ACQUISITION AGREEMENT

EXHIBIT 2.1

THIS AGREEMENT CONTAINS REPRESENTATIONS AND WARRANTIES THE PARTIES HERETO MADE TO AND SOLELY FOR THE BENEFIT OF EACH OTHER. THE ASSERTIONS EMBODIED IN THOSE REPRESENTATIONS AND WARRANTIES ARE QUALIFIED BY INFORMATION IN CONFIDENTIAL DISCLOSURE SCHEDULES THAT THE PARTIES HAVE EXCHANGED IN CONNECTION WITH SIGNING THE AGREEMENT. WHILE THE REGISTRANT BELIEVES THAT THE SECURITIES LAWS DO NOT REQUIRE THE INFORMATION CONTAINED IN THE DISCLOSURE SCHEDULES TO BE PUBLICLY DISCLOSED, THE DISCLOSURE SCHEDULES DO CONTAIN INFORMATION THAT MODIFIES, QUALIFIES AND CREATES EXCEPTIONS TO THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS AGREEMENT. ACCORDINGLY, INVESTORS AND SECURITY HOLDERS SHOULD NOT RELY ON THE REPRESENTATIONS AND WARRANTIES AS CHARACTERIZATIONS OF THE ACTUAL STATE OF FACTS. MOREOVER, INFORMATION CONCERNING THE SUBJECT MATTER OF THE REPRESENTATIONS AND WARRANTIES MAY CHANGE AFTER THE DATE OF THE AGREEMENT, WHICH SUBSEQUENT INFORMATION MAY OR MAY NOT BE FULLY REFLECTED IN THE REGISTRANT’S PUBLIC DISCLOSURES.

THE ATTACHMENTS TO THIS EXHIBIT LISTED IN THE TABLE OF CONTENTS HEREOF ARE NOT FILED HEREWITH, AS PROVIDED IN ITEM 601(b)(2) OF REGULATION S-K PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE REGISTRANT AGREES TO FURNISH SUPPLEMENTALLY A COPY OF ANY SUCH OMITTED ATTACHMENT TO THE SECURITIES AND EXCHANGE COMMISSION UPON REQUEST.

Execution Version

ACQUISITION AGREEMENT

among

ALPHA NATURAL RESOURCES, LLC,

MATE CREEK ENERGY OF W. VA., INC. AND VIRGINIA ENERGY COMPANY,

THE UNITHOLDERS OF POWERS SHOP, LLC,

and

THE SHAREHOLDERS OF
WHITE FLAME ENERGY, INC.,
TWIN STAR MINING, INC. AND NICEWONDER CONTRACTING, INC.

Dated as of
September 23, 2005

Table of Contents

EXHIBITS, ANNEXES AND SCHEDULES

ACQUISITION AGREEMENT

          THIS ACQUISITION AGREEMENT (this “Agreement”) is made as of September 23, 2005, among Alpha Natural Resources, LLC, a Delaware limited liability company (“Buyer”) , Mate Creek Energy of W. Va., Inc., a West Virginia corporation (“Mate Creek”), and Virginia Energy Company, a Virginia corporation (“Virginia Energy”), the unitholders of Powers Shop, LLC, a Virginia limited liability company (“Powers Shop”), and the shareholders of each of (i) White Flame Energy, Inc., a West Virginia corporation (“White Flame Energy”), (ii) Twin Star Mining, Inc., a West Virginia corporation (“Twin Star”) and (iii) Nicewonder Contracting, Inc., a West Virginia corporation (“Nicewonder Contracting”) set forth on the signature pages to this Agreement. Collectively, each of Mate Creek and Virginia Energy, each unitholder of Powers Shop, and each shareholder of White Flame Energy, Twin Star and Nicewonder Contracting shall be referred to in this Agreement individually as a “Seller” and collectively as “Sellers.” Buyer and each of the Sellers may be referred to in this Agreement as a “Party.” Collectively, Buyer and Sellers may be referred to in this Agreement as the “Parties.” Capitalized terms not otherwise defined in this Agreement have the meaning given such terms in Article I.

RECITALS

           WHEREAS , Mate Creek, Powers Shop, Virginia Energy, White Flame Energy, Twin Star and Nicewonder Contracting (collectively, the “Subject Companies”) engage in (i) the mining, processing, transportation and sale of coal produced by them in the States of West Virginia and the Commonwealths of Kentucky and Virginia, (ii) the domestic trading of coal, including the purchase and resale of coal produced by others, and (iii) activities related to the foregoing (collectively, the “Business”);

           WHEREAS, Buyer, through one or more of its Affiliates (collectively, “Alpha”), will purchase for Buyer Notes all of the outstanding capital stock of White Flame Energy, Twin Star and Nicewonder Contracting;

           WHEREAS , Alpha will purchase for cash all of the outstanding equity interests of Powers Shop (together with White Flame Energy, Twin Star and Nicewonder Contracting an “Acquired Company” and collectively, the “Acquired Companies”);

           WHEREAS , Alpha will purchase for cash the Acquired Assets of Mate Creek and Virginia Energy (each, an “Asset Company” and collectively, the “Asset Companies”), which Acquired Assets, together with the Acquired Companies shall be referred to collectively in this Agreement as the “Acquired Interests”;

           NOW, THEREFORE, the Parties agree as follows:

ARTICLE I
DEFINITIONS

          Unless otherwise expressly provided in this Agreement, the following terms, as used in this Agreement, have the following meanings:

          “AAA” has the meaning set forth in Section 13.18.

          “Accredited Investor” has the meaning set forth in Regulation D promulgated under the Securities Act.

