Contracts; Affiliate Transactions.  Neither Parent nor any of its Subsidiaries is a party to or bound by any contract, arrangement, commitment or understanding as of the date hereof that is a “material contract” (as such term is defined in Item 601(b)(10) of Regulation S-K of the 1933 Act) or other instrument that is required to filed as an exhibit to the Parent SEC Documents pursuant to Item 601(b)(2), (4) or (9) of Regulation S-K of the 1933 Act, that, in any such case, has not been filed or incorporated by reference in the Parent SEC Documents (each, a “Parent Material Contract”).  Each Parent Material Contract is, to Parent’s knowledge, a valid and binding agreement of the parties thereto (other than Parent and its Subsidiaries), and, to Parent’s knowledge, is in full force and effect and in all material respects enforceable against such other parties, in accordance with its terms (except to the extent that enforceability may be limited by (i) applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar laws from time to time in effect affecting generally the enforcement of creditors’ rights and remedies and (ii) general principles of equity, whether in a proceeding at law or in equity) and prior to the date hereof neither Parent nor any of its Subsidiaries has received any written notice to terminate, in whole or material part, any of the same.  None of Parent, any of its Subsidiaries or, to the knowledge of Parent, any other party thereto is in default or breach in any material respect under the material terms of any such Parent Material Contract, and, to the knowledge of Parent, no event or circumstance has occurred that, with notice or lapse of time or both, is reasonably likely to constitute any event of default thereunder that would be reasonably expected to result in the termination of such Parent Material Contract.  True and complete copies of each Parent Material Contract (including all modifications and amendments thereto) have been made available to the Company prior to the date hereof.  Parent has no knowledge that any current officer, director or Affiliate of Parent is a party to any material agreement, contract, commitment or transaction with Parent or its Subsidiaries or has any material interest in any material property used by Parent or its Subsidiaries that would be required to be disclosed in a Parent SEC Document under Item 404 of Regulation S-K under the 1933 Act that has not been so disclosed.

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Section 5.22.  Properties.

(a)“Parent Leased Tangible Property” means all items of machinery, equipment, vehicles, and other tangible personal property leased or subleased by Parent or any of its Subsidiaries.

(b)“Parent Leased Real Property” means all real property and other interests in land, including coal, mining, exploration and surface rights, easements, rights of way, options, surface estates, coal and other mineral estates leased or subleased by Parent or any of its Subsidiaries.

(c)With respect to each lease or sublease of Parent Leased Tangible Property and Parent Leased Real Property, except where the failure of any of the following to be true and correct would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect:

(i)such lease or sublease is in full force and effect in all respects and enforceable in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally and general equitable principles whether in a proceeding at law or in equity;

(ii)(A) neither Parent nor any of its Subsidiaries is in default under any such lease or sublease and, no event has occurred which, with the passage of time or expiration of any grace period would constitute a default of Parent’s or its Subsidiaries’ obligations under such lease or sublease, (B) to the knowledge of Parent no other party to any such lease or sublease is in default thereunder and (C) neither Parent nor any of its Subsidiaries has received a written or other notice of default with respect to such lease or sublease;

(iii)no such lease or sublease has been mortgaged, deeded in trust or subjected to a Lien (other than Permitted Liens) by Parent or any of its Subsidiaries;

(iv)with regard to Parent Leased Real Property, Parent or one of its Subsidiaries has adequate rights of ingress and egress to such Parent Leased Property and all buildings, structures, facilities, fixtures and other improvements thereon;

(v)with regard to Parent Leased Real Property neither Parent nor any of its Subsidiaries owes any brokerage or other commissions with respect to any such lease or sublease for which adequate reserves have not been established on the Parent Balance Sheet;

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(vi)neither Parent nor any of its Subsidiaries has received written notice of or has knowledge of a claim or dispute under any lease or sublease regarding any of Parent Leased Real Property or Parent Leased Personal Property; and

(vii)other than Permitted Liens, there are no other matters that, to the knowledge of Parent, would adversely affect the rights of Parent or any of its Subsidiaries to Parent Leased Real Property or Parent Leased Tangible Property.

(d)“Parent Owned Real Property” means all real property, and other interests in land, including coal, mining, exploration and surface rights, easements, rights of way, options, surface estates and other mineral estates owned by Parent or any of its Subsidiaries.  With respect to each such parcel of Parent Owned Real Property, except where the failure of any of the following to be true and correct would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect:  (i) the owner has possession of, adequate rights of ingress and egress with respect to, and good and marketable fee simple title to each Parent Owned Real Property, free and clear of any Liens, except for Permitted Liens; (ii) there are no pending or, to Parent’s knowledge, threatened condemnation proceedings and no tenant or other party in possession of any of the Parent Owned Real Property has any right to purchase, or holds any right of first refusal to purchase, any of such properties; and (iii) other than Permitted Liens, there are no other matters that would adversely affect the title of Parent or any of its Subsidiaries.

(e)“Parent Owned Tangible Property” means all items of machinery, equipment, vehicles, and other tangible personal property owned by Parent or any of its Subsidiaries.  Parent or one of its Subsidiaries is in possession of, and except for such spare parts as are held on consignment, owns and has good title to all Parent Owned Tangible Property as operated as of the date hereof.  All such Parent Owned Tangible Property is free and clear of all Liens, other than Permitted Liens.

(f)Except with respect to real property leased to others, the plants, buildings, structures, mines and equipment owned or leased by Parent or any of its Subsidiaries are in all material respects in good operating condition and repair and have been reasonably maintained consistent with past practice and are adequate and suitable for the purpose for which they are currently being used.

(g)The Parent Leased Real Property, Parent Owned Real Property, Parent Leased Tangible Property, and Parent Owned Tangible Property constitute all of the property and assets (together with the Parent Permits and the Environmental Permits) used or held for use in connection with the businesses of Parent and its Subsidiaries and are adequate to conduct such businesses as currently conducted in all material respects.

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(h)Neither Parent nor any of its Subsidiaries has received written notice or has knowledge of any disputes with any adjoining landowners that would reasonably be expected to result in, individually or in the aggregate, a Parent Material Adverse Effect.

Section 5.23.  Intellectual Property.  Except as, individually or in the aggregate, would not reasonably be expected to be material:  (i) Parent and each of its Subsidiaries owns, or is licensed to use (in each case, free and clear of any Liens), all Intellectual Property Rights used in or necessary for the conduct of its business as currently conducted; (ii) neither Parent nor its Subsidiaries has infringed, misappropriated or otherwise violated the Intellectual Property Rights of any Person; (iii) to the knowledge of Parent, no Person has challenged, infringed, misappropriated or otherwise violated any Intellectual Property Right owned by and/or licensed to Parent or its Subsidiaries; (iv) neither Parent nor any of its Subsidiaries has received any written notice or otherwise has knowledge of any pending claim, action, suit, order or proceeding with respect to any Intellectual Property Right used by Parent or any of its Subsidiaries or alleging that the any services provided, processes used or products manufactured, used, imported, offered for sale or sold by Parent or any of its Subsidiaries infringes, misappropriates or otherwise violates any Intellectual Property Rights of any Person; (v) the consummation of the transactions contemplated by this Agreement will not alter, encumber, impair or extinguish any Intellectual Property Right of Parent or any of its Subsidiaries; and (vi) Parent and its Subsidiaries have taken reasonable steps to maintain the confidentiality of all material Trade Secrets owned, used or held for use by Parent or any of its Subsidiaries and no such Trade Secrets have been disclosed other than to employees, representatives and agents of Parent or any of its Subsidiaries all of whom are bound by written confidentiality agreements.

Section 5.24.  Licenses and Permits.  “Parent Permits” means all licenses, mining leases, mining authorities, franchises, permits, certificates, approvals or other similar authorizations issued to Parent and its Subsidiaries by any Governmental Authority, including those relating to the Identified Mining Laws but not including any other Environmental Permits.  The Parent Permits are in all material respects sufficient permits to conduct the business of Parent and its Subsidiaries as currently conducted.  The Parent Permits are in all material respects valid and in full force and effect, neither Parent nor any Subsidiary of Parent is in material default under, and no condition exists that with notice or lapse of time or both would constitute a material default under, any of the Parent Permits.  Neither Parent nor any of its Subsidiaries has received written notice that the Person issuing or authorizing any such Permit intends to terminate or will refuse to renew or reissue any such Permit upon its expiration.  Parent and its Subsidiaries have complied with the terms and conditions of the Parent Permits in all material respects.

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Section 5.25.  Absence of Certain Business Practices.  Neither Parent nor any of its Subsidiaries, nor any of their respective officers, directors, employees or agents, nor any Person acting on behalf of Parent or any of its Subsidiaries, has, directly or indirectly, within the past two years given or agreed to give any gift or similar benefit to any customer, supplier, governmental employee or other Person who is or may be in a position to help or hinder the respective business of Parent or any of its Subsidiaries (or assist Parent or any of its Subsidiaries in connection with any actual or proposed transaction) that (a) might subject Parent or any of its Subsidiaries to any material damage or material penalty assessed by any Governmental Authority, (b) if not given in the past might have had a material adverse effect, (c) if not continued in the future, might have a material adverse effect or (d) might subject Parent or any of its Subsidiaries to suit by any Governmental Authority.

Section 5.26.  Financing.  Parent has provided the Company with a true and complete copy of an executed commitment letter, including the attachments thereto (such commitment letter, with all such attachments and the fee letter related thereto entered into concurrently therewith, the “Parent Financing Commitment Letter”) from the ArcLight Funds confirming such parties’ commitment to provide Parent with financing of up to $150,000,000 to be used by Parent for the purposes set forth in the Parent Financing Commitment Letter (the “Parent Financing”).  The commitments and obligations to consummate the Parent Financing set forth in the Parent Financing Commitment Letter are subject to no conditions or other contingencies other than those set forth in the Parent Financing Commitment Letter.  Assuming the Parent Financing Commitment Letter is a legal, valid and binding obligation of the ArcLight Funds, the Parent Financing Commitment Letter is in full force and effect and is the legal, valid and binding obligation of Parent.  To the knowledge of Parent, the Parent Financing Commitment Letter is the legal, valid and binding obligation of the other parties thereto.  As of the date hereof, the Parent Financing Commitment Letter has not been amended or modified in any respect.  No event has occurred which, with or without notice, lapse of time or both, would constitute a default or material breach on the part of Parent under any term or condition of the Parent Financing Commitment Letter, and to the knowledge of Parent, no facts or circumstances exist as of the date hereof that would reasonably be expected to result in Parent being unable to satisfy on a timely basis any term or condition of closing to be satisfied by it pursuant to the Parent Financing Commitment Letter.  As of the date hereof, Parent has paid in full all commitment or other fees required by the Parent Financing Commitment Letter to be paid by it as of the date hereof.  The Parent Financing, if funded in accordance with the Parent Financing Commitment Letter, will not be in contravention of the terms and conditions of the Credit Agreement dated as of October 31, 2007, as amended, among Parent, as borrower, each lender from time to time party thereto, and Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer (the “Parent Credit Agreement”).

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Section 5.27.  No Parent Material Adverse Effect.  The representations and warranties contained in this Article 5, disregarding any qualification contained therein as to materiality or Parent Material Adverse Effect, are true and correct, with such exceptions as have not had and would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.

Section 5.28.  No Other Representations and Warranties.  Except for the representations and warranties contained in this Agreement or any other Transaction Document, neither Parent nor any other Person makes any other express or implied representation or warranty on behalf of Parent and its Subsidiaries (and its and their business operations, financial condition, assets and properties) and the Company shall be entitled to rely only on such representations and warranties.  Parent disclaims any representation or warranty, whether made by Parent or any of its Affiliates, officers, directors, employees, agents or representatives, that is not contained in this Agreement, any other Transaction Document or in any certificate delivered pursuant to this Agreement or any other Transaction Document.

ARTICLE 6

Covenants of the Company

The Company agrees that:

Section 6.01.  Conduct of the Company.  From the date hereof until the Effective Time or the earlier termination of this Agreement in accordance with the terms of Article 10, the Company shall, and shall cause each of its Subsidiaries to, conduct its business in the ordinary course consistent with past practice and in compliance with Applicable Law and use all commercially reasonable efforts to (i) preserve intact its present business organization, (ii) maintain in effect all of its material foreign, federal, state and local licenses, permits, consents, franchises, approvals and authorizations, (iii) maintain satisfactory relationships with its significant customers, lenders, suppliers and others having significant business relationships with it and (iv) subject to Section 6.01(d) and to the availability of necessary capital, continue to make capital expenditures with respect to the projects set forth on Section 6.01(iv) of the Company Disclosure Schedule.  Without limiting the generality of the foregoing, except as expressly contemplated by this Agreement or as set forth in the applicable subsection of Section 6.01 of the Company Disclosure Schedule, the Company shall not, nor shall it permit any of its Subsidiaries to, without the prior written consent of Parent (such consent not to be unreasonably withheld, delayed or conditioned):

(a)amend its articles of incorporation, bylaws or other similar organizational documents (whether by merger, consolidation or otherwise);

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(b)split, combine or reclassify any shares of capital stock of the Company or any of its Subsidiaries or declare, set aside or pay any dividend or other distribution (whether in cash, stock or property or any combination thereof) in respect of the capital stock of the Company or its Subsidiaries, or redeem, repurchase or otherwise acquire or offer to redeem, repurchase, or otherwise acquire any Company Securities or any Company Subsidiary Securities (other than the repurchase by the Company of any Company Securities as required by the terms of the Stock Plan);

(c)(i) other than the issuance of Company Stock upon conversion of the Company Convertible Debt Notes immediately prior to the Effective Time pursuant to Section 7 of the Company Convertible Debt NPA, issue, deliver or sell, or authorize the issuance, delivery or sale of, any shares of any Company Securities or Company Subsidiary Securities, or (ii) amend any term of any Company Security or any Company Subsidiary Security (in each case, whether by merger, consolidation or otherwise);

(d)incur any capital expenditures or any obligations or liabilities in respect thereof, except for any capital expenditures as identified on Section 6.01(d) of the Company Disclosure Schedule, which shall not exceed $10,000,000 for any individual project or the amount set forth on Section 6.01(d) of the Company Disclosure Schedule in the aggregate;

(e)acquire (by merger, consolidation, acquisition of stock or assets or otherwise), directly or indirectly, any assets, securities, properties, interests or businesses, other than (i) supplies in the ordinary course of business of the Company and its Subsidiaries in a manner that is consistent with past practice, (ii) acquisitions of coal reserves with a purchase price (including assumed indebtedness) that does not exceed $5,000,000 individually or $25,000,000 in the aggregate (iii) capital expenditures permitted under Section 6.01(d) above and (iv) acquisitions of securities that do not exceed $2,000,000 in the aggregate made with funds held in escrow accounts (and the reinvestment of amounts and investments held as of the date hereof in escrow accounts) established to support reclamation obligations of the Company or any of its Subsidiaries;

(f)sell, lease or otherwise transfer, or create or incur any Lien (other than Permitted Liens) on, any of the Company’s or its Subsidiaries’ assets, securities, properties, interests or businesses, other than (i) sales of inventory in the ordinary course of business consistent with past practices and (ii) sales of assets, securities, properties, interests or businesses with a sale price (including any related assumed indebtedness) that does not exceed $5,000,000 individually or $25,000,000 in the aggregate;

(g)make any loans, advances (other than advances pursuant to commercial transactions in the ordinary course of business and advances to employees in the ordinary course of business) or capital contributions to, or

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investments in, any other Person, other than to wholly owned Subsidiaries in the ordinary course of business consistent with past practice;

(h)create, incur, assume, suffer to exist or otherwise be liable (including pursuant to a guarantee) with respect to any indebtedness for borrowed money (which, for the avoidance of doubt, shall not be deemed to include capital leases or indebtedness up to an aggregate principal amount of $50,000,000 arising under the Funded Letter of Credit Facility or in respect of the Funded Letters of Credit (each, as defined in the Company Credit Agreement) issued pursuant thereto) if, after such creation, incurrence, assumption, sufferance or liability, the aggregate principal amount of indebtedness for borrowed money of the Company and its Subsidiaries (or in respect of which the Company or any of its Subsidiaries is otherwise liable) would exceed $250,000,000 (after deducting up to $25,000,000 of unrestricted cash or cash equivalents owned and held by the Company and its Subsidiaries at such time);

(i)(i) enter into any agreement or arrangement that limits or otherwise restricts in any material respect the Company, any of its Subsidiaries or any of their respective Affiliates or any successor thereto or that would, after the Effective Time, limit or restrict in any material respect the Company, any of its Subsidiaries, the Surviving Corporation, Parent or any of their respective Affiliates, from engaging or competing in any line of business, in any location or with any Person or (ii) (A) enter into any Covered Contract or, if consent is granted to enter into a Covered Contract and such Covered Contract is entered into, amend or modify in any material respect or terminate any such Covered Contract entered into after the date hereof, (B) amend or modify in any material respect or terminate any Material Contract or (C) otherwise waive, release or assign any material rights, claims or benefits of the Company or any of its Subsidiaries;

(j)except (A) for actions described on Section 6.01(j)(A) of the Company Disclosure Schedule, (B) to the extent required by Applicable Law, (C) to the extent required pursuant to the terms of any outstanding agreement or instrument that the Company or any of its Subsidiaries is a party (including pursuant to the Stock Plan) to and that is set forth on Section 4.21(a)(ix) of the Company Disclosure Schedule and (D) for action required by the Company’s existing severance and retention plan in effect as of the date hereof:  (i) grant or increase any severance or termination pay to (or amend any existing arrangement with) any director, officer or employee of the Company or any of its Subsidiaries, (ii) increase benefits payable under any existing severance or termination pay policies or employment agreements, (iii) enter into any employment, retention, change in control, deferred compensation or other similar agreement or arrangement (or amend any such existing agreement or arrangement) with any director, officer, employee or independent contractor of the Company or any of its Subsidiaries, (iv) establish, adopt or amend (except as required by Applicable Law) any collective bargaining, bonus, profit-sharing, thrift, pension, retirement,

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equity-based or other benefit plan or arrangement covering any director, officer, employee or independent contractor of the Company or any of its Subsidiaries or (v) increase compensation, bonus or other benefits payable to any director, officer, employee or independent contractor of the Company or any of its Subsidiaries;

(k)change the Company’s methods of accounting, except as required by concurrent changes in GAAP, as agreed to by its independent public accountants;

(l)except as set forth on Section 6.01(l) of the Company Disclosure Schedule, settle, or offer or propose to settle, (i) any litigation, investigation, arbitration, proceeding or other claim involving or against the Company or any of its Subsidiaries unless such settlement would not result in (A) the imposition of a consent order, injunction, decree or obligation that would restrict the future activity or conduct of the Company or any of its Affiliates, (B) a finding or admission of a violation of law or violation of the rights of any Person by the Company or any of its Affiliates, (C) a finding or admission that would have an adverse effect on other claims made or threatened against the Company or any of its Affiliates, or (D) any monetary liability on the part of the Company or any of its Subsidiaries in excess of $500,000 for any given matter or $1,000,000 in the aggregate for all matters, (ii) any stockholder litigation or dispute against the Company or any of its officers or directors or (iii) any litigation, arbitration, proceeding or dispute that relates to the transactions contemplated hereby;

(m)take any action that would intentionally make any representation or warranty of the Company hereunder inaccurate in any material respect at, or as of any time before, the Effective Time as if made as of the Effective Time;

(n)permit its existing lessees, licensees and assignees or agents to conduct exploration, development, drilling or mining operations for oil, gas, coal bed methane or any reserved minerals in a manner that will adversely affect any active coal mining operations on any Company Leased Real Property or any Company Owned Real Property in any material respect; or

(o)agree, resolve or commit to do any of the foregoing.

Section 6.02.  Notice of Stockholder Consents; Company Information Statement.  

(a)As promptly as practicable after the execution and delivery of this Agreement by each of the parties hereto, but in no event later than ten Business Days after the date hereof, the Company shall prepare and mail a notice complying with the requirements of Section 228 of Delaware Law to all Stockholders who have not executed and delivered a Stockholder Consent.  Such notice shall be reasonably acceptable to Parent.

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(b)As promptly as practicable after the execution and delivery of this Agreement by each of the parties hereto, the Company shall prepare, with the cooperation and assistance of Parent, an information statement (the “Information Statement”), which shall include information about this Agreement, the other Transaction Documents, the Merger and the other transactions contemplated hereby and thereby.  The Information Statement shall be reasonably acceptable to Parent.  The Company shall cause the Information Statement to be mailed to the Stockholders as promptly as practicable (but in no event earlier than two Business Days after the initial filing of the Registration Statement with the SEC).  The Company shall comply with the requirements of Section 262 of Delaware Law.  The Information Statement and any amendments or supplements thereto, when first mailed to holders of Company Stock, will comply as to form in all material respects with the applicable requirements of Delaware Law, and will not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading (other than information which is contained in the Information Statement and is supplied by Parent); provided that to the extent the Information Statement or any amendment or supplement thereto contains information of the same nature as the matters referenced in the first sentence of Section 4.22(k) (as such matters relate to the Company and its Subsidiaries), such information shall be true (and not fail to omit necessary facts) based only upon the knowledge of the Company.

Section 6.03.  No Solicitation.  (a)  Neither the Company nor any of its Subsidiaries shall, nor shall the Company or any of its Subsidiaries authorize or permit any of its or their stockholders, officers, directors, employees, investment bankers, attorneys, accountants, consultants, representatives, agents or advisors (collectively, “Representatives”) to, directly or indirectly, (i) solicit, initiate or take any action to facilitate or encourage the submission of any Acquisition Proposal, (ii) enter into or participate in any discussions or negotiations with, furnish any information relating to the Company or any of its Subsidiaries or afford access to the business, properties, assets, books or records of the Company or any of its Subsidiaries to, otherwise knowingly cooperate in any way with, or knowingly assist, participate in, facilitate or encourage any effort by any Third Party that is seeking to make, or has made, an Acquisition Proposal, or (iii) enter into any agreement in principle, letter of intent, term sheet or other similar instrument relating to an Acquisition Proposal.

(b)The Company shall, and shall cause its Subsidiaries and its and their respective Representatives to, cease immediately and cause to be terminated any and all existing activities, discussions or negotiations, if any, with any Third Party or any Third Party’s Representatives with respect to any Acquisition Proposal.  The Company shall promptly, after the date hereof, request that each Third Party (other than the Company’s Representatives), if any, that has executed a currently binding confidentiality agreement within the 24-month period prior to the date hereof in connection with its consideration of any Acquisition Proposal return or

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destroy all confidential information heretofore furnished to such Person by or on behalf of the Company or any of its Subsidiaries (and all analyses and other materials prepared by or on behalf of such Person that contains, reflects or analyzes that information).  The Company shall take all commercially reasonable actions necessary to secure its rights and ensure the performance of such other party’s obligations under such confidentiality agreements as promptly as practicable; provided that except as set forth in the preceding sentence (relating to the request of the Company) the Company shall not be required to take action to cause a Third Party to return or destroy information unless the Company has knowledge of a breach of the confidentiality or use provisions of the applicable confidentiality agreement.

(c)Notwithstanding anything to the contrary contained in this Section 6.03, if at any time following the date of this Agreement and prior to obtaining the Company Stockholder Approval, the Company has received a written Acquisition Proposal from a third party that the Company’s Board of Directors believes in good faith to be bona fide and the Company’s Board of Directors determines in good faith, after consultation with an independent financial advisor and an outside counsel, that such Acquisition Proposal constitutes or could reasonably be expected to result in a Superior Proposal, then the Company may:  (A) furnish information with respect to the Company and its Subsidiaries to the person making such Acquisition Proposal, (B) participate in discussions or negotiations with the person making such Acquisition Proposal regarding such Acquisition Proposal and (C) terminate this Agreement pursuant to Section 10.01(e) to concurrently enter into a definitive agreement with respect to such Superior Proposal, if the Board determines in good faith that the failure to take such action would violate its fiduciary duties under Applicable Law.  During the time period contemplated by the first sentence of this clause (c), the Company shall promptly notify Parent if it receives an Acquisition Proposal from a person or group of related persons (including the material terms and conditions thereof but not the identity of the person making such Acquisition Proposal) and shall keep Parent apprised of any material developments, discussions and negotiations concerning such Acquisition Proposal.  As used herein, the term “Superior Proposal” means any bona fide binding written Acquisition Proposal not obtained in violation of this Section 6.03 that the Company’s Board of Directors determines in its good faith judgment provides for terms and conditions that are more favorable to the Company’s stockholders from a financial point of view than this Agreement; provided that for purposes of the definition of “Superior Proposal”, the references to “20% or more” in the definition of Acquisition Proposal shall be deemed to be references to “a majority” and the definition of Acquisition Proposal shall only refer to a transaction or series of transactions (x) directly involving the Company (and not exclusively its Subsidiaries) or (y) involving a sale or transfer of all or substantially all of the assets of the Company and its Subsidiaries, taken as a whole.

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Section 6.04.  Tax Matters.  (a) From the date hereof until the Effective Time, neither the Company nor any of its Subsidiaries shall make or change any material Tax election, change any annual tax accounting period, adopt or change any method of tax accounting, file any material amended Tax Returns or claims for material Tax refunds, enter into any material closing agreement, surrender any material Tax claim, audit or assessment, surrender any right to claim a material Tax refund, offset or other reduction in Tax liability, consent to any extension or waiver of the limitations period applicable to any Tax claim or assessment or take or omit to take any other action, if any such action or omission would have the effect of increasing the Tax liability or reducing any Tax asset of the Company or any of its Subsidiaries.

(b)The Company and each of its Subsidiaries shall establish or cause to be established in accordance with GAAP on or before the Effective Time an adequate accrual for all Taxes due with respect to any period or portion thereof ending prior to or as of the Effective Time.

(c)All transfer, documentary, sales, use, stamp, registration, value added and other such Taxes and fees (including any penalties and interest) incurred in connection with the Merger (including any real property transfer tax and any similar Tax) shall be paid by the Company when due, and the Company shall, at its own expense, file all necessary Tax returns and other documentation with respect to all such Taxes and fees for which Applicable Law imposes a filing obligation on the Company, and, if required by Applicable Law, the Company shall, and shall cause its Subsidiaries to, join in the execution of any such Tax returns and other documentation.

(d)From the date hereof until the Effective Time, the Company shall cooperate fully, as and to the extent reasonably requested by Parent and its authorized representatives, in connection with Tax matters relating to the Company and its Subsidiaries, including providing reasonable access to the offices, books and records, and employees and any third-party tax consultants of the Company and its Subsidiaries, providing records and information that are reasonably relevant to the preparation and filing of any Tax Return, statement, report or form, providing records and information relevant to any audit, litigation or other proceeding, providing copies of any Tax Sharing Agreements and making employees and any third-party tax consultants available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder.

Section 6.05.  Transaction Expenses.  Prior to Closing, the Company will use its reasonable best efforts to obtain customary “pay-off” letters from each of the Persons in respect of whom Transaction Expenses are, will be or were payable, acknowledging that each of such Persons has been paid in full, or will as of the Closing, be paid in full, all Transaction Expenses owed to it.  All Transaction Expenses that are in excess of the Transaction Expenses Cap and that

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are not included in the Excess Transaction Expenses Deduction Amount shall be the sole responsibility of the Designated Stockholders in accordance with Section 11.02(a) (and, if any claim is made upon the Company or any of its Subsidiaries after the Closing with respect to any such Transaction Expenses, Parent may, in its discretion, elect to have such expenses paid from the Escrow Property in accordance with Section 11.02(a) and the Escrow Agreement).

Section 6.06.  Company Convertible Debt.  Prior to the Closing, the Company will not (i) amend or waive any term (including the transfer restrictions contained therein) of any of the Company Convertible Debt Notes or any related agreement (including the Company Convertible Debt NPA), in either case, in a manner adverse to Parent (it being agreed and understood that any amendment or waiver of any term having an effect that applies only in the event this Agreement is terminated shall not, for purposes hereof, be “in a manner adverse to Parent”) or (ii) repay or prepay any of the Company Convertible Debt Notes.  

Section 6.07.  280G Approval.  Prior to the Closing, the Company will use its commercially reasonable efforts to satisfy the approval requirements of Section 280G(b)(5)(B) of the Code with respect to all payments to be made to disqualified individuals (within the meaning of Section 280G of the Code) in connection with the transactions contemplated hereby, including pursuant to the Stock Plan.

ARTICLE 7

Covenants of Parent

Parent agrees that:

Section 7.01.  Conduct of Parent.  From the date hereof until the Effective Time or the earlier termination of this Agreement in accordance with the terms of Article 10, without the prior written consent of the Company (such consent not to be unreasonably withheld, delayed or conditioned):

(a)Parent shall not adopt or propose any change in its certificate of incorporation or bylaws;

(b)Parent shall not declare, set aside or pay any dividend or other distribution (whether in cash, stock or property or any combination thereof) in respect of its capital stock; and

(c)Parent shall not, and shall not permit any of its Subsidiaries to, take any action that would intentionally make any representation and warranty of Parent hereunder inaccurate in any material respect at, or as of any time prior to, the Effective Time as if made as of the Effective Time.

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Section 7.02.  Obligations of Merger Subsidiary.  Parent shall take all action necessary to cause Merger Subsidiary to perform its obligations under this Agreement and to consummate the Merger on the terms and conditions set forth in this Agreement.

Section 7.03.  Stock Exchange Listing.  Parent shall use its commercially reasonable efforts to cause the shares of Parent Stock to be issued pursuant to the Parent Stock Issuance to be listed on the New York Stock Exchange, subject to official notice of issuance.

Section 7.04.  Employee Matters.

(a)As used herein, the term “Company Employees” means the individuals who are employed by the Company or any Subsidiary of the Company immediately prior to the Effective Time and the term “Continuing Employees” means the Company Employees who continue to be employed with Parent or one of its Subsidiaries or the Surviving Corporation or one of its Subsidiaries upon the Effective Time.  Parent shall, and shall cause the Surviving Corporation and its Subsidiaries to, provide any Company Employee whose employment is involuntarily terminated within six months following the Closing Date (other than for cause) who is covered by a severance plan listed on Section 7.04(a) of the Parent Disclosure Schedule with severance benefits as provided under such severance plan; provided that such Company Employee or Continuing Employee, as the case may be, satisfies any conditions for the receipt of severance benefits under such applicable severance plan.

(b)Subject to Applicable Law, Parent shall and shall cause the Surviving Corporation and its Subsidiaries to, for six months following the Closing, provide to each Continuing Employee while such Continuing Employee continues to be employed by Parent or one of its Subsidiaries or the Surviving Corporation or one of its Subsidiaries, employee benefits that are, at the election of Parent, substantially comparable in the aggregate to either (i) those provided to similarly situated employees of Parent or (ii) those provided by the Company and its Subsidiaries immediately prior to the Closing.

(c)Nothing contained herein shall be construed as requiring Parent, its Affiliates, the Company or its Subsidiaries to continue any specific Company Employee Plan, or to continue the employment of any specific person.  The provisions of this Section 7.04 are solely for the benefit of the parties to this Agreement, and no Company Employee or Continuing Employee shall have any third-party beneficiary rights or rights to any specific levels of compensation or benefits as a result of the application of this Section 7.04.

Section 7.05.  Board Appointments.  Effective as of the Effective Time (or, if the Effective Time shall occur before the date of Parent’s 2008 annual meeting of stockholders, promptly after such meeting), the Board of Directors of Parent

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shall (i) cause Parent’s Board of Directors to be expanded by such number of members as the Stockholders are then entitled to nominate pursuant to the Voting Agreement and (ii) appoint to the Board of Directors the individuals designated in accordance with the Voting Agreement.

Section 7.06.  Director and Officer Indemnification.  (a)Parent agrees that prior to the sixth anniversary of the Closing Date, Parent will not, and will not permit the Company to, amend (whether by merger, dissolution, liquidation or otherwise) the certificate of incorporation or bylaws of the Company in a manner that would diminish the indemnification rights of the officers and directors of the Company thereunder with respect to acts or omissions occurring prior to the Effective Time and Parent agrees to cause the Surviving Corporation to indemnify (and advance expenses) to the maximum extent provided therein except to the extent the Surviving Corporation would be limited from doing so under Applicable Law.  For the avoidance of doubt the parties agree that any indemnification payment required to be made thereunder with respect to any claim, action, suit or proceeding by any holder of shares of capital stock of the Company will be subject to indemnification under Section 11.02(a) (in accordance with the terms thereof).  The provisions of this Section 7.06 will survive the Closing, shall be enforceable by each officer and director of the Company and his or her successors and representatives, each of whom shall be a third party beneficiary of the obligations set forth in this Section 7.06, and shall be in addition to any rights such officer or director may have under Applicable Law or any agreement set forth on Section 4.21(a)(ix) of the Company Disclosure Schedule.

(b)At the Closing, Parent shall cause the Surviving Corporation to use all commercially reasonably efforts to obtain and maintain a “tail” extension of (i) the Company’s existing directors’ and officers’ insurance policies and (ii) the Company’s existing fiduciary liability insurance policies, in each case for acts or omissions occurring prior to the Effective Time and for a claims reporting or discovery period of at least six years from and after the Effective Time from an insurance carrier with the same or better credit rating as the Company’s current insurance carrier with respect to directors’ and officers’ liability insurance and fiduciary liability insurance (collectively, “D&O Insurance”) with terms, conditions, retentions and limits of liability that are at least as favorable as the Company’s existing policies with respect to any actual or alleged error, misstatement, misleading statement, act, omission, neglect, breach of duty or any other matter claimed against a director or officer of the Company or any of its Subsidiaries by reason of him or her serving in such capacity that existed or occurred at or prior to the Effective Time (including in connection with this Agreement or the other Transaction Documents or the transactions or actions contemplated hereby or thereby); provided that in no event shall the Surviving Corporation be required to expend for such tail extension an aggregate amount in excess of $350,000; provided further that if the cost of such insurance coverage exceeds such amount, the Surviving Corporation shall obtain a policy with the

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greatest coverage available (in its reasonable judgment) for a cost not exceeding such amount.  In lieu of Parent’s and the Surviving Corporation’s obligations in the preceding sentence, the Company is hereby expressly permitted to, prior to Closing, purchase such tail extension; provided that the terms and conditions thereof are as set forth in this Section 7.06(b) and otherwise reasonably acceptable to Parent, with the aggregate payments made (or to be made) by the Company in no event exceeding an aggregate amount of $350,000.

(c)If the Surviving Corporation or any of its respective successors or assigns (i) shall consolidate with or merge into any other corporation or entity and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) shall transfer all or substantially all of its properties and assets to any individual, corporation or other entity, then, and in each such case, proper provisions shall be made so that the successors and assigns of the Surviving Corporation shall assume all of the obligations set forth in this Section 7.06.

Section 7.07.  Books and Records.  From and after the Closing, Parent and the Surviving Corporation shall provide the Stockholder Representative (and its representatives and advisors) with reasonable access, for (a) financial reporting or disclosure purposes, or (b) defending any claim in respect of which an indemnification claim has been made, to all of the Company’s and its Subsidiaries’ accounting and tax books, records, notes and memoranda, whether electronic or written (“Books and Records”) in existence on or prior to the Effective Time, pertaining or relating to the period on or prior to the Effective Time and reasonably necessary for the relevant purpose; provided that (A) the provision of access pursuant to this Section 7.07 shall be during normal business hours, following a reasonable advance request for such access and shall not interfere unreasonably with the conduct of the business of Parent or any of its Subsidiaries (including the Company and its Subsidiaries) and (B) the provision of access pursuant to this Section 7.07 shall be conditioned on the Person receiving access entering into a confidentiality agreement in favor of Parent that is reasonably acceptable to Parent.  Unless otherwise consented to in writing by the Stockholder Representative, neither Parent nor the Surviving Corporation shall, for a period of five years following the Closing Date or such longer period as retention thereof is required by Applicable Law, destroy, alter or otherwise dispose of (or allow the destruction, alteration or disposal of) any of the Books and Records without first offering to surrender the same to the Stockholder Representative.

ARTICLE 8

Covenants of Parent and the Company

The parties hereto agree that:

Section 8.01.  Commercially Reasonable Efforts.

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(a)Except to the extent expressly provided elsewhere in this Agreement (including Section 8.09), the Company and Parent shall use their respective commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under Applicable Law to consummate the transactions contemplated by this Agreement, including (i) preparing and filing as promptly as practicable with any Governmental Authority or other Third Party all documentation to effect all necessary filings, notices, petitions, statements, registrations, submissions of information, applications and other documents and (ii) obtaining and maintaining all approvals, consents, registrations, permits, authorizations and other confirmations required to be obtained from any Governmental Authority or other Third Party that are necessary, proper or advisable to consummate the transactions contemplated by this Agreement; provided that the parties hereto understand and agree that neither the commercially reasonable efforts of any party hereto nor any other obligation of a party under this Agreement shall be deemed to include (i) entering into any settlement, undertaking, consent decree, stipulation or agreement with any Governmental Authority in connection with the transactions contemplated hereby or (ii) divesting or otherwise holding separate (including by establishing a trust or otherwise), or taking any other action (or otherwise agreeing to do any of the foregoing) with respect to any of its or the Surviving Corporation’s Subsidiaries or any of their respective Affiliates’ businesses, assets or properties.  No party shall pay any fee or make any payment to any Person (other than customary filing fees), make any commitment or enter into any amendment, consent or other agreement, in each case, with respect to obtaining any such approval, consent, registration, permit, authorization or other confirmation, except with the written consent of Parent.

(b)In furtherance and not in limitation of the foregoing, each of Parent and the Company shall make an appropriate filing of a Notification and Report Form pursuant to the HSR Act with respect to the transactions contemplated hereby as promptly as practicable and in any event within 20 Business Days of the date hereof and shall use its commercially reasonable efforts to supply as promptly as practicable any additional information and documentary material that may be requested pursuant to the HSR Act.  Parent shall pay the filing fee under the HSR Act with respect to the acquisition of the Company by Parent.

Section 8.02.  Certain Filings.  The Company and Parent shall cooperate with one another (i) in determining whether any action by or in respect of, or filing with, any Governmental Authority is required, or any actions, consents, approvals or waivers are required to be obtained from parties to any material contracts, in connection with the consummation of the transactions contemplated by this Agreement and (ii) in taking such actions or making any such filings, furnishing information required in connection therewith and seeking timely to obtain any such actions, consents, approvals or waivers.  Notwithstanding the foregoing, matters related to the Registration Statement (and approval thereof by the SEC) shall be governed by Section 8.09 and not this Section 8.02, and matters

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relating to filings under the HSR Act shall be governed by Section 8.01 and not this Section 8.02.

Section 8.03.  Public Announcements.  Parent and the Company shall consult with each other before issuing any press release, making any other public statement or scheduling any press conference or conference call with investors or analysts with respect to this Agreement or the transactions contemplated hereby and, except as may be required by Applicable Law or any listing agreement with or rule of any national securities exchange (in which case reasonable efforts shall be used to consult, including the sharing of a draft thereof prior to public release), shall not issue any such press release, make any such other public statement or schedule any such press conference or conference call before such consultation; provided (i) that Parent shall not be required to consult with the Company prior to making any employee communications and (ii) neither party shall be required to consult with the other party prior to making any communications substantially similar to communications previously issued after consultation with such other party.

Section 8.04.  Further Assurances.  At and after the Effective Time, the officers and directors of the Surviving Corporation shall be authorized to execute and deliver, in the name and on behalf of the Company or Merger Subsidiary, any deeds, bills of sale, assignments or assurances and to take and do, in the name and on behalf of the Company or Merger Subsidiary, any other actions and things to vest, perfect or confirm of record or otherwise in the Surviving Corporation any and all right, title and interest in, to and under any of the rights, properties or assets of the Company acquired or to be acquired by the Surviving Corporation as a result of, or in connection with, the Merger.

Section 8.05.  Notices of Certain Events.

(a)Each of the Company and Parent shall promptly notify the other of:

(i)any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the transactions contemplated by this Agreement;

(ii)any notice or other communication from any Governmental Authority in connection with the transactions contemplated by this Agreement;

(iii)any actions, suits, claims, investigations or proceedings commenced or, to its knowledge, threatened against, relating to or involving or otherwise affecting such party and any of its Subsidiaries, that relate to the consummation of the transactions contemplated by this Agreement;

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(iv)any inaccuracy of any representation or warranty of that party contained in this Agreement at any time during the term hereof that could reasonably be expected to cause the condition set forth in Section 9.02(a) or Section 9.03(a), as applicable, not to be satisfied; and

(v)any failure of that party to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder;

provided, however, that the delivery of any notice pursuant to this Section 8.05 shall not limit or otherwise affect the remedies available hereunder to the party receiving that notice.

(b)If the condition set forth in Section 9.02(a)(iv) is not capable of being satisfied prior to the End Date, then, at any time prior to the fifth Business Day before the date on which the Closing would have been expected to occur absent the failure of such condition to be satisfied, the Company may deliver a notice to Parent stating that the condition will not be satisfied, explaining in reasonable detail why such condition will not be satisfied and stating that Parent has the right to terminate the Agreement pursuant to Section 10.01(c)(ii).  In such an event, Parent shall, prior to Closing, elect to either (A) waive the condition set forth in Section 9.02(a)(iv) or (B) terminate this Agreement pursuant to Section 10.01(c)(ii).  If Parent elects to so waive the condition then Parent will be deemed to have waived all claims for indemnification pursuant to Section 11.02(a) in respect of all Damages that, based on the description in the notice provided to Parent pursuant to the first sentence of this Section 8.05(b), would reasonably be expected to arise from the matters described in such notice.

(c)If the condition set forth in Section 9.03(a)(iii) is not capable of being satisfied prior to the End Date, then, at any time prior to the fifth Business Day before the date on which the Closing would have been expected to occur absent the failure of such condition to be satisfied, Parent may deliver a notice to the Company stating that the condition will not be satisfied, explaining in reasonable detail why such condition will not be satisfied and stating that the Company has the right to terminate the Agreement pursuant to Section 10.01(d)(iv).  In such an event, the Company shall, prior to Closing, elect to either (A) waive the condition set forth in Section 9.03(a)(iii) or (B) terminate this Agreement pursuant to Section 10.01(d)(iv).  If the Company elects to so waive the condition then the Company and the Stockholders will be deemed to have waived all claims for indemnification pursuant to Section 11.02(d) in respect of all Damages that, based on the description in the notice provided to the Company pursuant to the first sentence of this Section 8.05(c), would reasonably be expected to arise from the matters described in such notice.

Section 8.06.  Confidentiality.  Prior to the Effective Time and after any termination of this Agreement, each of Parent and the Company shall hold, and

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shall cause its shareholders, officers, directors, employees, accountants, counsel, consultants, advisors and agents to hold, in confidence, all confidential documents and information concerning the other party furnished to it or its Affiliates in connection with the transactions contemplated by this Agreement in accordance with, and subject to the provisions of, the Confidentiality Agreements, including the provisions thereof limiting the use of such documents and information.  Except as provided in the preceding sentence and except with respect to the “standstill” obligations set forth in the Confidentiality Agreements (which obligations shall continue as set forth in such Confidentiality Agreements except to the extent relating to the transactions contemplated hereby), the Confidentiality Agreements are hereby terminated.

Section 8.07.  Tax-free Reorganization.  Prior to the Effective Time, each of Parent and the Company shall (and shall cause its respective controlled Affiliates to) use its commercially reasonable efforts to cause the Merger to qualify as a 368 Reorganization, and shall not take any action reasonably likely to cause the Merger not so to qualify.  Parent shall not take, or cause the Company to take, any action after the Effective Time reasonably likely to cause the Merger not to qualify as a 368 Reorganization.

Section 8.08.  Access to Information.  From the date hereof until the Effective Time and subject to Applicable Law and each Confidentiality Agreement, each party hereto shall:  (i) give the other party hereto and their respective counsel, financial advisors, auditors and other authorized representatives reasonable access to its and its Subsidiaries’ offices, properties, books and records, (ii) furnish to the other party hereto, its counsel, financial advisors, auditors and other authorized representatives such financial and operating data and other information as such Persons may reasonably request, (iii) instruct its and its Subsidiaries’ employees, counsel, financial advisors, auditors and other authorized representatives to cooperate with the other party hereto in connection therewith and (iv) cooperate in good faith with the other party hereto, its counsel, financial advisors, auditors and other authorized representatives (including in connection with Parent’s transition planning activities); provided that (A) the provision of access pursuant to this Section 8.08 shall be during normal business hours, following a reasonable advance request for such access and shall not interfere unreasonably with the conduct of the business of any Person; and (B) the provision of access pursuant to this Section 8.08 shall, in the case of any Person other than a party or its employees, be conditioned on (x) any such Person entering into an agreement in favor of the other party hereto on terms no less favorable to such party than the applicable Confidentiality Agreement or (y) as an alternative in the case of a representative of a party, such representative having agreed to comply with the terms of the Confidentiality Agreement protecting the other party’s information.  No information or knowledge obtained in any investigation pursuant to this Section shall be deemed to modify or affect any representation or warranty made by any party hereunder.  It is understood and agreed that because of the different circumstances involved the scope of access

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and information to be provided to Parent pursuant to the first sentence of this Section 8.08 will be different from the scope of access and information to be provided to the Company and that the scope of access and information to be provided to Parent is based upon what is reasonable for the buyer of an entire business or company and the scope or access and information to be provided to the Company is based upon what is reasonable for the acquiror of a 31% interest in a public company.

Section 8.09.  Registration Statement; Parent Stockholder Meeting.

(a)As promptly as practicable following the date of this Agreement, Parent shall prepare and file with the SEC the Registration Statement (which shall include the Parent Proxy Statement and all other proxy materials for the meeting of its stockholders (the “Parent Stockholder Meeting”) to be called for the purposes of seeking the Parent Stockholder Approval).  The Company shall cooperate in the preparation of the Registration Statement (which shall include the Parent Proxy Statement).  The information in the Registration Statement (which shall include the Parent Proxy Statement), as it may be amended or supplemented, shall not, on the date such Registration Statement is declared effective by the SEC, at the time the Parent Proxy Statement is first mailed to Parent’s stockholders, at the time of the Parent Stockholder Meeting and at the Closing, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not false or misleading, or omit to state any material fact necessary to correct any statement in any earlier communication with respect to either the Parent Stock Issuance or the solicitation of proxies for the Parent Stockholder Meeting which has become false or misleading; provided that to the extent the Registration Statement or any amendment or supplement thereto contains information of the same nature as the matters referenced in the first sentence of Section 4.22(k) (as such matters relate to Parent and its Subsidiaries), such information shall be true (and not fail to omit necessary facts) based only upon the knowledge of Parent.  The Registration Statement (including the Parent Proxy Statement) will comply as to form in all material respects with the applicable provisions of the 1933 Act and the 1934 Act.  If at any time prior to the Closing, any event or information should be discovered by Parent which should be set forth in a supplement to the Parent Proxy Statement or an amendment to the Registration Statement, Parent shall promptly inform the Company.  Notwithstanding the foregoing, Parent makes no representation or warranty with respect to any information which is contained in the Registration Statement and is supplied by the Company.

