Asset Exchange Agreement

Exhibit 10.3

Execution Version

Asset Exchange Agreement

Among

CNX Gas Company LLC

and

American Land Holdings of Indiana, LLC; Arclar Company, LLC; Black Beauty Coal Company, LLC;
Central States Coal Reserves of Illinois, LLC; Central States Coal Reserves of Indiana, LLC;
Central States Coal Reserves of Kentucky, LLC; Coal Reserve Holding Limited Liability Company #2;
Cyprus Creek Land Resources, LLC; Eastern Associated Coal, LLC; HCR Holdings, LLC; Independence
Material Handling, LLC; Martinka Coal Company, LLC; Midwest Coal Reserves of Illinois, LLC; Midwest
Coal Reserves of Indiana, LLC; Peabody Coal Company, LLC; Peabody Development Company, LLC;
and Randolph Land Holding Company, LLC.

Dated as of April 1, 2007

TABLE OF CONTENTS

Recitals			1
Agreements			1
ARTICLE I. Definitions			2
1.1 Defined Terms			2
1.2 Other Definitions			9
1.3 Rules of Construction			11
ARTICLE II. Exchange			12
2.1 Exchange of Peabody Assets and CNX Assets			12
2.2 CNX Assumed Liabilities; Peabody Retained Liabilities			17
2.3 Peabody Assumed Liabilities; CNX Retained Liabilities			17
ARTICLE III. Adjustments; Actions Prior to Closing			18
3.1 Closing Adjustments			18
3.2 Closing Adjustment Calculation			19
3.3 Allocated Values; Post-Closing Allocations			20
3.4 Updated Schedules and Exhibits			21
3.5 Taxpayer Identification Numbers			21
3.6 Consents			21
3.7 Asset Due Diligence			21
3.8 Adjustments for Environmental Defects			23
3.9 Adjustments for Title Defects			24
3.10 Peabody’s Response to Title Defect Notice			25
3.11 CNX’s Response to Title Defect Notice			26
3.12 Liens			26
ARTICLE IV. Surface Use and Other Activities			26
4.1 Surface Use Agreements			26
4.2 Cooperative Development			28
ARTICLE V. Closing and Actions Prior to Closing			28
5.1 Closing			28
5.2 Peabody’s Closing Deliveries			29
5.3 CNX Closing Deliveries			29
5.4 Transfer Documents			29
ARTICLE VI. Transfer Period Covenants			30
6.1 Transfer Period			30
6.2 Further Assurances			30
6.3 Obtaining Consents and Delivery of Notices			31
6.4 Governmental Filings			31
6.5 Recording Fees, Transfer Taxes and Similar Costs			32

ARTICLE VII. CNX’s Representations and Warranties			32
7.1 Organization and Standing			32
7.2 Power			32
7.3 Authorization and Enforceability			32
7.4 Liability for Brokers’ Fees			32
7.5 Alien Status			32
7.6 Litigation			32
7.7 Orders			33
7.8 Rentals and Royalties			33
7.9 No Conflicts			33
7.10 Compliance with Laws			33
7.11 Environmental Conditions			34
7.12 Taxes			34
7.13 Regulatory Approvals			35
7.14 Limited Title Warranty as to CNX Assets			35
7.15 Material Contracts			35
7.16 Employees			35
7.17 CNX Due Diligence			36
7.18 No Material Adverse Change			36
7.19 Undisclosed Material Liabilities			36
7.20 Insurance			37
7.21 Intellectual Property			37
7.22 Disclosure			37
7.23 Effectiveness of Representations and Warranties			37
ARTICLE VIII. Peabody’s Representations and Warranties			37
8.1 Organization and Standing			37
8.2 Power			37
8.3 Authorization and Enforceability			38
8.4 Liability for Brokers’ Fees			38
8.5 Alien Status			38
8.6 Litigation			38
8.7 Orders			38
8.8 Rentals and Royalties			38
8.9 No Conflicts			38
8.10 Compliance with Laws			39
8.11 Environmental Conditions			39
8.12 Taxes			40
8.13 Regulatory Approvals			40
8.14 Limited Title Warranty as to Peabody Assets			40
8.15 Material Contracts			40
8.16 Employees			41
8.17 Peabody Due Diligence			41
8.18 No Material Adverse Change			41
8.19 Undisclosed Material Liabilities			42
8.20 Insurance			42

8.21 Intellectual Property			42
8.22 Conveyance by Peabody Transferors			42
8.23 Disclosure			42
8.24 Effectiveness of Representations and Warranties			42
ARTICLE IX. Other Covenants			42
9.1 Certain Affirmative Covenants of Transferor			42
9.2 Certain Negative Covenants of Transferor			43
9.3 Confidentiality and Publicity			44
9.4 Disclaimers			45
9.5 Pittsburgh Seam Coal Interests Permit Revisions			46
9.6 Indiana Dormant Minerals Act Filings			45
ARTICLE X. Conditions Precedent			47
10.1 Conditions to CNX’s Obligations			47
10.2 Conditions to Peabody’s Obligations			48
ARTICLE XI. Termination, Effect of Termination and Specific Performance			49
11.1 Termination			49
11.2 Effect of Termination			49
11.3 Specific Performance			49
ARTICLE XII. Indemnification			50
12.1 Indemnification by Peabody			50
12.2 Indemnification by CNX			51
12.3 Procedure for Certain Indemnified Claims			51
12.4 Determination of Indemnification Amounts and Related Matters			52
12.5 Time and Manner of Certain Claims			53
12.6 Peabody Guaranty.			53
12.7 Other Indemnification			53
12.8 Exclusivity			54
ARTICLE XIII. Miscellaneous Provisions			54
13.1 Data and Information Review			54
13.2 Expenses			55
13.3 Brokers			55
13.4 Waivers			55
13.5 Notices			55
13.6 Entire Agreement; Prior Representations; Amendments; No Merger			56
13.7 Jurisdiction			57
13.8 WAIVER OF JURY TRIAL			57
13.9 Binding Effect; Benefits			57
13.10 Headings, Exhibits and Schedules			57
13.11 Counterparts			57
13.12 GOVERNING LAW			57
13.13 Severability			58