          “Acquired Assets” means all the properties and assets used or held for use in the Business that are owned or leased by the Asset Companies, whether or not located on their premises or shown on the Financial Statements, including, but not limited to, all right, title and interest in and to the Inventory, Equipment, Books and Records, Real Property, Mining Data and Intellectual Property of the Asset Companies and the rights of the Asset Companies with respect to the Contracts and the Permits; provided, however the Acquired Assets shall not include Books and Records, Mining Data and Intellectual Property owned by Mate Creek that is related to the Real Property or Mining Activities of third parties (who are not Sellers) for whom Mate Creek does contract engineering work.

          “Acquired Companies” has the meaning set forth in the Recitals.

          “Acquired Interests” has the meaning set forth in the Recitals.

          “ACT Litigation” means that certain legal action styled The Affiliated Construction Trades Foundation v. West Virginia Department of Transportation and Nicewonder Contracting Inc. , (SDWV CA No. 2:04-1344).

          “Active Operating Properties” means all property included in Permits currently issued to the Subject Companies prior to the Closing and property that is necessary or required to operate the Business in the manner currently conducted.

          “Actual Statement” has the meaning set forth in Section 2.3(b).

          “Additional Taxes” has the meaning set forth in Section 10.16(b).

          “Adverse Consequences” means all actions, suits, proceedings, hearings, investigations, charges, complaints, claims, demands, Decrees, damages, dues, penalties, fines, costs, amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses, expenses, and fees, including court costs and reasonable attorneys’ fees and expenses, but shall not include punitive, exemplary or consequential damages (except to the extent any such damages are included in a Third Party Claim for which a Purchaser Indemnitee is entitled to indemnification under the Indemnification Agreement).

          “Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person and, in the case of an

individual, includes the individual’s immediate family, and the trustees of a trust the beneficiaries of which include any one or more of the foregoing.

          “Affiliated Group” means any affiliated group within the meaning of Code §1504.

          “Alleghany Land Sublease” means that certain Lease dated July 15, 1970 from Island Creek Coal Company to Pine Rock Coals, Inc. subsequently partially assigned to White Flame Energy.

          “Alpha” has the meaning set forth in the Recitals.

          “Alpha Closing Certificate” means the certificate of Alpha substantially in the form of Exhibit A attached to this Agreement.

          “Applicable Period” has the meaning set forth in Section 7.5(a).

          “Assumed Liabilities” means (i) the applicable Subject Companies’ performance after the Closing Date of contractual obligations arising under the Contracts included in the Acquired Interests, (ii) the Subject Companies’ operation of the Business after the Closing Date under their respective Permits and Inactive Permits, including the discharge of Liabilities related to Mining Activities or pursuant to Reclamation Laws, (iii) all Liabilities expressly assumed by Buyer and its Affiliates pursuant to Article X of this Agreement, and (iv) matters arising out of the operation of the Business or the use, ownership or possession of the Acquired Interests after the Closing Date, excepting Retained Liabilities in each of clauses (i) through (iv).

          “Base Amount” has the meaning set forth in Section 2.2.

          “Base Working Capital” means $8,600,000.

          “Basis” means any past or present fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act, or transaction that forms or could form the foundation for any specified consequence.

          “Bonds” has the meaning set forth in Section 5.26.

          “Books and Records” means the original or true and complete copies of all of the books and records of the Subject Companies or pertaining to the Acquired Assets, including but not limited to, customer lists, employee records for those Employees employed by any of the Subject Companies immediately following the Closing Date, Contracts, purchase orders and invoices, sales orders and sales order log books, credit and collection records, plats, drawings and specifications, environmental and mining reports and studies, correspondence and miscellaneous records with respect to customers and supply sources, lessors and lessees, maps, core logs, engineering data, equipment maintenance records, Real Property records including deeds, leases, lessor and lessee correspondence files, abstracts, title reports and opinions, and title insurance policies, and all other

general correspondence, records, books and files owned by any Subject Company, but excluding any and all Tax Returns, books and records relating to the Retained Assets and Retained Liabilities and corporate records of the Asset Companies, and records, information, data, Mining Data and Intellectual Property owned by Mate Creek that is related to the Real Property or Mining Activities of third parties (who are not Sellers) that are not a part of the transaction set forth in this Agreement, for whom Mate Creek does contract engineering work.

          “Business” has the meaning set forth in the Recitals.

          “Business Day” means any day other than a Saturday, a Sunday or a United States federal or New York State banking holiday.

          “Buyer” has the meaning set forth in the preamble.

          “Buyer Benefit Plan” has the meaning set forth in Section 11.4.

          “Buyer Entities” has the meaning set forth in Section 7.5(a).

          “Buyer Notes” has the meaning set forth in Section 2.2.

          “Central Coal Contracts” means those coal sales contracts with certain third party coal customers entered into on behalf of one or more of the Subject Companies by Central Coal Company, all of which are set forth in Section 2.1 of the Disclosure Schedule, pursuant to which Central Coal acts as selling agent to sell coal produced by one or more Subject Companies.

          “CERCLA” has the meaning set forth in the definition of “Environmental Laws.”

          “CERCLIS” has the meaning set forth in Section 5.12(g).

          “Closing Balance Sheet” means a consolidated balance sheet of the Subject Companies as of the close of business on the Closing Date immediately preceding the consummation of the transactions contemplated by this Agreement (without giving effect to any purchase accounting adjustments arising from the such transactions), that is prepared in accordance with GAAP applied consistently with past practices and which shall be prepared and certified by the Chief Financial Officer of Buyer.

          “Closing Date” means the date of the Closing.

          “Closing” has the meaning set forth in Section 2.7.

          “Coal Act” means the Coal Industry Retiree Health Benefit Act of 1992 as amended (codified at Subtitle J of the Code).