(b)Parent shall use all commercially reasonable efforts to have the Registration Statement declared effective by the SEC (which shall include clearance by the SEC of the Parent Proxy Statement), as promptly as practicable after such filing and Parent shall cause the Parent Proxy Statement to be mailed to Parent’s stockholders as promptly as practicable thereafter.

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(c)Parent shall promptly notify the Company of the receipt of any comments from the SEC or its staff and of any request by the SEC or its staff for amendments or supplements to the Registration Statement (including the Parent Proxy Statement included therein) or for additional information and shall supply the Company with copies of all correspondence between Parent or any of its representatives and the SEC.  Parent and the Company shall cooperate with each other and provide to each other all information necessary in order to prepare all amendments to the Registration Statement (including the Parent Proxy Statement) as expeditiously as practicable.

(d)If at any time prior to the Parent Stockholder Meeting there shall occur any event with respect to Parent, or with respect to the information included in the Registration Statement (including the Parent Proxy Statement), which event is required to be described in an amendment or supplement to the Parent Proxy Statement (or a post-effective amendment to the Registration Statement), such event shall be so described, and such amendment or supplement shall as promptly as practicable be filed with the SEC and, as required by Applicable Law, disseminated to the Parent’s stockholders.

(e)Parent shall, as soon as practicable following the date hereof, duly call, give notice of, convene and hold the Parent Stockholder Meeting for the purpose of seeking the Parent Stockholder Approval. Parent shall engage a nationally recognized proxy solicitation firm for the purposes of seeking the Parent Stockholder Approval and shall instruct such firm to solicit proxies in a manner that is designed to obtain such approval within a timely solicitation period, taking into account all relevant facts and circumstances.  Except as required by Applicable Law, Parent shall, through its Board of Directors, recommend to its stockholders that they give the Parent Stockholder Approval, including recommending the Parent Stock Issuance (the “Parent Board Recommendation”), and neither Parent nor the Board of Directors of Parent shall withhold, withdraw, qualify, modify or amend (or publicly propose or resolve to withhold, withdraw, qualify or modify), the Parent Board Recommendation (or approve or recommend, or publicly propose to approve or recommend, any agreement or transaction, or cause or permit Parent to enter into any agreement requiring Parent to abandon, terminate or fail to consummate the transactions contemplated hereby or by the other Transaction Documents or breach its obligations hereunder or thereunder, or resolve, propose or agree to do any of the foregoing).  Notwithstanding any withholding, withdrawal, qualification, modification or amendment of the Parent Board Recommendation by the Board of Directors of Parent (which, for the avoidance of doubt, shall only be permitted in accordance with the third sentence of this Section 8.09(e)), the Board of Directors shall submit, for Parent Stockholder Approval, the transactions contemplated by this Agreement to Parent’s stockholders at the Parent Stockholder Meeting.

(f)The information supplied by the Company and included in Registration Statement shall not, on the date the Registration Statement is

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declared effective by the SEC, the date the Parent Proxy Statement is first mailed to the Parent’s stockholders, at the time of the Parent Stockholder Meeting and at the Closing, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not false or misleading; provided that to the extent the Registration Statement or any amendment or supplement thereto contains information of the same nature as the matters referenced in the first sentence of Section 4.22(k) (as such matters relate to the Company and its Subsidiaries), such information shall be true (and not fail to omit necessary facts) based only upon the knowledge of the Company.  If at any time prior to the Closing, any event or information should be discovered by the Company which event is required to be described in an amendment or supplement to the Parent Proxy Statement (or a post-effective amendment to the Registration Statement), the Company shall promptly inform Parent of the same.  Notwithstanding the foregoing, the Company makes no representation or warranty with respect to any information other than information supplied by the Company.

(g)The Company agrees that neither it nor any of its Representatives or any other people acting on its behalf will engage in solicitation or offering activities in connection with the Parent Stockholder Meeting or the offering of Parent Stock in connection with the Merger in violation of the 1933 Act or the 1934 Act.

(h)Nothing in this Section 8.09 shall prohibit Parent from combining the Parent Stockholder Meeting with Parent’s 2008 annual meeting of stockholders (including combining the Parent Proxy Statement with the proxy statement for such annual meeting) so long as doing so would not reasonably be expected to materially delay obtaining the Parent Stockholder Approval.

Section 8.10.  Financing.

(a)Parent shall (i) subject to the terms and conditions of the Parent Financing Commitment Letter and subject to the remainder of this Section 8.10(a), use its commercially reasonable efforts to complete the Parent Financing effective as of the Effective Time on the terms and conditions described in the Parent Financing Commitment Letter and such other terms and conditions as are necessary to give effect to the terms and conditions described in the Parent Financing Commitment Letter that are commercially reasonable, customary for bridge loans of a similar size and type, and not less favorable to Parent than those set forth in the Patriot Credit Agreement (collectively, “Acceptable Parent Financing Terms”); provided that the consummation of the Parent Financing on Acceptable Parent Financing Terms would not reasonably be expected to result in any claim of default under the Parent Credit Agreement relating to the terms of the Parent Financing and (ii) commencing at such time as Parent deems appropriate but in any event no later than 45 days after the date hereof, use its commercially reasonable efforts to identify one or more alternate financings on

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terms satisfactory to Parent in its discretion and if so identified, to negotiate the terms of and execute definitive documents with respect to such alternate financing (such definitive documents, the “Alternate Financing Documents”), and if so executed, to consummate the transactions contemplated by the Alternate Financing Documents (it being agreed and understood that the determination of Parent to cease negotiating any alternate financing and to execute or not execute Alternate Financing Documents shall, in each case, be in Parent’s discretion).  Parent’s obligations pursuant to the preceding sentence shall, subject to the remainder of this Section 8.10(a), include using such commercially reasonable efforts to (i) commencing at such time as Parent deems appropriate but in any event no later than 30 days after the date hereof, negotiate definitive agreements with respect to the Parent Financing on Acceptable Parent Financing Terms and (ii) satisfy all conditions to such Parent Financing or such alternate financing, to the extent the satisfaction of such conditions is within the reasonable control of Parent.  Parent shall in all material respects comply with its obligations under the Parent Financing Commitment Letter (or as applicable, any Alternate Financing Documents).  Notwithstanding the foregoing, Parent may (i) amend or otherwise modify the Parent Financing Commitment Letter or Alternate Financing Documents or (ii) terminate any Alternate Financing Documents or terminate the Parent Financing Commitment Letter so long as (A) such action would not reasonably be expected to delay or prevent the consummation of the Merger (other than pursuant to the two Business Day delay provision pursuant to Section 9.02(k)(ii)) or (B) in the case of a termination of the Parent Financing Commitment Letter, Parent has previously entered into binding Alternate Financing Documents (provided that any termination of the Parent Financing Commitment Letter shall cause the condition set forth in Section 9.02(k) to be (upon such termination) deemed waived in all respects as set for therein).

(b)The Company shall provide to Parent such cooperation and assistance as is reasonably requested by Parent in connection with the Parent Financing or any alternate financing, including (i) participation in meetings, (ii) furnishing Parent and its financing sources with financial and other information regarding the Company and its Subsidiaries as may be reasonably requested by Parent (subject to such financing sources being bound by the terms of the Confidentiality Agreement with respect to documents and information of the Company and its Subsidiaries), (iii) executing and delivering, as of the Effective Time (and with effect from and after the Effective Time), any pledge and security documents, other definitive financing documents, or other certificates, legal opinions or documents, as may be reasonably requested by Parent and (iv) taking all reasonably requested corporate actions, subject to the occurrence of the Effective Time (and with effect from and after the Effective Time), reasonably requested by Parent that are necessary or customary to permit the consummation of the Parent Financing or any alternate financing (provided that such corporate action shall not include any determination with respect to the merits of the Parent Financing or any alternate financing (or any other arrangement to be in effect after the Effective Time)).  Parent will keep the Company informed on a

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reasonably current basis in reasonable detail of the status of the Parent Financing or any alternate financing.  If the Closing does not occur, Parent shall reimburse the Company for any reasonable Third Party out of pocket costs (including reasonable fees and expenses of legal, financial and other advisors) incurred by the Company in connection with the foregoing matters in this Section 8.10(b).

(c)Parent shall use its commercially reasonable efforts to enforce its rights against any other party to the Parent Credit Agreement with respect to the Parent Financing or any Alternate Financing Documents and to cause the Administrative Agent or any other authorized representative of the lenders party to the Parent Credit Agreement to provide written confirmation to Parent that the consummation of the Parent Financing as referred to in Section 9.02(k)(i) or Section 9.02(k)(ii), as applicable, would not result in any default under the Parent Credit Agreement, which shall include, but shall not be limited to, upon the request of the Company, promptly commencing a litigation proceeding against the Administrative Agent or any such other party, in which Parent shall use commercially reasonable efforts to either (A) compel the Administrative Agent or such other person to provide such confirmation or (B) seek such other remedies that may be appropriate.

ARTICLE 9

Conditions to the Merger

Section 9.01.  Conditions to the Obligations of Each Party.  The obligations of the Company, Parent and Merger Subsidiary to consummate the Merger are subject to the satisfaction of the following conditions:

(a)the Parent Stockholder Approval shall have been obtained;

(b)there shall not be in effect any order, decree or injunction of a court of competent jurisdiction which enjoins or prohibits consummation of the Merger and there shall be no Applicable Law that shall have been enacted or promulgated that prohibits the consummation of the Merger;

(c)any applicable waiting period under the HSR Act relating to the Merger (including any such applicable waiting period relating to the Parent Stock Issuance in respect of any filing by the ArcLight Funds, Caisse de Dépôt et Placement du Québec and the ultimate parent entity (as such term is defined in 16 C.F.R. Section 801.1) of Cascade Investment, L.L.C.) shall have expired or been terminated;

(d)the Registration Statement shall have been declared effective and no stop order suspending the effectiveness of the Registration Statement shall be in effect and no proceedings for such purpose shall be pending before or threatened by the SEC; and

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(e)the shares of Parent Stock to be issued in the Merger shall have been approved for listing on the New York Stock Exchange, subject to official notice of issuance.

Section 9.02.  Conditions to the Obligations of Parent and Merger Subsidiary.  The obligations of Parent and Merger Subsidiary to consummate the Merger are subject to the satisfaction of the following further conditions:

(a) (i) the  Company shall have performed in all material respects all of its obligations hereunder required to be performed by it at or prior to the Effective Time, (ii) the representations and warranties of the Company contained Sections 4.02, 4.05, 4.12, 4.13, 4.20 and 4.26 shall be true in all material respects at and as of the Effective Time as if made at and as of such time (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty shall be true in all material respects as of such earlier date), (iii) the representations and warranties of the Stockholders in the other Transaction Documents shall be true at and as of the Effective Time as if made at and as of such time (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty shall be true in all material respects as of such earlier date), except where the failure of such representations and warranties to be true and correct, in the aggregate, would not adversely affect in any material respect (determined on an overall basis taking into account the rights and obligations of all Stockholders under all such other Transaction Documents) any material right of, benefit to or obligation of Parent contained in such other Transaction Documents, (iv) the other representations and warranties of the Company contained in this Agreement and in any certificate or other writing delivered by the Company pursuant hereto (which representations and warranties shall, for purposes of this Section 9.02(a) only, be read without any qualification contained therein as to materiality or Company Material Adverse Effect) shall be true at and as of the Effective Time as if made at and as of such time (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty (as so read) shall be true as of such earlier date), except where the failure of such representations and warranties to be true and correct, in the aggregate, has not had and would not reasonably be expected to have a Company Material Adverse Effect and (v) Parent shall have received a certificate signed by an executive officer of the Company to the foregoing effect;

(b)there shall not be instituted or pending any suit, action or proceeding initiated or maintained by any Governmental Authority relating to the transactions contemplated by this Agreement:  (i) seeking to restrain, prohibit or otherwise interfere with the ownership or operation by Parent or any of its Affiliates of all or any material portion of the business or assets of the Company or any of its Subsidiaries or of Parent or any of its Affiliates or to compel Parent or any of its Affiliates to dispose of all or any material portion of the business or assets of the

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Company or any of its Subsidiaries or of Parent or any of its Affiliates, (ii) seeking to impose or confirm limitations on the ability of Parent or any of its Affiliates effectively to exercise full rights of ownership of the Company or any of its Subsidiaries or (iii) seeking to require divestiture by Parent or any of its Affiliates of the Company, any of the Company’s Subsidiaries or any Subsidiary of Parent or any of its Affiliates (or all or any material portion of their respective business and assets);

(c)there shall not be any action taken, or any Applicable Law, injunction, order or decree proposed, enacted, enforced, promulgated, issued or deemed applicable to the Merger, by any Governmental Authority, other than the matters described in Sections 4.03 and 5.03, that could, directly or indirectly, reasonably be expected to result in any of the consequences referred to in Section 9.02(b)(i) through (iii);

(d)each of the Escrow Agreement and Registration Rights Agreement shall have been executed and delivered by each of the parties thereto (other than Parent), and each of the foregoing shall be in full force and effect;

(e)each Support Agreement shall be in full force and effect and no Stockholder party thereto shall be challenging the effectiveness of any such Support Agreement;

(f)the Voting Agreement shall be in full force and effect and no Stockholder party thereto shall be challenging the effectiveness of such Voting Agreement;

(g)the consents and approvals set forth on Exhibit 9.02(g) shall have been obtained or received, shall be in full force and effect, and shall be in form and substance reasonably satisfactory to Parent;

(h)the Company shall have delivered to Parent a certificate signed by an executive officer of the Company setting forth all Transaction Expenses (the excess, if any, of the amount of Transaction Expenses set forth in such certificate over the Transaction Expenses Cap, the “Excess Transaction Expenses Deduction Amount”) and certifying that the Company’s legal counsel, auditors, investment bankers and other consultants and advisors have agreed to the amounts set forth in such certificate pursuant to “pay-off” letters in the form described in Section 6.05;

(i)neither the Company nor any of its Subsidiaries shall have suffered a mining catastrophe that has involved, or would be reasonably likely to involve, a loss of lives;

(j)the Company shall have delivered a certificate (the “Company Outstanding Stock Number Certificate”) in form and substance reasonably satisfactory to Parent signed by an executive officer of the Company setting forth

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(i) the number of shares (the “Company Outstanding Stock Number”) of Company Stock (including vested Company Restricted Stock and unvested Company Restricted Stock) outstanding immediately prior to the Effective Time (including, for the avoidance of doubt, shares of Company Stock issued upon conversion of the Company Convertible Debt Notes), (ii) the number of such shares of Company Stock held by each Designated Stockholder immediately prior to the Effective Time and (iii) the Merger Conversion Price (as defined in the Company Convertible Debt NPA);

(k)either (i) the Parent Financing shall have been consummated upon the Acceptable Parent Financing Terms and the consummation of the Parent Financing on such terms would not reasonably be expected to result in any claim of default under the Parent Credit Agreement relating to the terms of the Parent Financing or (ii) in lieu of the Parent Financing, Parent shall have consummated a financing from an alternate source in an amount not less than the amount of the Parent Financing; provided that, if Parent is pursuing an alternate source of financing, the Closing is delayed by more than two Business Days because of the failure to satisfy the condition set forth in this Section 9.02(k), and during such period of delay the ArcLight Funds are ready, willing and able to consummate the Parent Financing upon Acceptable Parent Financing Terms and the consummation of the Parent Financing on such terms and conditions would not reasonably be expected to result in any claim of default under the Parent Credit Agreement relating to the terms of the Parent Financing), then at the end of such period of delay Parent will be required either to so consummate the Parent Financing or to waive the condition set forth in this Section 9.02(k); provided further that Parent will be deemed to have waived the condition in this Section 9.02(k) if (A) the Parent Financing Commitment Letter has been terminated by Parent or (B) the condition set forth in clause (e) under the heading “Conditions Precedent to Drawdown” on Exhibit A to the Parent Financing Commitment Letter fails to be satisfied as a result of the Parent Credit Agreement having been waived, amended, supplemented or otherwise modified, in each case in any manner materially adverse to the interests of the Lender (as defined on such Exhibit A), without the Lender’s consent; and

(l)Parent shall have received all documents it may reasonably request relating to the existence of the Company and its Subsidiaries and the authority of the Company for this Agreement, all in form and substance reasonably acceptable to Parent.

Section 9.03.  Conditions to the Obligations of the Company.  The obligations of the Company to consummate the Merger are subject to the satisfaction of the following further conditions:

(a) (i) Parent shall have performed in all material respects all of its obligations hereunder required to be performed by it at or prior to the Effective Time, (ii) the representations and warranties of Parent contained Sections 5.02,

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5.05, 5.13, 5.14 and 5.20 shall be true in all material respects at and as of the Effective Time as if made at and as of such time (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty shall be true in all material respects as of such earlier date), (iii) the other representations and warranties of Parent contained in this Agreement and in any certificate or other writing delivered by Parent pursuant hereto (which representations and warranties shall, for purposes of this Section 9.03(a) only, be read without any qualification contained therein as to materiality or Parent Material Adverse Effect) shall be true at and as of the Effective Time as if made at and as of such time (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty (as so read) shall be true as of such earlier date), except where the failure of such representations and warranties to be true and correct, in the aggregate, has not had and would not reasonably be expected to have a Parent Material Adverse Effect and (iv) the Company shall have received a certificate signed by an executive officer of Parent to the foregoing effect;

(b)each of the Escrow Agreement and the Registration Rights Agreement shall have been executed and delivered by Parent, and the Rights Agreement shall have been amended, and each of the foregoing shall be in full force and effect;

(c)neither Parent nor any of its Subsidiaries shall have suffered a mining catastrophe that has involved, or would be reasonably likely to involve, a loss of lives; and

(d)the Company shall have received all documents it may reasonably request relating to the existence of Parent and Merger Subsidiary and the authority of Parent and Merger Subsidiary for this Agreement, all in form and substance reasonably acceptable to the Company.

ARTICLE 10

Termination

Section 10.01.  Termination.  This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time (notwithstanding any approval of this Agreement by the stockholders of Parent, except as provided in Section 10.01(d)(i)):

(a)by mutual written agreement of the Company and Parent;

(b)by either the Company or Parent, if:

(i)the Merger has not been consummated on or before September 30, 2008 (the “End Date”); provided that the right to terminate

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this Agreement pursuant to this Section 10.01(b)(i) shall not be available to any party whose breach of any provision of this Agreement results in the failure of the Merger to be consummated by such time;

(ii)there shall be any Applicable Law that (A) makes consummation of the Merger illegal or otherwise prohibited or (B) enjoins the Company or Parent from consummating the Merger and such enjoinment shall have become final and nonappealable; or

(iii)the Parent Stockholder Meeting shall have been convened and the Parent Stockholder Approval shall not (taking into account any proper adjournment or postponement of the Parent Stockholder Meeting) have been obtained; or

(c)by Parent, if:

(i)a breach of any representation or warranty or failure to perform any covenant or agreement on the part of the Company set forth in this Agreement shall have occurred that would cause one or more of the conditions set forth in Section 9.02(a) not to be satisfied, and either (A) the Company is not using commercially reasonable efforts to cure such breach or failure or (B) such condition would not reasonably be expected to be satisfied by the End Date; or

(ii)the Company shall have delivered a notice to Parent pursuant to Section 8.05(b); or

(d)by the Company, if:

(i)the Board of Directors of Parent fails to make, withdraws, or modifies in a manner adverse to the Company, the Parent Recommendation (if permitted in accordance with the third sentence of Section 8.09(e)); provided that the Company shall not be permitted to terminate this Agreement pursuant to this Section 10.01(d)(i) after the Parent Stockholder Approval is obtained;

(ii)a breach of any representation or warranty or failure to perform any covenant or agreement on the part of the Parent or Merger Subsidiary set forth in this Agreement shall have occurred that would cause one or more of the conditions set forth in Section 9.03(a) not to be satisfied, and either (A) Parent is not using commercially reasonable efforts to cure such breach or failure or (B) such condition would not reasonably be expected to be satisfied by the End Date;

(iii)Parent shall enter into any agreement with respect to (A) a merger, consolidation, share exchange, business combination, reorganization, recapitalization, sale of all or substantially all of its assets

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or other similar transaction that, in any such case, requires the approval of the stockholders of Parent under Delaware Law or (B) a transaction involving the issuance of 20% or more of its stock, and, in either such case, the record date for the stockholder vote to approve such transaction shall occur prior to the Closing Date;

(iv)Parent shall have delivered a notice to the Company pursuant to Section 8.05(c); or

(e)by the Company prior to obtaining the Company Stockholder Approval if, in accordance with Section 6.03(c) the Company shall have concurrently entered into a definitive agreement with respect to a Superior Proposal.

The party desiring to terminate this Agreement pursuant to this Section 10.01 (other than pursuant to Section 10.01(a)) shall give notice of such termination to the other party.

Section 10.02.  Effect of Termination.

(a)Except as set forth below, if this Agreement is terminated pursuant to Section 10.01, this Agreement shall become void and of no effect without liability of any party (or any stockholder, director, officer, employee, agent, consultant or representative of such party) to the other party hereto; provided that, if such termination shall result from the willful (i) failure of either party to fulfill a condition to the performance of the obligations of the other party or (ii) failure of either party to perform a covenant hereof, such party shall be fully liable for any and all liabilities and damages incurred or suffered by the other party as a result of such failure.  The parties further agree that if (and only if) the Company establishes pursuant to a final, non-appealable judgment of the courts referred to in Section 12.07 that the termination of this Agreement resulted from the willful breach by Parent of its obligations hereunder, then (and only then) the Stockholders will be deemed to be third party beneficiaries of this Agreement in accordance with Section 12.05(a) and may pursue claims for damages suffered by such stockholders in their capacities as such as a result of such willful breach (but without duplication of any damages suffered by the Company, it being agreed and understood that in any such action contemplated by this sentence, the court may, among other things, consider whether such damages suffered by such Stockholders should include the benefit of the bargain of the Merger to the Stockholders (and in that regard, it is expressly acknowledged and agreed that the Company shall be permitted to bring such a claim on behalf of the Stockholders as set forth in the following proviso)); provided that any claim brought by the Stockholders pursuant to such third party beneficiary right may only be brought by the Company on behalf of such Stockholders.  The provisions of this Section 10.02 and Sections 8.06, 12.03, 12.06, 12.07, 12.08 and 12.13 shall survive any termination hereof pursuant to Section 10.01.

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(b)Notwithstanding the foregoing, in the event this Agreement is terminated (i) in accordance with Section 10.01(d)(i) or Section 10.01(b)(iii) (unless, in either case, at the time of termination one or more of the conditions set forth in Sections 9.01(b), 9.01(c) or 9.02 had not been satisfied and was not capable of being satisfied reasonably promptly) or (ii) in accordance with Section 10.01(b)(i), and in the case of this clause (ii), at the time of termination (A) the condition set forth in Section 9.02(k) shall not have been satisfied solely as a result of a potential claim of default under the Parent Credit Agreement relating to the terms of the Parent Financing and (B) all other conditions to Closing have been satisfied (or are immediately capable of being satisfied) or waived, then, in the case of clause (i) or (ii), as applicable, Parent shall reimburse the Company (on demand) for all costs and expenses of the Company incurred since January 1, 2008 in connection with the preparation and negotiation of this Agreement, the other Transaction Documents, the Merger and the other transactions contemplated hereby and thereby, including, without limitation, all fees and expenses of the Company’s counsel (including specialist and local counsel), financial advisors, auditors, other consultants (including but not limited to Weir Mining Consultants Inc.) and agents and other lenders under the Company’s and the Subsidiaries’ lending facilities; provided that, in no event shall the amount Parent is required to reimburse pursuant to this sentence exceed $5,000,000; provided, further that if this Agreement is terminated pursuant to Section 10.01(d)(i), Section 10.01(b)(i) or Section 10.01(b)(iii), and the expense reimbursement provided for in this sentence is payable, then such expense reimbursement shall be the sole and exclusive remedy of the Company and its Stockholders and Parent shall not be liable for any other Damages incurred or suffered by the Company or its Stockholders and the second sentence of this Section 10.02 shall be inapplicable.  The parties acknowledge and agree that the above expense reimbursement provisions are (i) an integral part of the transactions contemplated hereby and constitute liquidated damages and not a penalty in the event of the circumstances giving rise to the applicability thereof and (ii) essential to the overall transaction contemplated hereby and the Company has relied, and is relying, on Parent’s agreement to pay such expenses as and when due hereunder.

ARTICLE 11

Survival; Indemnification; Stockholder Representative Matters

Section 11.01.  Survival. The representations and warranties of the parties hereto contained in this Agreement or in any certificate or other writing delivered pursuant hereto or in connection herewith shall survive the Effective Time until the Business Day after the first anniversary of the Closing Date; provided that (a) the Company Core Representations (other than the representations and warranties contained in Sections 4.02, 4.05, 4.20 or 4.26) and the Parent Core Representations (other than the representations and warranties contained in Sections 5.02, 5.05 or 5.20) shall survive until the Business Day after the third anniversary of the Closing Date and (b) the representations and warranties in

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Sections 4.02, 4.05, 4.20, 4.26, 5.02, 5.05 and 5.20 shall survive until the latest date permitted by law.  The covenants and agreements of the parties hereto contained in this Agreement or in any certificate or other writing delivered pursuant hereto or in connection herewith shall survive the Closing until the earlier of full performance thereof or the shorter period explicitly specified therein, except that breaches of covenants and agreements shall survive until the latest date permitted by law.  Notwithstanding the preceding sentences, any breach of representation, warranty, covenant or agreement in respect of which indemnity may be sought under this Agreement shall survive the time at which it would otherwise terminate pursuant to the preceding sentences, if notice of the inaccuracy or breach thereof giving rise to such right of indemnity shall have been given to Parent (if the indemnity is sought against Parent) or the Stockholder Representative (if the indemnity is sought against the Stockholders), as applicable, prior to such time.

Section 11.02.  Indemnification.

(a)Subject to the last sentence of this Section 11.02(a) and to Sections 11.02(b) and 11.02(c), from and after the Effective Time, the Designated Stockholders hereby severally (based on each Designated Stockholder’s Pro Rata Share of any applicable Damages) but not jointly indemnify Parent and its Affiliates (including, from and after the Effective Time, the Company and its Subsidiaries) and their respective successors and assigns (collectively, the “Parent Indemnified Parties”) against, and agree to hold each of them harmless from, any and all Damages incurred or suffered by Parent, any Affiliate of Parent, the Company or any of its Subsidiaries arising out of any (i) misrepresentation or breach of warranty or alleged misrepresentation or breach of warranty made by the Company pursuant to any Transaction Document (a “Company Warranty Breach”), (ii) breach of covenant or agreement made or to be performed by the Company pursuant to any Transaction Document on or before the Effective Time (a “Company Covenant Breach”), (iii) any demand for appraisal by a holder of shares of capital stock of the Company in connection with the Merger, (iv) any claim, suit, action or proceeding by (A) any holder of shares of capital stock of the Company (including any suit on behalf of or in the name of the Company) in their capacity as such, in connection with the Merger or the other transactions contemplated by this Agreement or relating to its ownership of shares of capital stock or the issuance of the Company Convertible Debt or (B) any holder of Company Convertible Debt under or relating to such Company Convertible Debt except any claim by any such holder of Company Convertible Debt Notes to enforce the rights described in Section 7 of the Company Convertible Debt NPA or (v) any Transaction Expenses that are in excess of the Transaction Expenses Cap (without duplication for Transaction Expenses that are included in the Excess Transaction Expenses Deduction Amount and are therefore taken into account in the calculation of the Net Per Share Number), in each case regardless of whether such Damages arise as a result of the negligence, strict liability or any other liability under any theory of law or equity of, or violation of any law by, any party

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hereto or any of its Affiliates (including the Company and its Subsidiaries); provided that with respect to indemnification by the Designated Stockholders for any Company Warranty Breach (other than a misrepresentation or breach of warranty of any of the Company Core Representations and other than in cases of fraud or willful misrepresentation) pursuant to this Section, (x) the Designated Stockholders shall not be liable for any claim for indemnification where the amount of Damages with respect to such claim (provided that all claims based on substantially the same or similar acts, omissions or circumstances shall be considered part of a single claim for purposes of calculating the amount of Damages for purposes of this clause (x)) does not exceed $100,000 (the “Deminimis Amount”) (and the amount of such Damages shall not be aggregated for purposes of clause (y)), (y) the Designated Stockholders shall not be liable unless the aggregate amount of Damages with respect to all such Company Warranty Breaches exceeds $6,000,000 (the “Deductible Amount”) (in which case the Designated Stockholders shall be liable only for an amount equal to the excess of such Damages above such amount) and (z) the Designated Stockholders’ maximum liability shall not exceed the Escrow Property held in the Escrow Account.  The Designated Stockholders hereby agree that they will not be entitled to seek contribution from the Company, its Subsidiaries or any of their respective officers, directors or employees in respect of any liability of the Designated Stockholders under this Section 11.02(a).

(b)Parent hereby agrees that after Closing its sole and exclusive remedy with respect to any and all claims arising out of (i) any Company Warranty Breach (other than any misrepresentation or breach of warranty of any of the Company Core Representations and other than in cases of fraud or willful misrepresentation) or (ii) a Company Covenant Breach (other than a willful breach) (the claims referred to in clauses (i) and (ii) are hereinafter referred to as the “Escrow Only Claims”) shall be pursuant to a claim for indemnification against the then-available Escrow Property in accordance with this Section 11.02 and the Escrow Agreement.

(c)With respect to all claims for indemnification other than the Escrow Only Claims (“Direct Indemnification Claims”), the Parent Indemnified Parties may make a claim (i) against the then available Escrow Property in accordance with this Section 11.02 and the Escrow Agreement, (ii) against the Designated Stockholders directly (severally, based on each Designated Stockholder’s Pro Rata Share of any applicable Damages, and not jointly) or (iii) a combination of the foregoing; provided that (A) the aggregate maximum liability of the Designated Stockholders in respect of all Direct Indemnification Claims shall not exceed the proceeds (net of any reasonable brokerage commissions and any underwriting fees) received by the Designated Stockholders in the Merger (for the avoidance of doubt, the maximum aggregate liability of each Designated Stockholder in respect of all Direct Indemnification Claims shall not exceed the proceeds (net of any reasonable brokerage commissions and any underwriting fees) received by such Designated Stockholder in the Merger) and (B) except with

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respect to claims for misrepresentation or breach of warranty under Sections 4.02, 4.05, 4.20 or 4.26 and claims for indemnification under Section 11.02(a)(iv), the Parent Indemnified Parties shall not be entitled to make a Direct Indemnification Claim after the third anniversary of the Closing (it being understood and agreed that following the expiration of such time limit the Parent Indemnified Parties may continue to pursue any claim that was subject to such time limit so long as such claim was made prior to the expiration of such time limit).  Any amounts finally determined to be due and payable by a Designated Stockholder hereunder in respect of any Direct Indemnification Claim (or other claim made directly against a Designated Stockholder), in each case, to the extent permitted hereunder, may be satisfied by such Designated Stockholder by payment in cash, delivery of shares of Parent Stock (valued in accordance with the definition of “Market Value” hereunder) or in any combination thereof, at the election of the Designated Stockholder so satisfying such Direct Indemnification Claim or other claim; provided that any election to pay in whole or in part in shares of Parent Stock must be made prior to the commencement of the 10 consecutive trading day period referred to in the definition of “Market Value”.

(d)Subject to Sections 11.02(e) and Section 11.02(f), from and after the Effective Time, Parent hereby indemnifies each Stockholder (in its capacity as such) and its Affiliates (“Stockholder Indemnified Parties”) against, and agrees to hold each of them harmless from, any and all Damages incurred or suffered by the Company or such Stockholder or any of its Affiliates arising out of any (A) misrepresentation or breach of warranty or alleged misrepresentation or breach of warranty made by Parent or Merger Subsidiary pursuant to any Transaction Document (a “Parent Warranty Breach”) or (B) breach of covenant or agreement made or to be performed by Parent or Merger Subsidiary pursuant to any Transaction Document (a “Parent Covenant Breach”), in each case regardless of whether such Damages arise as a result of the negligence, strict liability or any other liability under any theory of law or equity of, or violation of any law by, any party hereto or any Stockholder or any of its Affiliates; provided that with respect to indemnification by Parent for any Parent Warranty Breach (other than a misrepresentation or breach of warranty of any of the Parent Core Representations and other than in cases of fraud or willful misrepresentation) pursuant to this Section, (x) Parent shall not be liable for any claim for indemnification where the amount of Damages with respect to such claim (provided that all claims based on substantially the same or similar acts, omissions or circumstances shall be considered part of a single claim for purposes of calculating the amount of Damages for purposes of this clause (x)) does not exceed the Deminimis Amount (and the amount of such Damages shall not be aggregated for purposes of clause (y)), (y) Parent shall not be liable unless the aggregate amount of Damages with respect to such Parent Warranty Breaches exceeds the Deductible Amount (in which case Parent shall be liable only for an amount equal to the excess of such Damages above such amount), and (z) Parent’s maximum liability shall not exceed $54,000,000 (the “Parent Cap”).  In consideration for the indemnification rights provided in this Section 11.02(d),

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each Stockholder hereby waives, to the fullest extent permitted by law, any claim under any Applicable Law relating to the sale or distribution of securities that it might otherwise have by virtue of the transactions contemplated hereby (and in the event any such claim under Applicable Law is brought by a Stockholder, such Stockholder hereby waives the indemnification rights provided in this Section 11.02(d) and shall promptly refund to Parent the amount of any Damages previously paid by Parent to such Stockholder in respect of any indemnification claim hereunder).  The parties further agree that if (and only if) the Stockholder Representative establishes pursuant to a final, non-appealable judgment of the courts referred to in Section 12.07 that Parent has breached this Agreement in a manner giving rise to a right of indemnification hereunder, then (and only then) the Stockholder Indemnified Parties will be deemed to be third party beneficiaries of this Agreement for purposes of this Section 11.02(d); provided that any claim brought by a Stockholder Indemnified Party pursuant to such third party beneficiary right may only be brought by the Stockholder Representative on behalf of such Stockholder Indemnified Party.

(e)After Closing, the sole and exclusive remedy of the Stockholder Indemnified Parties with respect to any and all claims arising out of (i) any Parent Warranty Breach (other than any misrepresentation or breach of warranty of any of the Parent Core Representations and other than in cases of fraud or willful misrepresentation) or (ii) a Parent Covenant Breach (other than a willful breach) (the claims referred to in clauses (i) and (ii) are hereinafter referred to as the “Parent Non-Core Claims”; and all other claims for indemnification under Section 11.02(d) are hereinafter referred to “Parent Core Claims”) shall be pursuant to a claim for indemnification against Parent in accordance with and subject to this Section 11.02.

(f)Except with respect to indemnification claims for misrepresentation or breach of warranty under Section 5.02, 5.05 or 5.20, the Stockholder Indemnified Parties shall not be entitled to make a Parent Core Claim after the third anniversary of the Closing (it being understood and agreed that following the expiration of such time limit the Stockholder Indemnified Parties may continue to pursue any claim that was subject to such time limit so long as such claim was made prior to the expiration of such time limit).  The aggregate maximum liability of Parent in respect of all Parent Core Claims shall not exceed $534,000,000.

(g)Amounts finally determined to be due and payable under this Section 11.02 in respect of any Damages that are subject to the indemnification obligations will be payable within five days of receipt of written notice to the Indemnifying Party (or the Stockholder Representative, in the case of an indemnification claim pursuant to Section 11.02(a)) of such Damages, and will bear interest beginning on the sixth day after receipt of such notice through the date of payment at a rate per annum equal to the Prime Rate as published in the Wall Street Journal, Eastern Edition in effect from time to time during such period plus 2%.

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(h)After Closing, each Indemnified Party will take all reasonable efforts to mitigate any Damages upon becoming aware of any event that would reasonably be expected to give rise thereto (provided that the costs and expenses of such mitigation shall be included as Damages arising from such event) and Damages incurred in violation thereof shall not be recoverable hereunder by the relevant Indemnified Party.

(i)The amount of Damages incurred by an Indemnified Party will be reduced by the amount recovered from any third party (after deducting attorneys’ fees, expenses and other costs of recoveries and any increase in insurance premiums), including from insurance policies and pursuant to other indemnification agreements.

(j)The amount of any Damages for which indemnification is provided under this Article 11 shall be decreased to take into account any net Tax benefit received by the applicable Indemnified Party.

(k)No Indemnified Party shall be entitled to recover Damages or otherwise be indemnified hereunder (or receive other payment, reimbursement or restitution) more than once in respect of any one given liability, loss, cost or shortfall, regardless of whether more than one claim for Damages arises in respect of it.

(l)Notwithstanding anything to the contrary herein, if Parent waives the condition set forth in Section 9.02(a)(iv) as set forth in Section 8.05(b), then Parent will be deemed to have waived its rights to indemnification to the extent set forth in Section 8.05(b).

(m)Notwithstanding anything to the contrary herein, if the Company waives the condition set forth in Section 9.03(a)(iii) as set forth in Section 8.05(c), then the Company and the Stockholders will be deemed to have waived their rights to indemnification to the extent set forth in Section 8.05(c).

Section 11.03.  Procedures.  

(a)The party seeking indemnification under this Article 11 (the “Indemnified Party”) agrees to give prompt notice (but no later than ten Business Days after receipt by an Indemnified Party of a notification of such Third Party claim) to the party against whom indemnity is sought (or the Stockholder Representative, in the case of an indemnification claim pursuant to Section 11.02(a)) (the “Indemnifying Party”) of the assertion of any Third Party claim against the Indemnified Party, or the commencement of any Third Party suit, action or proceeding against the Indemnified Party in respect of which indemnity may be sought under such Article.  The failure to so notify the Indemnifying Party shall not relieve the Indemnifying Party of its obligations hereunder, except to the extent such failure shall have materially and adversely prejudiced the Indemnifying Party.  Thereafter, the Indemnified Party shall

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deliver to the Indemnifying Party, as promptly as reasonably practicable following the Indemnified Party’s receipt thereof, copies of all written notices and documents (including any court papers) received by the Indemnified Party relating to the Third Party claim.  The Indemnifying Party shall be entitled to participate in the defense thereof and, if it so chooses within 10 Business Days of receipt of notice from the Indemnified Party (or such lesser number of days set forth in the notice as may be required by court proceeding in the event of a litigated matter), to, subject to Section 11.03(b), assume the defense thereof with counsel selected by the Indemnifying Party and reasonably acceptable to the Indemnified Party; provided, however, that the Indemnifying Party shall not be entitled to assume or maintain control of the defense of any Third Party claim and shall pay the fees and expenses of counsel retained by the Indemnified Party if (i) the Third Party claim relates to or arises in connection with any criminal proceeding, action, indictment, allegation or investigation, (ii) the Third Party claim seeks injunctive or equitable relief against the Indemnified Party, (iii) the Indemnifying Party has failed to defend or is failing to defend in good faith the Third Party claim, (iv) the Indemnifying Party and the Indemnified Party are both named parties to the proceedings and the Indemnified Party shall have reasonably concluded that representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them, (v) in the case of a Parent Indemnified Party as the Indemnified Party, it would reasonably be expected that the Damages arising from such Third Party claim will exceed 110% of the Escrow Availability Amount at such time or (vi) in the case of a Stockholder Indemnified Party as the Indemnified Party, it would reasonably be expected that the Damages arising from such Third Party claim will exceed 110% of the Non-Core Cap Availability Amount at such time and Parent does not waive the limitations in Section 11.03(b) with respect to such claim; provided, further, that prior to assuming control of any such defense, the Indemnifying Party must acknowledge that, subject to Section 11.03(b), it has an indemnity obligation for all Damages resulting from such Third Party claim notwithstanding anything in Section 11.02 to the contrary.  As used herein, the term “Escrow Availability Amount” means, with respect to any given claim at any given time, the amount then remaining in the Escrow Account at such time after deducting the aggregate amount of all Damages that would reasonably be expected to arise from other then pending claims against the Escrow Account.  As used herein, the term “Non-Core Cap Availability Amount” means, with respect to any given claim at any given time, the excess of the Parent Cap over the sum of (A) the aggregate amount of Damages previously paid by Parent at such time in respect of claims subject to the Parent Cap and (B) the aggregate amount of all Damages that would reasonably be expected to arise from other then pending claims against Parent that are subject to the Parent Cap.  If the Indemnifying Party assumes such defense, the Indemnified Party shall nonetheless have the right to participate at its own expense in the defense thereof and to employ counsel separate from the counsel employed by the Indemnifying Party, it being understood that the Indemnifying Party shall control such defense.  If the Indemnifying Party chooses to defend a Third Party claim, all Indemnified Parties shall provide reasonable cooperation in

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the defense thereof.  The Indemnifying Party shall not be liable under this Article 11 for any settlement, admission of liability, compromise or other discharge of liability, effected without its consent of any claim, litigation or proceeding in respect of which indemnity may be sought hereunder, which consent shall not be unreasonably withheld.  The Indemnifying Party shall not, without the prior written consent of the Indemnified Party, settle, compromise or offer to settle or compromise any Third Party claim unless (i) such settlement or compromise shall include as an unconditional term thereof the giving by the claimant of a release of the Indemnified Party, reasonably satisfactory to the Indemnified Party, from all liability with respect to such Third Party claim and (ii) such settlement or compromise would not result in (A) the imposition of a consent order, injunction, decree or obligation that would restrict the future activity or conduct of the Indemnified Party or any of its Affiliates, (B) a finding or admission of a violation of law or violation of the rights of any Person by the Indemnified Party or any of its Affiliates, (C) a finding or admission that would have an adverse effect on other claims made or threatened against the Indemnified Party or any of its Affiliates, or (D) any monetary liability of the Indemnified Party that will not be paid or reimbursed by the Indemnifying Party concurrently with such settlement.  Notwithstanding the foregoing, no consent of the Stockholders or the Stockholder Representative shall be required for the filing of any Tax Return required to be filed by Parent or the Company after the Effective Time, and no such consent shall be required in connection with the conclusion of any tax audit or similar proceeding after the Effective Time.

(b)If the Indemnifying Party assumes control of the defense of a Third Party claim in respect of which (i) an Escrow Only Claim has been made, the Indemnifying Party shall be responsible for (A) 100% of the Damages arising therefrom up to the Escrow Availability Amount at the time the Indemnifying Party assumed the defense, (B) 50% of the Damages arising therefrom to the extent such Damages exceed such Escrow Availability Amount but do not exceed 200% of such Escrow Availability Amount and (C) 100% of the Damages arising therefrom to the extent such Damages exceed 200% of such Escrow Availability Amount or (ii) a Parent Non-Core Claim has been made, the Indemnifying Party shall be responsible for (x) 100% of the Damages arising therefrom up to the Non-Core Cap Availability Amount at the time the Indemnifying Party assumed the defense, (B) 50% of the Damages arising therefrom to the extent such Damages exceed such Non-Core Cap Availability Amount but do not exceed 200% of such Non-Core Cap Availability Amount and (C) 100% of the Damages arising therefrom to the extent such Damages exceed 200% of such Non-Core Cap Availability Amount.

Section 11.04.  Adjustment to Consideration for Tax Purposes.  Any amount paid under Article 11 will be treated as an adjustment to the Merger Consideration except to the extent a final determination that is not subject to further appeal, review or modification through proceedings or otherwise or Applicable Law (including a revenue ruling or other similar pronouncement)

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causes or requires any such amount not to constitute an adjustment to the Merger Consideration for United States federal income Tax purposes.

Section 11.05.  Stockholder Representative.

(a)Effective upon and by virtue of the consent of the holders of the Company Stock approving and adopting this Agreement and the Merger, and without any further act of any of the holders of the Company Stock, the Stockholder Representative shall be hereby appointed as the representative of the Designated Stockholders and as the attorney-in-fact and agent for and on behalf of each Designated Stockholder with respect to any claims by any Indemnified Party pursuant to Section 11.02(a) and any amendments to or waivers of the Escrow Agreement or this Article 11; provided, however, that any amendment or waiver of the Escrow Agreement or this Article 11 that shall adversely affect the rights or obligations of any Designated Stockholder under the Escrow Agreement or this Article 11 shall require the prior written consent of such adversely affected Designated Stockholder (other than any change affecting all Designated Stockholders similarly).  The Stockholder Representative hereby accepts such appointment.  The Stockholder Representative will take any and all actions and make any decisions required or permitted to be taken by the Stockholder Representative under the Escrow Agreement and this Agreement, including the exercise of the power to (i) agree to, negotiate, enter into settlements and compromises of, commence any suit, action or proceeding, and comply with orders of courts with respect to, claims for Damages, (ii) litigate, resolve, settle or compromise any Contested Claim (as defined in the Escrow Agreement) made pursuant to this Agreement, and (iii) take all actions necessary in the judgment of the Stockholder Representative for the accomplishment of the foregoing or as contemplated by this Agreement or the Escrow Agreement.  The Stockholder Representative will have authority and power to act on behalf of each Stockholder with respect to the disposition, settlement or other handling of all claims against the Escrow Property under this Article 11 and all related rights or obligations of the Designated Stockholders arising under this Article 11.  The Stockholder Representative shall use commercially reasonable efforts based on contact information available to the Stockholder Representative to keep the Designated Stockholders reasonably informed with respect to actions of the Stockholder Representative pursuant to the authority granted the Stockholder Representative under this Agreement which actions have a material impact on the amounts payable to the Designated Stockholders.  Each Designated Stockholder shall promptly provide written notice to the Stockholder Representative of any change of address of such Designated Stockholder.