13.14 Third Persons; Joint Ventures			58
13.15 Construction			58
13.16 Attorneys’ Fees			58
13.17 Risk of Loss			58
13.18 Tax Consequences			59
13.19 Commercially Reasonable Efforts			59
13.20 Time			59
13.21 Reserved Rights			59
13.22 Rule Against Perpetuities			59
List of Exhibits and Schedules			63

Asset Exchange Agreement

     THIS ASSET EXCHANGE AGREEMENT (“Agreement”) is made and entered into on June 20, 2007, but effective as of April 1, 2007, among American Land Holdings of Indiana, LLC, Arclar Company, LLC, Black Beauty Coal Company, LLC, Central States Coal Reserves of Illinois, LLC, Central States Coal Reserves of Indiana, LLC, Coal Reserve Holding Limited Liability Company #2, Cyprus Creek Land Resources, LLC, HCR Holdings, LLC, Independence Material Handling, LLC, Martinka Coal Company, LLC, Midwest Coal Reserves of Illinois, LLC, Midwest Coal Reserves of Indiana, LLC, Peabody Coal Company, LLC, Peabody Development Company, LLC, Randolph Land Holding Company, LLC, each a Delaware limited liability company (collectively, the “Peabody Oil and Gas Subs”), Central States Coal Reserves of Kentucky, LLC and Eastern Associated Coal, LLC, each a Delaware limited liability company (together, the “Peabody Coal Subs”, and together with the Peabody Oil and Gas Subs, “Peabody”), each with their principal place of business located at 701 Market Street, St. Louis, Missouri 63101, and CNX Gas Company LLC, a Virginia limited liability company (“CNX”), with its principal place of business located at 5 Penn Center West, Suite 401, Pittsburgh, Pennsylvania 15276.

Recitals

     A. Peabody owns, leases, controls, or claims certain rights, title, estates, and interests in various Oil and Gas assets as more fully described in Section 2.1(d) hereof (the “Peabody Assets”).

     B. Each Peabody Oil and Gas Sub and each Peabody Coal Sub is a wholly-owned subsidiary of Peabody Investments Corp.

     C. CNX owns, leases, or otherwise controls certain rights, estates, and interests in various coal and Oil and Gas assets as more fully described in Section 2.1(c) hereof (the “CNX Assets”).

     D. This Agreement sets forth the terms and conditions on which Peabody shall convey or cause to be conveyed to CNX all of the Peabody Assets, and CNX shall convey or cause to be conveyed to the Peabody Coal Subs all of the CNX Assets, in such a manner as to effect a like-kind exchange of such assets under Section 1031 of the Code.

Agreements

     In consideration of the mutual covenants and promises set forth in this Agreement, Peabody and CNX agree as follows:

ARTICLE I.
Definitions

     1.1 Defined Terms. In addition to terms defined elsewhere in this Agreement, the following terms with initial capital letters, when used in this Agreement, shall have the meanings set forth below:

     “Affiliate” means, with respect to any Person, any other Person controlling, controlled by, or under common control with such Person, with “control” for such purpose meaning the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities or voting interests, by contract or otherwise.

     “Applicable Program” means a domestic, international or foreign renewable or alternative energy, emissions reduction or emissions quantification, certification or reporting program, scheme, organization or Legal Requirement, adopted by a Governmental Authority or otherwise, or other similar program, public or private, with respect to which exists a market of any size, a registry or a reporting system for or with respect to ERCs or attributes of ERCs. Without limiting the generality of the foregoing, Applicable Program includes any legislation introduced into the U.S. Congress between 2000 and the date of this Agreement, whether or not enacted, as well as any current, or future legislation or regulation concerned with renewable energy, alternative energy, carbon or carbon-equivalents, greenhouse gases, or any actions that would result in or be recognized as “early action” under such programs, or any Legal Requirement involving or administered by any Governmental Authority, GIS or any other entity, public or private, that may or does certify the generation of an ERC under any present or future domestic, international, or foreign ERC or other emissions trading program.

     “Assets” means the Peabody Assets or the CNX Assets, as the context requires.

     “Assumed Liabilities” means the Peabody Assumed Liabilities or the CNX Assumed Liabilities, as the context requires.

     “Bonds” means the surety, performance, reclamation, and other bonds issued in favor of, on behalf of, or in the name of either of the Parties in connection with the Assets or the Permits.

     “Burdens on Production” means annual and other rentals, advance royalties, bonus, option and similar payment obligations, royalties, overriding royalties, net profit or carried interests, and other payment obligations, encumbrances, charges, and expenses that burden the Oil and Gas Interests, other than any of the foregoing in favor of Peabody or any Affiliate of Peabody.

     “Business Day” means any day other than a Saturday or Sunday or a day on which banks in St. Louis, Missouri, are authorized or required to be closed.

     “CBM” means all occluded coal bed methane gas and all associated natural gas and other hydrocarbons of whatever quality or quantity normally within, produced, or emitted from a coal seam or any related, associated superincumbent or adjacent rock material or strata.

     “Closing Date” means the date on which the Closing occurs.

     “Closing Deliveries” means the documents and instruments described in Sections 5.2 and 5.3.

     “Closing Time” means 11:59 P.M. Central Daylight Time on the Closing Date.

     “CMM” means coal mine methane and gob gas from inactive or sealed areas which is liberated and accumulates within a fractured collapsed zone, mine void, or mine workings resulting from all forms of mining.

     “Code” means the Internal Revenue Code of 1986, as amended.

     “CONSOL Parties” means CONSOL Energy Inc. and any of its Affiliates who are predecessors in title to CNX with respect to the CNX Assets.