          “COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1986, as amended.

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

          “Commitment” means (a) options, warrants, convertible securities, exchangeable securities, subscription rights, conversion rights, exchange rights or other contracts that could require a Person to issue any of its Equity Interests or to sell any Equity Interests it owns in another Person; (b) any other securities convertible into, exchangeable or exercisable for, or representing the right to subscribe for any Equity Interest of a Person or owned by a Person; (c) statutory pre-emptive rights or pre-emptive rights granted under a Person’s Organizational Documents; and (d) stock appreciation rights, phantom stock, profit participation, guarantee of profit, guarantee against loss, or other similar rights with respect to a Person.

          “Confidential Information” means any information concerning the Business or the Acquired Interests that is not already generally available to the public; provided, however , no work product, information, data or records of Mate Creek relating to Mining Activities or properties of third parties (who are not Sellers) for whom Mate Creek does contract engineering work shall be deemed Confidential Information.

          “Contaminated” or “Contamination” means the presence of one or more Hazardous Substances in such quantity or concentration as to: (i) violate any Environmental Law; (ii) require disclosure to any Governmental Authority; (iii) require remediation or removal; (iv) interfere with or prevent the customary use of the Real Property owned by the Acquired Companies or included in the Acquired Assets; or (v) create any Liability to fund the clean up of the Real Property.

          “Contracts” shall mean all of the contracts, agreements or leases, written and oral, of the Acquired Interests, including, without limitation, the Central Coal Contracts.

          “Crown Property” means the real property leased by White Flame Energy from Crown Industries, Inc. pursuant the Lease Agreement dated November 22, 1997, as amended.

          “Decree” means any injunction, judgment, order, decree, charge or ruling of any applicable Governmental Authority.

          “Disclosure Schedule” has the meaning set forth in Article V.

          “Dispute” has the meaning set forth in Section 13.18.

          “Employee” means any Person (i) employed by and rendering personal services for a Subject Company, (ii) receiving short-term or long-term disability benefits from a Subject Company under an Employee Benefit Plan, (iii) on vacation or an approved leave of absence from his employment with a Subject Company or (iv) off work from a Subject Company and receiving or eligible to receive benefits under a Workers’ Compensation Act The term “current and former

Employees” means all Persons who fall within the term Employee at any time prior to the Closing Date.

          “Employee Benefit Plans” has the meaning set forth in Section 5.24(a).

          “Encumbrances” means any charge, claim, community or other marital property interest, right of way, easement, encroachment, servitude, right of first option, right of first refusal, restriction on use, mortgage, pledge, lien, property right or interest, restriction on transfer, or other security interest or Equity Interest, other than Permitted Encumbrances.

          “Entity” means a partnership, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, or a Governmental Authority.

          “Environment” means surface or ground water, water supply, soil or the ambient air.

          “Environmental Laws” means all Laws that relate to (a) the prevention, abatement or elimination of pollution, or the protection of the Environment, or of natural resources, including, without limitation, (i) Laws applicable to Mining Activities or related activities and (ii) all Reclamation Laws, (b) the generation, handling, treatment, storage, disposal or transportation of waste materials, (c) the regulation of or exposure to Hazardous Substances, including, without limitation, the Comprehensive Environmental Response Compensation and Liability Act, 42 U.S.C. §§9601 et. Seq. (“CERCLA”), the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act, as amended, 42 U.S.C. §§6901 et. seq. (“RCRA”), the Clean Air Act, 42 U.S.C. §§7401 et. seq., the Clean Water Act, 33 U.S.C. §§1251 et. seq., the Toxic Substances Control Act, 15 U.S.C. §§2601 et. seq. and the Emergency Planning and Community Right to Know Act, 42 U.S.C. §§11001 et. seq. and any other similar applicable Laws relating to the matters set forth in (a) — (c) above.

          “Environmental Matter” means any assertion of a violation, claim, Decree or directive by any Governmental Authority or any other Person for personal injury, damage to property or the Environment, nuisance, Contamination or other adverse effects on the Environment, or for damages or restrictions resulting from or related to (i) the operation of the Business or the ownership, use or operation at or on any Real Property or other assets owned, operated or leased by the Subject Companies or their Affiliates or any predecessors; or (ii) the existence or the continuation of a Release of, or exposure to, or the transportation, storage or treatment of any Hazardous Substance into the Environment from or related to any Real Property or assets currently or formerly owned, operated or leased by the Subject Companies or their Affiliates or any predecessors or any activities on or operations thereof.

          “Environmental or Response Action” means all actions required: (i) to clean up, remove, treat or in any other way address any Hazardous Substance; (ii) to prevent the Release or threat of Release, or minimize the further Release of any Hazardous Substance so it does not migrate or endanger or threaten to endanger public health or welfare or the indoor or outdoor Environment; (iii) to perform pre-remedial studies and investigations or post-remedial monitoring and care; (iv) to bring facilities on any Real Property currently or formerly owned, operated or leased by the Subject

Companies or their Affiliates or any predecessors and the facilities located and operations conducted thereon into compliance with all Environmental Laws and all permits and other authorizations, and the filing of all notifications and reports required under any Environmental Laws; or (v) for the purpose of environmental protection of any Real Property currently or formerly owned, operated or leased by Sellers or their Affiliates or any predecessors; but such term shall not include actions in response to Mining Environmental Liabilities or actions required under Reclamation Laws.

          “EPA” has the meaning set forth in Section 5.12(d).