(b)A decision, act, consent or instruction of the Stockholder Representative (which decision, act, consent or instruction shall be jointly made by each entity constituting the Stockholder Representative) hereunder shall constitute a decision, act, consent or instruction of all Designated Stockholders and, as between Parent and its Affiliates (on the one hand) and the Designated

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Stockholders (on the other hand), shall be final, binding and conclusive upon each of such Designated Stockholders, and the Escrow Agent and Parent may rely upon any such decision, act, consent or instruction of the Stockholder Representative as being the decision, act, consent or instruction of each and every such Designated Stockholder.  The Escrow Agent and Parent shall be relieved from any liability to any Person for any acts done by them in accordance with such decision, act, consent or instruction of the Stockholder Representative.

(c)The Stockholder Representative will incur no liability with respect to any action taken or suffered by any party in reliance upon any notice, direction, instruction, consent, statement or other document believed by such Stockholder Representative to be genuine and to have been signed by the proper person (and shall have no responsibility to determine the authenticity thereof), nor for any other action or inaction, except for gross negligence, bad faith or willful misconduct on the part of the Stockholder Representative.  In all questions arising under this Agreement or the Escrow Agreement, the Stockholder Representative may rely on the advice of outside counsel, and the Stockholder Representative will not be liable to anyone for anything done, omitted or suffered in good faith by the Stockholder Representative based on such advice.

(d)The Designated Stockholders shall severally (each based on its Pro Rata Share) but not jointly indemnify the Stockholder Representative and hold the Stockholder Representative harmless against any loss, liability or expense incurred without gross negligence, bad faith or willful misconduct, on the part of the Stockholder Representative and arising out of or in connection with the acceptance or administration of the Stockholder Representative’s duties hereunder, including the reasonable fees and expenses of any legal counsel retained by the Stockholder Representative.

(e)At any time during the term of the Escrow Agreement, a majority-in-interest of Designated Stockholders may, by written consent, appoint a new representative as the Stockholder Representative.  Notice together with a copy of the written consent appointing such new representative and bearing the signatures of Designated Stockholders of a majority-in-interest of those Designated Stockholders must be delivered to Parent and the Escrow Agent not less than ten days prior to such appointment.  Such appointment will be effective upon the later of the date indicated in the consent or ten days after such notice is received by Parent and the Escrow Agent.  For the purposes of this Section 11.05, a “majority-in-interest of the Designated Stockholders” shall mean Designated Stockholders representing in the aggregate over 50% of the percentage interests in the Escrow Shares.

(f)In the event that the Stockholder Representative becomes unable or unwilling to continue in his or its capacity as Stockholder Representative, or if the Stockholder Representative resigns as a Stockholder Representative, a majority-in-interest of the Designated Stockholders shall, by written consent, appoint a new

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representative as the Stockholder Representative.  Notice and a copy of the written consent appointing such new representative and bearing the signatures of the holders of a majority-in-interest of the Designated Stockholders must be delivered to Parent and the Escrow Agent.  Such appointment will be effective upon the later of the date indicated in the consent or the date such consent is received by Parent and the Escrow Agent.

(g)As amongst the Stockholders, and subject to Section 11.05(b), any instruction given to the Stockholder Representative by a majority-in-interest of Designated Stockholders, in connection with the matters set forth in Article 11 or any other matter, shall be final and binding on all Stockholders.

ARTICLE 12

Miscellaneous

Section 12.01.  Notices.  All notices, requests and other communications to any party hereunder shall be in writing (including facsimile transmission and electronic mail (“e-mail”) transmission, so long as a receipt of such e-mail is requested and received) and shall be given,

if to Parent or Merger Subsidiary, to:

Patriot Coal Corporation

12312 Olive Boulevard, Suite 400

St. Louis, Missouri 63141

Attention:  Joseph W. Bean

Facsimile No.:  (314) 275-3656

e-mail:  jbean@patriotcoal.com

with a copy to:

Davis Polk & Wardwell

450 Lexington Avenue

New York, New York  10017

Attention:  William L. Taylor

Facsimile No.:  (212) 450-3800

e-mail:  william.taylor@dpw.com

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if to the Company, to:

Magnum Coal Company

500 Lee Street East

Suite 900

Charleston, WV 25301

Attention: Richard H. Verheij, Senior Vice President, General Counsel and Secretary

Facsimile No.: (304) 380-0370

e-mail: RVerheij@magnumcoal.com

with copies to:

Freshfields Bruckhaus Deringer LLP

520 Madison Avenue

34th Floor

New York, New York  10022

Attention:  Matthew F. Herman Esq.

                 Melissa Raciti-Knapp Esq.

Facsimile No.:  (212) 277-4001

e-mail:  matthew.herman@freshfields.com

melissa.raciti@freshfields.com

if to the Stockholder Representative, to:

Arclight Energy Partners Fund I, L.P. and

Arclight Energy Partners Fund II, L.P.

c/o Arclight Capital Partners LLC

200 Clarendon Street, 55th Floor

Boston, MA  02117

Attention:  General Counsel

Facsimile No.:  (617) 867-4698

with a copy to:

Skadden, Arps, Slate, Meagher & Flom LLP

Four Times Square

New York, New York  10036

Attention:  Sean C. Doyle, Esq.

Facsimile No.:  (212) 735-2000

e-mail:  sean.doyle@skadden.com

or to such other address or facsimile number as such party may hereafter specify for the purpose by notice to the other parties hereto.  All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5:00 p.m. on a Business Day in the place of

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receipt.  Otherwise, any such notice, request or communication shall be deemed to have been received on the next succeeding Business Day in the place of receipt.

Section 12.02.  Amendments and Waivers.  (a) Any provision of this Agreement may be amended or waived prior to the Effective Time if, but only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by each party to this Agreement or, in the case of a waiver, by each party against whom the waiver is to be effective.

(b)No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.  Except as expressly set forth herein, the rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by Applicable Law.

Section 12.03.  Expenses.  Except as otherwise provided herein, all costs and expenses incurred in connection with this Agreement shall be paid by the party incurring such cost or expense.

Section 12.04.  Disclosure Schedule References.   The parties hereto agree that any reference in a particular Section of either the Company Disclosure Schedule or the Parent Disclosure Schedule shall only be deemed to be an exception to (or, as applicable, a disclosure for purposes of) (a) the representations and warranties (or covenants, as applicable) of the relevant party that are contained in the corresponding Section or subsection of this Agreement; (b) any other representation and warranty (or covenant, as applicable) of such party that is contained in this Agreement, but only if the relevance of that reference as an exception to (or a disclosure for purposes of) such representation and warranty (or covenant, as applicable) would be readily apparent to a reasonable person who has read only this Agreement and the Company Disclosure Schedule and the Parent Disclosure Schedule; and (c) any other representation and warranty (or covenant, as applicable) of a relevant party that is cross-referenced in such Section.  Except as the context requires, any items or matters reflected in either the Company Disclosure Schedule or the Parent Disclosure Schedule, as the case may be, are not necessarily limited to matters required by this Agreement to be therein reflected, and such items or matters are set forth for informational purposes only and do not necessarily include items of a similar nature.  In no event shall the inclusion or reference of any such item or matter be deemed or interpreted to broaden or otherwise modify any of the provisions of this Agreement.  The fact that any item or matter is reflected in either the Company Disclosure Schedule or the Parent Disclosure Schedule, as the case may be, shall not be construed as an admission of liability under Applicable Law, nor shall either the Company Disclosure Schedule or the Parent Disclosure Schedule, as the case may be, be used as a basis for interpreting the terms “material,”

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 “materially,” “materiality” or “Company Material Adverse Effect” or “Parent Material Adverse Effect” (as the case may be), or similar qualifications herein.

Section 12.05.  Binding Effect; Benefit; Assignment.  (a) The provisions of this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns.  Except as provided in, and subject to, Section 7.06, Section 10.02 and Article 11 (including the provisions that limit the circumstances in which a non-party may make a claim), no provision of this Agreement is intended to confer any rights, benefits, remedies, obligations or liabilities hereunder upon any Person other than the parties hereto and their respective successors and assigns.  For the avoidance of doubt, nothing in Section 7.04 is intended to create any third party rights, benefits, remedies, obligations or liabilities under any of the provisions referred to in the preceding sentence.

(b)No party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of each other party hereto, except that Parent or Merger Subsidiary may transfer or assign its rights and obligations under this Agreement, in whole or from time to time in part, to (i) one or more of their Affiliates at any time and (ii) after the Effective Time, to any Person; provided that such transfer or assignment shall not relieve Parent or Merger Subsidiary of its obligations hereunder or enlarge, alter or change any obligation of any other party hereto or due to Parent or Merger Subsidiary; provided further, that no such assignment shall adversely affect the Company (prior to the Effective Time) or the Stockholders.

Section 12.06.  Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of  Delaware, without regard to the conflicts of law rules of such state.

Section 12.07.  Jurisdiction.  The parties hereto agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby shall be brought in any Delaware state court, and each of the parties hereby irrevocably consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by Applicable Law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.  Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court.  Without limiting the foregoing, each party agrees that service of process on such party as provided in Section 12.01 shall be deemed effective service of process on such party.

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Section 12.08.  WAIVER OF JURY TRIAL.  EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

Section 12.09.  Counterparts; Effectiveness.  This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each party hereto shall have received a counterpart hereof signed by all of the other parties hereto.  Until and unless each party has received a counterpart hereof signed by the other party hereto, this Agreement shall have no effect and no party shall have any right or obligation hereunder (whether by virtue of any other oral or written agreement or other communication).  Any such counterpart may be delivered by facsimile or other electronic format (including “.pdf”).

Section 12.10.  Entire Agreement.  This Agreement, the other Transaction Documents and, to the extent set forth in Section 8.06, the Confidentiality Agreements constitute the entire agreement between the parties with respect to the subject matter of this Agreement and supersede all prior agreements and understandings, both oral and written, between the parties with respect to the subject matter of this Agreement and the other Transaction Documents.

Section 12.11.  Severability.  If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other Governmental Authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party.  Upon such a determination, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.

Section 12.12.  Specific Performance.  The parties hereto agree that irreparable damage would occur if any provision of this Agreement were not performed in accordance with the terms hereof and that the parties shall be entitled (without the requirement to post bond) to an injunction or injunctions to prevent breaches of this Agreement or to enforce specifically the performance of the terms and provisions hereof in the courts provided for in Section 12.07, in addition to any other remedy to which they are entitled at law or in equity.

Section 12.13.  Representation of the Company and its Stockholders.  Each of the parties to this Agreement hereby agrees, on its own behalf and on behalf of

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its directors, officers, employees and Affiliates, that Freshfields Bruckhaus Deringer LLP may serve as counsel to each and any of the Company’s stockholders, the Stockholder Representative and their respective Affiliates (individually and collectively, “Seller Group”), on the one hand, and the Company, on the other hand, in connection with the negotiation, preparation, execution and delivery of this Agreement and the other Transaction Documents and the consummation of the Merger and the other transactions contemplated hereby and by the other Transaction Documents, and that, both prior to and following consummation of the Merger (or in the event of the termination of this Agreement), Freshfields Bruckhaus Deringer LLP may serve as counsel to any member of the Seller Group or any director, member, partner, officer, employee or Affiliate of Seller Group, in connection with any litigation, claim or obligation arising out of or relating to this Agreement or the other Transaction Documents, or the Merger or the other transactions contemplated hereby and by the other Transaction Documents notwithstanding such representation, and each of the parties hereto hereby consents thereto and waives any conflict of interest arising therefrom, and each of such parties shall cause any Affiliate thereof to consent to waive any conflict of interest arising from such representation.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

MAGNUM COAL COMPANY
By:	/s/ Paul Vining
	Name:	Paul Vining
	Title:	President and Chief Executive Officer
PATRIOT COAL CORPORATION
By:	/s/ Richard M. Whiting
	Name:	Richard M. Whiting
	Title:	President and Chief Executive Officer
COLT MERGER CORPORATION
By:	/s/ Mark N. Schroeder
	Name:	Mark N. Schroeder
	Title:	President

ARCLIGHT ENERGY PARTNERS FUND I, L.P. and ARCLIGHT ENERGY PARTNERS FUND II, L.P., acting jointly, as Stockholder Representative ARCLIGHT ENERGY PARTNERS FUND I, L.P. By:  ArcLight PEF GP, LLC, its General Partner By:  ArcLight Capital Holdings, LLC, its Manager
By:	/s/ Daniel R. Revers
Name:  Daniel R. Revers
Title:     Manager
ARCLIGHT ENERGY PARTNERS FUND II, L.P. By:  ArcLight PEF GP II, LLC, its General Partner By:  ArcLight Capital Holdings, LLC, its Manager
By:	/s/ Daniel R. Revers
Name:   Daniel R. Revers
Title:      Manager

EX-4.1

Exhibit 4.1

EXECUTION COPY

FIRST AMENDMENT TO RIGHTS AGREEMENT

This Amendment dated as of April 2, 2008 (this “Amendment”) to the Rights Agreement, dated as of October 22, 2007 (the “Rights Agreement”), between Patriot Coal Corporation, a Delaware corporation (the “Company”), and American Stock Transfer & Trust Company, a New York chartered bank, as Rights Agent (the “Rights Agent”).  Capitalized terms used herein and not defined shall have the meanings specified in the Rights Agreement.

WHEREAS, the Company and the Rights Agent are parties to the Rights Agreement;

WHEREAS, the Company proposes to enter into an Agreement and Plan of Merger Agreement, dated as of April 2, 2008 (as amended, supplemented, modified or replaced from time to time, the “Merger Agreement”), by and among the Company, Colt Merger Corporation, a Delaware corporation (“Merger Subsidiary”), Magnum Coal Company, a Delaware corporation (“Magnum”), and ArcLight Energy Partners Fund I, L.P. and ArcLight Energy Partners Fund II, L.P., acting jointly, as Stockholder Representative, as well as the Transaction Documents (as such term is defined in the Merger Agreement), providing for, among other transactions, the merger of Merger Subsidiary with and into Magnum, with Magnum being the surviving corporation (the “Merger”) and the issuance of Common Shares to the Stockholders (as defined in the Merger Agreement) as consideration for the Merger (such issuance, the “Company Stock Issuance”);

WHEREAS, Section 27 of the Rights Agreement permits the Company to amend the Rights Agreement;

WHEREAS, the Board of Directors of the Company has determined that the Merger Agreement and the terms and conditions set forth therein and the transactions contemplated thereby, including, without limitation, the Merger and the Company Stock Issuance, are in the best interests of the Company and its shareholders;

WHEREAS, the Board of Directors of the Company has determined that it is in the best interests of the Company and its shareholders to modify the terms of the Rights Agreement to exempt the Merger Agreement and all of the transactions contemplated thereby including, without limitation, the Merger and the Company Stock Issuance, from the application of the Rights Agreement, and in connection therewith the Company is entering into this Amendment and directing the Rights Agent to enter into this Amendment; and

WHEREAS, all acts and things necessary to make this Amendment a valid agreement, enforceable according to its terms have been done and performed, and the execution and delivery of this Amendment by the Company and the Rights Agent have been in all respects duly authorized by the Company and the Rights Agent.

NOW, THEREFORE, in consideration of the promises and mutual agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which

are hereby acknowledged, and intending to be legally bound, the Company and the Rights Agent hereby agree as follows:

A.           Amendment of Certain Definitions.

Section 1 of the Rights Agreement is supplemented to add the following definitions in the appropriate alphabetical locations:

“ArcLight Funds” shall mean ArcLight Energy Partners Fund I, L.P. and ArcLight Energy Partners Fund II, L.P.

“Company Stock Issuance” shall mean the issuance of Common Shares to the Stockholders pursuant to the Merger Agreement.

“Magnum Transactions” shall mean the transactions contemplated by the Magnum Transaction Documents.

“Magnum Transaction Documents” shall mean the Transaction Documents (as such term is defined in the Merger Agreement), as each may be amended from time to time.

“Merger” shall mean the “Merger” as such term is defined in the Merger Agreement.

“Merger Agreement” shall mean the Agreement and Plan of Merger, dated as of April 2, 2008, by and among the Company, Colt Merger Corporation, a Delaware corporation, Magnum Coal Company, a Delaware corporation, and ArcLight Energy Partners Fund I, L.P. and ArcLight Energy Partners Fund II, L.P., acting jointly, as Stockholder Representative, as amended from time to time.

“Stockholders” shall have the meaning ascribed to such term in the Merger Agreement.

Section 1(a) of the Rights Agreement is hereby amended by restating the last sentence thereof in its entirety as follows:

“Notwithstanding the foregoing, if the Board of Directors of the Company determines in good faith that a Person who would otherwise be an “Acquiring Person,” as defined pursuant to the provisions of this paragraph (a), has become such inadvertently, and such Person divests as promptly as practicable (as determined in good faith by the Board of Directors) a sufficient number of Common Shares so that such Person would no longer be an “Acquiring Person,” as defined pursuant to the provisions of this paragraph (a), then such Person shall not therefor be deemed to be an “Acquiring Person” for any purposes of this Agreement.”

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Section 1(a) of the Rights Agreement is hereby further amended and supplemented by adding the following sentence at the end thereof:

“Notwithstanding anything in this Agreement to the contrary, (i) no Stockholder or any of its Affiliates or Associates shall be deemed to be an Acquiring Person solely by virtue of (A) the approval, execution and delivery of any of the Magnum Transaction Documents or any amendment thereof approved in advance by the Board of Directors of the Company, (B) the consummation of any of the Magnum Transactions, (C) the consummation of the Merger or (D) the Company Stock Issuance and (ii) none of the ArcLight Funds or their respective Affiliates or Associates shall be deemed to be an Acquiring Person as a result of being the Beneficial Owner of greater than 15% of the Common Shares of the Company then outstanding; provided, that such Beneficial Ownership relates solely to Common Shares that were issued to the ArcLight Funds in the Company Stock Issuance; provided, further that if at any time the ArcLight Funds or their respective Affiliates or Associates are or become the Beneficial Owner of any other Common Shares and at such time the ArcLight Funds are or become the Beneficial Owner of 15% or more of the Common Shares of the Company then outstanding, then the exception set forth in this clause (ii) shall not apply and the ArcLight Funds shall be deemed to be an Acquiring Person (unless the Board of Directors of the Company determines in good faith that the ArcLight Funds have inadvertently become the Beneficial Owner of such other Common Shares and the ArcLight Funds divest such other Common Shares as promptly as practicable (as determined in good faith by the Board of Directors)).”

Section 1(d) of the Rights Agreement is hereby amended and supplemented by adding the following sentence at the end thereof:

“Notwithstanding anything in this Agreement to the contrary, no party to any of the Magnum Transaction Documents shall be deemed to be the Beneficial Owner of any Common Shares held by any other party to any such agreement solely by virtue of the execution and delivery of such Magnum Transaction Document or any amendment thereof approved in advance by the Board of Directors of the Company or the performance of such party’s rights and obligations under such agreements or any such amendment.”

Section 1(x) of the Rights Agreement is hereby amended and supplemented by adding the following sentence at the end thereof:

“Notwithstanding anything in this Agreement to the contrary, a Shares Acquisition Date shall not be deemed to have occurred solely as the result of (i) the approval, execution and delivery of

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the Magnum Transaction Documents or any amendment thereof approved in advance by the Board of Directors of the Company, (ii) the consummation of any of the Magnum Transactions, (iii) the consummation of the Merger or (iv) the Company Stock Issuance.”

B.           Amendment of Section 3.  Section 3(a) of the Rights Agreement is hereby amended and supplemented by adding the following sentence at the end thereof:

“Notwithstanding anything in this Agreement to the contrary, a Distribution Date shall not be deemed to have occurred solely as the result of (i) the approval, execution and delivery of the Magnum Transaction Documents or any amendment thereof approved in advance by the Board of Directors of the Company, (ii) the consummation of any of the Magnum Transactions, (iii) the consummation of the Merger or (iv) the Company Stock Issuance.”

Furthermore, Section 3 of the Rights Agreement is hereby amended and supplemented by adding the following sentence at the end thereof as Section 3(d):

“(d) Nothing in this Agreement shall be construed to give any holder of Rights or any other Person any legal or equitable rights, remedies or claims under this Agreement, and no holder of Rights shall be entitled to exercise such Rights, solely by virtue of (i) the approval, execution and delivery of the Magnum Transaction Documents or any amendment thereof approved in advance by the Board of Directors of the Company, (ii) the consummation of any of the Magnum Transactions, (iii) the consummation of the Merger or (iv) the Company Stock Issuance.”

C.           Effect of Amendment.  Except as expressly set forth herein, the Rights Agreement shall not by implication or otherwise be supplemented or amended by virtue of this Amendment, but shall remain in full force and effect, as amended hereby.  This Amendment shall be construed in accordance with and as a part of the Rights Agreement, and all terms, conditions, representations, warranties, covenants and agreements set forth in the Rights Agreement and each other instrument or agreement referred to therein, except as herein amended, are hereby ratified and confirmed.  To the extent that there is a conflict between the terms and provisions of the Rights Agreement and this Amendment, the terms and provisions of this Amendment shall govern for purposes of the subject matter of this Amendment only.

D.           Waiver of Notice.  The Rights Agent and the Company hereby waive any notice requirement with respect to each other under the Rights Agreement, if any, pertaining to the matters covered by this Amendment.

E.           Severability.  If any provision, covenant or restriction of this Amendment is held by a court of competent jurisdiction or other authority to be invalid, illegal or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this

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Amendment shall remain in full force and effect and shall in no way be effected, impaired or invalidated.

F.           Governing Law.  This Amendment shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the laws of such state applicable to contracts to be made and performed entirely within such state.

G.           Counterparts.  This Amendment may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.

H.           Effective Date of Amendment.  This Amendment shall be deemed effective as of the date first written above, as if executed on such date.

I.           Descriptive Headings.  Descriptive headings appear herein for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof.

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first written above.

PATRIOT COAL CORPORATION
By:	/s/ Joseph W. Bean
	Name: Joseph W. Bean
	Title: Senior Vice President, General Counsel & Corporate Secretary

AMERICAN STOCK TRANSFER & TRUST COMPANY
By:	/s/ Herbert J. Lemmer
	Name: Herbert J. Lemmer
	Title: Vice President

EX-10.1

Exhibit 10.1

FORM OF REGISTRATION RIGHTS AGREEMENT

REGISTRATION RIGHTS AGREEMENT, dated as of [__________], 2008 (this “Agreement”), by and among Patriot Coal Corporation, a Delaware corporation (the “Company”), ArcLight Energy Partners Fund I, L.P., a Delaware limited partnership, and ArcLight Energy Partners Fund II, L.P., a Delaware limited partnership.

W I T N E S S E T H:

WHEREAS, Magnum Coal Company, a Delaware corporation (“Target”), the Company, Colt Merger Corporation, a Delaware corporation and wholly-owned subsidiary of the Company (“Merger Subsidiary”) and the Stockholder Representative (as defined below), entered into an Agreement and Plan of Merger (the “Merger Agreement”) dated as of [       ], 2008, pursuant to which, among other things, Merger Subsidiary is being merged with and into Target;

WHEREAS, the Company and the Shareholders desire to make certain agreements relating to the registration of Company Securities (as defined below) and certain other matters.

NOW, THEREFORE, in consideration of the premises and of the agreements and covenants set forth herein and in the Merger Agreement, and intending to be legally bound hereby, the parties hereto hereby agree as follows:

ARTICLE 1

DEFINITIONS

Section 1.01. Definitions.  As used in this Agreement, the following terms shall have the following meanings:

“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such Person, and, for the purposes hereof, the term “control” means the power to direct the management and policies of such Person (directly or indirectly), whether through ownership of securities, by contract or otherwise (and the terms controlling and controlled have the meanings correlative to the foregoing).

“Business Day” means any day, except a Saturday, Sunday or legal holiday on which banking institutions in The City of New York are authorized or obligated by law or executive order to close.

“Common Stock” means the common stock, par value $0.01 per share, of the Company and any stock into which such Common Stock may thereafter be converted or exchanged in connection with any exchange, conversion, stock split, stock dividend, distribution, recapitalization or similar event of the Company.

“Company Securities” means the Common Stock (i) issued to Shareholders in connection with the Merger and (ii) issued in connection with any exchange, conversion, stock split, stock dividend, distribution, recapitalization or similar event of the Company, with respect to or in exchange or replacement for, the shares of Common Stock referred to in clause (i).

“Damages” shall have the meaning set forth in Section 2.06.

“Delay Notice” shall have the meaning set forth in Section 2.01(f).

“Demand Registration” shall have the meaning set forth in Section 2.01(a).

“Exchange Act” means the Securities Exchange Act of 1934.

“FINRA” means the Financial Industry Regulatory Authority.

“Governmental Authority” means any transnational, or domestic or foreign, federal, state or local governmental authority, department, court, agency or official, including any political subdivision thereof.

“Indemnified Party” shall have the meaning set forth in Section 2.08.

“Indemnifying Party” shall have the meaning set forth in Section 2.08.

“Inspectors” shall have the meaning set forth in Section 2.05(g).

“Lock-Up Period” shall have the meaning set forth in Section 2.04.

“Maximum Offering Size” shall have the meaning set forth in Section 2.01(e).

“Majority Shareholders” shall mean the holders of a majority of the outstanding Registrable Securities held by the Shareholders that are party to this Agreement.

“Merger” means the merger of Merger Subsidiary with and into Target.

“Person” shall mean an individual, partnership, corporation, business trust, joint stock company, limited liability company, unincorporated association, joint venture or other entity of whatever nature.

“Piggyback Registration” shall have the meaning set forth in Section 2.02(a).

“Public Offering” means an underwritten public offering of Registrable Securities of the Company pursuant to an effective registration statement under the Securities Act, other than pursuant to a registration statement on Form S-4, Form S-8 or any similar or successor form.

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“Records” shall have the meaning set forth in Section 2.05(g).

“Registering Shareholders” shall have the meaning set forth in Section 2.01(a).

“Registrable Securities” means, at any time, any Company Securities until (i) a registration statement covering such securities has been declared effective by the SEC and such securities have been disposed of pursuant to such effective registration statement, (ii) such securities are sold under circumstances in which all of the applicable conditions of Rule 144 (or any similar provisions then in force) under the Securities Act are met, (iii) such securities can be sold under Rule 144 without limitation, (iv) such securities are otherwise Transferred and such securities may be resold without subsequent registration under the Securities Act, or (v) such securities shall have ceased to be outstanding.

“Registration Documents” shall have the meaning set forth in Section 2.06.

“Registration Expenses” means any and all expenses incident to the performance of or compliance with any registration or marketing of securities, including all (i) applicable registration, filing fees, applicable SEC fees, national securities exchange or inter-dealer quotation system fees, and all other fees and expenses payable in connection with the listing of the Registrable Securities, (ii) fees and expenses of compliance with any securities or “blue sky” laws (including reasonable fees and disbursements of counsel to the underwriters in connection with “blue sky” qualifications of the securities registered and determination of their eligibility for investment under the laws of the various jurisdictions), (iii) expenses in connection with the preparation, printing, mailing and delivery of any registration statements, prospectuses and other documents in connection therewith and any amendments or supplements thereto (including without limitation word processing, duplicating, telephone and facsimile expenses, and messenger and delivery expenses), (iv) internal expenses of the Company (including all salaries and expenses of its officers and employees performing legal or accounting duties), (v) reasonable fees and disbursements of counsel for the Company and customary fees and expenses for independent certified public accountants retained by the Company (including the expenses relating to any comfort letters or costs associated with the delivery by independent certified public accountants of any “cold comfort” letters requested pursuant to Section 2.05(h)), (vi) reasonable fees and expenses of any special experts retained by the Company in connection with such registration, (vii) all reasonable fees and expenses of one counsel (separate from counsel to the Company) for all of the Shareholders participating in the offering selected by the Majority Shareholders, (viii) fees and expenses in connection with any review by the FINRA of the underwriting arrangements or other terms of the offering, and all fees and expenses of any qualified independent underwriter, including the fees and expenses of any counsel thereto, (ix) transfer agents’ and registrars’ fees and expenses and the fees and expenses of any other agent appointed in connection with such offering, (x) expenses relating to any analyst or investor presentations or any “road shows” undertaken in connection with the registration, marketing or selling of the Registrable Securities and (xi) all out-of pocket costs and

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expenses incurred by the Company or its appropriate officers in connection with their compliance with Section 2.05(m); provided that Registration Expenses shall not include any underwriting fees, discounts and commissions attributable to the sale of Registrable Securities. Except as set forth in clause (viii) above, Registration Expenses shall not include any out-of-pocket expenses of the Shareholders (or the agents who manage their accounts).

“Registration Request” shall have the meaning set forth in Section 2.01.

“Requesting Shareholder” shall have the meaning set forth in Section 2.01.

“SEC” means the Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933.

“Shareholder” means at any time, any Person (other than the Company) who shall then be a party to or bound by this Agreement, so long as such Person shall “beneficially own” (as such term is defined in Rule 13d-3 of the Exchange Act) any Company Securities.

“Stockholder Representative” shall have the meaning assigned to such term in the Merger Agreement.

“Subsidiary” means any corporation or other organization, whether incorporated or unincorporated, of which (i) at least fifty percent (50%) of the securities (or other interests having by their terms ordinary voting power to elect a majority of the board of directors or others performing similar functions with respect to such corporation or other organization) is directly or indirectly owned or controlled by the relevant Person or

(ii) the relevant Person (or any other Subsidiary of the relevant Person) is a general partner.

“Suspension Notice” shall have the meaning set forth in Section 2.01(f).

“Transfer” means, with respect to any Company Securities, (i) when used as a verb, to sell, assign, dispose of, foreclose on a pledge of, or otherwise transfer such Company Securities or any economic participation or interest therein, whether directly or indirectly, or agree or commit to do any of the foregoing and (ii) when used as a noun, a direct or indirect sale, assignment, disposition, foreclosure on a pledge or other transfer of such Company Securities or any participation or interest therein or any agreement or commitment to do any of the foregoing.

“Voting Agreement” means the Voting and Standstill Agreement dated as of March [ ], 2008 by and among the Company, the Stockholder Representative and the other stockholders parties thereto.

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Section 1.02. Other Definitional and Interpretative Provisions.  The words “hereof”, “herein” and “hereunder” and words of like import used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement.  Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular.  Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”, whether or not they are in fact followed by those words or words of like import.  “Writing”, “written” and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form.  References to any agreement or contract are to that agreement or contract as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof; provided that with respect to any agreement or contract listed on any schedules hereto, all such amendments, modifications or supplements must also be listed in the appropriate schedule. References to any Person include the successors and permitted assigns of that Person. References from or through any date mean, unless otherwise specified, from and including or through and including, respectively.  References to any particular statute or law shall be to such statute or law as amended from time to time, and to the rules and regulations promulgated thereunder and enforceable interpretations thereof.

ARTICLE 2

REGISTRATION RIGHTS

Section 2.01. Demand Registration. (a) Subject to Section 2.03, if the Company receives a request (a “Registration Request”) from Majority Shareholders requiring that the Company effect the registration under the Securities Act of all or any portion of the Registrable Securities (the Shareholders whose Registrable Securities are requested to be so registered, the “Requesting Shareholders”), and specifying the intended method of disposition thereof, then the Company shall promptly give notice of such requested registration (each such registration shall be referred to herein as a “Demand Registration”) but no later than 20 Business Days after receipt of the Registration Request to the other Shareholders; provided that no Registrable Securities may be sold and no Registration Request may be made prior to the Initial Lock-up Date (as defined in the Voting Agreement) and no registration statement shall be required to be filed pursuant to a Demand Registration prior to November 1, 2008.  Thereafter, the Company shall use all reasonable efforts to effect, as expeditiously as possible, the registration under the Securities Act and to cause such registration statement to be declared effective by the SEC, of:

(i) all Registrable Securities for which the Majority Shareholders have requested registration under this Section 2.01; and

(ii) all other Registrable Securities of the same class as those requested to be registered by the Majority Shareholders that any Shareholders with rights to request registration under Section 2.02 (all such Shareholders requesting

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registration, together with the Requesting Shareholders, and any Shareholders participating in a Piggyback Registration pursuant to Section 2.02, the “Registering Shareholders”) have requested the Company to register by request received by the Company within 10 Business Days after such Shareholders receive the Company’s notice of the Demand Registration,

all to the extent necessary to permit the disposition (in accordance with the intended methods thereof as aforesaid) of the Registrable Securities so to be registered, subject to the restrictions set forth in Sections 2.01(e) and 2.02(b); provided that, subject to Section 2.01(d), the Company shall not be obligated to effect more than three Demand Registrations and provided further that the Company shall not be obligated to effect a Demand Registration unless the aggregate proceeds expected to be received from the sale of the Registrable Securities requested to be included in such Demand Registration equals or exceeds $50,000,000.  The Company shall use all reasonable efforts to effect the registration of Registrable Securities for distribution in accordance with the intended method of distribution set forth in a written request delivered by the Majority Shareholders.

(b) Promptly after the expiration of the 10-Business Day period referred to in Section 2.01(a)(ii), the Company will notify all Registering Shareholders of the identities of the other Registering Shareholders and the number of shares of Registrable Securities requested to be included therein.  At any time prior to the effective date of the registration statement relating to such registration, the Majority Shareholders may revoke such request, without liability to any of the other Registering Shareholders, by providing a notice to the Company revoking such request; any Shareholder shall have the right to withdraw its request for inclusion of Registrable Securities in any registration statement pursuant to Section 2.01(a) at any time prior to the effective date of such registration statement by giving written notice to the Company of its request to withdraw.  A request, so revoked by the Majority Shareholder, shall be considered to be a Demand Registration unless (i) such revocation arose out of the fault of the Company (in which case the Company shall be obligated to pay all Registration Expenses in connection with such revoked request), (ii) there occurs an event or series of related events that has a material adverse effect on the business, assets condition (financial or otherwise) or results of operations of the Company and its Subsidiaries taken as a whole or (iii) the Requesting Shareholders reimburse the Company for all Registration Expenses of such revoked request incurred through the date of such revocation; provided that the Majority Shareholders may not utilize this clause (iii) more than once.

(c) The Company shall be liable for and pay all Registration Expenses in connection with any Demand Registration, regardless of whether such Registration is effected, except as set forth in Section 2.01(b).

(d) A Demand Registration shall not be deemed to have occurred:

(i) unless the registration statement relating thereto (A) has become effective under the Securities Act and (B) has remained effective for a period of at

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least 180 days in aggregate (or such shorter period in which all Registrable Securities of the Registering Shareholders included in such registration have actually been sold thereunder); provided that such registration statement shall not be considered a Demand Registration if, after such registration statement becomes effective, (1) such registration statement is interfered with by any stop order, injunction or other order or requirement of any Governmental Authority and (2) less than 75% of the Registrable Securities included in such registration statement have been sold thereunder;

(ii) if the Maximum Offering Size is reduced in accordance with Section 2.01(e) such that less than 662/3% of the Registrable Securities of the Requesting Shareholders sought to be included in such registration are included; or

(iii) As permitted pursuant to Section 2.01(b).

(e) If a Demand Registration involves a Public Offering and the managing underwriter advises the Company and the Requesting Shareholders in writing that, in its view, the number of shares of Registrable Securities requested to be included in such registration (including any securities that the Company proposes to be included that are not Registrable Securities) exceeds the largest number of shares that can be sold without having an adverse effect on such offering, including the price at which such shares can be sold (the “Maximum Offering Size”), the Company shall include in such registration, in the priority listed below, up to the Maximum Offering Size:

(i) first, all Registrable Securities requested to be registered by the Registering Shareholders (allocated, if necessary for the offering not to exceed the Maximum Offering Size, pro rata among such entities on the basis of the relative number of Registrable Securities beneficially owned by each);

(ii) second, any securities proposed to be registered by the Company; and

(iii) third, any securities proposed to be registered for the account of any other Persons, with such priorities among them as the Company shall determine.

(f) Upon notice to each Requesting Shareholder or Registering Shareholder, as the case may be, the Company may postpone the filing of any registration statement required to be prepared and filed by it pursuant to this Section 2.01 or suspend efforts to cause such registration statement to be declared effective (in each case, a “Delay Notice”) or suspend the disposition of Registrable Securities pursuant to an effective shelf registration statement and the related prospectus (the “Suspension Notice”) in each case pursuant to this Section 2.01 on no more than two occasions during any period of twelve consecutive months for a reasonable time specified in the notice but not exceeding 90 days in aggregate, if (i) an investment banking firm of recognized national standing shall

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advise the Company and the Requesting Shareholders in writing that effecting the registration would materially and adversely affect an offering of securities of such Company the preparation of which had then been commenced or (ii) the Company reasonably believes that such registration and offering would require premature disclosure of any material financing, material corporate reorganization or other material transaction or other material matter involving the Company.  Upon receipt of any Delay Notice or Suspension Notice, as the case may be, holders of Registrable Securities selling securities pursuant to an effective registration statement shall forthwith discontinue use of the prospectus contained in such registration statement and, if so directed by the Company, each such holder of Registrable Securities shall deliver to the Company all copies, other than permanent file copies then in such holder’s possession, of the prospectus then covering such Registrable Securities current at the time of receipt of such notice, and, in the event no registration statement has yet been filed, all drafts of the prospectus covering such Registrable Securities.

(g) Except in the case of a Public Offering, Registering Shareholders who intend to sell Registrable Securities pursuant to an effective registration statement must provide the Company two Business Days' notice prior to effecting such sale.

Section 2.02. Piggyback Registration. (a) If the Company proposes to register any Common Stock under the Securities Act following the Initial Lock-up Date (as defined in the Voting Agreement) (other than a registration on Form S-8, S-4 or any successor forms, relating to shares of Common Stock issuable upon exercise of employee stock options or in connection with any employee benefit or similar plan of the Company or in connection with a direct or indirect acquisition by the Company of another Person), whether or not for sale for its own account, the Company shall at each such time give prompt notice at least 20 Business Days prior to the anticipated filing date of the registration statement relating to such registration to each Shareholder, which notice shall set forth such Shareholder’s rights under this Section 2.02 and shall offer such Shareholder the opportunity to include in such registration statement the number of Registrable Securities of the same class or series as those proposed to be registered as each such Shareholder may request (a “Piggyback Registration”), subject to the provisions of Section 2.02(b).  Upon the request of any such Shareholder made within 10 Business Days after the receipt of notice from the Company (which request shall specify the number of Registrable Securities intended to be registered by such Shareholder), the Company shall use all reasonable efforts to effect the registration under the Securities Act of all Registrable Securities that the Company has been so requested to register by all such Shareholders, to the extent required to permit the disposition of the Registrable Securities so to be registered; provided that (i) if such registration involves a Public Offering, all such Registering Shareholders must sell their Registrable Securities to the underwriters selected as provided in Section 2.05(f)(ii) on the same terms and conditions as apply to the Company (it being understood, however, that no underwriting agreement shall require a Shareholder to (x) provide representations and warranties other than in respect of the Shareholder’s organizational matters and its authority to enter into such underwriting agreements (and related agreements such as a custody agreement and a

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power of attorney), title to the shares of Company Securities to be sold by such Shareholder and information provided in writing by such Shareholder for use in the registration statement or (y) provide indemnification or contribution to any Person other than on substantially the terms set forth in Section 2.07 below), and (ii) if, at any time after giving notice of its intention to register any Company Securities pursuant to this Section 2.02(a) and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason not to register such securities, the Company shall promptly give written notice to all Registering Shareholders after its decision not to register such securities and, thereupon, shall be relieved of its obligation to register any Registrable Securities in connection with such registration. No registration effected under this Section 2.02 shall relieve the Company of its obligations to effect a Demand Registration to the extent required by Section 2.01.  The Company shall pay all Registration Expenses in connection with each Piggyback Registration (whether or not the registration has been effected).

(b) If a Piggyback Registration involves a Public Offering (other than any Demand Registration, in which case the provisions with respect to priority of inclusion in such offering set forth in Section 2.01(e) shall apply) and the managing underwriter advises the Company in writing that, in its view, the number of shares of Common Stock that the Company, the Registering Shareholders and other Persons intend to include in such registration exceeds the Maximum Offering Size, the Company shall include in such registration, in the following priority, up to the Maximum Offering Size:

(i) first, any securities proposed to be registered for the account of any Persons pursuant to a right granted to such Persons by the Company to demand such registration as would not cause the offering to exceed the Maximum Offering Size;

(ii) second, so much of the securities proposed to be registered for the account of the Company as would not cause the offering to exceed the Maximum Offering Size;

(iii) third, all Registrable Securities or securities proposed to be registered for the account of any other Persons that have rights substantially similar to the Piggyback Registration rights granted herein requested to be included in such registration by any Registering Shareholders or such other Persons (allocated, if necessary for the offering not to exceed the Maximum Offering Size, pro rata among such Registering Shareholders and such other Persons on the basis of the relative number of shares of Registrable Securities or securities so requested to be included in such registration by each such Registering Shareholder or Person); and

(iv) fourth, any securities proposed to be registered for the account of any other Persons with such priorities among them as the Company shall determine.

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Section 2.03. Other Limits on Demand Registrations. In no event shall the Company be required to effect a Demand Registration within a period of 9 consecutive months after the effective date of any other registration statement relating to any Demand Registration.

Section 2.04. Lock-Up Agreements. If any registration of shares of Common Stock or securities convertible or otherwise linked to Common Stock of the Company shall be effected in connection with an underwritten public offering, if requested by the lead managing underwriter in connection with such underwritten public offering, neither the Company nor any Shareholder shall directly or indirectly Transfer (including for this Section 2.04, (A) if the underwriter or underwriters in such public offering require pledges, encumbrances and hypothecations to be included within the scope of the “lockup” arrangements in connection with such public offering, any pledge, encumbrance and hypothecation, and (B) any short sale or the entry into of any other hedging or other derivative transaction that has the effect of materially changing the economic benefits and risks of ownership of any Company Securities, but excluding any Transfer to an Affiliate so long as no filing under Section 16(a) of the Exchange Act, reporting a change in beneficial ownership of shares of Common Stock, shall be required or shall be voluntarily made during the Lock-Up Period) (except as part of such underwritten public offering) any Company Securities during the period beginning 5 days prior to the effective date of the applicable registration statement until the earlier of (i) such time as the Company and the lead managing underwriter shall agree and (ii) 90 days after the effective date (such period, the “Lock-Up Period” for the applicable registration statement); provided, however, that the foregoing restrictions shall not prevent any delivery of Escrow Shares (as defined in the Merger Agreement) to the Company or any other Indemnified Party (as defined in the Merger Agreement) pursuant to the indemnification obligations set forth in Article 11 of the Merger Agreement; provided, further, that the restrictions on Transfer contained in this Section 2.04 shall only apply in the event that each officer and director of the Company also agrees to such restrictions and remains bound thereby.  Each of the Company and the Shareholders agrees that it shall, upon written request, deliver to the underwriter or underwriters of any offering to which this Section 2.04 is applicable a customary agreement reflecting its agreement set forth in this Section 2.04.  Each Shareholder agrees that if while this Section 2.04 is in effect, it Transfers any Company Securities to an Affiliate, such Transfer shall be conditioned upon such Affiliate agreeing in writing to be bound by this Section 2.04, provided that if such Affiliate ceases to be an Affiliate of the applicable Shareholder, such Affiliate shall Transfer such Company Securities back to the applicable Shareholder prior to ceasing to be an Affiliate of such Shareholder.

Section 2.05. Registration Procedures. Whenever Shareholders request that any Registrable Securities be registered pursuant to Section 2.01 or 2.02, subject to the provisions of such Sections, the Company shall use all reasonable efforts to effect the registration and the sale of such Registrable Securities in accordance with the intended method of disposition thereof as quickly as practicable, and, in connection with any such request:

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(a) The Company shall as expeditiously as possible prepare and file with the SEC a registration statement on any form for which the Company then qualifies or that counsel for the Company shall deem appropriate and which form shall be available for the sale of the Registrable Securities to be registered thereunder in accordance with the intended method of distribution thereof, and prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement, and use all reasonable efforts to cause such filed registration statement to become and remain effective for a period of not less than 180 days (or such shorter period in which all of the Registrable Securities of the Registering Shareholders included in such registration statement shall have actually been sold thereunder); provided, however, that the Company may use Form S-3 (or any substitute form that may be adopted by the SEC) if the Company would qualify to use such form within 30 days of a request pursuant to Section 2.01 or 2.02 and the Company shall not be required to file such registration statement until it is so qualified.

(b) Prior to filing a registration statement or prospectus or any amendment or supplement thereto, the Company shall, if requested, furnish to each Registering Shareholder and each underwriter, if any, of the Registrable Securities covered by such registration statement copies of such registration statement as proposed to be filed, and thereafter the Company shall furnish to such Registering Shareholder and underwriter, if any, such number of copies of such registration statement, each amendment and supplement thereto (in each case including all exhibits thereto and documents incorporated by reference therein), the prospectus included in such registration statement (including each preliminary prospectus and any summary prospectus) and any other prospectus filed under Rule 424 or Rule 430A under the Securities Act and such other documents, in all cases including drafts thereof, as such Registering Shareholder or underwriter may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such Registering Shareholder.  Each Registering Shareholder shall have the right to request that the Company modify any information contained in such registration statement, amendment and supplement thereto pertaining to such Registering Shareholder and the Company shall use all reasonable efforts to comply with such request; provided, however, that the Company shall not have any obligation so to modify any information if the Company reasonably expects that so doing would cause the prospectus to contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading.

(c) After the filing of the registration statement, the Company shall (i) cause the related prospectus to be supplemented by any required prospectus supplement, and, as so supplemented, to be filed pursuant to Rule 424 under the Securities Act, (ii) comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by such registration statement during the applicable period in accordance with the intended methods of disposition by the Registering Shareholders

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thereof set forth in such registration statement or supplement to such prospectus and (iii) promptly notify each Registering Shareholder holding Registrable Securities covered by such registration statement of any stop order issued or threatened by the SEC or any state securities commission and take all reasonable actions required to prevent the entry of such stop order or to remove it if entered.

(d) The Company shall use all reasonable efforts to (i) register or qualify the Registrable Securities covered by such registration statement under such other securities or “blue sky” laws of such jurisdictions in the United States as any Registering Shareholder holding such Registrable Securities reasonably (in light of such Shareholder’s intended plan of distribution) requests and (ii) cause such Registrable Securities to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company and do any and all other acts and things that may be reasonably necessary or advisable to enable such Shareholder to consummate the disposition of the Registrable Securities owned by such Shareholder; provided that the Company shall not be required to (A) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 2.05(d), (B) subject itself to taxation in any such jurisdiction or (C) consent to general service of process in any such jurisdiction.