     “Contract” means any written agreement, contract, mortgage, deed of trust, bond, indenture, lease, license, note, joint operating agreement, division order, crude oil or gas sales or purchase contract, gathering, transportation or marketing agreement, easement, right-of-way, surface use or access agreement, service or supply agreement, certificate, option, warrant, right or other instrument, document, obligation or agreement, and any ratifications or amendments to any of the foregoing, which relates to the Assets or Transferor’s right to conduct Oil and Gas or coal operations on or with respect to any Asset; provided that “Contract” shall not include any such agreements, contracts or other rights to the extent they relate to any Reserved Rights.

     “Effective Time” means 12:00 A.M. Central Standard Time on Sunday, April 1, 2007.

     “Environmental Defect” means an adverse environmental condition on or of the Assets as to which both of the following are true: (a) the environmental condition is required to be remediated under Environmental Laws in effect at the Closing Date; and (b) the total cost to remediate such environmental condition to levels required by Environmental Laws in effect at the Closing Date, when combined with the total cost to remediate all other environmental conditions of which Transferee has timely given Transferor notice in accordance with the terms hereof to levels required by Environmental Laws in effect at the Closing Date, is reasonably estimated to exceed $1,000,000 (net to Transferor’s interest); provided, however, that “Environmental Defect” shall not include any adverse environmental condition in, on, about, affecting or resulting from any area designated unsuitable for mining, restriction on subsidence, restriction on reclamation, water discharge limitations based on water uses or stream receiving quality, abandoned and adjacent underground mine workings, restrictions on land use, surface reclamation requirements, or other design or performance standard relating to the design or operation of coal mines and related facilities.

     “Environmental Law” means any Legal Requirement whether now or hereafter in effect concerning human health, safety, welfare or the environment, including Legal Requirements relating to emissions, discharges, releases or threatened releases of Hazardous Substances into the environment, air (including both ambient and within buildings and other structures), surface water, ground water or land or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, presence, disposal, transport or handling of Hazardous Substances, including but not limited to the following statutes: the Clean Air Act, 42 U.S.C.A. §§ 7401 et seq.; the Clean Water Act, 33 U.S.C.A. §§ 1251 et seq.; the Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901 et seq. (“RCRA”); the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. §§ 9601 et seq. (“CERCLA”); the Emergency Planning and Community Right-to-Know Act, 42 U.S.C. Chapter 116; the Safe Drinking Water Act, 42 U.S.C. §§ 300h et seq.; the Toxic Substances Control Act, 15 U.S.C.A. §§ 2601-2692 (“TSCA”); the Surface Mining Control and Reclamation Act, 30 U.S.C. §§ 1201 et seq.; and any similar state or local law relating to any of the foregoing; and any state law regulating oil and gas exploration and production.

     “ERCs” mean any and all aspects, claims, characteristics or benefits related to the production, use, capture, flaring, burning, fueling, storage or sequestration of CBM and CMM produced from the lands containing the Oil and Gas Interests that are capable of being measured, verified or calculated, and which can produce credits, benefits, offsets, reductions, or allowances, howsoever entitled, or are otherwise capable of being recognized under an Applicable Program. Without limiting the generality of the foregoing, ERCs include those environmental or greenhouse gas emission reduction credits or allowances based on the production, sale, use or flaring of CBM or CMM produced from the lands containing the Oil and Gas Interests in lieu of venting such CBM or CMM to the atmosphere or otherwise disposing of or using such gases, resulting in the voluntary reduction in emissions to levels of control recognized by an Applicable Program. ERCs also include any action relating to CBM or CMM produced from the lands containing the Oil and Gas Interests that would be recognized as beneficial or of value in the event that any Governmental Authority imposes any tax, levy surcharge or other imposition on emissions of air pollutants, including greenhouse gases, or on products or services that are related to such emissions, including, without limitation, any “carbon tax.”

     “GAAP” means generally accepted accounting principles in the United States, consistently applied, including the statements and interpretations of the U.S. Financial Accounting Standards Board, consistently applied.

     “GIS” means a generation information system, generation attribute tracking system or other system that records generation from renewable or alternative energy or energy with other beneficial attributes in any particular geographic region, such as WREGIS, NEPOOL, GIS, ERCOT, PJM, M-RETS, or, if applicable, an Independent System Operator or a Regional Transmission Organization.

     “Governmental Authority” means: (a) the United States of America; (b) any state, commonwealth, territory or possession of the United States of America and any political subdivision thereof (including counties, municipalities, provinces, parishes and the like); (c) any Native American or Tribal entity; and (d) any court, quasi-governmental authority, tribunal,

department, commission, board, bureau, agency, authority or instrumentality of any of the foregoing.

     “Hazardous Substances” means: (a) any pollutant, contaminant, waste or chemical or any toxic, radioactive, ignitable, corrosive or otherwise hazardous substance, waste or material; (b) any “hazardous waste” as defined by RCRA; (c) any “hazardous substance” as defined by CERCLA; (d) any substance regulated by the TSCA; (e) asbestos or asbestos-containing material of any kind or character; (f) polychlorinated biphenyls; (g) any substances regulated under the provisions of Subtitle I of RCRA relating to underground storage tanks; (h) any substance the presence, use, treatment, storage or disposal of which is prohibited by or regulated under any Legal Requirement; and (i) any other substance which by any Legal Requirement requires special handling, reporting or notification of or to any Governmental Authority in its collection, storage, use, treatment, presence or disposal.

     “Judgment” means any judgment, judicial decision, writ, order, injunction, award or decree of or by any Governmental Authority.

     “Knowledge” means, when applied to Peabody, the actual knowledge of each of the persons as specified in Schedule 1.1a, and when applied to CNX, the actual knowledge of the persons as specified in Schedule 1.1b; provided that no person specified in either Schedule 1.1a or 1.1b shall have any personal liability or obligation hereunder.