          “Equipment” means the tangible machinery, vehicles, equipment, office equipment, computer hardware, supplies, materials, furniture, fixtures, furnishings, trailers, tools, parts and other personal property of every kind owned or leased by the Subject Companies (wherever located and whether or not carried on the books of the Subject Companies) other than Retained Assets, together with any express or implied warranty by the manufacturers or sellers or lessors of any item or component part thereof and all maintenance records and other documents relating thereto, having a replacement cost of $50,000 or more, all of which are listed on Section 1.1 of the Disclosure Schedule.

          “Equity Interest” means (a) with respect to a corporation, any and all shares of capital stock and any Commitments with respect thereto, (b) with respect to a limited liability company, trust or similar Person, any and all units, interests or other limited liability company interest, and any Commitments with respect thereto, and (c) any other direct equity ownership, participation in a Person and any Commitments with respect thereto.

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

          “ERISA Affiliate” means each Entity which is treated as a single employer with any Subject Company for purposes of Code §414.

          “Escrow Agent” means JP Morgan Chase Bank, N.A., as escrow agent pursuant to the Escrow Agreement.

          “Escrow Agreement” means that certain Escrow Agreement to be entered into at Closing attached as an exhibit to the Indemnification Agreement.

          “Estimated Allocation” has the meaning set forth in Section 10.13.

          “Estimated True Up” has the meaning set forth in Section 2.3(a).

          “Estimated Working Capital” has the meaning set forth in Section 2.3(a).

          “Final True Up” has the meaning set forth in Section 2.3(b).

          “Final Working Capital” has the meaning set forth in Section 2.3(b).

          “Financial Statements” has the meaning set forth in Section 5.8.

          “GAAP” means United States generally accepted accounting principles as in effect from time to time, consistently applied.

          “Governmental Authority” means any agency, authority, board, bureau, commission, court, tribunal, department, office or instrumentality of any nature whatsoever or any governmental unit, whether federal, state, county, district, city, other political subdivision, or taxing district, foreign or otherwise, and whether now or hereafter in existence, or any officer or official thereof acting in an official capacity.

          “Hazardous Substances” means any substance, chemical, waste, solid, material, pollutant or contaminant that is defined or listed as hazardous or toxic under any applicable Environmental Laws. Without limiting the generality of the foregoing, Hazardous Substances shall include any radioactive material, including any naturally-occurring radioactive material, and any source, special or by-product material as defined in 42 U.S.C. 2011, et seq., as now in effect, any asbestos-containing materials in any form or condition, any polychlorinated biphenyls in any form or condition, radioactive waste, or oil or petroleum products or by products and constituents.

          “Health and Safety Requirements” means all applicable federal, state, local and foreign Laws concerning public health and safety and worker health and safety, other than Environmental Laws.

          “HIPAA” means the Health Insurance Portability and Accountability Act of 1996, as amended, and all rules and regulations thereunder.

          “HSR Act” shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and regulations and rules promulgated pursuant to that act or any successor law.

          “Inactive Employee” means an Employee who is employed by the Business but is not actively working prior to the Closing because such Employee is disabled or on an approved leave of absence.

          “Inactive Permits” means the written permits, consents, licenses, orders, certificates, registrations, approvals and similar rights issued by a Governmental Authority and held by the Subject Companies that relate to idle, inactive or closed mining operations of and which are listed in Section 1.2 of the Disclosure Schedule.

          “Indemnification Agreement” means that certain Indemnification Agreement dated the date of this Agreement among the Buyer, Sellers and others.

          “Initial Filing” has the meaning set forth in Section 7.6(a).

          “Insurance Policies” means those policies of insurance, including any arrangements

for self-insurance, that the Subject Companies or Affiliates maintained with respect to the Business prior to and including the Closing Date.

          “Intellectual Property” means the trademarks, service marks, patents, copyrights (including any registrations, applications, licenses or rights relating to any of the foregoing) technology, logos, trade secrets, confidential information related to the Acquired Interests, inventions, know-how, designs, technical data, drawings, customer and supplier lists, pricing and cost information, or computer programs and processes and all goodwill associated therewith and rights thereunder, remedies against infringements thereof, and rights to protection of interests therein under the laws of all jurisdictions owned or licensed, leased or created by any of the Subject Companies.

          “Inventory” means all coal inventory of the Subject Companies located in the United States as of the Closing including, without limitation, all coal in transit to stockpiles or in transit to point of sale or in stockpiles, and all spare equipment parts, replacement and component parts, office, fuel and other supplies and similar items of the Subject Companies.

          “IRS” means the United States Internal Revenue Service.

          “Knowledge of Alpha” means the actual knowledge of the individuals listed in Section 1.3 of the Disclosure Schedule assuming due inquiry reasonable under the circumstances.

          “Knowledge of Sellers” means the actual knowledge of the individuals listed in Section 1.4 of the Disclosure Schedule assuming due inquiry reasonable under the circumstances, which shall require inquiry of the operating management of the Subject Companies.

          “Law” means any constitution, statute, code, ordinance, rule or regulation of any applicable Governmental Authority.

          “Liability” means any liability (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become due), including any liability for Taxes.

          “Material Adverse Change” or “Material Adverse Effect” with respect to the Acquired Interests means a change, event or occurrence that individually, or together with any other change, event or occurrence, has a material adverse impact on the financial position, business, results of operations or prospects of the Acquired Interests, taken as a whole, and a “Material Adverse Change” shall be deemed to have occurred if any such material adverse impact exists on any date, without regard to the duration of such material adverse impact; provided, however , that the term “Material Adverse Change” shall not include actions or omissions of Sellers or the Subject Companies taken with the prior written consent of Buyer.

          “Material Contracts” has the meaning set forth in Section 5.16(a).

          “MD&A Disclosure” means any “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure (required by Item 303 of Regulation S-K promulgated by the SEC (or any successor rule or regulation of the SEC)).