(e) The Company shall immediately notify each Registering Shareholder holding such Registrable Securities covered by such registration statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the occurrence of an event requiring the preparation of a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading and promptly prepare and make available to each Registering Shareholder and file with the SEC any such supplement or amendment.

(f)   (i) The Majority Shareholders shall, subject to the Company’s consent which shall not be unreasonably withheld, select an underwriter or underwriters in connection with any Public Offering resulting from the exercise by such Majority Shareholders of a Demand Registration, and (ii) the Company shall select an underwriter or underwriters in connection with any other Public Offering.  In connection with any Public Offering, the Company shall enter into customary agreements (including an underwriting agreement in customary form) and take all other customary actions as are reasonably required in order to expedite or facilitate the disposition of such Registrable Securities in any such Public Offering, including the engagement of a “qualified independent underwriter” in connection with the qualification of the underwriting arrangements with FINRA.

(g) Upon execution of confidentiality agreements in form and substance reasonably satisfactory to the Company, the Company shall make available for inspection by any Registering Shareholder and any underwriter participating in any disposition

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pursuant to a registration statement being filed by the Company pursuant to this Section 2.05 and any attorney, accountant or other professional retained by any such Shareholder or underwriter (collectively, the “Inspectors”), all financial and other records, pertinent corporate documents and properties of the Company and its Subsidiaries (collectively, the “Records”) as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause the officers, directors and employees of the Company and its Subsidiaries to supply all information reasonably requested by any Inspectors in connection with such registration statement.  Records that the Company determines, in good faith, to be confidential and that it notifies the Inspectors are confidential shall not be disclosed by the Inspectors unless (i) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in such registration statement or (ii) the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction.  Each Registering Shareholder agrees that information obtained by it as a result of such inspections shall be deemed confidential and shall not be used by it or its Affiliates for any other purpose (including as the basis for any market transactions in the Company Securities) unless and until such information is made generally available to the public.  Each Registering Shareholder further agrees that, upon learning that disclosure of such Records is sought in a court of competent jurisdiction, it shall give notice to the Company and allow the Company, at its expense, to undertake appropriate action to prevent disclosure of the Records deemed confidential.

(h) The Company shall furnish to each Registering Shareholder and to each underwriter, if any, a signed counterpart, addressed to such Registering Shareholder or underwriter, of (i) an opinion or opinions of counsel to the Company and (ii) a comfort letter or comfort letters from the Company’s independent public accountants, each in customary form and covering such matters of the kind customarily covered by opinions or comfort letters, as the case may be, as a majority of such Registering Shareholders or the managing underwriter therefor reasonably requests.

(i) The Company shall otherwise comply with all applicable rules and regulations of the SEC, and make available to its security holders, as soon as reasonably practicable, an earnings statement or such other document covering a period of at least 12 months, beginning within three months after the effective date of the registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder.

(j) The Company may require each Registering Shareholder promptly to furnish in writing to the Company such information regarding the distribution of the Registrable Securities as the Company may from time to time reasonably request and such other information as may be legally required or reasonably requested in connection with such registration.

(k) Each Registering Shareholder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 2.05(e), such Shareholder shall forthwith discontinue disposition of Registrable Securities pursuant to

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the registration statement covering such Registrable Securities until such Shareholder’s receipt of the copies of the supplemented or amended prospectus contemplated by Section 2.05(e), and, if so directed by the Company, such Shareholder shall deliver to the Company all copies, other than any permanent file copies then in such Shareholder’s possession, of the most recent prospectus covering such Registrable Securities at the time of receipt of such notice.  If the Company shall give such notice, the Company shall extend the period during which such registration statement shall be maintained effective (including the period referred to in Section 2.05(a)) by the number of days during the period from and including the date of the giving of notice pursuant to Section 2.05(e) to the date when the Company shall make available to such Shareholder a prospectus supplemented or amended to conform with the requirements of Section 2.05(e).

(l) The Company shall use all reasonable efforts to list all Registrable Securities covered by such registration statement on any securities exchange or quotation system on which any of the Registrable Securities are then listed or traded.

(m) The Company shall have appropriate officers of the Company (i) prepare and make presentations at any “road shows” and before analysts, as the case may be, as reasonably requested and (ii) otherwise cooperate as reasonably requested by the underwriters in the offering, marketing or selling of the Registrable Securities.

Section 2.06. Indemnification by the Company. The Company agrees to indemnify and hold harmless each Registering Shareholder holding Registrable Securities covered by a registration statement, its officers, directors, employees, partners and agents, and each Person, if any, who controls such Shareholder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any and all losses, claims, damages, liabilities and expenses (including reasonable expenses of investigation and reasonable attorneys’ fees and expenses incurred in connection with actions, proceedings or settlements in respect thereof) (“Damages”) (i) caused by or relating to any untrue statement or alleged untrue statement of a material fact contained or incorporated by reference in any registration statement or prospectus relating to the Registrable Securities (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto) or any preliminary prospectus, “issuer free writing prospectus” (as defined in Rule 433(h) of the Securities Act), offering circular, or other document (including any related registration statement, notification or similar document), together, the “Registration Documents” incident to any such registration, or (ii) caused by or relating to any omission or alleged omission in the Registration Documents to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or (iii) caused by or relating to any violation (or alleged violation) by the Company of applicable securities laws in connection with such registration, except in the case of clauses (i), (ii) and (iii) insofar as such Damages are caused by or related to any such untrue statement or omission or alleged untrue statement or omission so made or violation or alleged violation in each case based upon (A) information furnished in writing to the Company by such Registering Shareholder or on such Registering Shareholder’s behalf by its officers, directors, partners or legal

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counsel expressly for use therein or (B) information relating to Target furnished in writing to the Company by Target prior to the consummation of the Merger.  The Company also agrees to indemnify any underwriters of the Registrable Securities, their officers and directors and each Person who controls such underwriters within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act on substantially the same basis as that of the indemnification of the Registering Shareholders provided in this Section 2.06.

Section 2.07. Indemnification by Registering Shareholders. Each Registering Shareholder holding Registrable Securities included in any registration statement agrees, severally but not jointly, to indemnify and hold harmless the Company, its officers, directors and agents and each Person, if any, who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the Company to such Shareholder, but only with respect to information furnished in writing by such Registering Shareholder or on such Registering Shareholder’s behalf by its officers, directors, partners or legal counsel expressly for use in any registration statement or prospectus relating to the Registrable Securities, or any amendment or supplement thereto, or any preliminary prospectus. Each Registering Shareholder also agrees to indemnify and hold harmless underwriters of the Registrable Securities, their officers and directors and each Person who controls such underwriters within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act on substantially the same basis as that of the indemnification of the Company provided in this Section 2.07.  As a condition to including Registrable Securities in any registration statement filed in accordance with this Article, the Company may require that it shall have received an undertaking reasonably satisfactory to it from any underwriter to indemnify and hold it harmless to the extent customarily provided by underwriters with respect to similar securities.  No Registering Shareholder shall be liable under this Section 2.07 for any Damages in excess of the net proceeds actually received by such Registering Shareholder in the sale of Registrable Securities of such Registering Shareholder to which such Damages relate.

Section 2.08. Conduct of Indemnification Proceedings. If any proceeding (including any investigation by any Governmental Authority) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to Section 2.06 or 2.07, such Person (an “Indemnified Party”) shall promptly notify the Person against whom such indemnity may be sought (the “Indemnifying Party”) in writing and the Indemnifying Party shall assume the defense thereof, including the employment of counsel reasonably satisfactory to such Indemnified Party, and shall assume the payment of all fees and expenses; provided that the failure of any Indemnified Party so to notify the Indemnifying Party shall not relieve the Indemnifying Party of its obligations hereunder except to the extent that the Indemnifying Party is prejudiced by such failure to notify. In any such proceeding, any Indemnified Party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless (i) the Indemnifying Party and the Indemnified Party shall have mutually agreed to the retention of such counsel or (ii) in the reasonable judgment of

15

such Indemnified Party, representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them.  It is understood that, in connection with any proceeding or related proceedings in the same jurisdiction, the Indemnifying Party shall not be liable for the reasonable fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) at any time for all such Indemnified Parties, and that all such fees and expenses shall be reimbursed as they are incurred.  In the case of any such separate firm for the Indemnified Parties, such firm shall be designated in writing by the Indemnified Parties.  The Indemnifying Party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent, or if there be a final judgment for the plaintiff, the Indemnifying Party shall indemnify and hold harmless such Indemnified Parties from and against any loss or liability (to the extent stated above) by reason of such settlement or judgment.  Without the prior written consent of the Indemnified Party, no Indemnifying Party shall effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Party is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such settlement includes an unconditional release of such Indemnified Party from all liability arising out of such proceeding.  Each Indemnified Party shall furnish such information regarding itself or the claim in question as an Indemnifying Party may reasonably request in writing and as shall be reasonably required in connection with the defense of such claim and litigation resulting therefrom.

Section 2.09. Contribution. (a) If the indemnification provided for in Section 2.06 or 2.07 is held by a court of competent jurisdiction to be unavailable to the Indemnified Parties in respect of any Damages, then each such Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Damages,

(i) as between the Company and the Registering Shareholders holding Registrable Securities covered by a registration statement on the one hand and the underwriters on the other, in such proportion as is appropriate to reflect the relative benefits received by the Company and such Registering Shareholders on the one hand and the underwriters on the other, from the offering of the Registrable Securities, or if such allocation is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits but also the relative fault of the Company and such Registering Shareholders on the one hand and of such underwriters on the other in connection with the statements or omissions that resulted in such Damages, as well as any other relevant equitable considerations and

(ii) as between the Company on the one hand and each such Registering Shareholder on the other, in such proportion as is appropriate to reflect the relative fault of the Company and of each such Registering Shareholder in connection with such statements or omissions, as well as any other relevant equitable considerations.

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The relative benefits received by the Company and such Registering Shareholders on the one hand and such underwriters on the other shall be deemed to be in the same proportion as the total proceeds from the offering (net of underwriting discounts and commissions but before deducting expenses) received by the Company and such Registering Shareholders bear to the total underwriting discounts and commissions received by such underwriters, in each case as set forth in the table on the cover page of the prospectus.  The relative fault of the Company and such Registering Shareholders on the one hand and of such underwriters on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company and such Registering Shareholders or by such underwriters.  The relative fault of the Company on the one hand and of each such Registering Shareholder on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by such party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.  Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with a Public Offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control.  Unless otherwise superseded by the underwriting agreement entered into in connection with a Public Offering, the obligations of the Company and the Registering Shareholders under this Section 2.09 shall survive the consummation of any offering of Registrable Securities in a registration statement under this Agreement, and shall survive the termination of this Agreement.

(b) The Company and the Registering Shareholders agree that it would not be just and equitable if contribution pursuant to this Section 2.09 were determined by pro rata allocation (even if the underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in Section 2.09(a). The amount paid or payable by an Indemnified Party as a result of the Damages referred to in Section 2.09(a) shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 2.09, no underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any Damages that such underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission, and no Registering Shareholder shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities of such Shareholder were offered to the public (less underwriters’ discounts and commissions) exceeds the amount of any Damages that such Registering Shareholder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission.  No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to

17

contribution from any Person who was not guilty of such fraudulent misrepresentation.  Each Registering Shareholder’s obligation to contribute pursuant to this Section 2.09 is several in the proportion that the proceeds of the offering received by such Registering Shareholder bears to the total proceeds of the offering received by all such Registering Shareholders and not joint.

Section 2.10. Participation in Public Offering. No Shareholder may participate in any Public Offering hereunder unless such Shareholder (a) agrees to sell such Shareholder’s Registrable Securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements and the provisions of this Agreement in respect of registration rights.

Section 2.11. Other Indemnification. Indemnification similar to that specified herein (with appropriate modifications) shall be given by the Company and each Registering Shareholder participating therein with respect to any required registration or other qualification of securities under any federal or state law or regulation or Governmental Authority other than the Securities Act.

Section 2.12. Cooperation by the Company. If any Shareholder shall Transfer any Registrable Securities pursuant to Rule 144, the Company shall cooperate, to the extent commercially reasonable, with such Shareholder and shall provide to such Shareholder such information as such Shareholder shall reasonably request.

Section 2.13. No Transfer of Registration Rights. Except as provided in Section 3.07, none of the rights of Shareholders under this Article shall be assignable by any Shareholder to any Person. Any such purported assignments in violation of this Section

2.13 shall be null and void.

ARTICLE 3

GENERAL PROVISIONS

Section 3.01. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including facsimile transmission but not electronic mail) and shall be given,

(a) if to the Company, to:   Patriot Coal Corporation 12312 Olive Boulevard, Suite 400 St. Louis, Missouri 63141 Attention: Joseph W. Bean Facsimile No.:  (314) 275-3656

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with a copy to:

Davis Polk & Wardwell

450 Lexington Avenue

New York, NY 10017

Attention: William L. Taylor

Facsimile No.:  (212) 450-4800

(b)  if to any Shareholder, to:   ArcLight Energy Partners Fund I, L.P. ArcLight Energy Partners Fund II, L.P. c/o ArcLight Capital Partners, LLC 152 West 57th Street, 53rd Floor New York, NY 10019 Attention:       Robb E. Turner                        Senior Partner Facsimile No.:  212-888-9275   with a copy to:   ArcLight Energy Partners Fund I, L.P. ArcLight Energy Partners Fund II, L.P. c/o ArcLight Capital Partners, LLC 200 Clarendon Street, 55th Floor Boston, MA 02117 Attention:       Christine M. Miller                        Associate General Counsel Facsimile No.: 617.867.4698     and a further copy to:   Skadden, Arps, Slate, Meagher & Flom LLP Four Times Square New York, New York 10022 Attention: Sean C. Doyle, Esq. Facsimile No.: (212) 735-2000

or to such other address or facsimile number as such party may hereafter specify by notice to the other parties hereto.  All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5:00 p.m. on a Business Day in the place of receipt.  Otherwise, any such notice, request or communication shall be deemed to have been received on the next succeeding Business Day in the place of receipt.

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Section 3.02. Headings. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

Section 3.03. Amendments and Waivers. (a) Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by the Company and a number of Shareholders owning at least a majority of the Company Securities owned by all Shareholders at such time, or in the case of a waiver, by the party against whom the waiver is to be effective.

(b) No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.

Section 3.04. Termination. This Agreement shall terminate on the date that all Company Securities have ceased to be Registrable Securities, provided that the terms of Section 2.04 shall survive the termination of this Agreement until the Shareholders own less than 7.5% in the aggregate of the outstanding shares of Common Stock.  No party hereto shall be relieved from any liability for breach of this Agreement by reason of any such termination.  For the avoidance of doubt, this Agreement shall not otherwise terminate except with the mutual written agreement of each of the parties hereto.

Section 3.05. Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other Governmental Authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such a determination, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.

Section 3.06. Entire Agreement.  This Agreement constitutes the entire agreement of the parties and supersedes all prior agreements and undertakings, both written and oral, between the parties, or any of them, with respect to the subject matter hereof.

Section 3.07. Assignment. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, provided that no party may assign, delegate or otherwise transfer any of its rights, interests or obligations under this Agreement without the prior written consent of the other parties hereto, except that (i) the Company may assign, delegate or otherwise transfer any of its rights, interests or obligations under this Agreement to an Affiliate without the consent of any Shareholder and (ii) a Shareholder may assign,

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delegate or otherwise transfer any of its rights, interests or obligations under this Agreement to an Affiliate that agrees in writing to be bound by the terms of this Agreement without the consent of the Company in connection with a Transfer of Company Securities to such Affiliate provided that if such Affiliate ceases to be an Affiliate of the applicable Shareholder, such Affiliate shall cease to have any rights hereunder but shall otherwise continue to be bound by its obligations hereunder, but any such transfer or assignment shall not relieve the Company or the Shareholder, as the case may be, of its obligations hereunder.

Section 3.08. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to its conflicts of law principles.

Section 3.09. Jurisdiction. The parties hereto agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby shall be brought in any federal court located in the State of Delaware or any Delaware state court, and each of the parties hereby irrevocably consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.  Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court.  Without limiting the foregoing, each party agrees that service of process on such party as provided in Section 3.01 shall be deemed effective service of process on such party.

Section 3.10. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

Section 3.11. Counterparts; Third Party Beneficiaries. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.  Until and unless each party has received a counterpart of this Agreement signed by each of the other parties, this Agreement shall have no effect, and no party shall have any right or obligation under this Agreement (whether by virtue of any other oral or written agreement or other communication).  This Agreement shall become effective when each party shall have received a counterpart hereof signed by the other parties.  No provision of this Agreement is intended to confer upon any Person other than the parties hereto any rights or remedies hereunder.  Any such counterpart may be delivered by facsimile or other electronic format (including “.pdf”).

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

PATRIOT COAL CORPORATION
By:
	Name:
	Title:

ARCLIGHT ENERGY PARTNERS FUND I, L.P. and ARCLIGHT ENERGY PARTNERS FUND II, L.P.
ARCLIGHT ENERGY PARTNERS FUND I, L.P.
By:	ArcLight PEF GP, LLC, its General Partner
By:	ArcLight Capital Holdings, LLC, its Manager
By:
	Name:
	Title:

ARCLIGHT ENERGY PARTNERS FUND II, L.P.
By:	ArcLight PEF GP II, LLC, its General Partner
By:	ArcLight Capital Holdings, LLC, its Manager
By:
	Name:
	Title:

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EX-10.2

Exhibit 10.2

ArcLight Energy Partners Fund I, L.P.

ArcLight Energy Partners Fund II, L.P.

c/o ArcLight Capital Partners LLC

200 Clarendon Street, 55th Floor

Boston, MA  02117

April 2, 2008

Bridge Facility Commitment Letter

Patriot Coal Corporation

12312 Olive Boulevard, Suite 400

St. Louis, Missouri 63141

Attention:  Mark N. Schroeder

Ladies and Gentlemen:

You have advised ArcLight Energy Partners Fund I, L.P. and ArcLight Energy Partners Fund II, L.P. (collectively, “ArcLight” or “us”) that Patriot Coal Corporation (the “Borrower” or “you”) intends to acquire (the “Transaction”) Magnum Coal Company (“Magnum”) pursuant to an agreement and plan of merger dated as of April 2, 2008 (the “Merger Agreement”).  In that connection, you have requested that ArcLight commit to provide to the Borrower a subordinated second lien bridge loan facility in a principal amount of $150,000,000 (the “Bridge Facility”).

ArcLight is pleased to advise you of its commitment to provide the entire amount of the Bridge Facility upon the terms and subject to the conditions set forth or referred to in this commitment letter (the “Commitment Letter”) and in the Summary of Terms and Conditions attached hereto as Exhibit A (the “Term Sheet”; capitalized terms not otherwise defined herein shall have the meanings set forth in the Term Sheet).  You and ArcLight have discussed the desire to have other lenders participate in the Bridge Facility and ArcLight agrees to assist you in your efforts to obtain commitments from other potential lenders approved by ArcLight for the Bridge Facility.

In connection with the Bridge Facility, you agree promptly to prepare and provide to ArcLight all information with respect to the Borrower, its subsidiaries and the other transactions contemplated hereby, including all financial information and projections (the “Projections”), as we may reasonably request in connection with the Bridge Facility.  In connection with the Bridge Facility, you hereby represent and covenant that to the best of your knowledge (a) all information (other than Projections) provided to ArcLight, including any updates and supplements thereof (the “Information”), when taken as a whole will be correct in all material respects and will not, when taken as a whole, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein, not misleading in any material respect under the circumstances under which such statements are made at the time such statements are made, and (b) the Projections that have been

or will be made available to ArcLight or any of your representatives have been or will be prepared in good faith based upon reasonable assumptions (it being understood that the Projections are as to future events and are not viewed as facts and that actual results during the period or periods covered may differ significantly from the projected results and such difference may be material).  You understand that ArcLight and any other potential participants in the Bridge Facility may use and rely on the Information and Projections without independent verification thereof.

As consideration for ArcLight’s commitment hereunder, you agree to pay to ArcLight the non-refundable fees set forth in the Fee Letter dated as of the date hereof and delivered herewith (the “Fee Letter”).

ArcLight’s commitment hereunder is subject to (a) the absence of a Parent Material Adverse Effect (as defined in the Merger Agreement) as of the date hereof, (b) the negotiation, execution and delivery on or before September 30, 2008 of definitive documentation with respect to the Bridge Facility reasonably satisfactory to ArcLight and its counsel on Acceptable Bridge Terms (as defined in the Term Sheet) and (c) the conditions set forth herein and in the Term Sheet.  Notwithstanding anything herein to the contrary, ArcLight agrees that the execution and delivery of the Merger Agreement and consummation of the transactions contemplated thereby shall not constitute a material adverse condition or a material adverse change hereunder.  Those matters that are not covered by the provisions hereof and of the Term Sheet are subject to the approval and agreement of ArcLight and the Borrower.

You agree to indemnify and hold harmless ArcLight, its affiliates and its respective officers, directors, employees, advisors, and agents in their respective capacities as the provider of the Bridge Facility (each, an “indemnified person”) from and against any and all third party claims, damages and liabilities to which any such indemnified person may become subject arising out of or in connection with this Commitment Letter, the Bridge Facility, the use of the proceeds thereof or any claim, litigation, investigation or proceeding relating to any of the foregoing, regardless of whether any indemnified person is a party thereto, and to reimburse each indemnified person upon demand for any reasonable legal or other expenses incurred in connection with investigating or defending any of the foregoing; provided that the foregoing indemnity will not, as to any indemnified person, apply to losses, claims, damages, liabilities or related expenses to the extent they are found by a final, non-appealable judgment of a court to arise from the willful misconduct or gross negligence of such indemnified person.  No indemnified person shall be liable for any damages arising from the use by others of Information or other materials obtained through electronic, telecommunications or other information transmission systems other than where such damages are found by a final, non-appealable judgment of a court to arise from the willful misconduct or gross negligence of such indemnified person, and neither you  nor any indemnified person shall be liable for any special, indirect, consequential or punitive damages in connection with the Bridge Facility.

This Commitment Letter and the Fee Letter shall not be assignable by any party hereto without the prior written consent of the other parties hereto (and any purported assignment without such consent shall be null and void), is intended to be solely for the benefit of the parties hereto and is not intended to confer any benefits upon, or create any rights in favor of, any person other than the parties hereto.  This Commitment Letter may not be amended or waived except by an instrument in writing signed by you and ArcLight.  This Commitment Letter may

be executed in any number of counterparts, each of which shall be an original, and all of which, when taken together, shall constitute one agreement.  Delivery of an executed signature page of this Commitment Letter by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof.  This Commitment Letter (including the attached exhibit) and the Fee Letter set forth the entire understanding of the parties hereto as to the scope of the obligations of ArcLight under this Commitment Letter.  This Commitment Letter shall supersede all prior understandings and proposals, whether written or oral, between ArcLight and you relating to the Bridge Facility or the transactions contemplated under this Commitment Letter.  This Commitment Letter shall be governed by, and construed in accordance with, the laws of the State of New York.  To the fullest extent permitted by applicable law, the Borrower hereby irrevocably submits to the non-exclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and the United States Federal District Court for the Southern District of New York and any appellate court from any thereof in respect of any suit, action or proceeding arising out of or relating to the provisions of this Commitment Letter or the Fee Letter and irrevocably agrees that all claims in respect of any such suit, action or proceeding may be heard and determined in any such court.  The parties hereto hereby waive, to the fullest extent permitted by applicable law, any objection that they may now or hereafter have to the laying of venue of any such suit, action or proceeding brought in any such court, and any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.  THE PARTIES HERETO HEREBY WAIVE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS COMMITMENT LETTER OR THE FEE LETTER.

This Commitment Letter is delivered to you on the understanding that neither this Commitment Letter, the Term Sheet or the Fee Letter nor any of their terms or substance shall be disclosed, directly or indirectly, to any other person except (a) that this Commitment Letter and the Term Sheet may be disclosed to your and your affiliates’ and Magnum and Magnum’s affiliates’ officers, directors, employees, agents and advisors, including your bank group who are directly involved in the consideration of this matter or the Merger Agreement (or both) (provided that this Commitment Letter and Term Sheet may be disclosed to your bank group only upon the condition that you shall direct such bank group to keep this Commitment Letter and Term Sheet, and all of the terms and the substance contained therein, strictly confidential) or (b) as may be compelled in a judicial or administrative proceeding or as otherwise required by law, including applicable securities laws (in which case you agree to inform us promptly thereof).

The confidentiality provisions contained herein and in the Fee Letter shall remain in full force and effect notwithstanding the termination of this Commitment Letter or ArcLight’s commitment hereunder.  Notwithstanding the foregoing, all obligations of the parties under this Commitment Letter, shall automatically terminate and be superseded by the provisions of the definitive documentation relating to the Bridge Facility upon the execution thereof, and each party shall automatically be released from all liability in connection therewith at such time.

This Commitment Letter has been and is made solely for the benefit of the parties hereto, the indemnified persons, and their respective successors and assigns, and nothing in this Commitment Letter, expressed or implied, is intended to confer or does confer on any other person or entity any rights or remedies under or by reason of this Commitment Letter or the agreements of the parties contained herein.

If the foregoing correctly sets forth our agreement, please indicate your acceptance of the terms hereof and of the Term Sheet and the Fee Letter by returning to us executed counterparts hereof and of the Fee Letter not later than 5:00 p.m., New York City time, on April 2, 2008.  The commitments and agreements of the parties hereto will automatically expire (a) at such time in the event ArcLight has not received such executed counterparts in accordance with the immediately preceding sentence, (b) upon termination of the Merger Agreement and (c) on September 30, 2008 (the “Termination Date”) if the Closing Date has not yet occurred.  Each party hereto may terminate their respective commitments and agreements under this Commitment Letter at any time if any material breach or material default that, in each case, is not capable of being cured occurs in the performance of any of your obligations to any of the parties hereto with respect to the Transaction.  You may terminate your agreements under this Commitment Letter at any time prior to the Drawdown Date upon written notice to us, in which case ArcLight’s commitments and agreements under this Commitment Letter will automatically expire; provided, however, that all amounts due and owing under the Fee Letter shall have been paid in full.

[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]

ArcLight is pleased to have been given the opportunity to assist you in connection with this important financing.

Very truly yours,
ARCLIGHT ENERGY PARTNERS FUND I, L.P.
By:	ArcLight PEF GP, LLC, its General Partner
By:	ArcLight Capital Holdings, LLC, its Manager
By:	/s/ Daniel R. Revers
	Name:  Daniel R. Revers
	Title:    Manager
By:	/s/ Robb E. Turner
	Name:  Robb E. Turner
	Title:    Manager
ARCLIGHT ENERGY PARTNERS FUND II, L.P.
By:	ArcLight PEF GP II, LLC, its General Partner
By:	ArcLight Capital Holdings, LLC, its Manager
By:	/s/ Daniel R. Revers
	Name:  Daniel R. Revers
	Title:    Manager
By:	/s/ Robb E. Turner
	Name:  Robb E. Turner
	Title:    Manager

Accepted and agreed to

as of the date first

written above by:

PATRIOT COAL CORPORATION

By:   /s/ Mark N. Schroeder                         

Name: Mark N. Schroeder

Title: Senior Vice President & Chief Financial Officer

Exhibit A

   to the Commitment Letter

BRIDGE FACILITY

Summary of Terms and Conditions

April 2, 2008

Capitalized terms used and not otherwise defined herein are used with the meanings attributed thereto in the Commitment Letter dated April 2, 2008 (the “Commitment Letter”), from ArcLight to the Company, of which this Summary of Terms and Conditions forms an integral part.  For the avoidance of doubt, it is understood that the Bridge Facility Documentation shall be on (a) the terms and conditions set forth in this Term Sheet, the Commitment Letter and the Fee Letter, and (b) such other terms and conditions not materially less favorable, taken as a whole, to the Company than those set forth in the Existing Credit Agreement (collectively, the “Acceptable Bridge Terms”).

Borrower:	Patriot Coal Corporation (“Patriot” or the “Company”).
Lenders:	ArcLight Energy Partners Fund I, L.P. and ArcLight Energy Partners Fund II, L.P. (collectively, “ArcLight” or the “Lender”).
Guarantors:	The Guarantors under the Existing Credit Agreement.
Facility:	Up to U.S.$150,000,000 loan facility (the “Loan”) under the unconditional guarantee of the Guarantors subordinated as to lien and payment priority on the terms set forth in the Intercreditor Agreement (the “Guarantees”).  Once repaid or prepaid, the Loan may not be reborrowed.
Use of Proceeds:	The proceeds of the Loan shall be used by the Company to  repay a portion of the senior secured indebtedness of Magnum Coal Company (“Magnum”) and to pay related fees and expenses.
Availability:	Upon three business days’ prior notice, all or a portion of the Loan will be available in a single drawdown on the date upon which all such conditions precedent described below are satisfied, such date to occur no later than the Termination Date (such date, the “Drawdown Date”).

	Any amounts undrawn on the Drawdown Date will be cancelled and shall not be available for drawings thereafter.
Fees:	As set forth in the Fee Letter.
Interest Rate:	One month LIBOR plus 5.00% per annum (the “Initial Interest Rate”); provided, however that LIBOR shall never be less than 3.25%.  Accrued interest shall be payable in arrears on the last business day of each month following the Drawdown Date and upon Maturity and prepayment of any amounts under the Loan.  The portion of interest payable hereunder which exceeds the Initial Interest Rate shall be mandatorily paid-in-kind.
Default Rate:	The then-current interest rate plus 2.00% per annum.
Maturity Date:	April 30, 2012.
Repayment:	Principal shall be repaid in a single payment on the earlier of (a) the Maturity Date and (b) the date of the Optional Prepayment or the Mandatory Prepayment, each as described below.
Optional Prepayment:	The Company may, at its option, upon notice to ArcLight, at any time or from time to time after the date that is six months after the Drawdown Date, voluntarily prepay the Bridge Facility in full (but not in part) subject to payment of a premium, calculated as a percentage of the then outstanding Loan balance, plus accrued and unpaid interest thereon (as set forth in the chart below); provided, that such notice must be received by ArcLight not later than 11:00 a.m., three (3) business days prior to such voluntary prepayment.  If such notice is given by the Company, the Company shall make such prepayment and such payment shall be due and payable on the date specified therein.

Payment Date	Premium
Month 7	7.00%
Month 8	7.75%
Month 9	8.50%
Month 10	9.25%
Month 11	10.00%
(or thereafter)

	The Company may not optionally prepay the Loan prior to the seventh month subsequent to the Drawdown Date.
Mandatory Prepayment:	Beginning on the date which is the first day of the eleventh month subsequent to Drawdown Date, the Company  shall  prepay the Loan in full (and not in part), on request from the Lender not later than 11:00 a.m., three (3) business days prior to such mandatory prepayment (the “Lender Notice”), subject to payment of a premium, calculated as 10.00% of the then outstanding Loan balance (excluding any portion of such balance in respect of any accrued interest added to principal as contemplated by the penultimate proviso of this paragraph) (the “Prepayment Premium”), plus accrued and unpaid interest thereon (the full amount of the Loan being prepaid, including such accrued and unpaid interest thereon and the Prepayment Premium, the “Put Amount”); provided, however, that beginning on the date which is the first day of the twelfth month subsequent to the Drawdown Date, if the Company shall fail to prepay the Put Amount, then the then-current interest rate of the Bridge Facility will increase by 200 basis points and shall increase by an additional 200 basis points at the end of each 180-day period thereafter; and provided further, that the total interest payable by the Company shall not exceed the maximum rate permitted by applicable law; and provided further, that that the principal amount of the Loan on a going-forward basis to which such Initial Interest Rate increases (which, for the avoidance of doubt, shall include all increases set forth above) shall be applicable shall be equal to the Put Amount.
	The Lender may not require a mandatory prepayment of the Loan prior to the first day of the eleventh month subsequent to the Drawdown Date.
Documentation:	Promissory note and other customary credit documents as ArcLight reasonably determines to be appropriate in connection therewith (the “Bridge Facility Documentation”). The Bridge Facility Documentation shall be on the Acceptable Bridge Terms and otherwise reasonably satisfactory in form and substance to ArcLight and its counsel, and all legal matters in connection with the transaction contemplated hereby shall be reasonably satisfactory to such counsel.
Conditions Precedent to

Drawdown:	The availability of the Bridge Facility shall be conditioned upon the continuing satisfaction on or before the Termination Date of the conditions precedent set forth below (the date upon which all such conditions precedent shall be satisfied, the “Closing Date”):
	a) evidence of corporate authority, incumbency, and signatures;
	b) execution and delivery of Bridge Facility Documentation and receipt of legal opinions required under the Bridge Facility Documentation;
	c) absence of any default or event of default (excluding any default or event of default with respect to any representation or warranty not included in clause (ii) below); continuing accuracy of representation and warranties; provided that the only representations and warranties the making of which shall be a condition to availability of the Loan on the Drawdown Date shall be such of the representations and warranties (i) made by or on behalf of the Company and its subsidiaries in the Merger Agreement as are material to the interests of the Lender, but only to the extent that Magnum has a right not to consummate the merger and related transactions contemplated by the Merger Agreement and (ii) set forth herein relating to corporate power and authority, due authorization, execution and delivery, in each case as they relate to the entering into and performance of the Bridge Facility Documentation, the enforceability of the Bridge Facility Documentation, Federal Reserve margin regulations, the Investment Company Act and the status of the Loan as senior debt;
	d) consummation of the merger and related transactions contemplated by the Merger Agreement in accordance with the terms thereof, and no provision thereof shall have been waived, amended, supplemented or otherwise modified by the Company that would be materially adverse to the interests of the Lender (solely in that capacity);
	e) the consummation of the amendment of that certain Credit Agreement, dated as of October 31, 2007, among the Company, the lenders party thereto, and Bank of America, N.A., as administrative agent thereunder (the “Existing Credit Agreement”) (which amendment is attached as Appendix 7); confirmation that the Company has no other indebtedness other

	than as permitted under the Existing Credit Agreement; and the same has not been waived, amended, supplemented or otherwise modified in any manner materially adverse to the interests of the Lender without the Lender's consent, such consent not to be unreasonably withheld or delayed;
	f)  all documents and instruments required to perfect the ArcLight’s second priority security interest in the collateral under the Bridge Facility shall, pursuant to the Bridge Facility Documentation, have been executed;
	g) certified copies of all necessary governmental approvals and consents for the Loan; and
	h) a solvency certificate from the chief financial officer of the Company, which shall document the solvency of the Company after giving effect to the Transaction.
Representations
and Warranties:	As set forth in Appendix 1.
Affirmative
Covenants:	As set forth on Appendix 2.
Financial
Covenants:	a) EBITDA to consolidated interest expense to be not less than a ratio of 4.00, at the end of each fiscal quarter for the prior four quarters, calculated and using such defined financial and other terms as set forth in the Existing Credit Agreement; and
	b) Total debt at the end of each fiscal quarter to EBITDA for the prior four quarters not to exceed a ratio of 2.75, calculated and using such defined financial and other terms as set forth in the Existing Credit Agreement.
Negative
Covenants:	As set forth on Appendix 3.
Events of Default:	As set forth on Appendix 4 (collectively, the “Events of Default”).
Collateral:	The Loan shall constitute a secured “silent” second lien obligation of the Company that is subordinated in right of payment and the Guarantees shall constitute a secured “silent” second lien obligation of the Guarantors that is subordinated in

	right of payment, all as set forth in the Intercreditor Agreement, the form of which is set forth as Appendix 6.
	The Bridge Facility shall be secured by the Collateral, as defined in the Existing Credit Agreement.  The priority of the security interests and related creditor rights between the Existing Credit Agreement and the Bridge Facility will be set forth in an intercreditor agreement, the form of which is attached as Appendix 6.
Certain Definitions:	As set forth on Appendix 5.
Taxes:	Any and all payments made in connection with the Loans shall be made in U.S. dollars free and clear of any and all current or future taxes, deductions, charges, set-offs or counterclaims on Acceptable Bridge Terms and in a manner not more favorable to the Lender than the terms available to the lenders under the Existing Credit Agreement.
Assignment and
Participations:	The Lender, in its sole discretion, may assign all or a portion of the Loan under the facility, or may sell participations therein, to another person or persons.
Governing Law and
Jurisdiction:	The State of New York and submission to New York jurisdiction and waiver of jury trial, to the same extent as set forth in the Existing Credit Agreement.
Expenses:	The Company shall reimburse ArcLight for all reasonable and documented out-of-pocket expenses incurred in the preparation, negotiation, execution of the Bridge Facility Documentation and enforcement of the Loans, to the same extent as set forth in the Existing Credit Agreement.

Appendix 1
to the Term Sheet

Representations and Warranties to be Incorporated

into the Bridge Facility1

Below are the representations and warranties set forth in Article V of that certain Credit Agreement, dated as of October 31, 2007, among the Company, the lenders party thereto, and Bank of America, N.A., as administrative agent thereunder, as amended as of the date hereof (the “Existing Credit Agreement”). Capitalized terms used and not otherwise defined herein are used with the meanings attributed thereto in (i) the Commitment Letter dated April 2, 2008 (the “Commitment Letter”), from ArcLight to the Company, of which this Appendix 1 forms an integral part, or (ii) the Existing Credit Agreement, in each case as appropriate.  All section references set forth below, or any use of the phrases “herein,” “hereunder,” or similar phrases, shall refer to the relevant sections of the Existing Credit Agreement.  For the avoidance of doubt, it is understood that the representations and warranties contained in the Bridge Facility Documentation shall (i) with respect to the matters set forth below, be in the form set forth below, with such modifications as shall be necessary to give effect to the terms and conditions set forth in the Term Sheet, the Commitment Letter, the Fee Letter and, where applicable, to permit and give effect to the existence of the Existing Credit Agreement, and (ii) in the case of all other matters, be on Acceptable Bridge Terms.

The Borrower represents and warrants to the Administrative Agent and the Lenders that:

5.01.Existence, Qualification and Power.  Each Loan Party (a) (i) is duly organized or formed and, validly existing and (ii) in good standing under the Laws of the jurisdiction of its incorporation or organization, (b) has all requisite power and authority and all requisite governmental licenses, authorizations, consents and approvals to (i) own or lease its assets and carry on its business and (ii) execute, deliver and perform its obligations under the Loan Documents and Related Documents to which it is a party and consummate the Transactions, and (c) is duly qualified and is licensed and, as applicable, in good standing, under the Laws of each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification or license; except in each case referred to in clause (a)(ii), (b)(i) or (c), to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect.

5.02.Authorization; No Contravention.  The execution, delivery and performance by each Loan Party of each Loan Document and Related Document to

______________ 

1 To conform to final amendment to the Existing Credit Agreement upon satisfactory review of the same by ArcLight and its counsel.

which such Person is a party, (a) have been duly authorized by all necessary corporate or other organizational action, and (b) do not and will not (i) contravene the terms of any of such Person’s Organization Documents; (ii) conflict with or result in any breach or contravention of, or the creation of any Lien (except for any Liens that may arise under the Loan Documents) under, or require any payment to be made under (A) any Contractual Obligation to which such Person is a party or affecting such Person or the properties of such Person or any of its Subsidiaries or (B) any order, injunction, writ or decree of any Governmental Authority or any arbitral award to which such Person or its property is subject; or (c) violate any Law, except in each case referred to in clause (b)(ii) or (c) to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect.

5.03.Governmental Authorization; Other Consents.  (a) No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority and (b) no material approval, consent, exemption, authorization, or other action by, or notice to, or filing with any other Person, in each case, is necessary or required in connection with (i) the execution, delivery or performance by any Loan Party of this Agreement or any other Loan Document or Related Document, or for the consummation of the Transaction, (ii) the grant by any Loan Party of the Liens granted by it pursuant to the Collateral Documents or (iii) the perfection of the Liens created under the Collateral Documents (including the first priority nature thereof), (x) except for those approvals, consents, exemptions, authorizations or other actions which have already been obtained, taken, given or made and are in full force and effect, (y) any filings required to perfect the Liens created under the Collateral Documents and (z) those landlord consents required with respect to the leasehold mortgages required to be delivered hereunder.  All applicable waiting periods in connection with the Transactions have expired without any action having been taken by any Governmental Authority restraining, preventing or imposing materially adverse conditions upon the Transaction or the rights of the Loan Parties or their Subsidiaries freely to transfer or otherwise dispose of, or to create any Lien on, any properties now owned or hereafter acquired by any of them.

5.04.Binding Effect.  This Agreement has been, and each other Loan Document, when delivered hereunder, will have been, duly executed and delivered by each Loan Party that is party thereto.  This Agreement constitutes, and each other Loan Document when so delivered will constitute, a legal, valid and binding obligation of such Loan Party, enforceable against each Loan Party that is party thereto in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other Laws relating to or affecting creditors’ rights generally, general principles of equity, regardless of whether considered in a proceeding in equity or at law and an implied covenant of good faith and fair dealing.

5.05.Financial Statements; No Material Adverse Effect.  (a)  The Audited Financial Statements of the Borrower and its Subsidiaries (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; (ii) fairly present in all material respects the

financial condition of the Borrower and its Subsidiaries as of the date thereof and their results of operations for the period covered thereby in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; and (iii) show all material indebtedness and other material liabilities, direct or contingent, of the Borrower and its Subsidiaries as of the date thereof, including material liabilities for Taxes, material commitments and material Indebtedness.

(b)The unaudited consolidated balance sheet of the Borrower and its Subsidiaries dated June 30, 2007, and the related consolidated statements of income or operations, shareholders’ equity and cash flows for the fiscal quarter ended on that date (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein, and (ii) fairly present in all material respects the financial condition of the Borrower and its Subsidiaries as of the date thereof and their results of operations for the period covered thereby, subject, in the case of clauses (i) and (ii), to the absence of footnotes and to normal year-end audit adjustments.

(c)Since June 30, 2007, there has been no event or circumstance, either individually or in the aggregate, that has had or could reasonably be expected to have a Material Adverse Effect.

(d)The consolidated pro forma balance sheet of the Borrower and its Subsidiaries as at June 30, 2007, and the related consolidated pro forma statements of income and cash flows of the Borrower and its Subsidiaries for the six months then ended, certified by the chief financial officer or treasurer of the Borrower, copies of which have been furnished to the Administrative Agent, fairly present in all material respects the consolidated pro forma financial condition of the Borrower and its Subsidiaries as at such date and the consolidated pro forma results of operations of the Borrower and its Subsidiaries for the period ended on such date, in each case giving effect to the Transaction, all in accordance with GAAP.

(e)The consolidated forecasted balance sheet and statements of income and cash flows of the Borrower and its Subsidiaries delivered pursuant to Section 4.01 or Section 6.01(d) were prepared in good faith on the basis of the assumptions stated therein, which assumptions were believed to be reasonable in light of the conditions existing at the time of delivery of such forecasts.

5.06.Litigation.  There are no actions, suits, proceedings, claims or disputes pending or, to the knowledge of the Borrower, threatened, at law, in equity, in arbitration or before any Governmental Authority, by or against the Borrower or any of its Subsidiaries or against any of their properties or revenues that (a) purport to affect or pertain to this Agreement, any other Loan Document, any Related Document or the consummation of the Transaction, or (b) except as specifically disclosed in public filings prior to the date hereof, as to which there is a reasonable possibility of an adverse determination and that could reasonably be expected to have a Material Adverse Effect.

5.07.No Default.  Neither the Borrower nor any Subsidiary is in default under or with respect to any Contractual Obligation that could, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.  No Default has occurred and is continuing or would result from the consummation of the transactions contemplated by this Agreement or any other Loan Document.

5.08.Ownership of Property; Liens; Investments.  (a)  The Borrower and each of its Subsidiaries has good record title to, or valid leasehold, easement or other sufficient real property interests in, all real property necessary or used in the ordinary conduct of its business, except for such defects in title as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

(b)Schedule 7.01(i) sets forth a complete and accurate list as of the Closing Date of all Liens on the property or assets of the Borrower and each of its Subsidiaries, showing as of the date hereof the lienholder thereof, the principal amount of the obligations secured thereby and the property or assets of the Borrower or such Subsidiary subject thereto.

(c)Schedule 5.08(c) sets forth a complete and accurate list as of the Closing Date of the locations of all mines owned or leased by the Borrower or any of its Subsidiaries.

(d)To the best knowledge of the Borrower, the legal description attached as Exhibit A to each Mortgage accurately and completely describes the Mortgaged Property intended to be covered thereby.

(e)Schedule 7.03 sets forth a complete and accurate list as of the Closing Date of all Investments held by the Borrower and any of its Subsidiaries on the date hereof, showing as of the date hereof the amount, obligor or issuer and maturity, if any, thereof.

5.09.Environmental Compliance.  Except as disclosed in the Borrower’s most recent annual and quarterly reports filed with the SEC or on Schedule 5.09, or as otherwise could not reasonably be expected to have a Material Adverse Effect:

(a)The facilities and properties currently or formerly owned, leased or operated by the Borrower or any of its Subsidiaries (the “Properties”) do not contain, and have not previously contained, any Hazardous Materials in amounts or concentrations which (i) constitute or constituted a violation of, or (ii) could reasonably be expected to give rise to liability under, any applicable Environmental Law.

(b)None of the Borrower nor any of its Subsidiaries has received any notice of violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws with regard to any of the Properties or the business operated by the Borrower or any of its Subsidiaries

(the “Business”), or any prior business for which the Borrower has retained liability under any Environmental Law.

(c)Hazardous Materials have not been transported or disposed of from the Properties in violation of, or in a manner or to a location which could reasonably be expected to give rise to liability under, any applicable Environmental Law, nor have any Hazardous Materials been generated, treated, stored or disposed of at, on or under any of the Properties in violation of, or in a manner that could reasonably be expected to give rise to liability under, any applicable Environmental Law.

(d)No judicial proceeding or governmental or administrative action is pending or, to the knowledge of the Borrower, threatened under any Environmental Law to which the Borrower or any of its Subsidiaries is or, to the knowledge of the Borrower, will be named as a party or with respect to the Properties or the Business, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other similar administrative or judicial requirements outstanding under any Environmental Law with respect to the Properties or the Business.

(e)There has been no release or threat of release of Hazardous Materials at or from the Properties, or arising from or related to the operations of the Borrower or any of its Subsidiaries in connection with the Properties or otherwise in connection with the Business, in violation of or in amounts or in a manner that could reasonably be expected to give rise to liability under any applicable Environmental Laws.