     “Legal Requirement” means applicable common law and any statute, ordinance, code, law, rule, regulation, order, technical or other written standard, requirement or procedure enacted, adopted, promulgated, applied or followed by, or any agreement entered into by, any Governmental Authority, including any Judgment.

     “Lien” means, with respect to any Asset, any security agreement, financing statement filed with any Governmental Authority, conditional sale agreement, capital lease or other title retention agreement relating to such Asset, any lease, consignment or bailment given for purposes of security, any right of first refusal, equitable interest, lien, mortgage, indenture, pledge, option, charge, encumbrance, adverse interest, constructive trust or other trust, claim, attachment, exception to or defect in title or other ownership interest (including reservations, rights of entry, possibilities of reverter, encroachments, easements, rights-of-way, restrictive covenants, leases and licenses) of any kind, which otherwise constitutes an interest in or claim against Transferor’s title to such Asset, whether arising pursuant to any Legal Requirement, any Contract or otherwise.

     “Litigation” means any action, suit, proceeding, arbitration, investigation, hearing or other activity or procedure that could result in a Judgment, and any notice of any of the foregoing.

     “Losses” means any claims, losses, liabilities, damages, Liens, penalties, costs and expenses, including interest which may be imposed in connection therewith, expenses of investigation, reasonable fees and disbursements of counsel and other experts and the reasonable cost to any Person making a claim or seeking indemnification under this Agreement with respect

to funds expended by such Person by reason of the occurrence of any event with respect to which indemnification is sought, but shall in no event include special, incidental or consequential damages or lost profits.

     “Material Contracts” means all Contracts designated by CNX and Peabody as material on Schedules 1.1c and 1.1d, respectively.

     “Net Mineral Acre” means, with respect to Peabody Oil and Gas Interests, the product obtained by multiplying (a) each surface acre of land listed on Exhibit “C” and depicted or described in Exhibits “C-1” through “C-64”, by (b) Peabody’s percentage fee Oil and Gas Interest (with CBM or CMM accounted for separately in such lands to the extent located in the states of Illinois, Indiana, Kentucky or West Virginia), or percentage interest in CBM or CMM, as the case may be, in such lands, or in the case of Oil and Gas or CBM or CMM leasehold interests, by (c) Peabody’s percentage working interest in the coal or Oil and Gas mineral estate, as the case may be, in such lands. For purposes of this Agreement, the Parties agree that in Illinois, Indiana and West Virginia CBM and CMM shall deemed to be owned by the owner of the coal estate and that in Kentucky CBM and CMM shall be deemed to be owned by the owner of the “other minerals” estate. In such states, as to each surface acre under which Peabody owns all minerals rights in fee, or Oil and Gas rights acquired separately from the Oil and Gas estate, or CBM or CMM rights acquired through the coal or other minerals estate, Peabody shall be credited with a separate Net Mineral Acre (based on Peabody’s actual percentage ownership in the applicable mineral estate and reduced in accordance with the formula set forth above) for each of the Oil and Gas Interests and CBM or CMM Interests which shall be aggregated in calculating the Net Mineral Acre Threshold and the Mineral Acre Compensation Threshold in Section 3.10.

     “Oil and Gas” means oil and gas, CBM, CMM, and other liquid or gaseous hydrocarbons, including condensate and other substances produced therewith.

     “Order” means any award, decision, injunction, Judgment, order, decree, ruling, subpoena, or verdict entered, issued, made or rendered by any arbitrator, court or other Governmental Authority.

     “Party” and “Parties” means either CNX or Peabody, or both collectively.

     “Permit” means any approval, license, consent, permit, waiver, or other authorization issued, granted, given, or otherwise made available by or under the authority of any Governmental Authority or pursuant to any Legal Requirement.

     “Permitted Lien” means with respect to any Asset, or the Assets, as the context requires: (a) any Lien securing Taxes, assessments and governmental charges not yet due and payable or being contested in good faith (and for which adequate accruals or reserves have been established); (b) any customary zoning law or ordinance or any similar Legal Requirement; (c) any customary right reserved to any Governmental Authority to regulate the affected Asset or Assets; (d) any Lien (other than Liens securing indebtedness or arising out of the obligation to pay money) which does not and shall not individually or in the aggregate with one or more other

Liens materially interfere with the right or ability to own, use, enjoy, produce, mine, or operate the Assets, or to convey good title to the same, or materially detract from their value; (e) any inchoate materialmen’s, mechanic’s, workmen’s, repairmen’s or other like Liens arising in the ordinary course of business relating to the Assets; (f) the reservations, reverters and other rights granted or reserved herein or in the Transfer Documents; (g) any Partial Assignment Leases; (h) any joint operating agreement, crude oil or gas sales or purchase agreement, division order, or other Contract disclosed on Schedule 1.1(c) or 1.1(d), as applicable, hereto; (i) easements, conditions, covenants, restrictions, servitudes, permits, rights-of-way, surface leases, existing deed or water rights restrictions, historic preservation restrictions and ordinances, building restrictions and ordinances, zoning, planning and land use restrictions, and other rights and interests for the purpose of surface operations, roads, railways, pipelines, transmission and transportation lines and other like uses, or for the common use of real estate, rights-of-way, facilities and equipment; (j) any Third-Party Consents which are obtained and in force and effect on the Closing Date; (k) all rights to consent by, required notices to, filings with, or other actions by Governmental Authorities in connection with the sale and conveyance of an Asset if the same are customarily sought subsequent to such sale and conveyance; (l) rights of reassignment upon the surrender or expiration of any lease; (m) such Environmental Defects and Title Defects as Transferee has waived pursuant to Sections 3.8(a), 3.9(a)(ii) or 3.9(b)(ii), as applicable; (n) any Liens that Transferor shows by affirmative evidence are to be released at Closing; (o) defects in the early chain of title consisting of the mere failure to recite marital status in a document or omissions of successors of heirship proceedings, unless Transferee provides affirmative evidence that such failure or omission has resulted in another Person’s actual and superior claim of title to the relevant Asset; (p) defects that have been cured by possession under applicable statutes of limitation for adverse possession or for prescription; (q) defects based solely on lack of information in Transferor’s files; and (r) all Burdens on Production of which Transferee or any successor or assign has actual notice (as set forth on Schedule 1.1(i)) or record notice; provided that “Permitted Liens” shall not include any Lien securing any debt, encumbrance or monetary claim, or any pledge, deed of trust, mortgage, security interest or similar lien, caused, created or allowed, with respect to the Peabody Assets, by Peabody or its Affiliates or, with respect to the CNX Assets, by CNX or its Affiliates, which could prevent or interfere with the conduct of the business of the Transferee. Classification of any Lien as a “Permitted Lien” shall not affect any liability which CNX or Peabody may otherwise have under this Agreement, including any indemnity obligation under this Agreement.