          “Mining Activities” means those activities of the Subject Companies that involve or are related to surface mining, underground mining, auger mining, processing, sale or transporting of coal and coal by-products and the providing of services related thereto. For the purpose of this definition, “Mining Activities” shall include, without limitation, any activities defined under the SMCRA, and Laws governing, controlling or applying to coal mining operations.

          “Mining Data has the meaning set forth in Section 5.5(g).

          “Mining Environmental Liabilities” shall mean Liabilities that relate to or arise from both of the following: (i) any of the Hazardous Substances set forth on Section 1.5 of the Disclosure and (ii) an Environmental Matter or Environmental and Response Action associated with Mining Activities to the extent that such Mining Activities conformed to industry standard practices.

          “Month End Balance Sheet” means a consolidated balance sheet of the Subject Companies for the most recent month then ended (or, if not yet available, a good faith estimate of the consolidated balance sheet of the Subject Companies for the most recent month then ended), that is prepared in accordance with GAAP applied consistently with past practices and which shall be prepared and certified by Sellers Representative.

          “Most Recent Financial Statements” has the meaning set forth in Section 5.8.

          “Most Recent Fiscal Month End” has the meaning set forth in Section 5.8.

          “Most Recent Fiscal Year End” means December 31, 2004.

          “Multiemployer Plan” has the meaning set forth in Section 5.24(a).

          “MSHA” has the meaning set forth in Section 5.12(d).

          “Neutral Auditor” has the meaning set forth in Section 2.3(b).

          “Ordinary Course of Business” means the ordinary course of business consistent with the Subject Companies’ past custom and practice (including with respect to quantity and frequency).

          “Organizational Documents” means the articles of incorporation, certificate of incorporation, charter, bylaws, articles or certificate of formation, regulations, operating agreement, certificate of limited partnership, partnership agreement, and all other similar documents, instruments or certificates executed, adopted, or filed in connection with the creation, formation, or organization of a Person, including any amendments thereto.

          “OSM” has the meaning set forth in Section 5.12(d).

          “Party” and “Parties” have the meaning set forth in the preamble.

          “PBGC” means the Pension Benefit Guaranty Corporation.

          “Pension Plans” has the meaning set forth in Section 5.24(a).

          “Permits” means all written permits, consents, licenses, orders, certificates, registrations, approvals and similar rights issued by a Governmental Authority and held by the Subject Companies related to the Business, other than Inactive Permits, and which are listed in Section 1.6 of the Disclosure Schedule.

          “Permitted Encumbrances” means any of the following: (i) any liens for Taxes and assessments of Governmental Authorities not yet delinquent or, if delinquent, that are being contested in good faith and by appropriate proceedings if adequate reserves are maintained to the extent required by GAAP; (ii) liens of mechanics, materialmen, carriers, warehousemen or processors of labor, materials or supplies incurred in the Ordinary Course of Business (a) which are not overdue for a period of more than 30 days or (b) which are being contested in good faith and by appropriate proceedings if adequate reserves are maintained to the extent required by GAAP; (iii) encumbrances that would be apparent by a survey or in a physical inspection of the Real Property; (iv) all instruments of record in the offices of the Clerk of the Circuit Court for each county where the Real Property is located; and (v) easements and similar restrictions that do not materially interfere with the Business; (vi) zoning restrictions; (vii) rights of way, easements and other encumbrances granted by the owners of Real Property interests (who are not Sellers or the Subject Companies) to which the Sellers or the Subject Companies are not a party; and (viii) all Encumbrances disclosed on Section 1.7 of the Disclosure Schedule.

          “Person” means an individual or an Entity.

          “Post-Closing Period” means any taxable period beginning after the Closing Date.

          “Post-Closing Tax Return” has the meaning set forth in Section 10.1.

          “Pre-Closing Period” means any taxable period ending on or before the Closing Date.

          “Pre-Closing Tax Return” has the meaning set forth in Section 10.2.

          “Proceeding” means any action, litigation, suit, claim, dispute, demand, investigation, review, hearing, charge, complaint or other judicial or administrative proceeding, at law or in equity, before or by any Governmental Authority or arbitration or other dispute resolution proceeding.

          “Purchase Price” has the meaning set forth in Section 2.2.

          “Qualified Plans” has the meaning set forth in Section 5.24(a).

          “RCRA” has the meaning set forth in the definition of “Environmental Laws.”

          “Real Property” means the real property rights and interests owned, leased or subleased by the Subject Companies and any improvements, fixtures, easements, rights of way, and other appurtenants thereto (such as appurtenant rights in and to public streets) and all rights of the Subject Companies to surface, timber, coal, oil, natural gas (including coalbed methane, gob gas and coal mine methane), and all other minerals (including coal on the ground, coal refuse, coal waste and coal in the gob).

          “Reclamation Laws” means all Laws, as now or hereafter in effect, relating to reclamation Mining Activities or reclamation Liabilities including, without limitation, SMCRA.

          “Related Persons” means related persons as that term is defined in §9701(c)(2) of the Coal Act, except that it shall not include successors in interest.

          “Release” shall mean any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, dumping or disposing into the Environment of Hazardous Substances.

          “Representative” has the meaning set forth in Section 6.7.

          “Retained Assets” means (a) as to the Asset Companies, all of their assets, properties and rights, other than the Acquired Assets, (b) the assets of any Employee Benefit Plan, and (c) the assets, properties and rights listed in Section 1.8 of the Disclosure Schedule.