(f)The Properties and all operations at the Properties are in compliance with all applicable Environmental Laws.

(g)The Borrower and each of its Subsidiaries (i) hold all Environmental Permits (each of which is in full force and effect and is not subject to appeal) required for any of their current operations or for the current ownership, operation or use of the Properties, including all Environmental Permits required for the coal mining-related operations of the Borrower or any of its Subsidiaries or any pending construction or expansion related thereto; (ii) are, or have been, in compliance with all Environmental Permits; and (iii) have used commercially reasonable efforts to cause all contractors, lessees and other Persons occupying, operating or using the mines on the Properties to comply with all Environmental Laws and obtain all Environmental Permits required for the operation of the mines.

(h)To the knowledge of the Borrower, none of the Properties have any associated direct or indirect acid mine drainage.

5.10.Mining.

(a)The Borrower and each of its Subsidiaries has, in the amounts and forms required pursuant to Environmental Law, obtained all performance bonds and surety bonds, or otherwise provided any financial assurance required under

Environmental Law for Reclamation or otherwise (collectively, “Mining Financial Assurances”).

(b)There have been no accidents, explosions, implosions, collapses or flooding at or otherwise related to the Properties that have, directly or indirectly, resulted in, or could reasonably be expected to result in, a Material Adverse Effect.

5.11.Insurance.  The properties of the Borrower and its Subsidiaries are insured with financially sound and reputable insurance companies which may be Affiliates of the Borrower, in such amounts (after giving effect to any self-insurance compatible with the following standards), with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses and owning similar properties in localities where the Borrower or the applicable Subsidiary operates.

5.12.Taxes.  The Borrower and its Subsidiaries have filed all Federal, state and other tax returns and reports required to be filed, and have paid all Federal, state and other Taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties, income or assets otherwise due and payable (other than those which are being contested in good faith by appropriate proceedings diligently conducted and for which adequate reserves have been provided in accordance with GAAP), except where the failure to do any of the foregoing could not reasonably be expected to result in a Material Adverse Effect; no material tax Lien has been filed and, to the knowledge of the Borrower, no material claim is being asserted or audit being conducted, with respect to any material Tax, fee or other charge of the Borrower or any of its Subsidiaries.  There is no proposed tax assessment against the Borrower or any Subsidiary that would, reasonably be likely to have a Material Adverse Effect.  Neither any Loan Party nor any Subsidiary thereof is party to any tax sharing agreement, other than the Tax Separation Agreement.  The Spin-Off will not be taxable to the Borrower, Peabody or any of their respective Subsidiaries or Affiliates.

5.13.ERISA Compliance.

(a)Except as could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect, each Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and other Federal or state Laws (except that with respect to any Multiemployer Plan which is a Plan, such representation is deemed made only to the knowledge of the Borrower).  With respect to each Plan, no “accumulated funding deficiency” (within the meaning of Section 412 of the Code) has occurred, and no application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Code has been made.

(b)There are no pending or, to the knowledge of the Borrower, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan that could reasonably be expected to have a Material Adverse Effect.  There has been no nonexempt “prohibited transaction” (as defined in Section 406 of

ERISA) or violation of the fiduciary responsibility rules with respect to any Plan that has resulted or could reasonably be expected to result in a Material Adverse Effect.

(c)Except as could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect: (i) No ERISA Event has occurred or is reasonably expected to occur; (ii) no Pension Plan has any Unfunded Pension Liability; (iii) neither the Borrower nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iv) neither the Borrower nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v) neither the Borrower nor any ERISA Affiliate has engaged in a transaction that could be subject to Section 4069 or 4212(c) of ERISA.

5.14.Subsidiaries; Equity Interests; Loan Parties.  As of the Closing Date, the Borrower has no Subsidiaries other than those specifically disclosed in Schedule 5.14, and all of the outstanding Equity Interests in such Subsidiaries have been validly issued, are fully paid and non-assessable and are owned by each Person in the percentages specified on Schedule 5.14 free and clear of all Liens except those created under the Collateral Documents or permitted by this Agreement and the other Loan Documents.  Schedule 5.14 indicates which subsidiaries are Loan Parties as of the Closing Date showing (as to each Loan Party) the jurisdiction of its incorporation, the address of its principal place of business and its U.S. taxpayer identification number or, in the case of any non-U.S. Loan Party that does not have a U.S. taxpayer identification number, its unique identification number issued to it by the jurisdiction of its incorporation.

5.15.Margin Regulations; Investment Company Act.  (a)  The Borrower is not engaged and will not engage, principally or as one of its important activities, in the business of purchasing or carrying margin stock (within the meaning of Regulation U issued by the FRB), or extending credit for the purpose of purchasing or carrying margin stock.  Following the application of the proceeds of each Borrowing or drawing under each Letter of Credit, not more than 25% of the value of the assets (either of the Borrower only or of the Borrower and its Subsidiaries on a consolidated basis) subject to the provisions of Section 7.01, Section 7.04 or Section 7.05 or subject to any restriction contained in any agreement or instrument between the Borrower and any Lender or any Affiliate of any Lender relating to Indebtedness and within the scope of Section 8.01(e) will be margin stock.

(b)None of the Borrower, any Person Controlling the Borrower, or any Subsidiary is or is required to be registered as an “investment company” under the Investment Company Act of 1940.

5.16.Disclosure.  No report, financial statement, certificate or other information furnished (in writing) by or on behalf of any Loan Party to the

Administrative Agent or any Lender in connection with the transactions contemplated hereby and the negotiation of this Agreement or delivered hereunder or under any other Loan Document, taken as a whole with any other information furnished or publicly available, contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not materially misleading as of the date when made or delivered; provided, that with respect to any forecast, projection or other statement regarding future performance, future financial results or other future developments, the Borrower represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time such information was prepared (it being understood that any such information is subject to significant uncertainties and contingencies, may of which are beyond the Borrower’s control, and that no assurance can be given that the future developments addressed in such information can be realized).

5.17.Compliance with Laws.  The Borrower and each Subsidiary thereof is in compliance in all material respects with the requirements of all Laws (including any zoning, building, ordinance, code or approval or any building or mining permits) and all orders, writs, injunctions and decrees applicable to it or to its properties, except in such instances in which (a) such requirement of Law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted or (b) the failure to comply therewith, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

5.18.Intellectual Property; Licenses, Etc.  The Borrower and each of its Subsidiaries own, or possess the right to use, all of the trademarks, service marks, trade names, copyrights, patents, patent rights, franchises, licenses and other intellectual property rights (collectively, “IP Rights”) that are reasonably necessary for the operation of their respective businesses, except where the failure to own or possess the right to use such IP Rights could not reasonably be expected to have a Material Adverse Effect.  To the best knowledge of the Borrower, the use of such IP Rights by the Borrower or any Subsidiary does not infringe upon any rights held by any other Person, except for any infringement that could not reasonably be expected to have a Material Adverse Effect.  Except as specifically disclosed in Schedule 5.18, no claim or litigation regarding any of the foregoing is pending or, to the best knowledge of the Borrower, threatened, which, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

5.19.Solvency.  (a)  As of the Closing Date, after giving effect to the Transaction on such date, the Borrower is together with its Subsidiaries on a consolidated basis, Solvent.

(b)The Borrower does not intend to, and does not believe that it or any of its Subsidiaries will, incur debts beyond its ability to pay such debts as they mature, taking into account the timing and amounts of cash to be received by it or any such Subsidiary and the timing and amounts of cash to be payable on or in respect of its Indebtedness or the Indebtedness of any such Subsidiary,

5.20.Casualty, Etc.  Neither the businesses nor the properties of the Borrower or any of its Subsidiaries have been affected by any fire, explosion, accident, strike, lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act of God or of the public enemy or other casualty (whether or not covered by insurance) that, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

5.21.Labor Matters.  Except as specifically disclosed on Schedule 5.21, there are no collective bargaining agreements or Multiemployer Plans covering the employees of the Borrower or any of its Subsidiaries as of the Closing Date. (a) As of the Closing Date, neither the Borrower nor any Subsidiary has suffered any strikes, walkouts, work stoppages or other material labor difficulty within the last five years, and (b) since the Closing Date, neither the Borrower not any subsidiary has suffered any strikes, walkouts, work stoppages or other material labor difficulty that could reasonably be expected to result in a Material Adverse Effect.

5.22.Collateral Documents.  The provisions of the Collateral Documents are effective to create in favor of the Administrative Agent for the benefit of the Secured Parties a legal, valid and enforceable Lien on all right, title and interest of the Collateral owned by the Loan Parties and described therein.  Except for filings contemplated hereby and by the Collateral Documents, no filing or other action will be necessary to perfect such Liens.

5.23.Use of Proceeds.  The Borrower will use the proceeds of the Loans solely as provided for in Section 6.11.

5.24.Coal Act; Black Lung Act.

(a)The Borrower, each of its Subsidiaries and its “related persons” (as defined in the Coal Act) are in compliance in all material respects with the Coal Act and any regulations promulgated thereunder, and none of the Borrower, its Subsidiaries or its related persons has any liability under the Coal Act, except as disclosed in the Borrower’s financial statements or which could reasonably be expected to have a Material Adverse Effect or with respect to premiums or other material payments required thereunder which have been paid when due.

(b)The Borrower and each of its Subsidiaries are in compliance in all material respects with the Black Lung Act, and neither the Borrower nor any of its Subsidiaries has either incurred any Black Lung Liability or assumed any other Black Lung Liability, except as disclosed in the Borrower’s financial statements or which could reasonably be expected to have a Material Adverse Effect or with respect to premiums, contributions or other material payments required thereunder which have been paid when due.

Appendix 2
to the Term  Sheet

Affirmative Covenants to be Incorporated

into the Bridge Facility2

Below are the affirmative covenants set forth in Article VI  of  that certain Credit Agreement, dated as of October 31, 2007, among the Company, the lenders party thereto, and Bank of America, N.A., as administrative agent thereunder, as amended as of the date hereof (the “Existing Credit Agreement”). Capitalized terms used and not otherwise defined herein are used with the meanings attributed thereto in (i) the Commitment Letter dated April 2, 2008 (the “Commitment Letter”), from ArcLight to the Company, of which this Appendix 2 forms an integral part, or (ii) the Existing Credit Agreement, in each case as appropriate.  All section references set forth below, or any use of the phrases “herein,” “hereunder,” or similar phrases, shall refer to the relevant sections of the Existing Credit Agreement.  For the avoidance of doubt, it is understood that the affirmative covenants contained in the Bridge Facility Documentation shall (i) with respect to the matters set forth below, be in the form set forth below, with such modifications as shall be necessary to give effect to the terms and conditions set forth in the Term Sheet, the Commitment Letter, the Fee Letter and, where applicable, to permit and give effect to the existence of the Existing Credit Agreement, and (ii) in the case of all other matters, be on Acceptable Bridge Terms.

So long as any Lender shall have any Commitment hereunder, any Loan or other Obligation hereunder shall remain unpaid or unsatisfied (other than in respect of contingent obligations, indemnities and expenses related thereto not then payable or in existence as of the later of the Maturity Date or the Letter of Credit Expiration Date), or any Letter of Credit shall remain outstanding, the Borrower shall, and shall (except in the case of the covenants set forth in Sections 6.01 and 6.02 (a) – (g)) cause each Subsidiary to:

6.01.Financial Statements.  Deliver to the Administrative Agent and each Lender, in form and detail reasonably satisfactory to the Administrative Agent:

(a)as soon as available, but in any event within 90 days after the end of each fiscal year of the Borrower (commencing with the fiscal year ended December 31, 2007), a consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such fiscal year, and the related consolidated statements of income or operations, changes in shareholders’ equity and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and prepared in accordance with GAAP, such consolidated statements to be audited and accompanied by a report and opinion of an independent certified public accountant of

______________ 

2 To conform to final amendment to the Existing Credit Agreement upon satisfactory review of the same by ArcLight and its counsel.

nationally recognized standing, which report and opinion shall be prepared in accordance with generally accepted auditing standards and shall not be subject to any “going concern” or like qualification or exception or any qualification or exception as to the scope of such audit; and

(b)as soon as available, but in any event within 45 days after the end of each of the first three fiscal quarters of each fiscal year of the Borrower (commencing with the fiscal quarter ended March 31, 2008), a consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such fiscal quarter, and the related consolidated statements of income or operations, changes in shareholders’ equity and cash flows for such fiscal quarter and for the portion of the Borrower’s fiscal year then ended, setting forth in each case in comparative form the figures for the corresponding fiscal quarter of the previous fiscal year and the corresponding portion of the previous fiscal year, all in reasonable detail, such consolidated statements to be certified by a Responsible Officer of the Borrower as fairly presenting in all material respects the financial condition, results of operations, changes in shareholders’ equity and cash flows of the Borrower and its Subsidiaries in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes.

As to any information contained in materials furnished pursuant to Section 6.02(d), the Borrower shall not be separately required to furnish such information under Section 6.01(a) or (b) above, but the foregoing shall not be in derogation of the obligation of the Borrower to furnish the information and materials described in Sections 6.01(a) and (b) above at the times specified therein.

6.02.Certificates; Other Information.  Deliver to the Administrative Agent, in form and detail reasonably satisfactory to the Administrative Agent:

(a)concurrently with the delivery of the financial statements referred to in Section 6.01(a), a certificate of its independent certified public accountants reporting on such financial statements and stating that in performing their audit nothing came to their attention that caused them to believe the Borrower failed to comply with the financial covenants set forth in Section 7.11, except as specified in such certificate;

(b)concurrently with the delivery of the financial statements referred to in Sections 6.01(a) and (b) (commencing with the delivery of the financial statements for the fiscal quarter ended March 31, 2008), a duly completed Compliance Certificate signed by a Responsible Officer of the Borrower,  which shall include detailed computations of the financial covenants;

(c)promptly after any request by the Administrative Agent, copies of any detailed audit reports, management letters or recommendations submitted to the board of directors (or the audit committee of the board of directors) of any Loan Party by independent accountants in connection with the accounts or books of the Borrower or any of its Subsidiaries, or any audit of any of them;

(d)promptly after the same are available, copies of each annual report, proxy or financial statement or other report or communication sent to the stockholders of the Borrower, and copies of all annual, regular, periodic and special reports and registration statements which the Borrower may file or be required to file with the SEC under Section 13 or 15(d) of the Securities Exchange Act of 1934, or with any national securities exchange, and in any case not otherwise required to be delivered to the Administrative Agent pursuant hereto;

(e)unless otherwise required to be delivered to the Lenders hereunder, promptly after the furnishing thereof, copies of any statement or report furnished to any holder of debt securities of any Loan Party or of any of its Subsidiaries pursuant to the terms of any indenture or similar agreement and not otherwise required to be furnished to the Lenders pursuant to Section 6.01 or any other clause of this Section 6.02;

(f)as soon as available, but in any event prior to the date audited financial statements are required to be delivered, a report summarizing the insurance coverage (specifying type, amount and carrier) in effect for each Loan Party and its Subsidiaries and containing such additional information as the Administrative Agent, or any Lender through the Administrative Agent, may reasonably specify;

(g)promptly, and in any event within five Business Days after receipt thereof by the Borrower or any Subsidiary, copies of each material notice or other correspondence received from the SEC (or comparable agency in any applicable non-U.S. jurisdiction) concerning any material investigation or possible material investigation or other material inquiry by such agency regarding financial or other operational results of the Borrower or any Subsidiary;

(h)unless otherwise required to be delivered to the Lenders hereunder, not later than ten days after receipt thereof by the Borrower or any Subsidiary, copies of all notices of default, non-compliance or any other material matters (excluding those delivered pursuant to the relevant agreement in the ordinary course of business), material requests and other material documents (including amendments, waivers and other modifications) so received under or pursuant to any Related Document and, from time to time upon request by the Administrative Agent, such other information and reports regarding the Related Documents as the Administrative Agent may reasonably request;

(i)as soon as available, but in any event within the time period in which the Borrower must deliver its annual audited financials under Section 6.01(a), a report supplementing Schedule 5.08(c), identifying all Material Owned Real Property and Material Leased Real Property acquired or disposed of by any Loan Party during such fiscal year;

(j)promptly, such additional information regarding the business, financial, legal or corporate affairs of the Borrower or any Subsidiary, or compliance

with the terms of the Loan Documents, as the Administrative Agent or any Lender may from time to time reasonably request;

(k)not later than 90 days after the end of each fiscal year of the Borrower, a copy of summary projections by the Borrower of the operating budget and cash flow budget of the Borrower and its Subsidiaries for the succeeding fiscal year, such projections to be accompanied by a certificate of a Responsible Officer to the effect that such projections have been prepared based on assumptions believed by the Borrower to be reasonable.

Documents required to be delivered pursuant to Section 6.01(a) or (b) or Section 6.02(d) (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which the Borrower posts such documents, or provides a link thereto on the Borrower’s website on the Internet at the website address listed on Schedule 10.02; (ii) on which such documents are posted on the Borrower’s behalf on an Internet or intranet website, if any, to which each Lender and the Administrative Agent have access (whether a commercial, third-party website or whether sponsored by the Administrative Agent); or (iii) on which such documents are filed for public availability of the SEC’s Electronic Data Gathering and Retrieval system; provided, that the Borrower shall notify the Administrative Agent and each Lender (by telecopier or electronic mail) of the posting of any such documents and provide to the Administrative Agent by electronic mail electronic versions (i.e., soft copies) of the documents required to be delivered pursuant to Section 6.01(a) or (b) or Section 6.02(a).  Notwithstanding anything contained herein, in every instance the Borrower shall be required to provide paper copies of the Compliance Certificates required by Section 6.02(b) to the Administrative Agent.  Except for such Compliance Certificates, the Administrative Agent shall have no obligation to request the delivery or to maintain copies of the documents referred to above, and in any event shall have no responsibility to monitor compliance by the Borrower with any such request for delivery, and each Lender shall be solely responsible for requesting delivery to it or maintaining its copies of such documents.

The Borrower hereby acknowledges that (a) the Administrative Agent and/or the Arranger will make available to the Lenders and the L/C Issuer materials and/or information provided by or on behalf of the Borrower hereunder (collectively, “Borrower Materials”) by posting the Borrower Materials on IntraLinks or another similar electronic system (the “Platform”) and (b) certain of the Lenders may be “public-side” Lenders (i.e., Lenders that do not wish to receive material non-public information with respect to the Borrower or its securities) (each, a “Public Lender”).  The Borrower hereby agrees that so long as the Borrower is the issuer of any outstanding debt or equity securities that are registered or issued pursuant to a private offering or is actively contemplating issuing any such securities (w) all Borrower Materials that are to be made available to Public Lenders shall be clearly and conspicuously marked “PUBLIC” which, at a minimum, shall mean that the word “PUBLIC” shall appear prominently on the first page thereof; (x) by

marking Borrower Materials “PUBLIC,” the Borrower shall be deemed to have authorized the Administrative Agent, the Arranger, the L/C Issuer and the Lenders to treat the Borrower Materials as not containing any material non-public information with respect to the Borrower or its securities for purposes of United States Federal and state securities laws (provided, however, that to the extent the Borrower Materials constitute Information, they shall be treated as set forth in Section 10.07); (y) all Borrower Materials marked “PUBLIC” are permitted to be made available through a portion of the Platform designated “Public Investor;” and (z) the Administrative Agent and the Arranger shall be entitled to treat the Borrower Materials that are not marked “PUBLIC” as being suitable only for posting on a portion of the Platform not designated “Public Investor.”  Notwithstanding the foregoing, the Borrower shall not be under any obligation to mark the Borrower Materials “PUBLIC.”  In connection with the foregoing, each party hereto acknowledges and agrees that the foregoing provisions are not in derogation of their confidentiality obligations under Section 10.07.

6.03.Notices.  Notify the Administrative Agent:

(a)promptly, of the occurrence of any Default or Event of Default;

(b)promptly, of any event which could reasonably be expected to have a Material Adverse Effect;

(c)of the occurrence of any ERISA Event that, individually, or in the aggregate, would be reasonably likely to have a Material Adverse  Effect, as soon as possible and in any event within 30 days after the Borrower knows or has obtained notice thereof;

(d)of any material change in accounting policies or financial reporting practices by any Loan Party or any Subsidiary thereof, including any determination by the Borrower referred to in Section 2.10(b);

(e)promptly after the occurrence thereof, notice of any Environmental Liability Claim against or by the Borrower or any of its Subsidiaries that could (i) reasonably be expected to have a Material Adverse Effect or (ii) cause any property described in the Mortgages to be subject to any additional material restrictions on ownership, occupancy, use or transferability under any Environmental Law;

(f)promptly after the occurrence thereof, notice of any accidents, explosions, implosions, collapses or flooding at or otherwise related to the Properties that result in (i) any fatality or (ii) the trapping of any Person in any mine for more than twenty-four hours; and

(g)promptly after the occurrence thereof, notice of any matter that could reasonably be expected to result in an injunction or the issuance of any closure order pursuant to any Environmental Law or pursuant to any Environmental Permit that

could reasonably be expected to directly or indirectly result in the closure or cessation of operation of any mine for a period of more than 5 consecutive days.

Each notice pursuant to this Section shall be accompanied by a statement of a Responsible Officer of the Borrower setting forth details of the occurrence referred to therein and stating what action the Borrower has taken and proposes to take with respect thereto.

6.04.Payment of Obligations.  Pay and discharge as the same shall become due and payable (a) all Tax liabilities, assessments and governmental charges or levies upon it or its properties or assets, unless the same are being contested in good faith by appropriate proceedings diligently conducted and adequate reserves in accordance with GAAP are being maintained by the Borrower or such Subsidiary, except where failure to do so could not reasonably be expected to result in a Material Adverse Effect; (b) all lawful claims which, if unpaid, would by law become a Lien upon any material portion of the Collateral; and (c) all Indebtedness, as and when due and payable, but subject to any subordination provisions contained in any instrument or agreement evidencing such Indebtedness, except where failure to do so could not reasonably be expected to result in a Material Adverse Effect.

6.05.Preservation of Existence, Etc.  With respect to the Borrower and each of its Subsidiaries, (a) preserve, renew and maintain in full force and effect its legal existence and good standing under the Laws of the jurisdiction of its organization except in a transaction permitted by Section 7.04 or 7.05; provided, however, that the Borrower and its Subsidiaries may consummate the Spin-Off; (b) take all reasonable action to maintain all rights, privileges, permits, licenses and franchises necessary for the normal conduct of its business, except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect; and (c) preserve or renew all of its registered patents, trademarks, trade names and service marks, the non-preservation of which could reasonably be expected to have a Material Adverse Effect.

6.06.Maintenance of Properties.  With respect to the Borrower and each of its Subsidiaries, maintain, preserve and protect all of its material properties and equipment necessary in the operation of its business in good working order and condition (ordinary wear and tear and damage by fire or other casualty or taking by condemnation excepted); except where the failure to do so could not reasonably be expected to have a Material Adverse Effect.

6.07.Maintenance of Insurance.  Maintain with financially sound and reputable insurance companies which may be Affiliates of the Borrower, insurance with respect to its properties and business against loss or damage of the kinds customarily insured against by Persons engaged in the same or similar business, of such types and in such amounts (after giving effect to any self-insurance compatible with the following standards) as are customarily carried by companies engaged in similar businesses and owning similar properties in localities where the Borrower or the applicable Subsidiary

operates, except to the extent the failure to do so could not reasonably be expected to have a Material Adverse Effect.  Without limiting the generality of the foregoing, the Borrower and its Subsidiaries will maintain or cause to be maintained (a) flood insurance with respect to each Flood Hazard Property that is located in a community that participates in the National Flood Insurance Program, in each case in compliance with any applicable regulations of the Board of Governors of the Federal Reserve System, (b) liability insurance, (c) business interruption insurance, and (d) replacement value casualty insurance on the Collateral under such policies of insurance, with such insurance companies, in such amounts, with such deductibles, and covering such risks as would be carried or maintained under similar circumstances by Persons of established reputation engaged in similar businesses.  Each such policy of insurance shall (i) name the Administrative Agent, on behalf of Secured Parties, as an additional insured thereunder as its interests may appear, (ii) in the case of each casualty insurance policy, contain a loss payable clause or endorsement, reasonably satisfactory in form and substance to the Administrative Agent, that names the Administrative Agent, on behalf of the Secured Parties, as the loss payee thereunder and provide for at least thirty days’ prior written notice to the Administrative Agent of any modification or cancellation of such policy.

6.08.Compliance with Laws.  Comply in all material respects with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its business or property, except in such instances in which (a) such requirement of Law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted; or (b) the failure to comply therewith could not reasonably be expected to have a Material Adverse Effect.

6.09.Books and Records.  (a) Maintain proper books of record and account, in which in all material respects full, true and correct entries in conformity with GAAP consistently applied shall be made of all material financial transactions and matters involving the assets and business of the Borrower or such Subsidiary, as the case may be; and (b) maintain such books of record and account in material conformity with all applicable requirements of any Governmental Authority having regulatory jurisdiction over the Borrower or such Subsidiary, as the case may be.

6.10.Inspection Rights.  Permit representatives and independent contractors of the Administrative Agent and each Lender to visit and inspect any of its properties, to examine its corporate, financial and operating records, and make copies thereof or abstracts therefrom (except to the extent (i) any such access is restricted by a Requirement of Law or (ii) any such agreements, contracts or the like are subject to a written confidentiality agreement with a non-Affiliate that prohibits the Borrower or any of its Subsidiaries from granting such access to the Administrative Agent or the Lenders; provided, that with respect to such confidentiality restrictions affecting the Borrower or any of its Subsidiaries, a Responsible Officer is made available to such Lender to discuss such confidential information to the extent permitted), and to discuss the business, finances and accounts with its officers and independent public accountants at such reasonable times during normal business hours and as often as may be reasonably

desired, provided, that the Administrative Agent or such Lender shall give Borrower reasonable advance notice prior to any contact with such accountants and give the Borrower the opportunity to participate in such discussions.

6.11.Use of Proceeds.  Use the proceeds of the Credit Extensions for working capital, capital expenditures and other general corporate purposes.

6.12.Covenant to Guarantee Obligations and Give Security.  (a) Upon the formation or acquisition of any new direct or indirect Guarantor Subsidiary by any Loan Party, then the Borrower shall, at the Borrower’s expense:

(i)within 30 days after such formation or acquisition, cause such Guarantor Subsidiary, to duly execute and deliver to the Administrative Agent a counterpart of the Subsidiary Guaranty, guaranteeing the other Loan Parties’ obligations under the Loan Documents;

(ii)within 30 days after such formation or acquisition, furnish to the Administrative Agent a description any Material Owned Real Property and Material Owned Leased Property of such Guarantor Subsidiary, in detail reasonably satisfactory to the Administrative Agent;

(iii)(A) cause such Guarantor Subsidiary to duly execute and deliver to the Administrative Agent within 90 days after such formation or acquisition, deeds of trust, trust deeds, deeds to secure debt and/or mortgages covering Material Owned Real Property of such Guarantor Subsidiary, (B) cause such Guarantor Subsidiary to duly execute and deliver to the Administrative Agent within 120 days after such formation or acquisition, leasehold mortgages or leasehold deeds of trust with respect to all Material Leased Real Property of such Guarantor Subsidiary where the terms of the lease of such Material Leased Property (or applicable state law, if such lease is silent on the issue) do not prohibit a mortgage thereof, (C) cause such Guarantor Subsidiary to use commercially reasonable efforts to duly execute and deliver to the Administrative Agent within 120 days after such formation or acquisition, leasehold mortgages or leasehold deeds of trust with respect to all Material Leased Real Property of such Guarantor Subsidiary where the terms of the lease of such Material Leased Property (or applicable state law, if such lease is silent on the issue) prohibit a mortgage thereof; provided, that the Borrower shall use commercially reasonable efforts to deliver estoppel and consent agreements executed by the lessors of such Material Leased Real Property; provided, further, that the Borrower shall (x) deliver the initial requested form of consent to the lessor within 30 days after such formation or acquisition and (y) initiate communications with the lessors on the status of all such consents within 60 days after such formation or acquisition; provided, however, that if any consent has not been executed and returned to the Administrative Agent in a form reasonably satisfactory to the Administrative Agent within 90 days after such formation or acquisition, then the Administrative

Agent shall determine in its reasonable discretion whether such Subsidiary Guarantor has satisfied its obligations hereunder or whether such Subsidiary Guarantor’s obligations hereunder shall be extended for an additional period of time to be determined by the Administrative Agent, and (D) cause such Guarantor Subsidiary to duly execute and deliver to the Administrative Agent within 60 days after such formation or acquisition, supplements to the Security Agreement, supplements to the Intellectual Property Security Agreements and other security and pledge agreements, in all such cases, as specified by and in form and substance reasonably satisfactory to the Administrative Agent (including delivery of all Pledged Interests in and of such Guarantor Subsidiary, and other instruments of the type specified in Section 4.01(a)(iii)), in all such cases to the same extent that such documents and instruments would have been required to have been delivered by Persons that were Guarantor Subsidiaries on the Closing Date, securing payment of all the Obligations of such Guarantor Subsidiary under the Loan Documents;

(iv)(A) within 60 days after such formation or acquisition in the case of personal property, (B) within 90 days after such formation or acquisition in the case of Material Owned Real Property, and (C) within 120 days after such formation or acquisition in the case of Material Leased Real Property, cause such Guarantor Subsidiary to take, or, in the case of Material Leased Real Property where the terms of the lease of such Material Leased Real Property (or applicable state law, if such lease is silent on the issue) prohibit a mortgage thereof, cause such Guarantor Subsidiary to use commercially reasonable efforts to take, whatever additional action (including the recording of mortgages, the filing of Uniform Commercial Code financing statements, the giving of notices and the endorsement of notices on title documents) may be necessary in the reasonable opinion of the Administrative Agent to vest in the Administrative Agent (or in any representative of the Administrative Agent designated by it) valid and subsisting Liens on the properties purported to be subject to the deeds of trust, trust deeds, deeds to secure debt and/or mortgages, leasehold mortgages or leasehold deeds of trust, supplements to the Security Agreement, supplements to the Intellectual Property Security Agreements and security and pledge agreements delivered pursuant to Section 6.12(a)(iii), enforceable against all third parties, in all such cases to the same extent that such action would have been required to have been taken by Persons that were Guarantor Subsidiaries on the Closing Date;

(v)deliver to the Administrative Agent, upon the request of the Administrative Agent in its reasonable discretion, a signed copy of an opinion, addressed to the Administrative Agent and the other Secured Parties, of counsel for the Loan Parties reasonably acceptable to the Administrative Agent (A) as to the validity and enforceability of the agreements entered into pursuant to clause (iii)(A) above, and as to such other related matters as the Administrative Agent may reasonably request, within 90 days after such formation or acquisition, (B) as to the validity and enforceability of the agreements entered into pursuant to clause

(iii)(B) and, to the extent a mortgage is filed thereon, (iii)(C) above, and as to such other related matters as the Administrative Agent may reasonably request, within 120 days after such formation or acquisition, and (C) as to the validity and enforceability of the agreements entered into pursuant to clauses (i) and (iii)(D) above, and as to such other related matters as the Administrative Agent may reasonably request, within 60 days after such formation or acquisition; and

(vi)(A) within 90 days after such formation or acquisition in the case of Material Owned Real Property and (B) within 120 days after such formation or acquisition in the case of Material Leased Real Property, cause such Guarantor Subsidiary to provide, or, in the case of Material Leased Real Property where the terms of the lease of such Material Leased Real Property (or applicable state law, if such lease is silent on the issue) prohibit a mortgage thereof, cause such Guarantor Subsidiary to use commercially reasonable efforts to provide, the Administrative Agent with a legal description of all Material Owned Real Property and Material Leased Real Property, as applicable, from which any As-Extracted Collateral (as defined in the Security Agreement) will be severed or to which As-Extracted Collateral (as defined in the Security Agreement) otherwise relates, together with the name of the record owner of such Material Owned Real Property or Material Leased Real Property, as applicable, the county in which such Material Owned Real Property or Material Leased Real Property, as applicable, is located and such other information as may be necessary or desirable to file real property related financing statements, deeds of trust, trust deeds, deeds to secure debt, mortgages, leasehold mortgages and/or leasehold deeds of trust under Section 9-502(b) or 9-502(c) of the UCC or any similar legal requirements.

(b)Upon the acquisition of any Material Owned Real Property or Material Leased Real  Property by any Loan Party other than pursuant to any acquisition covered by Section 6.12(a), the Borrower shall, at the Borrower’s expense:

(i)within 30 days after such acquisition, furnish to the Administrative Agent a description of the property so acquired in detail reasonably satisfactory to the Administrative Agent;

(ii)(A) with respect to Material Owned Real Property, cause the applicable Loan Party to duly execute and deliver to the Administrative Agent within 90 days after such acquisition, deeds of trust, trust deeds, deeds to secure debt and/or mortgages, (B) with respect to Material Leased Real Property where the terms of the lease of such Material Leased Real Property (or applicable state law, if such lease is silent on the issue) do not prohibit a mortgage thereof, cause the applicable Loan Party to duly execute and deliver to the Administrative Agent within 120 days after such acquisition, leasehold mortgages or leasehold deeds of trust, and (C) with respect to Material Leased Real Property where the terms of the lease of such Material Leased Real Property (or applicable state law, if such lease is silent on the issue) prohibit a mortgage thereof, cause the applicable Loan

Party to use commercially reasonable efforts to duly execute and deliver to the Administrative Agent within 120 days after such acquisition, leasehold mortgages or leasehold deeds of trust; provided, that the Borrower shall use commercially reasonable efforts to deliver estoppel and consent agreements executed by the lessors of such Material Leased Real Property; provided, further, that the Borrower shall (x) deliver the initial requested form of consent to the lessor within 30 days after such acquisition and (y) initiate communications with the lessors on the status of all such consents within 60 days after such acquisition; provided, however, that if any consent has not been executed and returned to the Administrative Agent in a form reasonably satisfactory to the Administrative agent within 90 days after such acquisition, then the Administrative Agent shall determine in its reasonable discretion whether such Subsidiary Guarantor has satisfied its obligations hereunder or whether such Subsidiary Guarantor’s obligations hereunder shall be extended for an additional period of time to be determined by the Administrative Agent, in the case of clauses (A), (B) and (C), in form and substance reasonably satisfactory to the Administrative Agent, securing payment of all the Obligations of the applicable Loan Party under the Loan Documents;

(iii)(A) within 90 days after such acquisition in the case of Material Owned Real Property, and (B) within 120 days after such formation or acquisition in the case of Material Leased Real Property, cause the applicable Loan Party to take, or, in the case of Material Leased Real Property where the terms of the lease of such Material Leased Real Property do not permit a mortgage thereof, cause such Loan Party to use commercially reasonable efforts to take, whatever additional action (including the recording of mortgages and the filing of Uniform Commercial Code financing statements) may be necessary in the reasonable opinion of the Administrative Agent to vest in the Administrative Agent (or in any representative of the Administrative Agent designated by it) valid and subsisting Liens on such property, enforceable against all third parties;

(iv)deliver to the Administrative Agent, upon the request of the Administrative Agent in its reasonable discretion, a signed copy of an opinion, addressed to the Administrative Agent and the other Secured Parties, of counsel for the Loan Parties acceptable to the Administrative Agent (A) as to the validity and enforceability of the Collateral Documents entered into pursuant to clause (ii)(A) above and as to such other related matters as the Administrative Agent may reasonably request, within 90 days after such acquisition and (B) as to the validity and enforceability of the Collateral Documents entered into pursuant to clause (ii)(B) and, to the extent a mortgage is filed thereon, (ii)(B) above and as to such other related matters as the Administrative Agent may reasonably request, within 120 days after such acquisition; and

(v)(A) within 90 days after such acquisition in the case of Material Owned Real Property and (B) within 120 days after such acquisition in

the case of Material Leased Real Property, cause such Guarantor Subsidiary to provide, or, in the case of Material Leased Real Property where the terms of the lease of such Material Leased Real Property (or applicable state law, if such lease is silent on the issue) prohibit a mortgage thereof, cause such Guarantor Subsidiary to use commercially reasonable efforts to provide, the Administrative Agent with a legal description of all Material Owned Real Property and Material Leased Real Property, as applicable, from which any As-Extracted Collateral (as defined in the Security Agreement) will be severed or to which As-Extracted Collateral (as defined in the Security Agreement) otherwise relates, together with the name of the record owner of such Material Owned Real Property or Material Leased Real Property, as applicable, the county in which such Material Owned Real Property or Material Leased Real Property, as applicable, is located and such other information as may be necessary or desirable to file real property related financing statements, deeds of trust, trust deeds, deeds to secure debt, mortgages, leasehold mortgages and/or leasehold deeds of trust under Section 9-502(b) or 9-502(c) of the UCC or any similar legal requirements.

(c)Use commercially reasonable efforts to not enter into any lease prohibiting the granting of any mortgage or other security interest thereon (and the exercise of remedies with respect thereto), in each case to the Administrative Agent for the benefit of the Secured Parties, with respect to any Material Leased Real Property acquired after the Closing Date.

The foregoing requirements of Section 6.12(a) and (b) shall not apply to (i) those assets over which the granting of security interests in such assets would be prohibited by contract, applicable law or regulation or, with respect to the assets of any non-wholly owned subsidiary, the organizational documents of such non-wholly owned subsidiary, (ii) payroll, tax and other trust accounts, and (iii) those assets as to which the Administrative Agent and the Borrower reasonably determine that the cost of obtaining such security interest or perfection thereof are excessive in relation to the benefit to the Lenders of the security to be afforded thereby.

6.13.Compliance with Environmental Laws.  (a) Comply, and use commercially reasonable efforts to cause all lessees and other Persons operating or occupying its properties to comply, in all material respects, with all applicable Environmental Laws and Environmental Permits; obtain and renew all Environmental Permits necessary for its operations and properties, except where the failure to so comply, obtain or renew could not reasonably be expected to have Material Adverse Effect; and (b) undertake and perform any cleanup, removal, remedial or other action necessary to remove and clean up all Hazardous Materials from any of its properties, in accordance with the requirements of all Environmental Laws, except where the failure to so undertake and perform could not reasonably be expected to have a Material Adverse Effect.

6.14.Preparation of Environmental Reports.  Not more often than once per Property during the term of this Agreement (or more frequently during the continuance of an Event of Default), at the reasonable request of the Administrative Agent, the Borrower shall provide to the Lenders within 60 days after such request, at the expense of the Borrower, an environmental or mining site assessment or audit report for any of its Properties described in such request, prepared by an environmental or mining consulting firm reasonably acceptable to the Administrative Agent and indicating the presence or absence of Hazardous Materials and the estimated cost of any compliance or remedial action in connection with such Properties and the estimated cost of curing any violation or non-compliance of any Environmental Law.

6.15.Further Assurances.  Promptly upon request by the Administrative Agent, or any Lender through the Administrative Agent, (a) correct any material defect or error that may be discovered in any Loan Document or in the execution, acknowledgment, filing or recordation thereof, and (b) do, execute, acknowledge, deliver, record, re-record, file, re-file, register and re-register any and all such further acts, deeds, certificates, assurances and other instruments as the Administrative Agent, or any Lender through the Administrative Agent, may reasonably require from time to time in order to (i) carry out more effectively the purposes of the Loan Documents, (ii) to the fullest extent permitted by applicable law, subject the Borrower’s or any of its Subsidiaries’ properties, assets, rights or interests to the Liens now or hereafter intended to be covered by any of the Collateral Documents, and (iii) perfect and maintain the validity, effectiveness and priority of any of the Collateral Documents and any of the Liens intended to be created thereunder.

6.16.Compliance with Terms of Leaseholds and Related Documents.  (a)  Make all payments and otherwise perform all obligations in respect of all leases of real property to which the Borrower or any of its Subsidiaries is a party, keep such leases in full force and effect and not allow such leases to lapse or be terminated or any rights to renew such leases to be forfeited or cancelled, except, in any case, where the failure to do so, either individually or in the aggregate, could not be reasonably likely to have a Material Adverse Effect.

(b)Make all payments and otherwise perform all obligations in respect of all Related Documents, keep such Related Documents in full force and effect and not allow such Related Documents to lapse or be terminated or any rights to renew such Related Documents to be forfeited or cancelled, except, in any case, where the failure to do so, either individually or in the aggregate, could not be reasonably likely to have a Material Adverse Effect.

6.17.[Reserved].

6.18.[Reserved].

6.19.Certain Long Term Liabilities and Environmental Reserves.  To the extent required by GAAP, maintain adequate reserves for (i) future costs associated with any lung disease claim alleging pneumoconiosis or silicosis or arising out of exposure or alleged exposure to coal dust or the coal mining environment, (ii) future costs associated with retiree and health care benefits, (iii) future costs associated with Reclamation of disturbed acreage, removal of facilities and other closing costs in connection with its mining operations and (iv) future costs associated with other potential Environmental Liabilities.

6.20.Mining Financial Assurances.  Maintain all material Mining Financial Assurances to the extent required pursuant to any Environmental Law.

6.21.Post-Closing Obligations.  Perform the obligations set forth on Schedule 6.21, as and when set forth therein.

Appendix 3
to the Term Sheet

Negative Covenants to be Incorporated

into the Bridge Facility3

Below are the negative covenants set forth in Article VII  of  that certain Credit Agreement, dated as of October 31, 2007, among the Company, the lenders party thereto, and Bank of America, N.A., as administrative agent thereunder, as amended as of the date hereof (the “Existing Credit Agreement”). Capitalized terms used and not otherwise defined herein are used with the meanings attributed thereto in (i) the Commitment Letter dated April 2, 2008 (the “Commitment Letter”), from ArcLight to the Company, of which this Appendix 3 forms an integral part, or (ii) the Existing Credit Agreement, in each case as appropriate.  All section references set forth below, or any use of the phrases “herein,” “hereunder,” or similar phrases, shall refer to the relevant sections of the Existing Credit Agreement.  For the avoidance of doubt, it is understood that the negative covenants contained in the Bridge Facility Documentation shall (i) with respect to the matters set forth below, be in the form set forth below, with such modifications as shall be necessary to give effect to the terms and conditions set forth in the Term Sheet, the Commitment Letter, the Fee Letter and, where applicable, to permit and give effect to the existence of the Existing Credit Agreement, and (ii) in the case of all other matters, be on Acceptable Bridge Terms.

So long as any Lender shall have any Commitment hereunder, any Loan or other Obligation hereunder shall remain unpaid or unsatisfied (other than in respect of contingent obligations, indemnities and costs and expenses related thereto not then payable or in existence as of the later of the Maturity Date or the Letter of Credit Expiration Date), or any Letter of Credit shall remain outstanding, the Borrower shall not, nor shall it permit any Subsidiary to, directly or indirectly:

7.01.Liens.  Create, incur, assume or suffer to exist any Lien upon, or exception to title to, any of its property, assets or revenues, whether now owned or hereafter acquired, or sign or file under the Uniform Commercial Code of any jurisdiction a financing statement that names the Borrower or any of its Subsidiaries as debtor, or assign any accounts or other right to receive income, other than the following:

(a)Liens pursuant to any Loan Document;

(b)(i) Liens existing on the date hereof and listed on Schedule 7.01(i) and (ii) Liens securing Indebtedness assumed by Merger Sub on the Merger Date in connection with the Magnum Acquisition and listed on Schedule 7.01(ii) and, in each case, any refinancing, refunding, renewal or extension thereof; provided, that (A) the

_____________ 

3 To conform to final amendment to the Existing Credit Agreement upon satisfactory review of the same by ArcLight and its counsel.

assets and other property subject thereto are not expanded from the assets and other property subject thereto immediately prior to the Merger Date, (B) such Lien shall secure only those obligations which it secures on the Merger Date and the principal amount secured or benefited thereby is not increased from the principal amount so secured or benefited thereby immediately prior to the Merger Date, and (C) any refinancing, refunding, renewal or extension of the obligations secured or benefited thereby is permitted by Section 7.02(c);

(c)Liens for Taxes not yet due or which are being contested in good faith and by appropriate proceedings, if adequate reserves with respect thereto are maintained on the books of the applicable Person in accordance with GAAP;

(d)carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other like Liens arising in the ordinary course of business which are not overdue for a period of more than 60 days or which are being contested in good faith and by appropriate proceedings, if adequate reserves with respect thereto are maintained on the books of the applicable Person;

(e)pledges or deposits in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other social security legislation and deposits securing liability to insurance carriers under insurance or self-insurance arrangements;

(f)(i) deposits to secure the performance of bids, trade contracts and leases (other than Indebtedness), reclamation bonds, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business and (ii) Liens on assets to secure obligations under surety bonds obtained as required in connection with the entering into of new federal coal leases;

(g)easements, covenants, conditions, rights-of-way, zoning restrictions, other restrictions and other similar encumbrances which, in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the applicable Person;

(h)Liens securing attachments or judgments for the payment of money not constituting an Event of Default under Section 8.01(h) or securing appeal or surety bonds related to such attachments or judgments;

(i)Liens securing Indebtedness of the Borrower and its Subsidiaries permitted by Section 7.02(e) incurred to finance the acquisition of fixed or capital assets; provided, that (i) such Liens shall be created substantially simultaneously with the acquisition of such fixed or capital assets, (ii) such Liens do not at any time encumber any property other than the property financed by such Indebtedness (other than after-

acquired title in or on such property and proceeds of the existing collateral in accordance with the instrument creating such Lien), (iii) the principal amount of Indebtedness secured by any such Lien shall at no time exceed 100% of the original purchase price of such property at the time it was acquired, and (iv) if the terms of such Indebtedness require any Lien hereunder to be subordinated to such Liens, then the Lien hereunder shall be subordinated on terms reasonably acceptable to the Administrative Agent;

(j)Liens on the property or assets of a Person which becomes a Guarantor Subsidiary after the date hereof securing Indebtedness permitted by Section 7.02 not to exceed $25,000,000 at any time outstanding, provided, that (i) such Liens existed at the time such entity became a Guarantor Subsidiary and were not created in anticipation thereof, (ii) any such Lien is not expanded to cover any other property or assets of such Person (other than the proceeds of the property or assets subject to such Lien) or of the Borrower or any Guarantor Subsidiary, (iii) the amount of Indebtedness secured thereby is not increased, and (iv) if the terms of such Indebtedness require any Lien hereunder to be subordinated to such Liens, then the Lien hereunder shall be subordinated on terms reasonably acceptable to the Administrative Agent;

(k)Liens on the property of the Borrower or any of its Subsidiaries, as a tenant under a lease or sublease entered into in the ordinary course of business by such Person, in favor of the landlord under such lease or sublease, securing the tenant’s performance under such lease or sublease, as such Liens are provided to the landlord under applicable law and not waived by the landlord;

(l)Liens arising from precautionary Uniform Commercial Code financing statement filings with respect to operating leases or consignment arrangements entered into by the Borrower or any of its Subsidiaries in the ordinary course of business;

(m)Liens securing Refinancing Indebtedness, to the extent that the Indebtedness being refinanced was originally secured in accordance with this Section 7.01, provided, that such Lien does not apply to any additional property or assets of the Borrower or any of its Subsidiaries (other than the proceeds of the property or assets subject to such Lien);

(n)Production Payments, royalties, dedication of reserves under supply agreements or similar rights or interests granted, taken subject to, or otherwise imposed on properties consistent with normal practices in the mining industry;

(o)leases, subleases, licenses and rights-of-use granted to others incurred in the ordinary course of business and that do not materially and adversely affect the use of the property encumbered thereby for its intended purpose;

(p)Liens in favor of a banking institution arising by operation of law or any contract encumbering deposits (including the right of set-off) held by such

banking institutions incurred in the ordinary course of business and which are within the general parameters customary in the banking industry;

(q)Liens on receivables and rights related to such receivables created pursuant to any Permitted Securitization Programs (to the extent that any such Disposition of receivables is deemed to give rise to a Lien);

(r)Liens on assets of the Borrower and its Subsidiaries that are not Collateral with a value (determined immediately prior to the incurrence of such Lien) in an aggregate amount (at actual cost, without adjustment for subsequent increases or decreases in the value of such asset) not in excess of $12,000,000 in the aggregate;

(s)Liens in favor of an escrow agent arising under an escrow arrangement incurred in connection with the issuance of notes with respect of the proceeds of such notes and anticipated interest expenses with respect to such notes;

(t)rights of owners of interests in overlying, underlying or intervening strata and/or mineral interests not owned by Borrower or on of its Subsidiaries, with respect to tracts of real property where the Borrower or applicable Subsidiary’s ownership is only surface or severed mineral or is otherwise subject to mineral severances in favor of one or more third parties;

(u)other defects and exceptions to title of real property where such defects or exceptions could not be reasonably be expected to have a Material Adverse Effect; and

(v)Liens securing Indebtedness under the Magnum Acquisition Credit Agreement; provided, that (A) such Liens do not encumber any property in which the Lenders do not have a perfected Lien securing the Obligations, (B) the principal amount secured or benefited thereby is not increased after the Amendment Effective Date (other than with respect to the capitalization of interest, if any), and (C) any refinancing, refunding, renewal or extension of the obligations secured or benefited thereby is permitted by Section 7.02(c).