     “Person” means any human being, Governmental Authority, corporation, limited liability company, general or limited partnership, joint venture, trust, association or unincorporated entity of any kind.

     “Prime Rate” means the prime rate of interest, as announced from time to time, of The Bank of New York in New York City.

     “Reserved Rights” means the rights reserved by Peabody under the Peabody Deed described in Section 5.4(b).

     “Taxes” means all levies and assessments of any kind or nature imposed by any Governmental Authority, including all income, sales, use, ad valorem, value added, franchise,

severance, production, net or gross proceeds, withholding, payroll, employment, F.I.C.A., excise or property taxes, levies, production, and any other payment required to be made to any state abandoned property administrator or other public official pursuant to an abandoned property, escheat or similar law, together with any interest thereon and any penalties, additions to tax or additional amounts applicable thereto.

     “Third Party Consents” means certain rights of consent to transfer, termination, amendment, acceleration, suspension, revocation, or cancellation held by third Persons which are or may be exercisable by such Persons by reason of the execution and delivery of this Agreement or the consummation of the exchange contemplated hereby, and specified in Schedules 1.1e and 1.1f; provided, however, that the term “Third Party Consents” shall not include Transfer Approvals.

     “Title Defect” means with respect to any Asset: (a) any material noncompliance with Legal Requirements of any Governmental Authority relating to ownership of property that results in substantial risk of loss of Transferor’s title to such Asset or value thereof; (b) the existence of any suit, action, or other proceeding before any court or Governmental Authority that would result in substantial loss or impairment of the Transferor’s title to any Asset or a material portion of the value thereof; (c) the holder’s exercise of any preferential right to purchase affecting such Asset; (d) any material encumbrance, encroachment, irregularity, defect in, or objection to Transferor’s title to any of the Assets (other than Permitted Liens), which, alone or in combination with other defects, renders Transferor’s title to such Asset less than good, or which would unreasonably interfere with Transferee’s enjoyment of such Asset; and (e) any defect in title resulting from Peabody’s failure to comply with the Indiana Dormant Mineral Interest Act where (i) title has lapsed or will lapse prior to the end of the Transfer Period or (ii) the title attorneys for CNX are reasonably unwilling to certify title in Peabody as a result of non-compliance with the Indiana Dormant Mineral Interest Act. Title Defect does not, however, include any Permitted Lien, any pending Litigation or legislation seeking to resolve the status of CBM or CMM ownership, any prescriptive rights, any Lien, right, remedy or claim arising under any title curative statute pertaining to mineral interests, any defect, noncompliance, or other limitation on Transferor’s title, right, and interest in or to ERCs or ERC Rights, or Transferor’s ability to deliver ERC Rights to Transferee which arises as a result of legislation by any Governmental Authority. For purposes of this definition, “ERC Rights” shall mean Peabody ERC Rights or CNX ERC Rights, as the case may be.

     “Transfer Approvals” means the approvals and consents of a Governmental Authority specified on Schedules 1.1g and 1.1h.

     “Transfer Documents” means the instruments and documents described in Section 5.4 which are to be executed and delivered by or on behalf of CNX or Peabody, as the case may be, or any Affiliate of either of them in connection with the exchange contemplated in this Agreement.

     “Transferee” means CNX, a Peabody Coal Sub or a Peabody Oil and Gas Sub, as applicable, insofar as the term refers to the Party that shall acquire Assets from the other Party.

     “Transferor” means CNX, a Peabody Coal Sub or a Peabody Oil and Gas Sub, as applicable, insofar as the term refers to the Party that shall transfer Assets to the other Party.

     “Workable Coal Bed” means any seam of coal which is either (i) twenty six inches (26”) or more in thickness, or (ii) reasonably likely to be commercially mined or extracted within ten (10) years of the proposed commencement date of the Oil and Gas operations affecting such seam (such determination being made by a nationally recognized mining engineering firm selected by the Parties) based upon reasonable assumptions and trade custom in effect as of the start date of the such proposed Oil and Gas operations.

     1.2 Other Definitions. The following terms are defined in the Sections indicated:

TERM		SECTION
1031 Exchange		2.1(a)(i)
Adjustment Period		3.1(a)
Affected Tons		3.11(b)(i)
Agreement		Preamble
Allocated Values		3.3(a)
CNX		Preamble
CNX Assets		2.1(c)
CNX Assumed Liabilities		2.2(a)
CNX Books and Records		2.1(c)(v)
CNX Cap		12.4(b)
CNX Deed		5.4(a)
CNX Environmental Defects Amount		3.8(b)(ii)
CNX ERC Actions		2.1(d)(iv)(B)
CNX ERC Rights		2.1(c)(v)(B)
CNX Excluded Assets		2.1(e)(i)
CNX Retained Liabilities		2.3(b)
CNX Reviewable Data		13.1(b)
CNX Surface Use Agreement		4.1(d)
Closing		5.1