          “Retained Debt” means (a) all indebtedness for borrowed money of the Subject Companies, including, all principal, interest, prepayment penalties, early termination fees or other obligations evidenced by or under a note, bond, debenture, letter of credit, draft or similar instrument and including any loans made to the Subject Companies by the holders of their Equity Interests, (b) all obligations to pay the deferred purchase price of property or services, (c) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to acquired property, (d) all indebtedness associated with equipment financing arrangements, including, without limitation, any prepayment penalties, early termination fees or other similar obligations related to such indebtedness, and (e) all guarantees of any of the foregoing.

          “Retained Employees” has the meaning set forth in Section 11.2.

          “Retained Liabilities” means the following Liabilities of the Subject Companies:

               (i) all Liabilities (including any post-Closing premium assessments for pre-Closing periods) under applicable Workers’ Compensation Acts for or based upon the

employment of (a) the current and former Employees who are not Retained Employees, and (b) the current or former Employees who are Retained Employees, but only with respect to claims where the date of injury or the last injurious increment of exposure needed to give rise to the claim occurred prior to and including the Closing Date, and excluding any post-Closing increases in premium rates arising from the Subject Companies’ pre-Closing experience;

               (ii) all Liabilities (including any post-Closing premium assessments for pre-Closing periods) arising under the federal black lung Laws for or based upon the employment of (a) the current and former Employees who are not Retained Employees, and (b) the current and former Employees who are Retained Employees, but only with respect to claims where the Employee was not exposed to the occupational hazard after the Closing for a period equal to or greater than the minimum period of exposure needed to impose liability on a new employer, and excluding any post-Closing increases in premium rates arising from the Subject Companies’ pre-Closing experience;

               (iii) all Liabilities arising under COBRA, HIPAA and other similar Laws, including all Liabilities of a fiduciary for breach of fiduciary duty or any other failure to act or comply in connection with the administration of an Employee Benefit Plan;

               (iv) all Liabilities arising under or based upon the Employee Benefit Plans, including all Liabilities arising from or related to contributions to, the termination of, withdrawal from, or cessation of a Subject Company’s participation in, and benefits due under any Employee Benefit Plan, and all Liabilities of an ERISA Affiliate for contributions to and the termination of a pension plan or contributions to or a withdrawal from a multiemployer plan (as those terms are defined in §§3(2) and (37) of ERISA);

               (v) all Liabilities for salaries, wages, bonuses, overtime payments, vacation days, personal days and similar forms of leave or compensation for or based upon the employment of (i) the current and former Employees who are not Retained Employees, and (ii) the current and former Employees who are Retained Employees, but only to the extent they are accrued, due, or earned prior to and including the Closing Date;

               (vi) all Liabilities for claims of any current or former Employees pursuant to the WARN Act arising out of acts or omissions of the Subject Companies prior to the Closing Date;

               (vii) all Liabilities arising out of compliance with Laws relating to equal employment opportunity, employment, leaves of absence, returns to work, and labor relations for or based upon the employment or termination of employment, or any other action taken or not taken with respect to (i) applicants for employment, (ii) the current and former Employees who are not Retained Employees, and (iii) the current and former Employees who are Retained Employees, but only with respect to periods prior to and including the Closing Date;

               (viii) all Liabilities of the Subject Companies for non-pension retiree benefits, including retiree medical benefits for current and former Employees (and their eligible

dependents and beneficiaries);

               (ix) all Liabilities relating to assets held in trust under any Employee Benefit Plan;

               (x) [reserved];

               (xi) all Liabilities for the claims, legal actions, suits, litigation, arbitrations, grievances, disputes or investigations involving the Subject Companies or based on the action or inaction of the Subject Companies prior to and including the Closing Date, including, without limitation, (A) all such matters set forth in Section 5.20 of the Disclosure Schedule and (B) all Liabilities related to any continuing nuisance claims and their future effect;

               (xii) all Liabilities of the Subject Companies for unpaid Taxes with respect to any Tax year or portion thereof ending on or before the Closing Date or for any Tax year beginning before and ending after the Closing Date to the extent allocable to the portion of such period beginning before and ending on the Closing Date;

               (xiii) all Liabilities of the Subject Companies for the unpaid Taxes of any Person under Reg. §1.1502-6 (or any similar provision of state, local, or foreign law), as a transferee or successor, by contract, or otherwise;

               (xiv) all Liabilities for any Environmental Matter or Environmental or Response Action related to any asset that is not included in the Acquired Interests;

               (xv) [reserved];

               (xvi) all Liabilities related to Retained Assets and Retained Debt;

               (xvii) all Liabilities to third parties for personal injury or damage to property (other than Liabilities for Environmental Matters or Environmental or Response Actions) attributable to or arising out of the ownership or operation of the Business at or prior to the Closing but not those which are attributable to or arising out of the ownership or operation of the Business after the Closing;

               (xviii) all reclamation obligations arising out of Mining Activities occurring on or prior to the Closing Date as required by the contract mining agreements, as amended, between Mingo Logan Coal Company and its affiliates, on the one hand, and Twin Star, on the other hand; and

               (xix) all Liabilities, if any, of the Subject Companies and its Related Persons (collectively, the “Seller Group”) under the Coal Act, including Liabilities for beneficiaries eligible under the Coal Act who are assigned to a member of Seller Group or for whom a member of Seller Group is required to provide or pay for medical benefits, and for premiums or other

contributions that are assessed against any member of Seller Group; provided , that the Liabilities retained pursuant to this subsection shall not be affected by Buyer or any of its Affiliates being identified under the Coal Act as a successor, successor in interest or Related Person under the Coal Act to any member of Seller Group solely as a result of Buyer’s purchase of the Acquired Interests.

          “Section 338(h)(10) Elections” has the meaning set forth in Section 10.16(a).

          “Section 338(h)(10) Estimate” has the meaning set forth in Section 10.16(b).