7.02.Indebtedness.  Create, incur, assume or suffer to exist any Indebtedness, except:

(a)Indebtedness under the Loan Documents;

(b)(i) Indebtedness outstanding on the date hereof and listed on Schedule 7.02(i) and (ii) Indebtedness assumed by Merger Sub in connection with the Magnum Acquisition on the Merger Date and listed on Schedule 7.02(ii);

(c)any refinancings, refundings, renewals or extensions of Indebtedness permitted under Section 7.02(b) and Section 7.02(n); provided, that (i) the amount of such Indebtedness (the “Refinancing Indebtedness”) is not increased at the

time of such refinancing, refunding, renewal or extension except by an amount equal to a reasonable premium or other reasonable amount paid, and fees and expenses reasonably incurred, in connection with such refinancing and by an amount equal to any existing commitments unutilized thereunder, (ii) the direct or any contingent obligor with respect thereto is not changed, as a result of or in connection with such refinancing, refunding, renewal or extension and (iii) the terms relating to principal amount, amortization, maturity, collateral (if any) and subordination (if any), and other material terms taken as a whole, of any such refinancing, refunding, renewing or extending Indebtedness, and of any agreement entered into and of any instrument issued in connection therewith, are no less favorable in any material respect to the Loan Parties or the Lenders than the terms of any agreement or instrument governing the Indebtedness being refinanced, refunded, renewed or extended and the interest rate applicable to any such refinancing, refunding, renewing or extending Indebtedness does not exceed the then applicable market interest rate (as determined in good faith by the Board of Directors of the Borrower, or as determined by the Administrative Agent in the case of any refinancings, refundings, renewals or extensions of Indebtedness permitted under Section 7.02(n));

(d)Guarantees of the Borrower or any of its Subsidiaries in respect of Indebtedness otherwise permitted hereunder of the Borrower or any other Loan Party, other than Guarantees by Subsidiaries of the Borrower of Indebtedness permitted under Section 7.02(n);

(e)Indebtedness in respect of Capital Lease Obligations and purchase money obligations for fixed or capital assets within the limitations set forth in Section 7.01(i); provided, however, that the aggregate amount of all such Indebtedness at any one time outstanding shall not exceed 1.0% of Tangible Assets of the Loan Parties;

(f)Indebtedness in respect of Swap Contracts incurred in the ordinary course of business and consistent with prudent business practice;

(g)Indebtedness of the Borrower or any other Loan Party to any other Loan Party and of any non-Loan Party Subsidiary to any Loan Party or any other non-Loan Party; provided, that such Indebtedness must be subordinated to the Obligations on customary terms;

(h)Intercompany current liabilities incurred in the ordinary course of business of the Borrower and its Subsidiaries;

(i)Indebtedness incurred in connection with any Permitted Securitization Program in an aggregate principal amount not to exceed $50,000,000; and

(j)Indebtedness in respect of netting services, automatic clearinghouse arrangements, overdraft protections and similar arrangements in each case in connection with deposit accounts and in the ordinary course of business;

(k)Indebtedness representing deferred or equity compensation to employees of the Borrower or any of its Subsidiaries incurred in the ordinary course of business;

(l)Indebtedness in an aggregate principal amount not to exceed 5% of Tangible Assets of the Borrower and its Subsidiaries at any time outstanding; provided, that (i) the covenants and events of default of such Indebtedness are, as a whole, no more restrictive to the obligors or the lenders thereon than the Revolving Credit Loans and (ii) such Indebtedness shall not be Guaranteed by any Subsidiary of the Borrower that is not a Subsidiary Guarantor hereunder;

(m)Indebtedness in the form of bank guaranties, bid, performance, reclamation bonds, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business, in an aggregate amount not to exceed $400,000,000; provided that such Indebtedness described in this clause (m) is not secured by any Lien other than a Lien on cash described in Section 7.01(f); and

(n)subject to the consummation of the Magnum Acquisition, Indebtedness incurred by the Borrower under the Magnum Acquisition Credit Agreement.

7.03.Investments.  Make or hold any Investments, except:

(a)Investments held by the Borrower or any of its Subsidiaries in the form of Cash Equivalents;

(b)advances to officers, directors and employees of the Borrower and Subsidiaries in an aggregate amount not to exceed $500,000 at any time outstanding, for travel, entertainment, relocation and analogous ordinary business purposes;

(c)Investments consisting of extensions of credit in the nature of accounts receivable or notes receivable arising from the grant of trade credit in the ordinary course of business, and Investments received in satisfaction or partial satisfaction thereof from financially troubled account debtors to the extent reasonably necessary in order to prevent or limit loss;

(d)Investments (including debt obligations and Equity Interests) received in satisfaction of judgments or in connection with the bankruptcy or reorganization of suppliers and customers of the Borrower and its Subsidiaries and in settlement of delinquent obligations of, and other disputes with, such customers and suppliers arising in the ordinary course of business;

(e)Investments in the nature of Production Payments, royalties, dedication of reserves under supply agreements or similar rights or interests granted,

taken subject to, or otherwise imposed on properties with normal practices in the mining industry;

(f)Investments existing on the date hereof and set forth on Schedule 7.03 and extensions, renewals, modifications, restatements or replacements thereof; provided, that no such extension, renewal, modification or restatement shall increase the amount of the original loan, advance or investment, except by an amount equal to any premium or other reasonable amount paid in respect of the underlying obligations and fees and expenses incurred in connection with such replacement, renewal or extension;

(g)promissory notes and other similar non-cash consideration received by the Borrower and its Subsidiaries in connection with Dispositions not otherwise prohibited under this Agreement;

(h)Investments in any assets constituting a business unit received by the Borrower or its Subsidiaries by virtue of an asset exchange or swap with a third party or acquired as a capital expenditure;

(i)Swap Contracts permitted under Section 7.02(f);

(j)Investments by the Borrower or its Subsidiaries in any Loan Party or entity that becomes a Loan Party as a result of such Investment and Investments by any non-Loan Party in any other non-Loan Party; provided, that if the Investment is in the form of Indebtedness, such Indebtedness must be permitted pursuant to Section 7.02(g);

(k)Permitted Acquisitions;

(l)Investments by the Borrower or its Subsidiaries to acquire the remaining 18.5% of Capital Stock of KE Ventures, LLC in an aggregate principal amount not to exceed $34,000,000;

(m)Investments by the Borrower or any of its Subsidiaries not otherwise permitted under this Section 7.03 in an aggregate amount not in excess of 2.5% of Tangible Assets of the Borrower and Subsidiaries; and

(n)the Magnum Acquisition.

7.04.Fundamental Changes.  Merge, dissolve, liquidate, consolidate with or into another Person, or Dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to or in favor of any Person, except that, so long as no Default exists or would result therefrom:

(a)any Subsidiary may merge with (i) the Borrower, provided, that the Borrower shall be the continuing or surviving Person, or (ii) any one or more other

Subsidiaries, provided, that when any Subsidiary that is a Loan Party is merging with another Subsidiary, the Loan Party shall be the continuing or surviving Person;

(b)any Subsidiary may Dispose of all or substantially all of its assets (upon voluntary liquidation or otherwise) to the Borrower or to another Subsidiary; provided, that if the transferor in such a transaction is a Loan Party, then the transferee must either be the Borrower or another Loan Party;

(c)the Borrower and any Subsidiary may merge or consolidate with any other Person in a transaction in which the Borrower is the surviving or continuing Person;

(d)the Borrower and its Subsidiaries may consummate the Spin-Off; and

(e)the Borrower and its Subsidiaries may consummate any transaction that would be permitted as an Investment under Section 7.03.

7.05.Dispositions.  Make any Disposition or enter into any agreement to make any Disposition, except:

(a)Dispositions of used, worn out, obsolete or surplus property by the Borrower or any of its Subsidiaries in the ordinary course of business or the abandonment or allowance to lapse or expire or other Disposition of Intellectual Property in the ordinary course of business that is, in the reasonable judgment of the Borrower, no longer economically practicable to maintain or useful in the conduct of the Borrower and its Subsidiaries taken as a whole;

(b)Dispositions of inventory in the ordinary course of business;

(c)Dispositions of equipment or real property to the extent that (i) such property is exchanged for credit against the purchase price of similar replacement property or (ii) the proceeds of such Disposition are reasonably promptly applied to the purchase price of such replacement property;

(d)Dispositions of property by any Subsidiary to the Borrower or to a wholly-owned Subsidiary; provided, that if the transferor of such property is a Loan Party, the transferee thereof must either be the Borrower or a another Loan Party;

(e)Dispositions permitted by Section 7.04;

(f)Dispositions by the Borrower and its Subsidiaries of property pursuant to sale-leaseback transactions, provided, that the book value of all property so Disposed of, from and after the Closing Date, shall not exceed 2.0% of Tangible Assets;

(g)Dispositions by the Borrower and its Subsidiaries not otherwise permitted under this Section 7.05; provided, that (i) at the time of such Disposition, no Default shall exist or would result from such Disposition, and (ii) the aggregate book value of all property Disposed of in reliance on this clause (g) in any fiscal year shall not exceed 2.5% of Tangible Assets;

(h)so long as no Default shall occur and be continuing, the grant of any option or other right to purchase any asset in a transaction that would be permitted under the provisions of this Section 7.05;

(i)leases, subleases, assignments, licenses, sublicenses of real or personal property or Intellectual Property in the ordinary course of business and in accordance with the applicable Collateral Documents; provided, however, that any license or sublicense of intellectual property shall be on the non-exclusive basis;

(j)sales or discounts (without recourse) of accounts receivable arising in the ordinary course of business in connection with the compromise of collection thereof;

(k)sales, transfers and other dispositions of Investments in joint ventures to the extent required by, or make pursuant to customary buy/sell arrangement between, the joint venture parties set forth in joint venture arrangements and similar binding arrangements;

(l)transfers of property subject to casualty or condemnation events upon receipt of the Net Cash Proceeds constituting and Extraordinary Receipt; and

(m) Permitted Securitization Programs.

provided, however, that any Disposition pursuant to Section 7.05(a), (b), (c), (f), (g), (l), and (m) shall be for fair market value.

7.06.Restricted Payments.  Declare or make, directly or indirectly, any Restricted Payment, except that, so long as no Default shall have occurred and be continuing at the time of any action described below or would result therefrom:

(a)each Subsidiary may make Restricted Payments to the Borrower, the Subsidiary Guarantors and any other Person that owns a direct Equity Interest in such Subsidiary, ratably according to their respective holdings of the type of Equity Interest in respect of which such Restricted Payment is being made;

(b)the Borrower and each Subsidiary may declare and make dividend payments or other distributions payable solely in the common stock or other Equity Interests of such Person;

(c)the Borrower and each Subsidiary may purchase, redeem or otherwise acquire Equity Interests issued by it with the proceeds received from the substantially concurrent issue of new shares of its common Equity Interests;

(d)the Borrower may declare or pay cash dividends to its stockholders and purchase, redeem, or otherwise acquire for cash Equity Interests issued by it solely out of 25% of consolidated net income of the Borrower and its Subsidiaries arising after December 31, 2008 and computed on a cumulative consolidated basis with other such transactions by the Borrower since such date; provided, that at the time of such declaration (in the case of dividends) or the date of any such Restricted Payment (in the case of any other Restricted Payment), and after giving effective thereto, no Default shall have occurred and be continuing and the Borrower is in compliance with the financial covenants set forth in Section 7.11; and

(e)the Borrower or any of its Subsidiaries may purchase (i) Equity Interests in any Loan Party or options with respect thereto held by directors, officers or employees of the Borrower or any Subsidiary (or their estates or authorized representatives) in connection with the death, disability or termination of employment of any such director, officer or employee and (ii) Equity Interests in any Loan Party for future issuance under any employee stock plan.

7.07.Change in Nature of Business.  Engage in any material line of business other than a Similar Business.

7.08.Transactions with Affiliates.  Enter into any transaction of any kind with any Affiliate, including, without limitation, any purchase, sale, lease or exchange of property or the rendering of any service, unless such transaction is (a) not prohibited by this Agreement and (b) upon fair and reasonable terms substantially as favorable to the Borrower or such Subsidiary as would be obtainable by the Borrower or such Subsidiary at the time in a comparable arm’s length transaction with a Person other than an Affiliate.  The foregoing restrictions shall not apply to the following:

(a)transactions between or among the Borrower and any other Loan Parties or between and among any Loan Parties;

(b)the payment of reasonable and customary fees and reimbursement of expenses payable to directors of the Borrower or any Subsidiary or to any Plan, Plan administrator or Plan trustee;

(c)loans and advances to directors, officers and employees to the extent permitted by Section 7.03;

(d)arrangements with respect to the procurement of services of directors, officers, independent contractors, consultants or employees in the ordinary course of business and the payment of customary compensation (including bonuses) and

other benefits (including retirement, health, stock option and other benefit plans) and reasonable reimbursement arrangements in connection therewith;

(e)payments to directors and officers of the Borrower and its Subsidiaries in respect of the indemnification of such Persons in such respective capacities from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements, as the case may be, pursuant to the Organization Documents or other corporate action of the Borrower or its Subsidiaries, respectively, or pursuant to applicable law; and

(f)Restricted Payments permitted by Section 7.06.

7.09.Burdensome Agreements.  Enter into any Contractual Obligation (other than this Agreement or any other Loan Document) that (a) limits the ability (i) of any Subsidiary to make Restricted Payments to the Borrower or any Subsidiary Guarantor or to otherwise transfer property to or invest in the Borrower or any Subsidiary Guarantor, unless such Contractual Obligations could not reasonably be expected to materially hinder the Borrower’s ability to meet its obligations under this Agreement.

7.10.Use of Proceeds.  Use the proceeds of any Credit Extension, whether directly or indirectly, and whether immediately, incidentally or ultimately, to purchase or carry margin stock (within the meaning of Regulation U of the FRB) or to extend credit to others for the purpose of purchasing or carrying margin stock or to refund indebtedness originally incurred for such purpose.

7.11.Financial Covenants.  (a)  Consolidated Interest Coverage Ratio.  Permit the Consolidated Interest Coverage Ratio as of the end of any fiscal quarter of the Borrower, commencing with the fiscal quarter ending March 31, 2008, for the period of four consecutive fiscal quarters of the Borrower ending on such date to be less than 4.00:1.00; provided, that (i) the Consolidated Interest Coverage Ratio for the fiscal quarter ending March 31, 2008, shall be measured for such fiscal quarter only, (ii) the Consolidated Interest Coverage Ratio for the fiscal quarter ending June 30, 2008, shall be measured for a period of two consecutive fiscal quarters of the Borrower ending on such date, and (iii) the Consolidated Interest Coverage Ratio for the fiscal quarter ending September 30, 2008, shall be measured for a period of three consecutive fiscal quarters of the Borrower ending on such date.

(b)Consolidated Leverage Ratio.  Permit the Consolidated Leverage Ratio as of the end of any fiscal quarter of the Borrower, commencing with the fiscal quarter ending March 31, 2008, for any period of four consecutive fiscal quarters of the Borrower ending on such date to be greater than 2.75:1.00.

7.12.Capital Expenditures.  Make or become legally obligated to make any Capital Expenditure, except for Capital Expenditures in the ordinary course of

business not exceeding, in the aggregate for the Borrower and its Subsidiaries during each fiscal year set forth below, the amount set forth opposite such fiscal year:

Fiscal Year	Amount
2008	$220,000,000
2009	$235,000,000
2010	$220,000,000
2011	$220,000,000

provided, however, that so long as no Default has occurred and is continuing or would result from such expenditure, any portion of any amount set forth above, if not expended in the fiscal year for which it is permitted above, may be carried over for expenditure in the next following fiscal year; and provided, further, if any such amount is so carried over, it will be deemed used in the applicable subsequent fiscal year before the amount set forth opposite such fiscal year above

7.13.Amendments of Organization Documents.  Amend any of its Organization Documents in any respect materially adverse to the Lenders.

7.14.Accounting Changes.  Make any change in (a) its accounting policies or reporting practices, except as required or permitted by GAAP, or (b) its fiscal year.

7.15.Prepayments, Etc. of Indebtedness.  If an Event of Default under Sections 8.01(a) or (b) (only with respect to an Event of Default under Section 7.11) shall have occurred and be continuing, voluntarily prepay, redeem, purchase, defease or otherwise satisfy prior to the scheduled maturity thereof in any manner, or make any payment in violation of any subordination terms of, any Indebtedness, except (a) the prepayment of the Credit Extensions in accordance with the terms of this Agreement and (b) regularly scheduled or required repayments or redemptions of Indebtedness set forth in Schedule 7.02(i) and refinancings and refundings of such Indebtedness in compliance with Section 7.02(c).

7.16.Amendment, Etc. of Related Documents and Indebtedness.  (a)  Cancel or terminate any Related Document or consent to or accept any cancellation or termination thereof, other than in accordance with its terms (b) amend, modify or change in any manner any term or condition of any Related Document or give any consent, waiver or approval thereunder, (c) waive any default under or any breach of any term or condition of any Related Document, (d) take any other action in connection with any Related Document, in the case of each of clauses (a) through (d), that would materially impair the value of the interest or rights of any Loan Party thereunder or that would materially impair the ability of the Lenders to be repaid hereunder or (e) if an Event of Default under Sections 8.01(a) or (b) (only with respect to an Event of Default under Section 7.11) shall have occurred and be continuing, amend, modify or change in any

manner any term or condition of any Indebtedness set forth in Schedule 7.02(i), except for any refinancing, refunding, renewal or extension thereof permitted by Section 7.02(c).

7.17.Limitation on Negative Pledge Clauses.  Enter into any Contractual Obligation (other than this Agreement or any other Loan Document) that limits the ability of the Borrower or any Subsidiary Guarantor to create, incur, assume or suffer to exist any Lien upon any of its property to secure the Obligations hereunder; provided, however, that the foregoing clause shall not apply to Contractual Obligations which:

(a)exist on the date hereof and (to the extent not otherwise permitted by this Section 7.17) are listed on Schedule 7.17 hereto;

(b)are binding on a Subsidiary at the time such Subsidiary first becomes a Subsidiary of the Borrower, so long as such Contractual Obligations were not entered into solely in contemplation of such Person becoming a Subsidiary of the Borrower;

(c)arise in connection with any Lien permitted by Section 7.01 to the extent such restrictions relate solely to the assets (and any proceeds in respect thereof) which are the subject of such Lien;

(d)represent Indebtedness permitted by Section 7.02 (b), (c), (d), (e), (k) and (l); provided, that such Indebtedness shall not conflict with (i) any terms of this Agreement, any other Loan Document or the terms of any other Indebtedness and (ii) the Borrower’s obligation to grant Liens to the Administrative Agent for the benefit of the Secured Parties in Collateral acquired after the Closing Date in accordance with the terms of the Loan Documents;

(e)represent secured Indebtedness permitted by Section 7.01(j) to the extent that such restrictions apply only to the Subsidiaries incurring or guaranteeing such Indebtedness (and the Subsidiaries of such Subsidiaries);

(f)arise in connection with any Disposition permitted by Section 7.05, with respect to the assets so Disposed;

(g)are customary provisions in joint venture agreements and other similar agreements applicable solely to such joint venture or the Equity Interests therein;

(h)are customary restrictions on leases, subleases, licenses or asset sale agreements otherwise permitted hereby so long as such restrictions relate to the assets subject thereto;

(i)are customary provisions restricting subletting or assignment of any lease governing a leasehold interest of the Borrower or any Subsidiary;

(j)are customary limitations (including financial maintenance covenants) existing under or by reason of leases entered into in the ordinary course of business;

(k)are restrictions on cash or other deposits imposed under contracts entered into in the ordinary course of business;

(l)are customary provisions restricting assignment of any agreements;

(m)are restrictions imposed by any agreement relating to any Permitted Securitization Program to the extent that such restrictions relate to the assets (and any proceeds in respect thereof) that are the subject of such Permitted Securitization Program; or

(n)are set forth in any agreement evidencing an amendment, modification, restatement, renewal, increase, supplement, refunding, replacement or refinancing of the Contractual Obligations referred to in clauses (a) through (l) above; provided, that such amendment, modification, restatement, renewal, increase, supplement, refunding, replacement or refinancing is, in the good faith judgment of the Borrower, not materially less favorable to the Loan Parties and the Lenders with respect to such limitations than those applicable pursuant to such Contractual Obligations prior to such amendment, modification, restatement, renewal, increase, supplement, refunding, replacement or refinancing.

Appendix 4
to the Term  Sheet

Events of Default to be Incorporated

into the Bridge Facility4

Below are the Events of Default set forth in Section 8.01 of  that certain Credit Agreement, dated as of October 31, 2007, among the Company, the lenders party thereto, and Bank of America, N.A., as administrative agent thereunder, as amended as of the date hereof (the “Existing Credit Agreement”). Capitalized terms used and not otherwise defined herein are used with the meanings attributed thereto in (i) the Commitment Letter dated April 2, 2008 (the “Commitment Letter”), from ArcLight to the Company, of which this Appendix 4 forms an integral part, or (ii) the Existing Credit Agreement, in each case as appropriate.  All section references set forth below, or any use of the phrases “herein,” “hereunder,” or similar phrases, shall refer to the relevant sections of the Existing Credit Agreement.  For the avoidance of doubt, it is understood that the Events of Default contained in the Bridge Facility Documentation shall (i) with respect to the matters set forth below, be in the form set forth below, with such modifications as shall be necessary to give effect to the terms and conditions set forth in the Term Sheet, the Commitment Letter, the Fee Letter and, where applicable, to permit and give effect to the existence of the Existing Credit Agreement, and (ii) in the case of all other matters, be on Acceptable Bridge Terms.

8.01.Events of Default.  Any of the following shall constitute an Event of Default:

(a)Non-Payment.  The Borrower or any other Loan Party fails to pay (i) when and as required to be paid herein, any amount of principal of any Loan or any L/C Obligation or (ii) within three days after the same becomes due, any interest on any Loan or on any L/C Obligation, any fee due hereunder, or any other amount payable hereunder or under any other Loan Document; or

(b)Specific Covenants.  (i) The Borrower fails to perform or observe any term, covenant or agreement contained in any of Sections 6.03(a), 6.03(b), 6.03(c), 6.05(a), 6.07, 6.08, 6.10, 6.11, 6.12, 6.15, 6.16, 6.20, 6.21 or Article VII, (ii) any of the Subsidiary Guarantors fails to perform or observe any term, covenant or agreement contained in Section IV of the Subsidiary Guaranty (but only to the extent it relates to a default under one of the covenants listed in clause (i) above) or (iii) any of the Loan Parties fails to perform or observe any term, covenant or agreement contained in Section 4 of the Security Agreement; or

___________ 

4 To conform to final amendment to the Existing Credit Agreement upon satisfactory review of the same by ArcLight and its counsel.

(c)Other Defaults.  Any Loan Party fails to perform or observe any other covenant or agreement (not specified in Section 8.01(a) or (b) above) contained in any Loan Document on its part to be performed or observed and such failure continues for 30 days; or

(d)Representations and Warranties.  Any representation, warranty, certification or statement of fact made or deemed made by or on behalf of the Borrower or any other Loan Party herein, in any other Loan Document, or in any document delivered in connection herewith or therewith shall be incorrect or misleading in any material respect when made or deemed made; or

(e)Cross-Default.  (i) The Borrower or any Subsidiary (A) fails to make any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) in respect of any Indebtedness or Guarantee (other than Indebtedness hereunder, Indebtedness under Swap Contracts or Guarantees of the Obligations), in each case having an aggregate principal amount (including undrawn committed or available amounts and including amounts owing to all creditors under any combined or syndicated credit agreement) of more than the Threshold Amount, beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness or Guarantee was created or (B) fails to observe or perform any other agreement or condition relating to any such Indebtedness or Guarantee or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event occurs, the effect of which default or other event is to permit the holder or holders of such Indebtedness or the beneficiary or beneficiaries of such Guarantee (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity, or such Guarantee to become due or payable; (ii) there occurs under any Swap Contract an Early Termination Date (as defined under such Swap Contract) resulting from (A) any event of default under such Swap Contract as to which a Loan Party or any Subsidiary thereof is the Defaulting Party (as defined in such Swap Contract) or (B) any Termination Event (as so defined) under such Swap Contract as to which a Loan Party or any Subsidiary thereof is an Affected Party (as so defined) and, in either event, the Swap Termination Value owed by such Loan Party or such Subsidiary as a result thereof is greater than the Threshold Amount; or (iii) there occurs under any of the Coal Supply Agreements, the Coal Supply Agreement I, the Coal Supply Agreement II, or any Liability Assumption Agreement an early termination of such agreement for any reason which could reasonably be expected to have an adverse effect on any Loan Party or that would impair the ability of the Lenders to be repaid in full hereunder.

(f)Insolvency Proceedings, Etc.  The Borrower or any of its Subsidiaries institutes or consents to the institution of any proceeding under any Debtor Relief Law, or makes an assignment for the benefit of creditors; or applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer for it or for all or any substantial part of its property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is

appointed without the application or consent of such Person and the appointment continues undischarged or unstayed for 60 calendar days; or any proceeding under any Debtor Relief Law relating to any such Person or to all or any substantial part of its property is instituted without the consent of such Person and continues undismissed or unstayed for 60 calendar days, or an order for relief is entered in any such proceeding; or

(g)Inability to Pay Debts; Attachment.  (i) The Borrower or any of its Subsidiaries becomes unable or admits in writing its inability or fails generally to pay its debts as they become due, or (ii) any writ or warrant of attachment or execution or similar process is issued or levied against all or any substantial part of the property of any such Person and is not released, vacated or fully bonded within 60 days after its issue or levy; or

(h)Judgments.  There is entered against the Borrower or any of its Subsidiaries one or more final judgments or orders for the payment of money in an aggregate amount (as to all such judgments and orders) exceeding the Threshold Amount (to the extent not covered by independent third-party insurance), and, such judgments or orders shall not have been vacated, discharged, stayed or bonded pending appeal within 60 days from the entry thereof; or

(i)ERISA.  (i) The occurrence of any of the following events that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect: (i) an ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan which has resulted or could reasonably be expected to result in an actual obligation to pay money of the Borrower under Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC or (ii) the Borrower or any ERISA Affiliate fails to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan; or

(j)Invalidity of Loan Documents.  Any Loan Document, at any time after its execution and delivery and for any reason other than as expressly permitted hereunder or satisfaction in full of all the Obligations, ceases to be in full force and effect; or any Loan Party or any other Person contests in any manner the validity or enforceability of any Loan Document; or any Loan Party denies that it has any or further liability or obligation under any Loan Document, or purports to revoke, terminate or rescind any Loan Document; or

(k)Change of Control.  There occurs any Change of Control;

(l)Collateral Documents.  Any Collateral Document after delivery thereof pursuant to Section 4.01 or 6.12 shall for any reason (other than pursuant to the terms hereof or thereof, including as a result of a transaction permitted by Section 7.04 or 7.05) cease to create a valid and perfected Lien, with the priority required hereby or thereby (subject to Liens permitted by Section 7.01), on the Collateral purported to be

covered thereby, except to the extent that any such loss of perfection or priority results from the failure of the Administrative Agent to maintain possession of certificates actually delivered to it representing securities pledged under the Collateral Documents or to file UCC continuation statements and except as to Collateral consisting of real property to the extent that such losses are covered by a lender’s title insurance policy and such insurer has not denied or failed to acknowledge coverage; or

(m)Tax Matters.  (i) The Spin-Off fails to qualify under Section 355 of the Code, (ii) the Capital Stock of Borrower distributed in connection with the Spin-Off fails to be treated as qualified property pursuant to Section 355(e) of the Code or (iii) the contribution of assets by Peabody to Borrower in connection with the Spin-Off fails to qualify under Section 368 of the Code or Peabody recognizes any gain in connection with such contribution.

Appendix 5
to the Term Sheet

Definitions to be Incorporated

into the Bridge Facility5

Below are certain Definitions set forth in Section 1.01 of that certain Credit Agreement, dated as of October 31, 2007, among the Company, the lenders party thereto, and Bank of America, N.A., as administrative agent thereunder, as amended as of the date hereof (the “Existing Credit Agreement”).  Capitalized terms used and not otherwise defined herein are used with the meanings attributed thereto in (i) the Commitment Letter dated April 2, 2008 (the “Commitment Letter”), from ArcLight to the Company, of which this Appendix 5 forms an integral part, or (ii) the Existing Credit Agreement, in each case as appropriate.  All section references set forth below, or any use of the phrases “herein,” “hereunder,” or similar phrases, shall refer to the relevant sections of the Existing Credit Agreement.  For the avoidance of doubt, it is understood that the Definitions contained in the Bridge Facility Documentation shall (i) with respect to the matters set forth below, be in the form set forth below, and (ii) in the case of all other matters, be on Acceptable Bridge Terms.

“Amendment” means the Amendment No. 1 to that certain Credit Agreement, dated as of October 31, 2007, among the Company, the lenders party thereto, and Bank of America, N.A., as administrative agent thereunder (the “Existing Credit Agreement”).

“Amendment Effective Date” means the date that the Amendment shall become effective.

“Magnum Acquisition” has the meaning set forth in the Existing Credit Agreement (as amended by the Amendment).

“Magnum Acquisition Credit Agreement” has the meaning set forth in the Existing Credit Agreement (as amended by the Amendment).

“Merger Date” means the date that the Magnum Acquisition is consummated.

____________

5 Note: Definitions to conform with the Existing Credit Agreement, as amended, and the Intercreditor Agreement definitions.  Also, additional definitions are to be imported as required.

“Subsidiary Guarantors” means, collectively, the subsidiaries of the Borrower listed on Schedule 1.01(a) and each other Guarantor Subsidiary of the Borrower that guarantees the Obligations pursuant to Section 6.12 or otherwise.

EX-10.3

Exhibit 10.3

SUPPORT AGREEMENT

SUPPORT AGREEMENT, dated as of April 2, 2008 (this “Agreement”), among Patriot Coal Corporation, a Delaware corporation (“Parent”), and the stockholder whose name appears on the signature page of this Agreement (the “Stockholder”).

W I T N E S S E T H:

WHEREAS, Magnum Coal Company, a Delaware corporation (the “Company”), Parent, Colt Merger Corporation, a Delaware corporation and wholly-owned subsidiary of Parent (“Merger Subsidiary”) and ArcLight Energy Partners Fund I, L.P. and ArcLight Energy Partners Fund II, L.P., acting jointly, as stockholder representative (the “Stockholder Representative”), have entered into an Agreement and Plan of Merger (the “Merger Agreement”) concurrently with the execution and delivery of this Agreement, pursuant to which, among other things, Merger Subsidiary will be merged with and into the Company (capitalized terms used in this Agreement but not defined herein shall have the meanings ascribed to them in the Merger Agreement);

WHEREAS, as of the date hereof, the Stockholder owns beneficially and of record the number of shares set forth on Exhibit A hereto of the common stock, par value $0.01 per share, of the Company (the “Company Stock”) (all such Company Stock and any shares of Company Stock of which ownership of record or the power to vote is hereafter acquired by the Stockholder prior to the termination of this Agreement being referred to herein as the “Shares”); and

WHEREAS, as a condition to the willingness of Parent to enter into the Merger Agreement, Parent has requested that the Stockholder agree to enter into and perform its obligations under this Agreement (including executing, upon the terms and subject to the conditions hereof, a written consent in the form of Exhibit B hereto (the “Written Consent”)), and, in order to induce Parent to enter into the Merger Agreement, the Stockholder has so agreed.

NOW, THEREFORE, in consideration of the premises and of the mutual agreements and covenants set forth herein and in the Merger Agreement, and intending to be legally bound hereby, the parties hereto hereby agree as follows:

ARTICLE 1

Voting Agreement

Section 1.01.  Agreement to Consent to and Support the Merger.  (a) The Stockholder, solely in the Stockholder’s capacity as a stockholder of the Company, hereby agrees (i) to execute and deliver to Parent, immediately after the execution of the Merger Agreement, the Written Consent (and agrees not to revoke or otherwise withdraw

such Stockholder’s approval and adoption of the actions described in such Written Consent); (ii) if requested by Parent, to vote or exercise its right to consent with respect to all Shares that the Stockholder is entitled to vote at the time of any vote or action by written consent to approve and adopt the Merger Agreement, the Merger and all agreements related to the Merger and any actions related thereto at any meeting of the stockholders of the Company, and at any adjournment thereof, at which such Merger Agreement and other related agreements, or such other actions, are submitted for the consideration and vote of the stockholders of the Company; and (iii) that it will not vote any Shares in favor of, or consent to, and will vote against and not consent to, the approval of any (A) Acquisition Proposal (other than the Merger) or any action or transaction in furtherance thereof or (B) corporate action the consummation of which would frustrate the purposes, or prevent or delay the consummation, of the transactions contemplated by the Merger Agreement.

(b)Effective upon the entry into the Merger Agreement by the parties thereto:

(i)The Stockholder hereby confirms the appointment, pursuant to Section 11.05 of the Merger Agreement, of ArcLight Energy Partners Fund I, L.P. and ArcLight Energy Partners Fund II, L.P., acting jointly, as such Stockholder’s true and lawful agent and attorney-in-fact as the “Stockholder Representative” under the Merger Agreement and the Escrow Agreement, and agrees to abide by and be bound by the terms of Section 11.05 of the Merger Agreement, which is incorporated herein by this reference.  The Stockholder hereby acknowledges that the Stockholder Representative may be removed or replaced only in accordance with the provisions of Section 11.05 of the Merger Agreement.  The Stockholder hereby agrees that the Stockholder Representative shall not be liable for any act done or omitted as Stockholder Representative under the Merger Agreement or the Escrow Agreement, other than in the case of gross negligence, bad faith or willful misconduct.

(ii)The Stockholder hereby acknowledges, and agrees to be bound by, the provisions of the Merger Agreement with respect to (A) the conversion of shares of Company Stock (including Company Restricted Stock and the shares of Company Stock to be issued upon conversion of the Company Convertible Debt Notes immediately prior to the Effective Time) pursuant to the Merger and the payment of the Merger Consideration (including the delivery of such Stockholder’s Pro Rata Share of the Escrow Shares to the Escrow Agent to be held in accordance with the Merger Agreement and the Escrow Agreement) set forth in Article 2 of the Merger Agreement, (B) the indemnification obligations of the Stockholder (to the extent such Stockholder is a Designated Stockholder) set forth in Article 11 of the Merger Agreement (including, without limitation, the related provisions, procedures and limitations set forth in such Article 11), (C) the indemnification rights of the Stockholder set forth in Article 11 of the Merger Agreement (including, without limitation, the related provisions, procedures, limitations and disclaimers set forth in such Article 11), (D) the disposition of the

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Escrow Shares set forth in Article 2 of the Merger Agreement and in the Escrow Agreement, (E) the limitations with respect to the ability of the Stockholder to bring claims against Parent set forth in Section 10.02 of the Merger Agreement and (F) Article 12 of the Merger Agreement to the extent relating to the foregoing provisions of the Merger Agreement.

(iii)Parent hereby acknowledges that the Stockholder shall be an express third party beneficiary of the provisions of the Merger Agreement, as set forth therein, subject to the limitations and restrictions set forth therein.

Section 1.02.  Irrevocable Proxy.  The Stockholder hereby revokes any and all previous proxies granted with respect to the Shares.  By entering into this Agreement, the Stockholder hereby irrevocably (but subject to termination in accordance with Section 4.04 hereof) grants a proxy appointing Parent as the Stockholder’s attorney-in-fact and proxy, with full power of substitution, for and in the Stockholder’s name, to vote, express consent or dissent, or otherwise to utilize such voting power, in each case, in the manner contemplated by Section 1.01 above (but only in such manner) as Parent or its proxy or substitute shall, in Parent’s sole discretion, deem proper with respect to the Shares.  The Stockholder hereby acknowledges and agrees that such proxy is coupled with an interest, constitutes, among other things, an inducement for Parent to enter into the Merger Agreement, is irrevocable (other than as provided in Section 4.04) and shall not be terminated by operation of law or otherwise upon the occurrence of any event (other than as provided in Section 4.04) and that, so long as this proxy is in effect, no subsequent proxies with respect to the Shares shall be given (and if given shall not be effective).

Section 1.03.  Other Capacities.  If the Stockholder is an officer or director of the Company, nothing in this Agreement shall be deemed to apply to, or to limit in any manner, the discretion of the Stockholder with respect to any action to be taken (or omitted) by such Stockholder in his or her fiduciary capacity as a director or officer of the Company; provided that it is agreed and understood by the parties to this Agreement that the obligations, covenants and agreements of the Stockholder contained in this Agreement are separate and apart from such Stockholder’s fiduciary duties as a director or officer of the Company and no fiduciary obligations that the Stockholder may have as a director or officer of the Company shall countermand the obligations, covenants and agreements of the Stockholder, in his or her capacity as a stockholder of the Company, contained in this Agreement.

ARTICLE 2

Representations and Warranties of the Stockholder

The Stockholder hereby represents, warrants and covenants to Parent as follows:

Section 2.01.  Organization; Authorization.  If the Stockholder is not a natural person, the Stockholder is a Person that has been duly organized, is validly existing and,

3

to the extent applicable, is in good standing under the laws of its jurisdiction of organization.  The execution, delivery and performance by the Stockholder of this Agreement and the consummation by the Stockholder of the transactions contemplated hereby are within the corporate (or other entity) or individual powers of the Stockholder and have been duly authorized by all necessary corporate (or other entity) action.  If this Agreement is being executed in a representative or fiduciary capacity, the person signing this Agreement has full power and authority to enter into and perform this Agreement.  This Agreement constitutes a valid and binding Agreement of the Stockholder.

Section 2.02.  No Conflict; Required Filings and Consents.  (a) The execution and delivery of this Agreement by the Stockholder does not, and the performance of this Agreement by the Stockholder will not: (i) conflict with or result in a breach of any organizational documents of the Stockholder, (ii) conflict with or violate any law, rule, regulation, order, judgment or decree applicable to the Stockholder or by which it or any of the Stockholder’s properties or assets is bound or affected or (iii) require any consent or other action by any Person under, result in any breach of, constitute a default (or an event that with notice or lapse of time or both would become a default) under, give to another party any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a Lien on any of the property or assets of the Stockholder, including (without limitation) the Shares, pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Stockholder is a party or by which the Stockholder or any of the Stockholder’s properties or assets is bound or affected, with such exceptions, in the case of each of clauses (ii) and (iii), as would not, individually or in the aggregate, reasonably be expected to prevent or materially delay or impair the performance by the Stockholder of the Stockholder’s obligations under this Agreement (a “Stockholder MAE”).  There is no beneficiary or holder of a voting trust certificate or other interest of any trust of which the Stockholder is a trustee whose consent is required for either the execution and delivery of this Agreement or the consummation by the Stockholder of the transactions contemplated by this Agreement.

(b)The execution and delivery of this Agreement by the Stockholder does not, and the performance of this Agreement by the Stockholder will not, require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Authority.  The Stockholder does not have any other understanding in effect with respect to the voting or transfer of any Shares except for the Magnum Coal Company Stockholders Agreement dated as of March 21, 2006 among the Company, the Stockholder and the other parties thereto (the “Magnum Stockholders Agreement”).

Section 2.03.  Litigation.  As of the date hereof, there is no private or governmental action, suit, proceeding, claim, arbitration or investigation pending before any agency, court or tribunal (foreign or domestic) or, to the knowledge of the Stockholder, threatened against the Stockholder, any of its properties or, if the Stockholder is an entity, any of its officers, directors, employees, partners or trustees in their capacities as such, that, individually or in the aggregate, would reasonably be

4

expected to have a Stockholder MAE.  As of the date hereof, there is no judgment, decree or order against the Stockholder or, if the Stockholder is an entity, any of its officers, directors, employees, partners or trustees in their capacities as such, that would prevent, enjoin, alter or materially delay any of the transactions contemplated by this Agreement, or that would reasonably be expected to have a Stockholder MAE.

Section 2.04.  Title to Shares.  TheStockholder is the record and beneficial owner of the Shares, free and clear of any Lien (other than Liens created by the Magnum Stockholders Agreement) and free of any other limitation or restriction that would prevent the Stockholder from satisfying its obligations pursuant to this Agreement.  Immediately prior to the Effective Time, the Stockholder will have good and valid title to the Shares free and clear of any Lien (other than Liens created by the Magnum Stockholders Agreement).  As of the date hereof, the Shares described on Exhibit A hereto are the only shares of the Company Stock owned of record or beneficially by the Stockholder on the date of this Agreement.

Section 2.05.  Written Consent; Informed Consent.  Upon its execution and delivery by the Stockholder pursuant to Section 1.01, the Written Consent shall constitute valid and effective approval by the Stockholder of the Merger Agreement and the Merger, and no other vote, consent or approval by the Stockholder shall be necessary by the Stockholder in its capacity as a stockholder of the Company in connection with the consummation of the Merger.  The Stockholder has received and reviewed a copy of this Agreement and the form of Merger Agreement and the exhibits thereto and has had an opportunity to obtain the advice of counsel prior to executing this Agreement.

Section 2.06.  No Community Property Rights.  If the Stockholder is an individual and has a spouse, such spouse is not entitled to any rights under any community property statute or other Applicable Law or agreement with respect to the Shares which would adversely affect the covenants made by the Stockholder pursuant to this Agreement or the conversion of such Shares into Merger Consideration pursuant to the terms of the Merger Agreement.

ARTICLE 3

Covenants of the Stockholder

Section 3.01.  No Proxies for or Encumbrances on Shares.  Except as set forth in the last sentence of this Section 3.01, the Stockholder shall not, without the prior written consent of Parent, directly or indirectly, (i) except pursuant to the Merger Agreement, sell, convert, assign, encumber, transfer, pledge or otherwise dispose of any of the Stockholder’s Shares or enter into any contract, option or other arrangement or undertaking with respect to the direct or indirect acquisition or sale, conversion, assignment, transfer, encumbrance or other disposition of any Shares or (ii) deposit any Shares into a voting trust or enter into a voting agreement or arrangement or grant any proxy with respect to any Shares (other than as contemplated hereunder).  

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Notwithstanding the foregoing, the consent of Parent shall not be required in the event that the Stockholder transfers all or any portion of the Shares to an Affiliate of the Stockholder, with such transfer conditioned upon such Affiliate entering into an agreement in the form hereof.

Section 3.02.  Other Offers.  The Stockholder shall not, and shall cause its Representatives acting on behalf of the Stockholder or the Company not to, take any action, directly or indirectly, that is prohibited by Section 6.03(a) of the Merger Agreement.  The Stockholder shall, and shall cause its Representatives to, cease immediately and cause to be terminated any and all existing activities, discussions or negotiations, if any, with any Third Party or any Third Party’s Representatives conducted prior to the date hereof with respect to any Acquisition Proposal.

Section 3.03.  Appraisal Rights.  The Stockholder agrees not to exercise any rights (including under Section 262 of Delaware Law) to demand appraisal of any Shares which may arise with respect to the Merger.

Section 3.04.  Release by Stockholder.