TERM		SECTION
Confidential Information		9.3(a)
Environmental Defects Deadline		3.8(a)
Estimated Net Closing Adjustment		3.1
Excess Title Defects Amount		3.10(c)
Final Adjustment Amount		3.2(b)(i)
Final Adjustment Certificate		3.2(b)(i)
Final Net Closing Adjustment		3.2(b)(ii)
Final Title Defect Notice Deadline		3.9(b)(i)
Gross Sales Proceeds		5.4(a)
Indemnified Losses		3.7(e)
Indemnitee		12.3
Indemnitor		12.3
Initial Adjustment Certificate		3.2(a)
Initial Title Defect Notice Deadline		3.9(a)(i)
Kentucky Coal Interests		2.1(c)(ii)
Litigation Matter		12.3
Material CNX Contracts		2.1(c)(iv)
Material Peabody Contracts		2.1(d)(ii)
Mineral Acre Compensation Threshold		3.10(b)
Minimum Damage Requirement		12.4(a)
Net Mineral Acre Threshold		3.10(a)
Partial Assignment Leases		2.1(d)(iii)
Peabody		Preamble
Peabody Assets		2.1(d)
Peabody Assumed Liabilities		2.3(a)
Peabody Books and Records		2.1(d)(vi)
Peabody Cap		12.4(a)

TERM		SECTION
Peabody Coal Subs		Preamble
Peabody Deed		5.4(b)
Peabody Environmental Defects Amount		3.8(b)(ii)
Peabody ERC Rights		2.4(d)(iv)(B)
Peabody Excluded Assets		2.1(e)(ii)
Peabody Guaranty		12.6
Peabody Oil and Gas Interests		2.1(d)(i)
Peabody Oil and Gas Subs		Preamble
Peabody Predecessors		8.6
Peabody Retained Liabilities		2.2(b)
Peabody Reviewable Data		13.1(a)
Peabody Surface Use Agreement (SUA)		4.1(a)
Permit Revisions		9.5
Pittsburgh Seam CBM and CMM Interests		2.1(c)(iii)
Pittsburgh Seam Coal Interests		2.1(c)(i)
Post-Closing Consent		6.3(a)
Replacement Interests		3.8(b)(iii)
Right of First Refusal		5.2(d)
Taking		13.17(b)
Title Defect Notice		3.9(a)(i)
Total Affected Tons		3.9(a)(i)
Transferee Group		3.7(e)
Transferor Group		3.7(e)
Transfer Period		6.1
UMWA Contract		10.1(i)

     1.3 Rules of Construction. Unless otherwise expressly provided in this Agreement, (a) accounting terms used in this Agreement shall have the meaning ascribed to them under

GAAP; (b) words used in this Agreement, regardless of the gender used, shall be deemed and construed to include any other gender, masculine, feminine, or neuter, as the context requires; (c) the word “including” is not limiting, and the word “or” is not exclusive; (d) the capitalized term “Section” refers to sections of this Agreement; (e) references to a particular Section include all subsections thereof; (f) references to a particular statute or regulation include all amendments thereto, rules and regulations thereunder and any successor statute, rule or regulation, or published clarifications or interpretations with respect thereto, in each case as from time to time in effect; (g) references to a Person include such Person’s successors and assigns to the extent not prohibited by this Agreement; (h) references to a “day” or number of “days” (without the explicit qualification “Business”) shall be interpreted as a reference to a calendar day or number of calendar days; and (i) references to “directors” shall be deemed to include the managers, including managing members, of any limited liability company and references to “shareholders” shall be deemed to include the members of any limited liability company.

ARTICLE II.
Exchange

     2.1 Exchange of Peabody Assets and CNX Assets.

          (a) Exchange Covenant. Subject to the terms, conditions, exceptions and reservations set forth in this Agreement, at Closing but effective as of the Effective Time:

               (i) CNX and Peabody agree to exchange simultaneously all rights, title, estates, and interests of CNX in, to, and under the CNX Assets for all rights, title, estates, and interests of Peabody in, to and under the Peabody Assets, in each case free and clear of all Liens (except Permitted Liens); provided that this Agreement shall not constitute an agreement to assign or transfer any Asset or any claim or right or any benefit arising thereunder or resulting therefrom without the consent of a third Person thereto if such assignment or transfer without such consent would constitute a breach or other contravention of such Asset or in any way adversely affect the rights of the Transferee thereunder. CNX and Peabody each acknowledge that the Parties desire and intend to effect their respective transfers and acquisitions of the CNX Assets or the Peabody Assets, as the case may be, pursuant to this Agreement as one or more exchanges of like-kind properties under Section 1031 of the Code (a “1031 Exchange”); and

               (ii) CNX or Peabody, as appropriate, shall pay to the other in cash the Estimated Net Closing Adjustment pursuant to Section 3.1 hereof, as such may be adjusted under Section 3.2 hereof.

          (b) Transfer of Beneficial Title. Subject to the terms, conditions, exceptions and reservations of this Agreement, at Closing beneficial title to, and all other rights and obligations relating to, the CNX Assets shall be transferred to the Peabody Coal Subs, and beneficial title to, and all other rights and obligations relating to, the Peabody Assets shall be transferred to CNX. The transfer of beneficial title shall be effective as of the Effective Time, notwithstanding that transfer of record title to the Assets under the Transfer Documents may not be complete until the end of the Transfer Period.