          “Securities Act” means the Securities Act of 1933, as amended.

          “SEC” means the Securities and Exchange Commission.

          “Seller Group” has the meaning set forth in paragraph (xix) of the definition of “Retained Liabilities.”

          “Sellers” has the meaning set forth in the preamble.

          “Sellers Closing Certificate” means the certificate of Sellers substantially in the form of Exhibit B attached to this Agreement.

          “Sellers Representative” means David Lester.

          “SMCRA” has the meaning set forth in Section 5.12(e).

          “Straddle Period” means a Tax period or year commencing before and ending after the Closing Date.

          “Straddle Return” means a Tax Return for a Straddle Period.

          “Subject Companies” has the meaning set forth in the Recitals.

          “Subsidiary” means any Person with respect to which a specified Person (or a Subsidiary thereof) owns a majority of the Equity Interests or has the power to vote or direct the voting of sufficient Equity Interests to elect a majority of the directors or a similar governing body; provided, however, that Buchanan Energy, LLC shall not be deemed a subsidiary of any of the other Subject Companies.

          “Tax” or “Taxes” means any federal, state, local, or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, premium, windfall profits, environmental (including taxes under Code §59A), customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not.

          “Tax Return” means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, , including any required tax shelter disclosures and reporting, any schedule or attachment thereto, and any amendment thereof.

          “Terminated Employees” has the meaning set forth in Section 11.1.

          “Third Party Claim” means any Proceeding by or before any Governmental Authority or any arbitration or other alternative dispute resolution proceeding made or brought by any Person who is not a Party or an Affiliate of a Party.

          “WARN Act” means the Worker Adjustment and Retraining Notification Act, as amended.

          “Welfare Plans” has the meaning set forth in Section 5.24(a).

          “Working Capital” means the working capital of the Subject Companies computed in accordance with Section 1.10 of the Disclosure Schedule.

          “Workers’ Compensation Acts” means Laws that provide for awards to employees and their dependents for employment-related accidents and diseases.

          “Year End Financial Statements” has the meaning set forth in Section 5.8.

ARTICLE II
PURCHASE AND SALE OF ACQUIRED INTERESTS

     2.1 Basic Transaction . Upon the terms and subject to the conditions of this Agreement, Buyer agrees to purchase from Sellers, and Sellers agrees to convey, transfer, sell, assign and deliver (or cause to be conveyed, transferred, sold, assigned and delivered in the case of the Central Coal Contracts) to the Subsidiaries designated by Buyer in Section 2.1 of the Disclosure Schedule, all of the Acquired Interests free and clear of all Encumbrances (other than Permitted Encumbrances), for which Sellers shall receive the consideration specified in this Article II. Upon the terms and subject to the conditions of this Agreement, Buyer agrees to assume and become responsible for all of the Assumed Liabilities at the Closing.

     2.2 Purchase Price . At Closing, Buyer agrees to pay Sellers Representative, on behalf of and for the benefit of Sellers, an aggregate of (i) $227,400,000, (the “Base Amount”) plus (ii) the Estimated True Up as calculated in Section 2.3(a) (together with the Base Amount, the “Purchase Price”). Buyer shall pay the Purchase Price by (x) its promissory notes (the “Buyer Notes”) in the form of Exhibit G in the aggregate principal amount of $221,000,000 and (y) cash in the aggregate amount of $6,400,000 for the balance of the Purchase Price payable by wire transfer of immediately available funds to Sellers Representative, on behalf of and for the benefit of Sellers, in accordance

with the instructions provided by Seller Representative. The Purchase Price shall be increased or decreased, as the case may be, after Closing, by the aggregate of the Final True Up pursuant to Section 2.3 and by the payment of Additional Taxes pursuant to Sections 10.16(b) and (c). The Base Amount shall be allocated and paid to each Seller in the amounts and the form of consideration indicated on Section 2.2 of the Disclosure Schedule and the Estimated True Up shall be allocated to each Seller in the manner determined by Sellers Representative each in a manner consistent with the Final Allocation pursuant to Section 10.13.

     2.3 Working Capital True Up .

          (a) At least two Business Days prior to the Closing, Sellers Representative shall deliver to Buyer the Month End Balance Sheet. If the Working Capital of the Subject Companies as calculated based on the Month End Balance Sheet and in accordance with Section 1.10 of the Disclosure Schedule (the “Estimated Working Capital”) is greater than or less than the Base Working Capital, then the Purchase Price shall be increased or decreased, as appropriate, at Closing on a dollar-for-dollar basis by the amount of such excess or deficit (such adjustment, the “Estimated True Up”).