(a)Effective as of the Effective Time, in consideration of Parent’s performance under the Merger Agreement and payments to be made thereunder, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the Stockholder, the Stockholder, for himself, herself or itself (as applicable), and each of his, her or its (as applicable) heirs, executors, Affiliates, successors, and assigns (collectively, the “Stockholder Releasing Parties”) after taking into account the terms and conditions of the Merger and the Transaction Documents, and the transactions contemplated thereby, including the terms of the Company Convertible Debt, the Parent Financing and the Parent Financing Commitment Letter, among other things, hereby forever fully and irrevocably releases Parent, Merger Subsidiary, their respective Affiliates, the Company and its Subsidiaries, and their respective current and former directors, officers, managers, employees, agents, advisors and other representatives in their capacities as such (collectively, the “Stockholder Released Parties”), from any and all claims, demands, and causes of action of every kind and nature, whether known or unknown, suspected or unsuspected, to the extent relating to actions, events or circumstances occurring or failing to occur on or prior to the Effective Time (including any and all claims, liabilities, demands or causes of action relating to or arising out of federal or state statutes (including securities laws) or common law, claims for breach of contract, claims relating to the Company Convertible Debt, breach of fiduciary duty, misrepresentation, defamation, infliction of emotional distress or any other tort under the common law of any state or claims for damages, costs, expenses, and attorneys’, brokers’ and accountants’ fees and expenses) (collectively, the “Stockholder Released Claims”); provided that the Stockholder is not releasing any claim or right arising under (i) the Merger Agreement, (ii) any indemnification agreement in favor of any Stockholder Releasing Parties (including any indemnification provisions contained in the Company’s certification of incorporation or by-laws) set forth on Section 4.05(c) of

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the Company Disclosure Schedule, (iii) any claim under the Company’s directors and officers insurance policies and the Company’s fiduciary duty liability insurance policies, (iv) if the Stockholder is also an employee of the Company, any employment agreement or arrangement (including any employee benefit plan) applicable to the Stockholder that is set forth on Section 4.16 of the Company Disclosure Schedule and Applicable Law or (v) any claim, demand or cause of action such Stockholder Releasing Party may have against Parent or any of its Affiliates (other than the Company and its Subsidiaries) that is not related to the transactions contemplated by the Merger Agreement or the Company Convertible Debt NPA.

(b)The Stockholder represents and warrants that he, she or it (as applicable) has not sold, assigned or otherwise transferred, and will not sell, assign or otherwise transfer, any Stockholder Released Claims.  Effective as of the Effective Time, the Stockholder, on behalf of himself, herself or itself (as applicable) and the Stockholder Releasing Parties, hereby irrevocably agrees to refrain from directly or indirectly asserting any claim or demand or commencing (or causing to be commenced) any suit, action, or proceeding of any kind, in any court or before any tribunal, against any Stockholder Released Party based upon any Stockholder Released Claim.

Section 3.05.  Confidentiality.  From the date hereof until the second anniversary of Closing, the Stockholder agrees that the Stockholder and its Representatives acting on its behalf shall hold in confidence and not disclose to any Person any information (irrespective of the form of information and including, without limitation, all analyses, compilations, data, studies, notes, translations, memoranda and other documents prepared by the Stockholder or its Representatives containing or based in whole or in part on any such information) concerning the Company or its Subsidiaries or Parent or its Subsidiaries in possession of the Stockholder or its Representatives as of the Closing, except (A) as may be compelled in a judicial or administrative proceeding or as otherwise required by Applicable Law or the rules of any applicable insurance commission or similar organization, (B) to the extent the same was publicly known or subsequently becomes publicly known through no act or omission by the Stockholder or its Representatives, (C) to the extent relating to information concerning the Company or its Subsidiaries, to the Stockholder’s officers, employees, directors, [stockholders], members, limited partners,andtrustees, and, on a “need to know basis” agents, legal, tax and accounting advisers, in each case, it being understood that such Person to whom such disclosure is made will be informed of the confidential nature of such information and instructed to keep such information confidential and the Stockholder shall be responsible for any breach of confidentiality by any such Person.

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Section 3.06.  Further Assurances.  The Stockholder agrees to execute and deliver, or cause to be executed and delivered, all further documents and instruments and to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations, to consummate and make effective the transactions contemplated by this Agreement, including to vest in Parent the power to carry out the provisions of Article 1.

Section 3.07.  Stockholder Only.  Notwithstanding anything to the contrary contained herein, Parent agrees and acknowledges that (i) the Stockholder is entering into this Agreement in its individual capacity and (ii) none of the covenants or other agreements contained herein or provisions hereof shall in any way bind any Affiliates of the Stockholder (other than the matters contemplated by Section 3.04 and Section 3.05, and in respect thereof, only as set forth therein).  Parent agrees and acknowledges that this Section 3.07 is an integral part of the transactions contemplated hereby and the Stockholder would not enter into this Agreement without this Section 3.07.

Section 3.08.  Certain Transactions.  The Stockholder agrees that until the Effective Time, it shall not directly or indirectly, enter into any contract, option or other arrangement or understanding with respect to any sale, transfer, assignment, lending or similar disposition of any shares of Parent Stock payable to it as Merger Consideration, including pursuant to any short sale or any other hedging or other derivative transaction that has the effect of materially changing the economic benefits or risks of ownership of any shares of Parent Stock.

Section 3.09.  HSR Filing.

(a)[If compliance by the Stockholder with the applicable requirements of the HSR Act is required in connection with the issuance of Parent Stock to such Stockholder pursuant to the transactions contemplated by the Merger Agreement,] The Stockholder and Parent shall each (and the Stockholder shall cause its ultimate parent entity (as such term is defined in 16 C.F.R. Section 801.1), if any, to) use its commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under Applicable Law relating to the issuance of Parent Stock to such Stockholder pursuant to the transactions contemplated by the Merger Agreement, including (i) preparing and filing as promptly as practicable with any Governmental Authority all documentation to effect all necessary filings, notices, petitions, statements, registrations, submissions of information, applications and other documents, in each case, relating to the application of the HSR Act to the issuance of Parent Stock to such Stockholder and (ii) obtaining and maintaining all approvals, consents, registrations, permits, authorizations and other confirmations required to be

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obtained from any Governmental Authority in connection with the HSR Act that are necessary, proper or advisable in connection with the issuance of Parent Stock to such Stockholder; provided that the parties hereto understand and agree that neither the commercially reasonable efforts of the Stockholder, its ultimate parent entity or Parent nor any other obligation of the Stockholder, its ultimate parent entity or Parent under this Agreement shall be deemed to include (i) entering into any settlement, undertaking, consent decree, stipulation or agreement with any Governmental Authority in connection with the transactions contemplated hereby or (ii) divesting or otherwise holding separate (including by establishing a trust or otherwise), or taking any other action (or otherwise agreeing to do any of the foregoing) with respect to any of the Stockholder, its ultimate parent entity, Parent or their respective Affiliates’ businesses, assets or properties.

(b)In furtherance and not in limitation of the foregoing, each of the Stockholder (or its ultimate parent entity) and Parent shall [(if compliance with the HSR Act is required pursuant to Section 3.09(a))] make an appropriate filing of a Notification and Report Form pursuant to the HSR Act with respect to the transactions contemplated hereby as promptly as practicable and in any event within 20 Business Days of the date hereof and each shall use its commercially reasonable efforts to supply as promptly as practicable any additional information and documentary material that may be requested pursuant to the HSR Act.  The Stockholder shall pay the filing fee under the HSR Act with respect to the acquisition of Parent Stock by the Stockholder.

Section 3.10.  NYSE Cooperation.From the date hereof until the Effective Time, the Stockholder shall use its commercially reasonable efforts to cooperate with Parent in connection with any discussions between Parent and the New York Stock Exchange regarding the independence of any nominees to Parent’s Board of Directors selected by the Stockholder Representative pursuant to the Voting Agreement.

ARTICLE 4

General Provisions

Section 4.01.  Notices.  All notices, requests and other communications to any party hereunder shall be in writing (including facsimile transmission but not electronic mail) and shall be given,

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(a)  if to Parent, to:

Patriot Coal Corporation

12312 Olive Boulevard, Suite 400

St. Louis, Missouri 63141

Attention:  Joseph W. Bean

Facsimile No.:  (314) 275-3656

with a copy to:

Davis Polk & Wardwell

450 Lexington Avenue

New York, NY  10017

Attention:  William L. Taylor

Facsimile No.:  (212) 450-4800

(b)  if to the Stockholder, to the Stockholder Representative as follows:

ArcLight Energy Partners Fund I, L.P.

ArcLight Energy Partners Fund II, L.P.

c/o ArcLight Capital Partners, LLC

152 West 57th Street, 53rd Floor

New York, NY 10019

Attention: Robb E. Turner

                        Senior Partner

Facsimile No.: 212-888-9275

with a copy to:

ArcLight Energy Partners Fund I, L.P.

ArcLight Energy Partners Fund II, L.P.

c/o ArcLight Capital Partners, LLC

200 Clarendon Street, 55th Floor

Boston, MA 02117

Attention:  Christine M. Miller

                  Associate General Counsel

Facsimile No.: 617.867.4698

and a further copy to:

Skadden, Arps, Slate, Meagher & Flom LLP

Four Times Square

New York, New York 10022

Attention: Sean C. Doyle, Esq.

Facsimile No.: (212) 735-2000

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or to such other address or facsimile number as such party may hereafter specify for the purpose by notice to the other parties hereto.  All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5:00 p.m. on a Business Day in the place of receipt.  Otherwise, any such notice, request or communication shall be deemed to have been received on the next succeeding Business Day in the place of receipt.

Section 4.02.  Headings.  The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

Section 4.03.  Amendments and Waivers.  (a) Any provision of this Agreement (including any Schedule or Exhibit hereto) may be amended or waived if, but only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by each party, or in the case of a waiver, by the party against whom the waiver is to be effective.

(b)No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.  The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.

Section 4.04.  Termination.  This Agreement and all provisions hereof shall terminate on the earlier to occur of (i) the date, if any, that the Merger Agreement is terminated in accordance with its terms or (ii) written agreement of Parent and the Stockholder; provided that such termination shall not relieve any party hereto from any liability for breach of this Agreement occurring prior to any such termination.  

Section 4.05.  Severability.  If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other Governmental Authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party.  Upon such a determination, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.

Section 4.06.  Entire Agreement.  This Agreement supersedes all prior agreements and undertakings, both written and oral, between the parties, or any of them, with respect to the subject matter hereof.

Section 4.07.  Assignment.  The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and

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permitted assigns, provided that no party may assign, delegate or otherwise transfer any of its rights, interests or obligations under this Agreement without the prior written consent of the other parties hereto, except that Parent may assign, delegate or otherwise transfer any of its rights, interests or obligations under this Agreement to an Affiliate without the consent of the Stockholder, but any such transfer or assignment shall not relieve Parent of its obligations hereunder (and in the event that such Person is no longer an Affiliate of Parent, any such rights and interests shall be automatically assigned or transferred to Parent).

Section 4.08.  Fees and Expenses.  All costs and expenses (including, without limitation, all fees and disbursements of counsel, accountants, investment bankers, experts and consultants to a party) incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs and expenses.

Section 4.09.  Specific Performance.  The parties hereto agree that irreparable damage would occur if any provision of this Agreement were not performed in accordance with the terms hereof and that the parties shall be entitled (without the requirement to post bond) to an injunction or injunctions to prevent breaches of this Agreement or to enforce specifically the performance of the terms and provisions hereof in the courts provided for in Section 4.11, in addition to any other remedy to which they are entitled at law or in equity.

Section 4.10.  Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to its conflicts of law principles.

Section 4.11.  Jurisdiction.  The parties hereto agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby shall be brought in any Delaware state court, and each of the parties hereby irrevocably consents to the jurisdiction of such court (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.  Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court.  Without limiting the foregoing, each party agrees that service of process on such party as provided in Section 4.01 shall be deemed effective service of process on such party.

Section 4.12. WAIVER OF JURY TRIAL.  EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

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Section 4.13. Counterparts; Third Party Beneficiaries.  This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.  Until and unless each party has received a counterpart of this Agreement signed by each of the other parties, this Agreement shall have no effect, and no party shall have any right or obligation under this Agreement (whether by virtue of any other oral or written agreement or other communication).  This Agreement shall become effective when each party shall have received a counterpart hereof signed by the other parties.  No provision of this Agreement is intended to confer upon any Person other than the parties hereto any rights or remedies hereunder.  Any such counterpart may be delivered by facsimile or other electronic format (including “.pdf”).

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

PATRIOT COAL CORPORATION
By:
	Name:
	Title:

[STOCKHOLDER]

By:

Address:

[Signature Page to Support Agreement]

Exhibit A

LIST OF SHARES

Class of Shares	Number of Shares Held by the Stockholder
Common Stock

Exhibit B

MAGNUM COAL COMPANY

(A Delaware corporation)

WRITTEN CONSENT

Dated as of April 2, 2008

WHEREAS: The undersigned is a holder of the number and class of shares of Magnum Coal Company, a Delaware corporation (the “Company”), set forth on the signature page hereto;

NOW, THEREFORE: Pursuant to Section 228 of the Delaware General Corporation Law (the “DGCL”) and the By-laws of the Company, the undersigned stockholder hereby consents in writing to the following:

The adoption of the Agreement and Plan of Merger (the “Merger Agreement”) dated as of April 2, 2008 among the Company, Patriot Coal Corporation, a Delaware corporation (“Parent”), Colt Merger Corporation, a Delaware corporation and wholly owned subsidiary of Parent and ArcLight Energy Partners Fund I, L.P. and ArcLight Energy Partners Fund II, L.P., acting jointly, as stockholder representative, and the transactions contemplated by the Merger Agreement.

This consent shall have the same force and effect as if taken at a meeting of stockholders of the Company duly called and constituted pursuant to the DGCL and the By-laws of the Company.

[Signature Page Follows]

IN WITNESS WHEREOF, the undersigned stockholder has hereunto executed this written consent as of the date first written above.

[NAME OF STOCKHOLDER]

[SIGNATURE OF STOCKHOLDER]

Class of Shares	Number of Shares Held by the Stockholder
Common Stock

EX-10.4

Exhibit 10.4

VOTING AND STANDSTILL AGREEMENT

VOTING AND STANDSTILL AGREEMENT, dated as of April 2, 2008 (this “Agreement”), among Patriot Coal Corporation, a Delaware corporation (“Parent”), the stockholders whose names appears on the signature page of this Agreement (each, a “Stockholder” and collectively, the “Stockholders”), and ArcLight Energy Partners Fund I, L.P. and ArcLight Energy Partners Fund II, L.P., acting jointly, as stockholder representative (the “Stockholder Representative”).

W I T N E S S E T H:

WHEREAS, Magnum Coal Company, a Delaware corporation (the “Company”), Parent, Colt Merger Corporation, a Delaware corporation and wholly-owned subsidiary of Parent (“Merger Subsidiary”) and the Stockholder Representative, entered into an Agreement and Plan of Merger (the “Merger Agreement”) dated as of April 2, 2008, pursuant to which, among other things, Merger Subsidiary will be merged with and into the Company at the Effective Time (capitalized terms used in this Agreement but not defined herein shall have the meanings ascribed to them in the Merger Agreement);

WHEREAS, as of the Effective Time, each share of the common stock, par value $0.01 per share, of the Company (the “Company Stock”), held by the stockholders of the Company immediately prior to the Effective Time will be converted into the right to receive a number of shares of common stock, par value $0.01 per share, of Parent (“Parent Stock”), in accordance with Article 2 of the Merger Agreement.  The stockholders of the Company (including the Stockholders) whose shares of Company Stock are converted into the right to receive Parent Stock pursuant to Article 2 of the Merger Agreement shall be referred to herein as the “Company Holders”, and the shares of Parent Stock payable as consideration pursuant to Article 2 of the Merger Agreement (including the Escrow Shares) to such Company Holders shall be referred to herein as “Parent Shares”; and

WHEREAS, the Stockholders, the Stockholder Representative and Parent desire to make certain agreements relating to (i) the ownership and voting of Parent Shares held by such Stockholders, (ii) the composition of Parent’s Board of Directors (the “Board”) and (iii) certain other matters.

NOW, THEREFORE, in consideration of the premises and of the mutual agreements and covenants set forth herein and in the Merger Agreement, and intending to be legally bound hereby, the parties hereto hereby agree as follows:

ARTICLE 1

Voting Agreement; Standstill Restrictions

Section 1.01.  Stockholder Nominees to Parent Board.

(a)Subject to Section 1.02, effective as of the Effective Time (or, if the Effective Time shall occur prior to the date of Parent’s 2008 annual meeting of stockholders (the “2008 Meeting”), promptly after the 2008 Meeting), the Board shall cause the number of authorized members of the Board to be expanded by two members and shall appoint to the Board two nominees designated in writing by the Stockholder Representative, one of whom shall serve as a Class I director on the Board and one of whom shall serve as a Class II director on the Board.  Subject to Section 1.02, following such appointment, at any meeting of the stockholders of Parent at which the Class I or Class II directors of the Board are to be elected, Parent will include in the slate of directors recommended for election by the Board to the stockholders of Parent one nominee selected by the Stockholder Representative to serve as a Class I director or one nominee selected by the Stockholder Representative to serve as a Class II director, as applicable.  

(b)Subject to Section 1.02, in the event of the resignation, death, removal or disqualification of a director nominated by the Stockholder Representative pursuant to Section 1.01(a), the Stockholder Representative shall promptly designate a replacement director.  

(c)Any Board nominee selected by the Stockholder Representative pursuant to Section 1.01(a) or Section 1.01(b), and any replacement nominee or director selected by the Stockholder Representative at any time, shall (i) at the time of initial nomination and at each time he or she would be nominated for re-election, be reasonably acceptable to the Nominating and Governance Committee of the Board, (ii) at all times be, to the reasonable satisfaction of the Nominating and Governance Committee of the Board, an “independent director” as such term is defined from time to time in the New York Stock Exchange’s listing standards (or the listing standards of the principal national securities exchange on which Parent Stock is then traded), disregarding the failure to satisfy the tests set forth in Sections 303A.02(b)(ii) or 303A.02(b)(v) of the New York Stock Exchange Listed Company Manual to the extent such failure results solely from one or more of the relationships set forth on Section 4.26 of the Company Disclosure Schedule and (iii) agree to resign in the event his or her term shall end as provided in Section 1.02(a) or Section 1.02(b).  Assuming the accuracy of the representation and warranty of the ArcLight Funds in Section 2.06, Parent acknowledges that (x) Robb E. Turner and John Erhard shall be the nominees initially designated for appointments in accordance with Section 1.01(a) and that, as of the date hereof, such individuals satisfy the requirements of clauses (i) and (ii) of the immediately preceding sentence and (y) for purposes of this Agreement, any individual who is an associate (as such term is defined under Rule 12b-2 under the 1934 Act) of ArcLight Energy Partners Fund I, L.P. or

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ArcLight Energy Partners Fund II, L.P. shall be deemed not to fail to satisfy the requirements of clause (ii) of the immediately preceding sentence solely as a result of ownership by any Person of Parent Shares or any of the relationships set forth on Section 4.26 of the Company Disclosure Schedule.

(d)A decision, act, consent or instruction of the Stockholder Representative hereunder (including, without limitation, any selection of a nominee to the Board pursuant to Section 1.01(a) or Section 1.01(b)) shall constitute a decision, act, consent or instruction of all Stockholders and shall be final, binding and conclusive upon each of such Stockholders, and Parent may rely upon any such decision, act, consent or instruction of the Stockholder Representative as being the decision, act, consent or instruction of each and every such Stockholder.  Parent shall be relieved from any liability to any Person for any acts done by them in accordance with such decision, act, consent or instruction of the Stockholder Representative.

Section 1.02.  Reduction of Stockholder Board Designation Rights.

(a)At such time after the Effective Time that (i) the aggregate number of Parent Shares owned by the Company Holders is less than twenty percent (20%) of the Aggregate Share Number but greater than or equal to ten percent (10%) of the Aggregate Share Number or (ii) the aggregate number of Parent Shares owned by the ArcLight Funds is less than ten percent (10%) of the Aggregate Share Number, the Stockholder Representative shall be entitled to nominate only one member of the Board and, unless the Board (without the participation of the nominees of the Stockholder Representative) shall approve such nominee remaining on the Board, the Stockholder Representative shall cause one of its nominees on the Board to resign effective immediately as of such time and the term of such director shall immediately end.

(b)At such time after the Effective Time that the aggregate number of Parent Shares owned by the Company Holders is less than ten percent (10%) of the Aggregate Share Number, the Stockholder Representative shall not be entitled to nominate any members of the Board and, unless the Board (without the participation of the nominee(s) of the Stockholder Representative) shall approve such nominee(s) remaining on the Board, the Stockholder Representative shall cause all of its remaining nominee(s) on the Board to resign effective immediately as of such time and the term of such director(s) shall immediately end.

(c)For the avoidance of doubt, once the Company Holders have lost the right to nominate one or both members of the Board, they shall not thereafter regain such rights regardless of any subsequent acquisitions of Parent Shares by Company Holders or any change to the outstanding Parent Stock by Parent that in either case results in Company Holders owning shares in the amounts described in Section 1.02(a) or Section 1.02(b).

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(d)References in this Section 1.02 to the Aggregate Share Number shall be appropriately adjusted for any change in the outstanding shares of Parent Stock by reason of any reclassification, recapitalization, stock split, combination, exchange or readjustment of shares.

(e)For purposes of this Section 1.02, (i) no Company Holder shall be deemed to own any Parent Shares that any Company Holder has Transferred, (ii) any Company Holder that is a Reduced Standstill Stockholder shall be deemed, at any applicable time, to have Transferred and no longer own 30% of the Parent Shares held by such Company Holder at such time, (iii) any Company Holder that is a Limited Standstill Stockholder shall be deemed, at any applicable time, to have Transferred and no longer own 70% of the Parent Shares held by such Company Holder at such time, and (iv) the Stockholder set forth on Schedule 1.02(e) shall be deemed to have Transferred and no longer own all Parent Shares held by such Stockholder effective as of the Effective Time.  

(f)Each Stockholder agrees to promptly notify Parent each time such Stockholder Transfers any Parent Shares, which notice shall set forth the number of Parent Shares so Transferred.  On request from time to time (but no more than once per fiscal quarter), each Stockholder agrees to certify to Parent the number of Parent Shares owned by such Stockholder and to provide appropriate evidence of such ownership.

(g)As used in this Agreement, “Aggregate Share Number” means the sum of (i) the aggregate number of Parent Shares issued pursuant to Article 2 of the Merger Agreement and (ii) the number of shares of Parent Stock outstanding as of the date of the Merger Agreement.

(h)As used in this Agreement, (i) “ArcLight I” means ArcLight Energy Partners Fund I, L.P., (ii) “ArcLight II” means ArcLight Energy Partners Fund II, L.P. and (iii) “ArcLight Funds” means ArcLight I and ArcLight II, together.

(i)As used in this Agreement, with respect to all Stockholders other than Limited Standstill Stockholders, “Transfer” shall mean, directly or indirectly, to sell, transfer, assign, lend or similarly dispose of any Parent Shares (other than a sale, transfer, assignment or disposition solely between the ArcLight Funds), or to enter into any contract, option or other arrangement or understanding with respect to any such sale, transfer, assignment, lending or similar disposition of any Parent Shares, and shall include (i) a short sale or the entry into of any other hedging or other derivative transaction that has the effect of materially changing the economic benefits or risks of ownership of any Parent Shares and (ii) except for purposes of Section 3.01, any delivery of Escrow Shares to Parent or any other Indemnified Party pursuant to the indemnification obligations set forth in Article 11 of the Merger Agreement; provided that a Transfer shall not include any pledge or hypothecation of, or other similar encumbrance on, any Parent Shares in connection with any bona fide lending arrangement with a commercial banking institution; provided, further, that such

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transaction shall be a Transfer subject to the terms of Section 1.02, Section 1.05 and Section 3.01 if such financial institution shall foreclose on such Parent Shares pursuant to such arrangement.

(j)As used in this Agreement, with respect to the Limited Standstill Stockholders, “Transfer” shall mean, directly or indirectly, to sell, transfer, assign, lend or similarly dispose of any Parent Shares (other than a sale, transfer, assignment or disposition to an Affiliate of such Limited Standstill Stockholder subject to such transferee Affiliate agreeing to (i) be bound by the provisions of this Agreement to the same extent as the Limited Standstill Stockholder transferor and (ii) transfer such Parent Shares to the Limited Standstill Stockholder transferor in the event that such transferee is no longer an Affiliate of such Limited Standstill Stockholder transferor), or to enter into any contract, option or other arrangement or understanding with respect to any such sale, transfer, assignment, lending or similar disposition of any Parent Shares, and shall include (A) a short sale or the entry into of any other hedging or other derivative transaction that has the effect of materially changing the economic benefits or risks of ownership of any Parent Shares and (B) except for purposes of Section 3.01, any delivery of Escrow Shares to Parent or any other Indemnified Party pursuant to the indemnification obligations set forth in Article 11 of the Merger Agreement; provided that a Transfer shall not include (x) any Permitted Short Sale or (y) any pledge or hypothecation of, or other similar encumbrance on, any Parent Shares in connection with any bona fide lending arrangement with a commercial banking institution; provided, further, that such transaction referred to in clause (y) shall be a Transfer subject to the terms of Section 1.02, Section 1.07 and Section 3.01 if such financial institution shall foreclose on such Parent Shares pursuant to such arrangement.  As used herein, “Permitted Short Sale” means a transaction of the kind described in clause (A) of the preceding sentence that is entered into by (i) a group or other division of such Limited Standstill Stockholder (on the one hand) that is separated by an internal information barrier or similar policy of the Limited Standstill Stockholder (which barrier or policy has been complied with insofar as it relates to the Parent Shares) from (ii) the group or division (or groups or divisions) within the Limited Standstill Stockholder that have either participated in the negotiation and execution of this Agreement on behalf of the Limited Standstill Stockholder or are the group that is responsible for the ownership and disposition of the Parent Shares acquired in the Merger by such Limited Standstill Stockholder (on the other hand), and has so entered into such a transaction in the ordinary course of business for a purpose other than hedging the economic exposure of the Limited Standstill Stockholder in respect of the Parent Shares acquired in the Merger.

Section 1.03.  Support of Parent Board Nominees.  Each Stockholder agrees that so long as the Stockholder Representative is entitled to nominate any members to the Board pursuant to this Agreement, such Stockholder will vote, or execute written consents or proxies with respect to, as the case may be, all of its shares of Parent Stock in favor of the entire slate of directors recommended for election by the Board to the

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stockholders of Parent at any meeting of Parent stockholders at which any directors are elected.

Section 1.04.  Additional Voting Obligations.  Except as prohibited by Applicable Law, each Stockholder (other than the Stockholders set forth on Schedule 1.04 hereto) agrees that so long as the Stockholder Representative is entitled to nominate any members to the Board pursuant to this Agreement, such Stockholder shall vote, or execute written consents or proxies with respect to, as the case may be, all of its shares of Parent Stock as recommended by the Board in the case of (a) any stockholder proposal submitted for a vote at any meeting of Parent’s stockholders and (b) any proposal submitted by Parent for a vote at any meeting of Parent’s stockholders relating (i) to the appointment of Parent’s accountants or (ii) a Parent equity compensation plan and/or any material revisions thereto.

Section 1.05.  ArcLight Funds Standstill.

(a)Each ArcLight Fund (each, an “ArcLight Standstill Stockholder”) agrees that until the termination of the Standstill Period, neither such ArcLight Standstill Stockholder nor any of its Affiliates will, directly or indirectly, unless invited to do so (on an unsolicited basis) by the Board (excluding the vote of any members of the Board appointed by the Stockholder Representative pursuant to this Agreement) in writing: (i) acquire, offer or propose to acquire, or agree or seek to acquire, by purchase or otherwise, any securities or direct or indirect rights or options to acquire any securities of Parent; (ii) enter into or agree, offer, propose or seek to enter into, or otherwise be involved in or part of, any acquisition transaction, merger or other business combination relating to Parent or any acquisition transaction for all or substantially all of the assets of Parent or any of its businesses; (iii) make, or in any way participate in, any “solicitation” of “proxies” (as such terms are defined under Regulation 14A under the 1934 Act) to vote, or seek to advise or influence any Person with respect to the voting of, any voting securities of Parent, (iv) except as contemplated by Section 1.03 or Section 1.04, form, join or in any way participate in a “group” (within the meaning of Section 13(d)(3) of the 1934 Act) with respect to any voting securities of Parent; (v) except as contemplated by Section 1.01 and except pursuant to its ability (subject to Section 1.03 and Section 1.04) to vote shares of Parent Stock held by it, seek, propose or otherwise act alone or in concert with others, to influence or control the management, Board or policies of Parent; (vi) enter into any discussions, negotiations, arrangements or understandings with any other Person with respect to any of the foregoing activities or propose any of such activities to any other Person; (vii) advise, assist, knowingly encourage, act as a financing source for or otherwise invest in any other Person in connection with any of the foregoing activities; or (viii) disclose any intention, plan or arrangement inconsistent with any of the foregoing.  Notwithstanding the foregoing, nothing in this Section 1.05 shall prohibit the Transfer of Parent Shares from one ArcLight Fund to the other ArcLight Fund.  Each ArcLight Standstill Stockholder agrees that it shall promptly advise Parent of any inquiry or

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proposal made to such ArcLight Standstill Stockholder with respect to any of the foregoing.

(b)Each ArcLight Standstill Stockholder agrees that, during the Standstill Period, neither it nor any of its Affiliates will, directly or indirectly: (i) request to Parent or its Representatives to amend or waive any provision of this Section 1.05 (including this sentence); or (ii) take any initiative with respect to Parent which would reasonably be expected to require Parent to make a public announcement regarding (A) any of the activities referred to in Section 1.05(a) or (B) the possibility of such ArcLight Standstill Stockholder or any other Person acquiring control of Parent, whether by means of a business combination or otherwise.

(c)For purposes of Section 1.05 and Section 1.06, “Parent” shall be deemed to include Parent, any successor to or person in control of Parent, or any division thereof or of any such successor or controlling person.

(d)Subject to Section 1.05(e), the restrictions set forth in Sections 1.05(a) and 1.05(b) shall not prohibit any ArcLight Standstill Stockholder from engaging in one or more of the types of transactions referred to in Sections 1.05(a) and 1.05(b) in the event that: (i) Parent has entered into a definitive agreement with a third party with respect to (A) a tender offer or exchange offer for more than 50% of the outstanding Parent Stock, (B) any other acquisition transaction, merger or other business combination in which holders of Parent’s voting stock before the transaction would not hold a majority of the voting power of Parent’s (or if Parent is not the surviving entity in such transaction, the surviving entity’s) voting stock (or of the voting stock of an entity that directly or indirectly holds a majority of the voting power of Parent’s or such surviving entity’s voting stock) immediately after such transaction or (C) any acquisition transaction for more than 50% of the assets of Parent and its Subsidiaries, taken as a whole (the transactions in clauses (A), (B) and (C), each a “Business Combination Transaction”); or (ii) a third party commences a tender offer or exchange offer (which would, if completed in accordance with its terms, result in a Business Combination Transaction) and, in the case of this clause (ii), either the Board of Directors of Parent has recommended such offer or not rejected such offer within ten business days after the announcement thereof.  

(e)Notwithstanding anything to the contrary in this Agreement, if (i) a Business Combination Transaction with respect to which Parent has entered into a definitive agreement is terminated without the closing thereunder being consummated or (ii) a third party tender or exchange offer of the type described in clause (ii) of Section 1.05(d) is terminated without being consummated, then the provisions of this Section 1.05 shall once again thereafter apply in accordance with their terms and each ArcLight Standstill Stockholder shall once again be subject to such provisions.

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(f)As used in this Agreement, “Standstill Period” means the period commencing at the Effective Time and ending upon the later to occur of (i) the Stockholder Representative no longer being entitled to nominate any members of the Board pursuant to this Agreement or (ii) nine months after such time as the ArcLight Standstill Stockholders and their respective Affiliates, the Reduced Standstill Stockholders and their respective Affiliates, and the Limited Standstill Stockholders and their respective Affiliates in the aggregate own less than 7.5% of the Parent Stock outstanding at such time.

Section 1.06.  Reduced Stockholder Standstill.

(a)Each Stockholder identified on Schedule 1.06 hereto (each, a “Reduced Standstill Stockholder”) agrees that until the termination of the Standstill Period, neither such Reduced Standstill Stockholder nor any of its controlled Affiliates will, directly or indirectly, unless invited to do so (on an unsolicited basis) by the Board (excluding the vote of any members of the Board appointed by the Stockholder Representative pursuant to this Agreement) in writing: (i) acquire, offer or propose to acquire, or agree or seek to acquire, by purchase or otherwise, any securities or direct or indirect rights or options to acquire any securities of Parent; (ii) enter into or agree, offer, propose or seek to enter into, or otherwise be involved in or part of, any acquisition transaction, merger or other business combination relating to Parent or any acquisition transaction for all or substantially all of the assets of Parent or any of its businesses; (iii) make, or in any way participate in, any “solicitation” of “proxies” (as such terms are defined under Regulation 14A under the 1934 Act) to vote, or seek to advise or influence any Person with respect to the voting of, any voting securities of Parent, (iv) except as contemplated by Section 1.03 or Section 1.04, form, join or in any way participate in a “group” (within the meaning of Section 13(d)(3) of the 1934 Act) with respect to any voting securities of Parent; (v) except as contemplated by Section 1.01 and except pursuant to its ability (subject to Section 1.03 and Section 1.04) to vote shares of Parent Stock held by it, seek, propose or otherwise act alone or in concert with others, to influence or control the management, Board or policies of Parent; (vi) enter into any discussions, negotiations, arrangements or understandings with any other Person with respect to any of the foregoing activities or propose any of such activities to any other Person; (vii) advise, assist, knowingly encourage, act as a financing source for or otherwise invest in any other Person in connection with any of the foregoing activities; or (viii) disclose any intention, plan or arrangement inconsistent with any of the foregoing; provided, that nothing herein shall prohibit a Reduced Standstill Stockholder or any of its controlled Affiliates from (A) engaging in any of the activities referred to in clause (i) hereof so long as such activities are in the ordinary course of such Reduced Standstill Stockholder’s or its controlled Affiliate’s business and are not conducted for the purpose of obtaining control of or influencing or controlling the management, Board or policies of Parent or for the purpose of avoiding the effect of the standstill provisions contained in this Section 1.06 or (B) investing in or providing financing to or otherwise holding an interest in any

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Person that engages in any of the activities referred to in clauses (i) through (viii) hereof, so long as such investment, financing, or interest is made or obtained in the ordinary course of such Reduced Standstill Stockholder’s or its controlled Affiliate’s business (and not for the purpose of avoiding the effect of the standstill provisions contained in this Section 1.06), and such Person is not controlled by such Reduced Standstill Stockholder.

(b)Each Reduced Standstill Stockholder agrees that, during the Standstill Period, neither it nor any of its controlled Affiliates will, directly or indirectly: (i) request to Parent or its Representatives to amend or waive any provision of this Section 1.06 (including this sentence); or (ii) take any initiative with respect to Parent which would reasonably be expected to require Parent to make a public announcement regarding (A) any of the activities referred to in Section 1.06(a) or (B) the possibility of such Reduced Standstill Stockholder or any other Person (except as provided in clause (B) of the proviso to Section 1.06(a)) acquiring control of Parent, whether by means of a business combination or otherwise.

(c)Subject to Section 1.06(d), the restrictions set forth in Sections 1.06(a) and 1.06(b) shall not prohibit any Reduced Standstill Stockholder from engaging in one or more of the types of transactions referred to in Sections 1.06(a) and 1.06(b) in the event that: (i) Parent has entered into a definitive agreement with a third party with respect to a Business Combination Transaction; or (ii) a third party commences a tender offer or exchange offer (which would, if completed in accordance with its terms, result in a Business Combination Transaction) and, in the case of this clause (ii), either the Board of Directors of Parent has recommended such offer or not rejected such offer within ten business days after the announcement thereof.

(d)Notwithstanding anything to the contrary in this Agreement, if (i) a Business Combination Transaction with respect to which Parent has entered into a definitive agreement is terminated without the closing thereunder being consummated or (ii) a third party tender or exchange offer of the type described in clause (ii) of Section 1.06(c) is terminated without being consummated, then the provisions of this Section 1.06 shall once again thereafter apply in accordance with their terms and each Reduced Standstill Stockholder shall once again be subject to such provisions.

Section 1.07.  Limited Stockholder Standstill.

(a)Each Stockholder identified on Schedule 1.07 hereto (each, a “Limited Standstill Stockholder”) agrees that until the termination of the Standstill Period, neither such Limited Standstill Stockholder nor any of its controlled Affiliates will, directly or indirectly, unless invited to do so (on an unsolicited basis) by the Board (excluding the vote of any members of the Board appointed by the Stockholder Representative pursuant to this Agreement) in writing: (i) acquire, offer or propose to acquire, or agree or seek to acquire, by purchase or otherwise, any securities or direct or indirect rights or options to acquire any securities of Parent; (ii) enter into or agree, offer, propose or seek to enter

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into, or otherwise be involved in or part of, any acquisition transaction, merger or other business combination relating to Parent or any acquisition transaction for all or substantially all of the assets of Parent or any of its businesses; (iii) make, or in any way participate in, any “solicitation” of “proxies” (as such terms are defined under Regulation 14A under the 1934 Act) to vote, or seek to advise or influence any Person with respect to the voting of, any voting securities of Parent, (iv) except as contemplated by Section 1.03 or Section 1.04, form, join or in any way participate in a “group” (within the meaning of Section 13(d)(3) of the 1934 Act) with respect to any voting securities of Parent; (v) except as contemplated by Section 1.01 and except pursuant to its ability (subject to Section 1.03 and Section 1.04) to vote shares of Parent Stock held by it, seek, propose or otherwise act alone or in concert with others, to influence or control the management, Board or policies of Parent; (vi) enter into any discussions, negotiations, arrangements or understandings with any other Person with respect to any of the foregoing activities or propose any of such activities to any other Person; (vii) advise, assist, knowingly encourage, act as a financing source for or otherwise invest in any other Person in connection with any of the foregoing activities; or (viii) disclose any intention, plan or arrangement inconsistent with any of the foregoing; provided, that nothing herein shall prohibit a Limited Standstill Stockholder or any of its controlled Affiliates from (A) engaging in any of the activities referred to in clauses (i), (iii), (iv), (vi), (vii) and (viii) (except, in the case of clauses (vi), (vii) and (viii), to the extent relating to clauses (ii) or (v)) hereof so long as such activities are in the ordinary course of such Limited Standstill Stockholder’s or its controlled Affiliate’s business and are not conducted for the purpose of obtaining control of or influencing or controlling the management, Board or policies of Parent or for the purpose of avoiding the effect of the standstill provisions contained in this Section 1.07 or (B) investing in or providing financing to or otherwise holding an interest in any Person that engages in any of the activities referred to in clauses (i) through (viii) hereof, so long as such investment, financing, or interest is made or obtained in the ordinary course of such Limited Standstill Stockholder’s or its controlled Affiliate’s business (and not for the purpose of avoiding the effect of the standstill provisions contained in this Section 1.07), and such Person is not controlled by such Limited Standstill Stockholder.

(b)Each Limited Standstill Stockholder agrees that, during the Standstill Period, neither it nor any of its controlled Affiliates will, directly or indirectly: (i) request to Parent or its Representatives to amend or waive any provision of this Section 1.07 (including this sentence); or (ii) take any initiative with respect to Parent which would reasonably be expected to require Parent to make a public announcement regarding (A) any of the activities referred to in Section 1.07(a) or (B) the possibility of such Limited Standstill Stockholder or any other Person (except as provided in clause (B) of the proviso to Section 1.07(a)) acquiring control of Parent, whether by means of a business combination or otherwise.

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(c)Subject to Section 1.07(d), the restrictions set forth in Sections 1.07(a) and 1.07(b) shall not prohibit any Limited Standstill Stockholder from engaging in one or more of the types of transactions referred to in Sections 1.07(a) and 1.07(b) in the event that: (i) Parent has entered into a definitive agreement with a third party with respect to a Business Combination Transaction; or (ii) a third party commences a tender offer or exchange offer (which would, if completed in accordance with its terms, result in a Business Combination Transaction) and, in the case of this clause (ii), either the Board of Directors of Parent has recommended such offer or not rejected such offer within ten business days after the announcement thereof.

(d)Notwithstanding anything to the contrary in this Agreement, if (i) a Business Combination Transaction with respect to which Parent has entered into a definitive agreement is terminated without the closing thereunder being consummated or (ii) a third party tender or exchange offer of the type described in clause (ii) of Section 1.07(c) is terminated without being consummated, then the provisions of this Section 1.07 shall once again thereafter apply in accordance with their terms and each Limited Standstill Stockholder shall once again be subject to such provisions.

Section 1.08.  Irrevocable Proxy.Each Stockholder hereby revokes any and all previous proxies granted with respect to its shares of Parent Stock.  By entering into this Agreement, each ArcLight Fund hereby irrevocably grants a proxy appointing Parent as its attorney-in-fact and proxy, with full power of substitution, for and in such Stockholder’s name, to vote, express consent or dissent, or otherwise to utilize such voting power in the manner contemplated by Section 1.03 and Section 1.04 as Parent or its proxy or substitute shall, in Parent’s sole discretion, deem proper with respect to such ArcLight Fund’s shares of Parent Stock.  Each ArcLight Fund hereby acknowledges and agrees that such proxy is coupled with an interest, constitutes, among other things, an inducement for Parent to enter into the Merger Agreement and this Agreement, is irrevocable (other than as provided in Section 4.04) and shall not be terminated by operation of law or otherwise upon the occurrence of any event (other than as provided in Section 4.04) and that no subsequent proxies with respect to the shares of Parent Stock shall be given (and if given shall not be effective).  Each Stockholder shall cause all of its shares of Parent Stock to be represented, in person or by proxy, at all meetings of holders of Parent Stock of which such Stockholder has notice, so that such shares of Parent Stock may be counted for the purpose of determining the presence of a quorum at such meetings.

Section 1.09.  Stockholder Only.  Notwithstanding anything to the contrary contained herein, Parent agrees and acknowledges that (i) each Stockholder is entering into this Agreement in its individual capacity and (ii) none of the covenants or other agreements contained herein or provisions hereof shall in any way bind any Affiliates of such Stockholder, except as specifically provided herein.  Parent agrees and acknowledges that this Section 1.09 is an integral part of the transactions contemplated

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hereby and the Stockholder would not enter into this Agreement without this Section 1.09.

ARTICLE 2

Representations and Warranties of the Stockholder

Each Stockholder (or, in the case of Section 2.06, each of the ArcLight Funds) hereby represents, warrants and covenants to Parent as follows as of the Effective Time:

Section 2.01.  Organization; Authorization.  If such Stockholder is not a natural person, such Stockholder is a Person that has been duly organized, is validly existing and, to the extent applicable, is in good standing under the laws of its jurisdiction of organization.  The execution, delivery and performance by such Stockholder of this Agreement and the consummation by such Stockholder of the transactions contemplated hereby are within the corporate (or other entity) or individual powers of such Stockholder and have been duly authorized by all necessary corporate (or other entity) action.  If this Agreement is being executed in a representative or fiduciary capacity, the person signing this Agreement has full power and authority to enter into and perform this Agreement.  This Agreement constitutes a valid and binding Agreement of such Stockholder.

Section 2.02.  No Conflict; Required Filings and Consents.  (a) The execution and delivery of this Agreement by such Stockholder does not, and the performance of this Agreement by such Stockholder will not: (i) conflict with or result in a breach of any organizational documents of such Stockholder, (ii) conflict with or violate any law, rule, regulation, order, judgment or decree applicable to such Stockholder or by which it or any of such Stockholder’s properties or assets is bound or affected or (iii) require any consent or other action by any Person under, result in any breach of, constitute a default (or an event that with notice or lapse of time or both would become a default) under, give to another party any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a Lien on any of the property or assets of such Stockholder, including (without limitation) the Parent Shares, pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which such Stockholder is a party or by which such Stockholder or any of such Stockholder’s properties or assets is bound or affected, with such exceptions, in the case of each of clauses (ii) and (iii), as would not, individually or in the aggregate, reasonably be expected to prevent or materially delay or impair the performance by the Stockholder of the Stockholder’s obligations under this Agreement (a “Stockholder MAE”).  There is no beneficiary or holder of a voting trust certificate or other interest of any trust of which such Stockholder is a trustee whose consent is required for either the execution and delivery of this Agreement or the consummation by such Stockholder of the transactions contemplated by this Agreement.

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(b)The execution and delivery of this Agreement by such Stockholder does not, and the performance of this Agreement by such Stockholder will not, require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Authority.  Such Stockholder does not have any other understanding in effect with respect to the voting or transfer of any Parent Shares except for the Registration Rights Agreement and the Escrow Agreement.

Section 2.03.  Litigation.  As of the date hereof, there is no private or governmental action, suit, proceeding, claim, arbitration or investigation pending before any agency, court or tribunal (foreign or domestic) or, to the knowledge of such Stockholder, threatened against such Stockholder, any of its properties or, if such Stockholder is an entity, any of its officers, directors, employees, partners or trustees in their capacities as such, that, individually or in the aggregate, would reasonably be expected to have a Stockholder MAE.  As of the Effective Time, there is no judgment, decree or order against such Stockholder or, if such Stockholder is an entity, any of its officers, directors, employees, partners or trustees in their capacities as such, that would prevent, enjoin, alter or materially delay any of the transactions contemplated by this Agreement, or that would reasonably be expected to have a Stockholder MAE.

Section 2.04.  Title to Shares.  As of the Effective Time, such Stockholder is the record and beneficial owner of the Parent Shares it is entitled to receive pursuant to Article 2 of the Merger Agreement in respect of the shares of Company Stock set forth on Schedule 2.04(a) hereto and the shares of Company Stock to be issued upon conversion of the Company Convertible Debt Notes set forth on Schedule 2.04(a) hereto, free and clear of any Lien and free of any other limitation or restriction that would prevent such Stockholder from satisfying its obligations pursuant to this Agreement.  With respect to Stockholders other than the ArcLight Funds, the Parent Shares are the only shares of Parent Stock owned of record or beneficially by such Stockholder or its controlled Affiliates as of the Effective Time.  With respect to the ArcLight Funds, the Parent Shares are the only shares of Parent Stock owned of record or beneficially by such Stockholder, and any of its Affiliates as of the Effective Time.  For the avoidance of doubt, the representations and warranties of Stockholders other than the ArcLight Funds in this Section 2.04 relate solely to the direct ownership of such Stockholder and its controlled Affiliates and such Stockholder shall not, for the purposes of this Section 2.04, be deemed the beneficial owner of any shares owned by any of its Affiliates that are not controlled Affiliates.  The parties hereto agree that the representations made in this Section 2.04 shall not apply to the Stockholders with respect to the entities set forth on Schedule 2.04(b).