          (c) CNX Assets. “CNX Assets” means all rights, title, estates, and interests in and to the following described assets and properties, excepting and excluding the CNX Excluded Assets described in Section 2.1(e)(i):

               (i) Pittsburgh Seam Coal Interests. All of CNX’s rights, title, estates, and interests in and to Pittsburgh seam coal rights and reserves located in, on, and under that certain real property adjacent to Peabody’s Federal #2 Mine, located in Monongalia County, West Virginia and Greene County, Pennsylvania, and more fully described as the green shaded parcels (denoted in the legend as “Consol’s Reserve Area”) and the green cross-hatched parcels (denoted on the legend as “Consol’s Partial Interest Reserve Area”) on the attached Exhibit “A”, together with all subsidence rights and associated mining rights relating to such property (collectively, the “Pittsburgh Seam Coal Interests”);

               (ii) Kentucky Coal Interests. All of CNX’s rights, title, estates, and interests in and to coal rights and reserves located in, on, and under that certain real property in Muhlenberg, McLean, and Ohio Counties, Kentucky, and more fully described as the green shaded parcels (denoted on the legend as “Consol Property Owned”) on the attached Exhibit “B”, together with all subsidence rights and associated mining rights relating to such property (collectively, the “Kentucky Coal Interests”);

               (iii) Pittsburgh Seam CBM and CMM Interests. All of CNX’s rights, title, estates, and interests in and to CBM and CMM in the Pittsburgh Coal Seam Interests, including all rights to recover, sell and/or vent CBM or CMM produced from the Pittsburgh Coal Seam Interests (collectively, the “Pittsburgh Seam CBM and CMM Interests”);

               (iv) Contracts. All of CNX’s rights, title, and interests in, to, under or derived from all Contracts and Permits that relate to any of the CNX Assets described in Sections 2.1(c)(i), (ii) and (iii) above, or to the production and sale of coal, CBM, or CMM attributable to such CNX Assets, including, without limitation, those Contracts described on Schedule 1.1c (the “Material CNX Contracts”), but excluding any mining Permits or approvals relating to the Pittsburgh Seam Coal Interests or Kentucky Coal Interests;

               (v) ERC Rights and Other Credits.

                    (A) All rights CNX may now have or later acquire to claim any ERCs associated with Peabody’s production of CBM and CMM from the lands containing the Pittsburgh Seam CBM and CMM Interests and the sale or use of such CBM and CMM in lieu of venting such CBM or CMM to the atmosphere or otherwise disposing of or using such gases; and

                    (B) all rights that CNX may now have or later acquire to claim any other credits or allowances (including any tax credits or allowances) relating to production of CBM and CMM by Peabody in advance of coal mining operations by any Peabody Oil and Gas or Coal Sub, or its successors and assigns, on the real property containing the Pittsburgh Seam CBM and CMM Interests ((A) and (B) collectively, the “CNX ERC Rights”);

               (vi) Books and Records. Copies of all accounting, land and Contracts files and records, and all drilling, engineering, geologic and technical records, files, maps, data, analyses, drawings, blueprints, financial assurances, bonds, and insurance policies (only to the extent an outstanding claim has been filed under any such policy with respect to any of the CNX Assets), schematics, reports, lists, and plans and processes, concerning or relating to the CNX Assets (the “CNX Books and Records”), which are in the physical possession of CNX, or with respect to which CNX has the right of access and the ability to obtain copies, as of April 1, 2007 or as of the Closing Date, and excepting such books, files, records and other materials and data that are subject to confidentiality obligations or other similar restrictions under agreements with third Persons who are not Affiliates of CNX; provided, however, that CNX shall use commercially reasonable efforts to obtain and make available to Peabody CNX Books and Records that are not in the physical possession of CNX as of April 1, 2007 or as of the Closing Date; and

               (vii) Insurance Claims. All rights to insurance proceeds receivable after the Effective Time with respect to any Peabody Assumed Liabilities insured on a “claims made” basis, and all insurance proceeds (to the extent not already expended by CNX to restore or replace the lost or damaged asset, which replacement asset shall be a transferred Asset) received prior to Closing with respect to any asset which, if held by CNX as of the Effective Time, would be a CNX Asset.

          (d) Peabody Assets. “Peabody Assets” means all rights, title, estates, and interests in and to the following described assets and properties, excepting and excluding the Peabody Excluded Assets and the Reserved Rights described in Sections 2.1(e) and 5.4(b), respectively:

               (i) Peabody Oil and Gas Interests. All of Peabody’s fee, leasehold, mineral, royalty, and other rights and interests in and to Oil and Gas, in, on or under approximately Six Hundred and Six Thousand, One Hundred and One (606,101) acres of land as listed on Exhibit “C” and depicted on the maps attached hereto as Exhibits “C-1” through “C-64” (including, without limitation, landowners’ or reserved royalties, overriding royalties, rights to free gas either reserved in favor of or granted to Peabody and its Affiliates, as well as any right to vent CBM and CMM or to stimulate coal seams except as otherwise provided in Section 5.4(b)) (collectively, the “Peabody Oil and Gas Interests”);

               (ii) Contracts. All of Peabody’s rights, title, and interests in, to, under, or derived from all Contracts and Permits to the extent they relate solely to any of the Peabody Oil and Gas Interests or the production and sale of Oil and Gas attributable to such Peabody Oil and Gas Interests, including, without limitation, those described on Schedule 1.1d (the “Material Peabody Contracts”);

               (iii) Partial Assignment Leases. Except as set forth in the Peabody Deed, all of Peabody’s rights, title, and interests in, to, under, or derived from, those certain Oil and Gas leases and other Contracts entered into between a Peabody Oil and Gas Sub or Peabody Coal Sub and third Persons covering part of the Peabody Oil and Gas Interests which are described on Exhibit “D” attached hereto (collectively, the “Partial Assignment Leases”);

               (iv) ERC Rights and Other Credits.