Section 2.05.  No Community Property Rights.  If such Stockholder is an individual and has a spouse, such Stockholder’s spouse is not entitled to any rights under any community property statute or other Applicable Law or agreement with respect to the

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Parent Shares owned by such Stockholder which would adversely affect the covenants made by such Stockholder pursuant to this Agreement.

Section 2.06.  Director Nominee Disclosure.Each ArcLight Fund represents and warrants that (i) the information supplied by Robb E. Turner and John Erhard to Parent in the Director and Officer Questionnaire completed by such individual is accurate and complete, (ii) neither of such individuals, nor such ArcLight Fund or any of its Affiliates has, or has had at any time in the past three years, any relationship with Parent, the Company or any of their respective Subsidiaries except (A) as set forth in Section 4.26 of the Company Disclosure Schedule and (B) relationships as directors and holders of Company Stock and Company Convertible Debt Notes and (iii) as of the Effective Time, neither of such individuals will fail to be “independent” with respect to Parent under Section 303A.02(b) of the New York Stock Exchange Listed Company Manual (except to the extent that any such individual fails to satisfy the tests set forth in Sections 303A.02(b)(ii) or 303A.02(b)(v) of the New York Stock Exchange Listed Company Manual as a result of the relationships set forth on Section 4.26 of the Company Disclosure Schedule).

ARTICLE 3

Additional Covenants of the Parties

Section 3.01.  Lock-Up.

(a)From the Effective Time until the date that is 180 days after the Effective Time (the “Initial Lock-up Date”), each Stockholder agrees that it shall not, without Parent’s prior written consent (which consent shall be determined by the Board in its sole discretion, excluding the vote of any members of the Board appointed by the Stockholder Representative pursuant to this Agreement), Transfer any Parent Shares owned by it to any Person.

(b)From the Initial Lock-up Date until the date that is 270 days after the Effective Time (the “Second Lock-up Date”), each Stockholder agrees that it shall not, without Parent’s prior written consent (which consent shall be determined by the Board in its sole discretion, excluding the vote of any members of the Board appointed by the Stockholder Representative pursuant to this Agreement), Transfer more than 50% of the Parent Shares owned by it as of the Effective Time to any Person

(c)From the Second Lock-up Date until the date that is 360 days after the Effective Time, each Stockholder agrees that it shall not, without Parent’s prior written consent (which consent shall be determined by the Board in its sole discretion, excluding the vote of any members of the Board appointed by the Stockholder Representative pursuant to this Agreement), Transfer any shares to any Person to the extent that, when

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aggregated with any Transfers by such Stockholder permitted by Section 3.01(b), such Stockholder will have Transferred more than 75% of the Parent Shares owned by it as of the Effective Time.

(d)Notwithstanding clauses (a) through (c) of this Section 3.01, in the event that the Board determines to release any Stockholder from the provisions of this Section 3.01, each other Stockholder shall automatically be deemed released with respect to the same percentage of securities as the percentage of securities then held by the released Stockholder (and otherwise on the same terms and conditions).

Section 3.02.  Further Assurances.  Each of the parties hereto agrees to execute and deliver, or cause to be executed and delivered, all further documents and instruments and to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations, to consummate and make effective the transactions contemplated by this Agreement, including to vest in Parent the power to carry out the provisions of Article 1 and this Article 3.

ARTICLE 4

General Provisions

Section 4.01.  Notices.  All notices, requests and other communications to any party hereunder shall be in writing (including facsimile transmission but not electronic mail) and shall be given,

(a)  if to Parent, to:

Patriot Coal Corporation

12312 Olive Boulevard, Suite 400

St. Louis, Missouri 63141

Attention:  Joseph W. Bean

Facsimile No.:  (314) 275-3656

with a copy to:

Davis Polk & Wardwell

450 Lexington Avenue

New York, NY  10017

Attention:  William L. Taylor

Facsimile No.:  (212) 450-4800

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(b)  if to any Stockholder or to the Stockholder Representative, to the Stockholder Representative as follows:

with a copy to:

ArcLight Energy Partners Fund I, L.P.

ArcLight Energy Partners Fund II, L.P.

c/o ArcLight Capital Partners, LLC

152 West 57th Street, 53rd Floor

New York, NY 10019

Attention: Robb E. Turner

                Senior Partner

Facsimile No.: 212-888-9275

and

ArcLight Energy Partners Fund I, L.P.

ArcLight Energy Partners Fund II, L.P.

c/o ArcLight Capital Partners, LLC

200 Clarendon Street, 55th Floor

Boston, MA 02117

Attention:  Christine M. Miller

                  Associate General Counsel

Facsimile No.: 617.867.4698

and

Skadden, Arps, Slate, Meagher & Flom LLP

Four Times Square

New York, New York 10022

Attention: Sean C. Doyle, Esq.

Facsimile No.: (212) 735-2000

or to such other address or facsimile number as such party may hereafter specify for the purpose by notice to the other parties hereto.  All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5:00 p.m. on a Business Day in the place of receipt.  Otherwise, any such notice, request or communication shall be deemed to have been received on the next succeeding Business Day in the place of receipt.

Section 4.02.  Headings.  The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

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Section 4.03.  Amendments and Waivers.  (a). Any provision of this Agreement (including any Schedule or Exhibit hereto) may be amended or waived if, but only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by Parent, the Stockholder Representative and a number of Stockholders owning at least 66 2/3% of the Parent Shares owned by all Stockholders at such time, or in the case of a waiver, by the party against whom the waiver is to be effective; provided that no amendment to any provision of Section 1.04, Section 1.05, Section 1.06, Section 1.07, Section 3.01, Section 4.03(a) shall be effective against any Stockholder without such Stockholder’s written consent and no amendment that is adverse to any Stockholder shall be effective without the consent of such Stockholder.

(b)No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.  The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.

Section 4.04.  Effectiveness and Termination.  This Agreement shall become effective on the Effective Time (it being agreed and understood that if the Merger Agreement is terminated, this Agreement shall not become effective and shall become void and of no effect).  After the Effective Time, this Agreement shall terminate on the earlier of (i) the written agreement of Parent and the Stockholder Representative and (ii) the date, if any, of the termination of the Standstill Period; provided that such termination shall not relieve any party hereto from any liability for breach of this Agreement occurring prior to any such termination.

Section 4.05.  Severability.  If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other Governmental Authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party.  Upon such a determination, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.

Section 4.06.  Entire Agreement.  This Agreement supersedes all prior agreements and undertakings, both written and oral, between the parties, or any of them, with respect to the subject matter hereof.

Section 4.07.  Assignment.  The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, provided that no party may assign, delegate or otherwise transfer any of its rights, interests or obligations under this Agreement without the prior written consent of the other parties hereto, except that Parent may assign, delegate or otherwise transfer any

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of its rights, interests or obligations under this Agreement to an Affiliate without the consent of any Stockholder, but any such transfer or assignment shall not relieve Parent of its obligations hereunder (and in the event that such Person is no longer an Affiliate of Parent, any such rights and interests shall be automatically assigned or transferred to Parent).

Section 4.08.  Fees and Expenses.  All costs and expenses (including, without limitation, all fees and disbursements of counsel, accountants, investment bankers, experts and consultants to a party) incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs and expenses.

Section 4.09.  Specific Performance.  The parties hereto agree that irreparable damage would occur if any provision of this Agreement were not performed in accordance with the terms hereof and that the parties shall be entitled (without the requirement to post bond) to an injunction or injunctions to prevent breaches of this Agreement or to enforce specifically the performance of the terms and provisions hereof in the courts provided for in Section 4.11, in addition to any other remedy to which they are entitled at law or in equity.

Section 4.10.  Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to its conflicts of law principles.

Section 4.11.  Jurisdiction.  The parties hereto agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby shall be brought in any Delaware state court, and each of the parties hereby irrevocably consents to the jurisdiction of such court (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.  Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court.  Without limiting the foregoing, each party agrees that service of process on such party as provided in Section 4.01 shall be deemed effective service of process on such party.

Section 4.12. WAIVER OF JURY TRIAL.  EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

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Section 4.13. Counterparts; Third Party Beneficiaries.  This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.  Until and unless each party has received a counterpart of this Agreement signed by each of the other parties, this Agreement shall have no effect, and no party shall have any right or obligation under this Agreement (whether by virtue of any other oral or written agreement or other communication).  This Agreement shall become effective when each party shall have received a counterpart hereof signed by the other parties.  No provision of this Agreement is intended to confer upon any Person other than the parties hereto any rights or remedies hereunder.  Any such counterpart may be delivered by facsimile or other electronic format (including “.pdf”).

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

PATRIOT COAL CORPORATION
By:	/s/ Richard M. Whiting
	Name:	Richard M. Whiting
	Title:	President and Chief Executive Officer

ARCLIGHT ENERGY PARTNERS FUND I, L.P. and ARCLIGHT ENERGY PARTNERS FUND II, L.P., acting jointly, as Stockholder Representative ARCLIGHT ENERGY PARTNERS FUND I, L.P. By:  ArcLight PEF GP, LLC, its General Partner By:  ArcLight Capital Holdings, LLC, its Manager
By:	/s/ Daniel R. Revers
	Name:	Daniel R. Revers
	Title:	Manager

ARCLIGHT ENERGY PARTNERS FUND II, L.P.  By:  ArcLight PEF GP II, LLC, its General Partner  By:  ArcLight Capital Holdings, LLC, its Manager
By:	/s/ Daniel R. Revers
	Name:	Daniel R. Revers
	Title:	Manager

ARCLIGHT ENERGY PARTNERS FUND I, L.P.  By:  ArcLight PEF GP, LLC, its General Partner  By:  ArcLight Capital Holdings, LLC, its Manager
By:	/s/ Daniel R. Revers
	Name:	Daniel R. Revers
	Title:	Manager

/s/ Timothy Elliott

Timothy Elliott

ARCLIGHT ENERGY PARTNERS FUND II, L.P. By:  ArcLight PEF GP II, LLC, its General Partner By:  ArcLight Capital Holdings, LLC, its Manager
By:	/s/ Daniel R. Revers
Name: Daniel R. Revers
Title: Manager

CAISSE DE DÉPÔT ET PLACEMENT DU QUÉBEC
By:	/s/ Ghislain Gauthier
Name: Ghislain Gauthier
Title: Senior Vice-President
By:	/s/ Cyrille Vittecoq
Name: Cyrille Vittecoq
Title: Vice-President, Investments

CASCADE INVESTMENT, L.L.C.
By:	/s/ Michael Larsor
Name: Michael Larsor
Title: Business Manager

CITIGROUP CAPITAL PARTNERS II 2006 CITIGROUP INVESTMENT, L.P. By:  Citigroup Private Equity LP, its general partner
By:	/s/ Darren Friedman
Name: Darren Friedman
Title: Vice President

CITIGROUP CAPITAL PARTNERS II EMPLOYEE MASTER FUND, L.P. By:  Citigroup Private Equity LP, its general partner
By:	/s/ Darren Friedman
Name: Darren Friedman
Title: Vice President

CITIGROUP CAPITAL PARTNERS II ONSHORE, L.P. By:  Citigroup Private Equity LP, its general partner
By:	/s/ Darren Friedman
Name: Darren Friedman
Title: Vice President

CITIGROUP CAPITAL PARTNERS II CAYMAN HOLDINGS, L.P. By:  Citigroup Private Equity LP, its general partner
By:	/s/ Darren Friedman
Name: Darren Friedman
Title: Vice President

HOWARD HUGHES MEDICAL INSTITUTE
By:	/s/ Landis Zimmerman
Name: Landis Zimmerman
Title: Vice President + Chief Investment Officer

THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
By:	/s/ Howard Stern
Name: Howard Stern
Title: Its Authorized Representative

THE BOARD OF TRUSTEES OF THE LELAND STANFORD JUNIOR UNIVERSITY By:  The Stanford Management Company
By:	/s/ Mark H. Hayes
Name: Mark H. Hayes
Title: Manager of Natural Resources Investments

/s/ Paul Vining

Paul Vining

/s/ David Turnbull

David Turnbull

/s/ Richard Verheij

Richard Verheij

/s/ Tom McQuade

Tom McQuade

/s/ B. Scott Spears

B. Scott Spears

/s/ Keith St. Clair

Keith St. Clair

/s/ Robert Bennett

Robert Bennett

/s/ Dwayne Francisco

Dwayne Francisco

Schedule 1.02(e)

The Northwestern Mutual Life Insurance Company

Schedule 1.04

Stockholder

Caisse de Dépôt et Placement du Québec

Howard Hughes Medical Institute

Schedule 1.06

LIST OF REDUCED STANDSTILL STOCKHOLDERS

Stockholder

Cascade Investment, L.L.C.

Citigroup Capital Partners II 2006 Citigroup Investment, L.P.

Citigroup Capital Partners II Employee Master Fund, L.P.

Citigroup Capital Partners II Onshore, L.P.

Citigroup Capital Partners II Cayman Holdings, L.P.

Howard Hughes Medical Institute

The Board of Trustees of The Leland Stanford Junior University

Schedule 1.07

LIST OF LIMITED STANDSTILL STOCKHOLDERS

Stockholder

Caisse de Dépôt et Placement du Québec

Schedule 2.04(a)

STOCKHOLDER SHARE OWNERSHIP

Stockholder Name	Shares of Company Stock Held by the Stockholder1	Company Convertible Debt Notes Held by the Stockholder
ARCLIGHT ENERGY PARTNERS FUND I, L.P.	17,843,448	$15,000,000.00
ARCLIGHT ENERGY PARTNERS FUND II, L.P.	9,300,554	$48,214,596.00
CAISSE DE DÉPÔT ET PLACEMENT DU QUÉBEC	4,946,990	$9,600,000.00
CASCADE INVESTMENT, L.L.C.	4,946,990	$11,588,720.00
CITIGROUP CAPITAL PARTNERS II 2006 CITIGROUP INVESTMENT, L.P.	1,017,068	$2,382,601.53
CITIGROUP CAPITAL PARTNERS II EMPLOYEE MASTER FUND, L.P.	1,142,457	$2,676,285.57
CITIGROUP CAPITAL PARTNERS II ONSHORE, L.P.	515,792	$1,208,231.36
CITIGROUP CAPITAL PARTNERS II CAYMAN HOLDINGS, L.P.	646,263	$1,513,949.54
HOWARD HUGHES MEDICAL INSTITUTE	3,321,580	$7,585,617.00
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY	3,321,580	$0.00
THE BOARD OF TRUSTEES OF THE LELAND STANFORD JUNIOR UNIVERSITY	1,784,315	$0.00
PAUL VINING	549,787	$154,000.00
TIMOTHY ELLIOTT	338,022	$0.00
DAVID TURNBULL	122,870	$20,000.00
RICHARD VERHEIJ	202,974	$25,000.00
TOM MCQUADE	110,169	$0.00
B. SCOTT SPEARS	114,957	$11,000.00
KEITH ST. CLAIR	266,948	$0.00
ROBERT BENNETT	221,733	$0.00
DWAYNE FRANCISCO	335,629	$0.00

__________ 

1 Subject to adjustment in the case of individuals in the event of net vesting of shares pursuant to the Stock Plan.

Schedule 2.04(b)

Mason Street Advisors LLC (a wholly-owned subsidiary of The Northwestern Mutual Life Insurance Company)

Frank Russell Company (a majority-owned subsidiary of The Northwestern Mutual Life Insurance Company) and its subsidiaries

EX-10.5

Exhibit 10.5

AMENDMENT NO. 1 TO CREDIT AGREEMENT

AMENDMENT (this “Amendment”) dated as of April 2, 2008 to the Credit Agreement (the “Credit Agreement”) dated as of October 31, 2007, among PATRIOT COAL CORPORATION, a Delaware corporation (the “Borrower”) and each lender from time to time party thereto (collectively, the “Lenders” and individually, a “Lender”).

W I T N E S S E T H :

WHEREAS, the parties hereto desire to amend the Credit Agreement to, among other things, (i) permit the Magnum Acquisition (as defined below), (ii) increase the rates of interest applicable to Loans thereunder, and (iii) modify certain covenants and related definitions to allow for changes in permitted indebtedness, permitted liens, permitted capital expenditures and other changes in respect of the Borrower and its Subsidiaries in connection with the Magnum Acquisition.

NOW, THEREFORE, the parties hereto agree as follows:

SECTION 1.  Defined Terms; References.  Unless otherwise specifically defined herein, each term used herein that is defined in the Credit Agreement has the meaning assigned to such term in the Credit Agreement.  Each reference to “hereof”, “hereunder”, “herein” and “hereby” and each other similar reference and each reference to “this Agreement” and each other similar reference contained in the Credit Agreement shall, after this Amendment becomes effective, refer to the Credit Agreement as amended hereby.

SECTION 2. Definition of Amendment No. 1 to Credit Agreement.  Section 1.01 of the Credit Agreement is amended to add a new definition in appropriate alphabetical order:

“Amendment No. 1 to Credit Agreement” meansthat certain Amendment No. 1 to Credit Agreement dated as of April 2, 2008 by and among the Borrower and the Required Lenders.

SECTION 3.  Definition of Applicable Rate.  The Applicable Rate schedule (the “Existing Rate Schedule”) set forth in the definition of Applicable Rate in Section 1.01 of the Credit Agreement is hereby deleted and replaced with the following revised schedule (the “Amended Applicable Rate Schedule”):

	Applicable Rate
Level	Consolidated Leverage Ratio	Eurocurrency Rate Loans and Letters of Credit	Base Rate Loans	Commitment Fee
I	≥ 2.50x	3.500%	2.500%	0.625%
II	≥ 2.00x	3.125%	2.125%	0.500%
III	≥ 1.50x	2.875%	1.875%	0.500%
IV	≥ 1.00x	2.625%	1.625%	0.375%

V < 1.00x 2.500% 1.500% 0.375%

provided that the Amended Applicable Rate Schedule shall apply to interest and fees accruing under the Credit Agreement on and after the Merger Date.  The Existing Rate Schedule shall continue to apply to interest and fees accruing under the Credit Agreement prior to the Merger Date.

SECTION 4.  Definition of Collateral.  The definition of “Collateral” in Section 1.01 of the Credit Agreement is hereby amended by adding the words “and the Intercreditor Agreement, if any” after each occurrence of the words “the Collateral Documents.”

SECTION 5.  Definition of Loan Documents.  The definition of “Loan Documents” in Section 1.01 of the Credit Agreement is hereby amended by deleting the word “and” at the end of clause (f) thereof, replacing the “.” with the words “, and” at the end of clause (g) thereof, and adding the following new clause (h) at the end thereof to read as follows:

“(h) the Intercreditor Agreement, if any.”

SECTION 6.  Definition of Intercreditor Agreement.  Section 1.01 of the Credit Agreement is hereby amended to add a new definition in appropriate alphabetical order:

“Intercreditor Agreement” means the Subordination and Intercreditor Agreement dated on or about the date of the Magnum Acquisition Credit Agreement, among the Borrower, the Administrative Agent and the Magnum Agent and (i) in respect of Bridge Debt Terms, on those terms and conditions substantially as set forth in Annex A, and (ii) in respect of Permanent Debt Terms, on terms and conditions that are substantially similar to those terms and conditions set forth in Annex A or which shall have been approved by the Administrative Agent on behalf of the Required Lenders, as the same shall be amended, restated, supplemented or modified from time to time.”

SECTION 7.  Definition of Magnum.  Section 1.01 of the Credit Agreement is amended to add a new definition in appropriate alphabetical order:

“Magnum” means Magnum Coal Company, a Delaware corporation.

SECTION 8.  Definition of Magnum Acquisition.  Section 1.01 of the Credit Agreement is amended to add a new definition in appropriate alphabetical order:

“Magnum Acquisition” means, collectively, (a) the consummation of the transactions described in the Merger Agreement, (b) the repayment in full of all outstanding Indebtedness of Magnum and its Subsidiaries and the termination of all commitments with respect thereto, including under Magnum’s existing senior secured credit facility (other than the Indebtedness set forth on Schedule 7.02(ii)), (c) the payment of the fees and expenses incurred in connection with the consummation of the foregoing, (d) on or prior to the Merger Date, the issuance by Magnum of convertible indebtedness in an aggregate principal amount of not less than $100,000,000 to be converted on or about the Merger Date into certain shares in Magnum, which shall be exchanged for certain shares in the Borrower and to be used to repay all outstanding indebtedness of Magnum and its

Subsidiaries (other than the Indebtedness set forth on Schedule 7.02(ii)) and (e) the issuance of Letters of Credit to replace outstanding letters of credit issued for the account of Magnum or its Subsidiaries.

SECTION 9.  Definition of Magnum Acquisition Credit Agreement.  Section 1.01 of the Credit Agreement is amended to add a new definition in appropriate alphabetical order:

“Magnum Acquisition Credit Agreement” means any combination of the following so long as the aggregate principal amount of indebtedness outstanding under the following on the Merger Date is not less than the amount necessary to repay in full on the Merger Date the principal amount of indebtedness outstanding under Magnum’s existing senior secured credit facility after giving effect to the transaction contemplated under paragraph (d) of the definition of “Magnum Acquisition” less the amount of unrestricted cash and cash equivalents of Magnum on the Merger Date (“Magnum Pay-off Amount”) (i) the Credit Agreement dated on or prior to the Merger Date among ArcLight or one or more affiliates thereof and the Borrower on terms substantially similar to those set forth on Annex B-I (the “Bridge Debt Terms”) and other material terms not otherwise included in the Bridge Debt Terms which are no more restrictive to the Borrower in any material respect than the representations, warranties, covenants and events of default contained in this Agreement or which shall have been approved by the Administrative Agent on behalf of the Required Lenders, (ii) the documentation with respect to second lien secured debt (the “Permanent Debt”) of the Borrower on terms substantially similar to those set forth on Annex B-II (the “Permanent Debt Terms”), and other material terms not otherwise included in the Permanent Debt Terms which are no more restrictive to the Borrower in any material respect than the representations, warranties, covenants and events of default contained in this Agreement or which shall have been approved by the Administrative Agent on behalf of the Required Lenders, or (iii) the documentation with respect to convertible senior debt or senior subordinated debt (the “Convertible Debt”) of the Borrower on terms substantially similar to those set forth on Annex B-III (the “Convertible Debt Terms”), and other material terms not otherwise included in the Convertible Debt Terms which are no more restrictive to the Borrower in any material respect than the representations, warranties, covenants and events of default contained in this Agreement or which shall have been approved by the Administrative Agent on behalf of the Required Lenders.

SECTION 10.  Definition of Magnum Agent.  Section 1.01 of the Credit Agreement is amended to add a new definition in appropriate alphabetical order:

“Magnum Agent” meansthe administrative agent or any person performing an equivalent role for the lenders under the Magnum Acquisition Credit Agreement.

SECTION 11.  Definition of Merger Agreement.  Section 1.01 of the Credit Agreement is amended to add a new definition in appropriate alphabetical order:

“Merger Agreement” meansthe Agreement and Plan of Merger by and among Magnum, the Borrower, Colt Merger Corporation, a Delaware corporation and a newly formed wholly-owned subsidiary of the Borrower (“Merger Sub”), and ArcLight Energy

Partners Fund I, L.P., a Delaware limited partnership, and ArcLight Energy Partners Fund II, L.P., a Delaware limited partnership (collectively, “ArcLight”), acting jointly as Stockholder Representative as defined therein, as amended or modified from time to time; provided that such amendment or modification is not in any manner materially adverse to the interests of the Lenders, unless consented to by the Administrative Agent on behalf of the Required Lenders.

SECTION 12.  Definition of Merger Date.  Section 1.01 of the Credit Agreement is amended to add a new definition in appropriate alphabetical order:

“Merger Date” meansthe date that the Magnum Acquisition is consummated.

SECTION 13.  Definition of Subsidiary Guarantors.  Section 1.01 of the Credit Agreement is amended by deleting and replacing the definition of “Subsidiary Guarantors” in its entirety to read as follows:

“Subsidiary Guarantors” means, collectively, the subsidiaries of the Borrower listed on Schedule 1.01(a), and each other Guarantor Subsidiary of the Borrower that guarantees the Obligations pursuant to Section 6.12 or otherwise.”

SECTION 14.  Fronting Fee and Documentary and Processing Charges Payable to L/C/ Issuer.  Upon the Merger Date, Section 2.03(j) of the Credit Agreement is hereby amended by replacing the percentage “0.125%” with “0.25%”.

SECTION 15.  Authorization; No Contravention.  Section 5.02(b)(ii) of the Credit Agreement is hereby amended by inserting the words “or the Magnum Acquisition Credit Agreement” after the words “Loan Documents” therein.

SECTION 16.  Senior Indebtedness.  Article V of the Credit Agreement is hereby amended by adding the following new Section 5.25 to the end thereof to read as follows:

“5.25  Senior Indebtedness.  The Obligations constitute “First Lien Obligations” of the Borrower under the Intercreditor Agreement, if any.”

SECTION 17.  Liens.  (a)  Section 7.01(b) of the Credit Agreement is hereby deleted and replaced in its entirety to read as follows:

“(b)  (i) Liens on the property of the Borrower or any of its Subsidiaries existing on the date hereof and listed on Schedule 7.01(i) and (ii) subject to consummation of the Magnum Acquisition, Liens on the property of Magnum or any of its Subsidiaries existing on the Merger Date and listed on Schedule 7.01(ii) (as may be amended or modified from time to time prior to the Merger Date; provided that such amendment or modification is not in any manner materially adverse to the interests of the Lenders, unless consented to by the Administrative Agent on behalf of the Required Lenders) and, in each case, any refinancing, refunding, renewal or extension thereof; provided, that (A) the assets and other property subject thereto are not expanded from the assets and other property subject thereto immediately prior to the Merger Date, (B) such Lien shall secure only those obligations which it secures on the Merger Date and the principal amount secured or benefited thereby is not increased from the principal amount so

secured or benefited thereby, and (C) any refinancing, refunding, renewal or extension of the obligations secured or benefited thereby is permitted by Section 7.02(c).”

(b)  Section 7.01(j) of the Credit Agreement is amended replacing the number “$15,000,0000” with “$25,000,000.”

(c)  Section 7.01 of the Credit Agreement is amended by deleting the word “and” at the end of clause (t) thereof, replacing the “.” with the words “; and” at the end of clause (u) thereof, and adding the following new clause (v) at the end thereof to read as follows:

“(v)  Liens securing Indebtedness under the Magnum Acquisition Credit Agreement; provided, that (A) such Liens do not encumber any property in which the Lenders do not have a perfected Lien securing the Obligations, (B) any refinancing, refunding, renewal or extension of the obligations secured or benefited thereby is permitted by the terms of the Intercreditor Agreement, and (C) such Liens are subordinated in favor of the Lenders under the terms and conditions set forth in the Intercreditor Agreement.”

SECTION 18.  Indebtedness.  (a)  Section 7.02(b) of the Credit Agreement is hereby deleted and replaced in its entirety to read as follows:

“(b)  (i) Indebtedness outstanding on the date hereof and listed on Schedule 7.02(i) and (ii) subject to consummation of the Magnum Acquisition, Indebtedness of Magnum or any of its Subsidiaries outstanding on the Merger Date and listed on Schedule 7.02(ii) (as may be amended or modified from time to time prior to the Merger Date; provided that such amendment or modification is not in any manner materially adverse to the interests of the Lenders, unless consented to by the Administrative Agent on behalf of the Required Lenders);”

(b)  Section 7.02(c) of the Credit Agreement is amended by (i) adding the words “and Section 7.02(n)” after the words “Section 7.02(b)”, and (ii) adding the words “, or as determined by the Administrative Agent in the case of any refinancings, refundings, renewals or extensions of Indebtedness permitted under Section 7.02(n)); provided that, notwithstanding the foregoing, refinancings, refundings, renewals or extensions of Indebtedness outstanding under any Magnum Acquisition Credit Agreement which is subject to an Intercreditor Agreement shall be permitted in accordance with the terms of the Intercreditor Agreement" after the word "Borrower" on the last line.

(c)  Section 7.02(m) of the Credit Agreement is amended by replacing “$200,000,000” with “$400,000,000”.

(d)  Section 7.02 of the Credit Agreement is amended by deleting the word “and” at the end of clause (l) thereof, replacing the “.” with the words “; and” at the end of clause (m) thereof, and adding the following new clause (n) at the end thereof to read as follows:

“(n)  subject to the consummation of the Magnum Acquisition, Indebtedness incurred by the Borrower under the Magnum Acquisition Credit Agreement, provided that the maximum aggregate principal amount of Indebtedness thereunder shall not exceed $150,000,000 (other than with respect to the capitalization of interest, if any) unless such Indebtedness constitutes Convertible Debt (as defined in the definition of Magnum Acquisition Credit Agreement) in

which case the aggregate principal amount shall not exceed $200,000,000 (other than with respect to the capitalization of interest, if any).”

SECTION 19.  Investments.  Section 7.03 of the Credit Agreement is amended by deleting the word “and” at the end of clause (l) thereof, replacing the “.” with the words “; and” at the end of clause (m) thereof, and adding the following new clause (n) at the end thereof to read as follows:

“(n)  the Magnum Acquisition.”

SECTION 20.  Capital Expenditures.  The Capital Expenditures schedule  (the “Existing CapEx Schedule”) set forth in Section 7.12 of the Credit Agreement is hereby deleted and replaced with the following revised schedule:

Fiscal Year	Amount
2008	$220,000,000
2009	$235,000,000
2010	$220,000,000
2011	$220,000,000

provided that such amended Capital Expenditure schedule shall apply to capital expenditures made on and after the Merger Date (it being understood that the dollar limits in such schedule for any year will apply to expenditures in such year made before and after the Merger Date).  The Existing CapEx Schedule shall continue to apply to capital expenditures made prior to the Merger Date.

SECTION 21. Magnum Acquisition Credit Agreement.  Article VII of the Credit Agreement is hereby amended by adding the following new Section 7.18 to the end thereof to read as follows:

“7.18  Magnum Acquisition Credit Agreement.  The Borrower shall not (i) amend or modify the Magnum Acquisition Credit Agreement in any manner that is (a) materially adverse to the interests of the Lenders with respect to any Magnum Acquisition Credit Agreement relating to Convertible Debt or (b) prohibited by the terms of the Intercreditor Agreement with respect to any Magnum Acquisition Credit Agreement for Bridge Debt or Permanent Debt, as the case may be, or (ii) make any payment or prepayment of principal (whether voluntary or mandatory) or make any early redemption or repurchase of indebtedness under the Magnum Acquisition Credit Agreement, or payment of interest or fees (other than scheduled payments of interest or fees and consent or waiver fees that may be paid on the same percentage basis as to the Lenders) under the Magnum Acquisition Credit Agreement; provided, however, if no Event of Default has occurred and is continuing, the Borrower shall be permitted to prepay principal, interest or fees under the Magnum Acquisition Credit Agreement if such prepayments are made solely from the proceeds of (a) an equity offering of the Borrower, (b) advances made on Bridge Debt Terms, Permanent Debt Terms or Convertible Debt Terms, as applicable; provided that in respect of advances made on Bridge Debt Terms or Permanent Debt Terms, each applicable lender agrees to enter into the Intercreditor Agreement, or (c) a refinancing of Magnum Acquisition Credit Agreement in accordance with Section 7.02(c).”

SECTION 22.  Collateral and Guaranty Matters.  Section 9.10 of the Credit Agreement is amended by adding the following new paragraph at the end thereof to read as follows:

“Notwithstanding the foregoing, any amendment, modification or waiver of any provision of the Intercreditor Agreement shall be governed by Section 9.3 thereof in which case the Administrative Agent, as the “First Lien Administrative Agent” under the Intercreditor Agreement, shall act upon the written consent of the Required Lenders.”

SECTION 23.  Schedules.  (a) Schedule 7.01 of the Credit Agreement is amended to read as “Schedule 7.01(i)”.

(b)  The Credit Agreement is amended by adding a new “Schedule 7.01(ii)” attached hereto as Exhibit A.

(c)  Schedule 7.02 of the Credit Agreement is amended to read as “Schedule 7.02(i)”.

(d)  The Credit Agreement is amended by adding a new “Schedule 7.02(ii)” attached hereto as Exhibit B.

SECTION 24.  Representations of Borrower.  The Borrower represents and warrants that (i) both before and after giving effect to this Amendment, the representations and warranties of the Borrower set forth in Article V of the Credit Agreement and contained in each other Loan Document, or which are contained in any document furnished at any time under or in connection with the Credit Agreement, are true and correct in all material respects on and as of the Amendment Effective Date, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct in all material respects as of such earlier date, and (ii) both before and after giving effect to this Amendment, no Default or Event of Default will have occurred and be continuing.

SECTION 25.  Authority.  The Borrower has the requisite corporate or other organizational power and authority to execute and deliver this Amendment and the Mortgage Modifications (as defined below) to which it is a party and to perform its obligations hereunder and under the Credit Agreement (as amended hereby) and the Mortgages to which it is a party, as modified by the Mortgage Modifications.  Each of the Subsidiary Guarantors has the requisite corporate or other organizational power and authority to execute and deliver the Consent (as defined below) and any Mortgage Modification to which it is a party.   The execution, delivery and performance by the Borrower of this Amendment and the Mortgage Modifications, as applicable, and by the Subsidiary Guarantors of the Consent and the Mortgage Modifications, as applicable, and the performance by the Borrower and each other Loan Party of the Credit Agreement (as amended hereby) and each other Loan Document to which it is a party as modified by the Mortgage Modifications in the case of the Mortgages, in each case, have been authorized by all necessary corporate or other organizational action of such Person, and no other corporate or other organizational proceedings on the part of each such Person is necessary to consummate such transactions.

SECTION 26.  Enforceability.  This Amendment has been duly executed and delivered on behalf of the Borrower.  The Consent has been duly executed and delivered by each of the Subsidiary Guarantors.  Each of the Mortgage Modifications has been duly executed and

delivered by each Loan Party party thereto.  Each of this Amendment, the Consent, the Mortgage Modifications and, after giving effect to this Amendment, the Credit Agreement and the other Loan Documents, (i) is the legal, valid and binding obligation of each Loan Party party hereto and thereto, enforceable against such Loan Party in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law) and (ii) is in full force and effect.  Neither the execution, delivery or performance of this Amendment or of the Consent or of the Mortgage Modifications or the performance of the Credit Agreement (as amended hereby), nor the performance of the transactions contemplated hereby or thereby, will adversely affect the validity, perfection or priority of the Administrative Agent’s Lien on any of the Collateral or its ability to realize thereon.  This Amendment is effective to amend the Credit Agreement as provided therein.

SECTION 27.  No Conflicts.  Neither the execution and delivery of this Amendment or the Consent or the Mortgage Modifications, nor the consummation of the transactions contemplated hereby and thereby, nor the performance of and compliance with the terms and provisions hereof or of the Credit Agreement (as amended hereby) or the Mortgages, as modified by the Mortgage Modifications by any Loan Party will, at the time of such performance, (i) violate or conflict with any provision of its certificate of formation or limited liability company agreement or other governing documents of such Person, (ii) violate, contravene or materially conflict with any Requirement of Law or Contractual Obligation (including, without limitation, Regulation U), except for any violation, contravention or conflict which could not reasonably be expected to have a Material Adverse Effect or (iii) result in or require the creation of any Lien (other than those permitted by the Loan Documents) upon or with respect to its properties.  No consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority or any other Person is required in connection with the transactions contemplated hereby.

SECTION 28.  Effect of Amendment.  (a) Except as specifically amended above or by the Mortgage Modifications in the case of the Mortgages, the Credit Agreement and the other Loan Documents are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed.  Without limiting the generality of the foregoing, the Collateral Documents and all of the Collateral described therein do and shall continue to secure the payment of all Obligations under and as defined therein.

(b)  The execution, delivery and effectiveness of this Amendment and the Mortgage Modifications shall not operate as a waiver of any right, power or remedy of any Secured Party under any of the Loan Documents, nor, except as expressly provided herein, constitute a waiver or amendment of any provision of any of the Loan Documents.  For the avoidance of doubt, the Borrower shall comply with Section 6.12 of the Credit Agreement with respect to any Person or assets acquired in connection with the Magnum Acquisition.

SECTION 29.  Governing Law.  This Amendment shall be governed by and construed in accordance with the laws of the State of New York.

SECTION 30.  Counterparts.  This Amendment may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

SECTION 31.  Effectiveness and Consent Fee.  (a)  This Amendment shall become effective on the date hereof provided that the following conditions are met (the “Amendment Effective Date”):

(i)the Administrative Agent shall have received from each of the Borrower and the Required Lenders a counterpart hereof signed by such party or facsimile or other written confirmation (in form satisfactory to the Administrative Agent) that such party has signed a counterpart hereof;

(ii)the Administrative Agent shall have received counterparts of the Consent of Guarantors attached hereto as Annex I (the “Consent”) executed by each of the Subsidiary Guarantors as of the date hereof;

(iii)the Administrative Agent shall have received a certificate from a Responsible Officer of the Borrower to the effect that since December 31, 2007, until the date hereof, there has been no event or circumstance, either individually or in the aggregate, that has had or could reasonably be expected to have a Material Adverse Effect;

(iv)the Merger Agreement shall have been executed and delivered simultaneously with this Amendment and the Administrative Agent shall have received an executed copy of the Merger Agreement certified by a Responsible Officer of the Borrower that such Merger Agreement is a true and correct copy of the original; and

(v)the Administrative Agent shall have received an opinion of Davis Polk & Wardwell, special New York counsel to the Borrower, and Joseph W. Bean, Esq., special Missouri counsel to the Borrower, dated the Amendment Effective Date and substantially in the form of Exhibits C-1 and C-2 hereto.

(b)  No later than the first Business Day after the Amendment Effective Date, the Borrower shall pay the Administrative Agent, in immediately available funds, (i) for the account of each consenting Lender that has evidenced its agreement hereto as provided in Section 31(a) by 5:00 P.M. (New York City time) on the later of (A) April 2, 2008 and (B) the time at which the Administrative Agent shall have determined that Required Lender consent to this Amendment has been obtained (such determination to be binding, absent manifest error, and notified in writing to the Lenders and the Borrower), a non-refundable consent fee in an amount equal to 0.75% of such Lender’s Commitment then outstanding as of the date hereof, and (ii) for the account of each other consenting Lender a non-refundable consent fee in an amount equal to 0.25% of such Lender’s Commitment then outstanding as of the date hereof.

SECTION 32.  Conditions Subsequent.  This Amendment shall become null and void and of no further force or effect if, without the written consent of the Administrative Agent acting on behalf of the Required Lenders at such time, any of the following conditions shall have occurred:

(i)  the Merger Date does not occur by September 30, 2008;

(ii)on or prior to the incurrence of Indebtedness under any Magnum Acquisition Credit Agreement, the Administrative Agent shall not have received duly executed Mortgage modifications (in proper form for recording and in form and substance reasonably satisfactory to the Administrative Agent) as requested by the Administrative Agent (the “Mortgage Modifications”);

(iii)the Merger Agreement shall have been amended or modified in any manner that is materially adverse to the interests of the Lenders;

(iv)any representation, warranty or covenant contained in the Merger Agreement is breached, unless a Responsible Officer of the Borrower delivers a certificate to the Administrative Agent to the effect that, in the good faith opinion of the Borrower, such breach does not give the Borrower a right not to consummate the Merger (as defined in the Merger Agreement) (whether or not the Borrower in fact exercises (or waives) such right)(for purposes of this clause (iv) only, to the extent relating to the closing condition in the Merger Agreement that certain representations and warranties be true with such exceptions as would not reasonably be expected to have a Company Material Adverse Effect (as defined in the Merger Agreement), the "Merger Agreement" shall mean the Merger Agreement in effect as of the Amendment Effective Date);

(v)the cash consideration paid by the Borrower in connection with the Merger Agreement for the Magnum Acquisition is made other than with the proceeds of the Magnum Acquisition Credit Agreement and/or the issuance by Magnum of convertible indebtedness pursuant to clause (d) of the definition of Magnum Acquisition; provided, however, that the Borrower shall be permitted to pay with cash on hand or Borrowings any fees or expenses related to the Magnum Acquisition or issue any Letters of Credit in connection with the Magnum Acquisition;

(vi)the Intercreditor Agreement has not been executed and delivered on or prior to the Merger Date; provided, however, in the event that the Borrower has issued Convertible Debt on Convertible Debt Terms, no Intercreditor Agreement shall be required;

(vii)the Administrative Agent shall not have received a certificate from a Responsible Officer of the Borrower to the effect that as of the Merger Date, no Default exists or will exist after giving effect to the Magnum Acquisition; and

(viii)immediately prior to and after giving effect to the Magnum Acquisition, the aggregate of unused and available Commitments plus the amount of other free and unencumbered cash and Cash Equivalents available to the Borrower shall be less than $75,000,000.

Notwithstanding anything contained herein to the contrary, any consent fee paid pursuant to Section 31(b) of this Amendment shall be deemed fully-earned when paid and shall not be refunded.

[Signature pages follow]

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first above written.

PATRIOT COAL CORPORATION
By:	/s/ Mark N. Schroeder
	Name:	Mark N. Schroeder
	Title:	Senior Vice President and Chief Financial Officer

BNP Paribas, as a Lender
By:	/s/ Betsy Jocher
	Name:	Betsy Jocher
	Title:	Director

By:	/s/ Richard Hawthorne
	Name:	Richard Hawthorne
	Title:	Vice President

United Overseas Bank Limited, New York Agency, as a Lender
By:	/s/ George Lim
	Name:	George Lim
	Title:	SVP & GM

By:	/s/ Mario Sheng
	Name:	Mario Sheng
	Title:	AVP

Southwest Bank, an M&I Bank, as a Lender
By:	/s/ John D. Haffenreffer
	Name:	John D. Haffenreffer
	Title:	EVP

By:	/s/ Susan L. Bentele
	Name:	Susan L. Bentele
	Title:	SVP

Sovereign Bank, as a Lender
By:	/s/ Robert D. Lanigan
	Name:	Robert D. Lanigan
	Title:	Senior Vice President

Citibank, N.A., as a Lender
By:	/s/ Mason McGurrin
	Name:	Mason McGurrin
	Title:	Vice President

Bank of Oklahoma, N.A., as a Lender
By:	/s/ Sarah N. Reavis
	Name:	Sarah N. Reavis
	Title:	Vice President

US Bank, NA, as a Lender
By:	/s/ Karen Meyer
	Name:	Karen Meyer
	Title:	Vice President

PNC Bank, National Association, as a Lender
By:	/s/ Richard C. Munsick
	Name:	Richard C. Munsick
	Title:	Senior Vice President

Lehman Brothers Commercial Bank, as a Lender
By:	/s/ Brian McNany
	Name:	Brian McNany
	Title:	Authorized Signatory

FIFTH THIRD BANK, as a Lender
By:	/s/ Robert M. Sander
	Name:	Robert M. Sander
	Title:	Vice President

Caterpillar Financial Services Corporation, as a Lender
By:	/s/ Christopher Patterson
	Name:	Christopher Patterson
	Title:	Global Operations Manager

Acknowledged by:
BANK OF AMERICA, N.A., as Administrative Agent
By:	/s/ Todd Mac Neill
	Name:	Todd Mac Neill
	Title:	Vice President

Annex 1

CONSENT OF GUARANTORS

Each of the undersigned is a Subsidiary Guarantor of the Obligations of the Borrower under the Credit Agreement and hereby (a) consents to the foregoing Amendment, (b) acknowledges that, notwithstanding the execution and delivery of the foregoing Amendment, the obligations of each of the undersigned Subsidiary Guarantors are not impaired or affected and all guaranties given to the holders of Obligations and all Liens granted as security for the Obligations continue in full force and effect, and (c) confirms and ratifies its obligations under each of the Loan Documents executed by it.  Capitalized terms used herein without definition shall have the meanings given to such terms in the Amendment to which this Consent is attached or in the Credit Agreement referred to therein, as applicable.

IN WITNESS WHEREOF, each of the undersigned has executed and delivered this Consent of Guarantors as of the 2nd day of April 2008.

[Signature pages follow]

[SUBSIDIARY GUARANTORS]
By:
	Name:
	Title:

Annex B-II

Permanent Debt Terms

Term	Detail
Maturity:	Not less than one year after the Maturity Date.
Interest Rate and Interest Periods:	On arm’s length market terms.
Payment Priority:	The Permanent Debt will rank equal in right of payment with all of the Borrower’s existing and future unsecured unsubordinated debt and senior in right of payment to all of the Borrower’s existing and future subordinated indebtedness.  The Permanent Debt will rank junior in right of payment to the Obligations.
Principal Repayment:	Principal payable on the maturity date.
Prepayment/Early Redemption	Prepayment/Early Redemption on or after at least six months after the Maturity Date.  In addition, upon a change in control in the Borrower, the Borrower must offer to repurchase the Permanent Debt (unless prohibited by the terms of the Credit Agreement).
Security:	Liens and Guarantees securing the Borrower’s obligations under the Permanent Debt shall be second in priority to the Liens and Guarantees securing the Obligations on terms and conditions set forth in the Intercreditor Agreement.
Representations and warranties	On terms no more restrictive to the Borrower in any material respect than the terms of the Credit Agreement with modifications reasonably necessary to reflect changes in structures.
Covenants	On terms no more restrictive to the Borrower in any material respect than the terms of the Credit Agreement with modifications reasonably necessary to reflect changes in structures.
Events of Default	On terms no more restrictive to the Borrower in any material respect than the terms of the Credit Agreement with modifications reasonably necessary to reflect changes in structures.

Annex B-III

Convertible Terms

Term	Detail
Maturity Date:	Not less than one year after the Maturity Date.
Interest Rate and Interest Payment Periods:	On arm’s length market terms.
Conversion Price:	On arm’s length market terms.
Payment Priority:	Pari passu with payments under the Patriot Credit Agreement or subordinated on arm’s length market terms.
Conversion:	On arm’s length market terms.
Early Redemption or Repurchase	On arm’s length market terms, subject to the terms and conditions of Section 7.18 of the Patriot Credit Agreement.
Security:	None.
Representations and Warranties:	On terms no more restrictive to the Borrower in any material respect than the terms of the Credit Agreement with modifications reasonably necessary to reflect changes in structures.
Covenants:	On terms no more restrictive to the Borrower in any material respect than the terms of the Credit Agreement with modifications reasonably necessary to reflect changes in structures.
Events of Default:	On terms no more restrictive to the Borrower in any material respect than the terms of the Credit Agreement with modifications reasonably necessary to reflect changes in structures.