                    (A) All rights Peabody may now have or later acquire to claim any ERCs associated with CNX’s production of CBM and CMM from the lands containing the Peabody Oil and Gas Interests and the sale or use of such CBM and CMM in lieu of venting such CBM or CMM to the atmosphere or otherwise disposing of or using such gases; and

                    (B) all rights that Peabody may now have or later acquire to claim any other credits or allowances (including any tax credits or allowances) relating to production of CBM and CMM by CNX in advance of coal mining operations by any Peabody Oil and Gas or Coal Sub, or its successors and assigns, on the real property containing the Peabody Oil and Gas Interests ((A) and (B) collectively, the “Peabody ERC Rights”); provided, however, that in exercising the Peabody ERC Rights, CNX shall not take any action that results or would reasonably be expected to result in additional cost (as determined by Peabody in good faith in connection with its exercise of the Reserved Rights) to Peabody in connection with operations conducted pursuant to the Reserved Rights; and provided further that the Peabody ERC Rights are subject to Peabody’s paramount Reserved Rights, and CNX agrees that upon receiving notice from Peabody, in accordance with the terms set forth in the Peabody Deed, or in any development plan prepared in accordance therewith, setting forth the time period for the intended exercise of any of Peabody’s Reserved Rights with respect to the Peabody ERC Rights, CNX will take all action, at its sole cost, reasonably required to timely develop such rights so as to not interfere with or delay any of Peabody’s coal mining operations (the “CNX ERC Actions”). If CNX fails to take any CNX ERC Action then, promptly upon Peabody’s request, CNX shall relinquish and reassign to Peabody all Peabody ERC Rights relating to CBM or CMM emissions recoverable in advance of Peabody’s coal mining operations; provided, however, that such relinquishment and reassignment only shall apply to Peabody ERC Rights on a site-specific basis, in an area reasonably defined by Peabody and only to the extent necessary for the exercise of its Reserved Rights as described above;

               (v) Other Tax Credits. All rights Peabody may now have or later acquire to claim any tax credits, except for any such tax credits which may arise from the exercise of the Reserved Rights, relating to exploration and production of Oil and Gas by CNX after the Effective Time with respect to the Peabody Assets;

               (vi) Books and Records. Copies of all accounting, land and Contracts files and records, and all drilling, engineering, geologic and technical records, files, maps, data, analyses, drawings, blueprints, financial assurances, bonds, and insurance policies (only to the extent an outstanding claim has been filed under any such policy with respect to any of the Peabody Assets), schematics, reports, lists, and plans and processes to the extent the same were obtained or prepared for the sole purpose of evaluating and developing the oil and gas potential of the Peabody Oil and Gas Interests (the “Peabody Books and Records”), which are in the physical possession of Peabody, or with respect to which Peabody has the right of access and the ability to obtain copies, as of April 1, 2007 or as of the Closing Date, and excepting such books, files, records and other materials and data that are subject to confidentiality obligations or other similar restrictions under agreements with third Persons who are not Affiliates of Peabody provided, however, that Peabody shall use commercially reasonable efforts to obtain

and make available to CNX Peabody Books and Records that are not in the physical possession of Peabody as of April 1, 2007 or as of the Closing Date; and

               (vii) Insurance Claims. All rights to insurance proceeds receivable after the Effective Time with respect to any CNX Assumed Liabilities insured on a “claims made” basis, and all insurance proceeds (to the extent not already expended by Peabody to restore or replace the lost or damaged asset, which replacement asset shall be a transferred Asset) received prior to Closing with respect to any asset which, if held by Peabody as of the Effective Time would be a Peabody Asset.

          (e) CNX and Peabody Excluded Assets.

               (i) The CNX Assets shall not include, and CNX specifically excludes from this transaction: (1) any accounts receivable accruing or attributable to the CNX Assets for the period prior to the Effective Time; (2) any refund of Taxes, costs or expenses borne by CNX or its predecessors in title attributable to the period prior to the Effective Time; (3) any rights, titles, estates or interests owned, leased, held or otherwise controlled by CNX in the lands described on Exhibits “A” or “B” that are not described or included in Section 2.1(c) hereof, and data, books, maps, records and other information relating thereto; and (4) subject to Peabody’s review rights under Section 13.1, all books, records, files, material, information and data that were obtained, prepared or received by CNX or any of its agents, consultants or representatives (A) for purposes other than evaluating and developing the Pittsburgh Seam Coal Interests, the Kentucky Coal Interests, or the Pittsburgh Seam CBM and CMM Interests, (B) in connection with internal evaluations of the Assets for management purposes, or (C) in connection with marketing of the Assets or the evaluation and negotiation of the transaction contemplated herein (collectively, the “CNX Excluded Assets”).

               (ii) The Peabody Assets shall not include, and Peabody specifically excludes from this transaction: (1) all Reserved Rights; (2) any accounts receivable accruing or attributable to the Peabody Assets for the period prior to the Effective Time; (3) all production of Oil and Gas from or attributable to the Peabody Assets with respect to all periods prior to the Effective Time and all proceeds attributable thereto; (4) any refund of Taxes, costs or expenses borne by Peabody or its predecessors in title attributable to the period prior to the Effective Time; (5) any rights, titles, estates or interests owned, leased, held or otherwise controlled by Peabody in the lands described on Exhibits “C-1” through “C-64” that are not described or included in Section 2.1(d) hereof; (6) all Oil and Gas rights, estates, interests, and claims in and to properties not depicted on the attached Exhibits “C-1” through “C-64” except as otherwise expressly provided herein as well as all Reserved Rights and data, books, maps, records and other information relating thereto; (7) except for common law or statutory rights to use the surface as incident or right appurtenant to the Peabody Oil and Gas Interests, all surface rights and estates in the lands listed on Exhibit “C” and depicted on the maps attached hereto as Exhibits “C-1” through “C-64”, and all roads, ditches and other surface improvements on such lands; (8) subject to CNX’s review rights under Section 13.1, all books, records, files, material, information and data that were obtained, prepared or received by Peabody or any of its agents, consultants or representatives (A) for purposes other than evaluating and developing the oil and gas potential of the Peabody Oil and Gas Interests, (B) in connection with Peabody’s exercise of

its Reserved Rights, (C) in connection with internal evaluations of the Assets for management purposes, or (D) in connection with marketing of the Assets or the evaluation and negotiation of the transaction contemplated herein (collectively, the “Peabody Excluded Assets”).

     2.2 CNX Assumed Liabilities; Peabody Retained Liabilities.

     &n