          (b) As soon as practicable, but in any event no later than 60 days following the Closing Date, Buyer shall prepare and deliver to Sellers Representative (i) the Closing Balance Sheet, upon which a payment (the “Final True Up”) will be based and (ii) a written statement (the “Actual Statement”), prepared by the Chief Financial Officer of Buyer, certifying the amount of the Final True Up (which may be a positive or negative number) and setting forth the calculation of such amount. The Final True Up shall be an amount equal to (A) the actual amount of Working Capital of the Subject Companies on the Closing Date as determined based on the Closing Balance Sheet (the “Final Working Capital”), less (B) the Estimated Working Capital. If, within10 Business Days following delivery of the Closing Balance Sheet and the Actual Statement to Sellers Representative, Sellers Representative shall not have given Buyer notice of Sellers Representative’s objection to the computation of the Final True Up (which notice shall contain a statement of the basis of such objection), then the amount of Final True Up at the Closing Date will be final and binding upon the Parties, absent manifest error. If Sellers Representative gives notice to Buyer of Sellers Representative’s objection, and Buyer and Sellers Representative are unable to resolve the issues in dispute within 30 days after delivery of such notice of objection, such issues will be submitted for resolution to Grant Thornton LLP, independent certified public accountants, or such other nationally recognized firm of independent certified public accountants mutually selected by the Parties (the “Neutral Auditor”). The Neutral Auditor shall be engaged within 15 days after the expiration of the 30 day period set forth in the preceding sentence. The Neutral Auditor shall make such review and examination of the relevant facts and documents as the Neutral Auditor deems appropriate, and shall permit each of Buyer and Sellers Representative to make a written presentation of their respective positions; provided, however , that the Neutral Auditor shall require all facts, documents and written presentations from Buyer and Sellers Representative to be completely submitted within 30 days after the Neutral Auditor has been engaged. Within 30 days after submission of such facts, documents and written presentations, the Neutral Auditor shall resolve all disputed items in writing and shall prepare and deliver its decision, which shall be final and binding upon the Parties without further recourse or collateral attack and, as to each disputed matter, shall accept (x) either Buyer’s or Sellers Representative’s position on each disputed matter set forth in Seller Representative’s notice of

objection provided pursuant to the fourth sentence of this Section 2.3(b) or (y) the stipulated position of Buyer and Sellers Representative with respect to any matter which prior to such stipulation was disputed. All costs of the dispute resolution process contemplated by this Section 2.3(b) (including, without limitation, the Neutral Auditor’s fees, but exclusive of attorneys’ fees) shall be borne by the Party who is the least successful in such process, which shall be determined by comparing (x) the position asserted by each Party on all disputed matters taken together to (y) the final decision of the Neutral Auditor on all disputed matters taken together. For purposes of the preceding sentence: the “disputed matters” shall be all matters raised in Sellers Representative’s notice of objection provided pursuant to the fourth sentence of this Section 2.3(b) and the “position asserted” by Sellers Representative shall be determined by reference to the notice of objection; and the “position asserted” by the Buyer shall be determined by reference to Buyer’s written presentation submitted pursuant to the sixth sentence of this Section 2.3(b). The Neutral Auditor shall not preside over any hearing of the Parties nor permit the Parties to make any oral arguments to the Neutral Auditor.

          (c) Within five Business Days of the completion of the computations required by Section 2.3(b), if the Final True Up is a positive number, it shall be paid by Buyer to Sellers Representative, on behalf and for the benefit of Sellers. If the Final True Up is a negative number, it shall be paid by Sellers to Buyer. Any such payments shall be made by wire transfer of immediately available funds.

          (d) The right to receive the positive Final True Up (or the obligation to pay the negative Estimated True Up and Final True Up) shall be allocated to each Seller in the manner determined by Sellers Representative and consistent with the Final Allocation pursuant to Section 10.13. Buyer and its Affiliates may conclusively and absolutely rely, without inquiry, upon Sellers Representative’s decisions regarding the proper allocation of such amounts to each Seller and each Seller agrees such decisions made by Sellers Representative shall be final and binding upon it. Each Seller agrees that Buyer shall have no Liability with respect to the payment of any positive Final True Up other than to pay any such amounts when due to Sellers Representative as determined in accordance with this Section 2.3.

          (e) Except as set forth in this Section 2.3, Buyer and Sellers shall bear their own expenses incurred in connection with the preparation and review of the Closing Balance Sheet and the Actual Statement.

     2.4 Retained Assets and Retained Liabilities .

          (a) Buyer is acquiring only the Acquired Interests and assuming only the Assumed Liabilities and is not acquiring any other assets or interests of any Person pursuant to this Agreement or assuming any other Liabilities.

          (b) Upon and after the Closing, the Retained Liabilities shall remain the sole responsibility of and shall be retained, paid, performed and discharged solely by Sellers. On or prior to the Closing Date, Sellers shall cause the Retained Assets and Retained Liabilities to be assigned to or assumed by Sellers in a manner satisfactory to Buyer (or, in the case of the Retained Debt, Sellers shall cause the Retained Debt to be assigned or otherwise transferred to a Seller or a third party designated by Sellers (other than the Acquired Interests) or fully pay and satisfy such Retained Debt).

To the extent that any of the Retained Assets and Retained Liabilities cannot be assigned to or assumed by Sellers prior to the Closing Date (including without limitation where such an assumption would constitute a breach or default under any agreement, encumbrance or commitment, would violate any Law or Decree), then Buyer, without having to incur or suffer any Adverse Consequences, and Sellers will execute and deliver any other documents, certificates, agreements and other writings, and take such other actions, in each case, as may be reasonably necessary or desirable in order to provide to or impose upon Sellers the benefits and unconditional obligation associated with any such Retained Assets and Retained Liabilities.

     2.5 Attempted Assignment of Acquired Interests . If any attempted assignment or assumption of any of the Acquired Interests pursuant to this Agreement would (i) constitute a breach or default under any Contract, (ii) violate any applicable Law or (iii) adversely affect the rights, or increase the obligations of Buyer or its Affiliates, so that Buyer or its Affiliates would not, in fact, receive all such rights, or assume the obligations, of Sellers with respect thereto as they exist prior to such attempted assignment or assumption, then Buyer, without having to incur or suffer any Adverse Consequences, and Sellers shall enter into such arrangements as may be reasonably acceptable to both Buyer and Sellers to provide Buyer or its Affiliates with the benefits of such Acquired Interests, as the case may be, and any transfer or assignment to Buyer or its Affiliates of any such Acquired Interest which shall require such consent or authorization of a third party that is not obtained shall be made subject to such consent or authorization being obtained.

     2.6 Intercompany Transactions . Immediately before the Closing, all outstanding receivables, payables and other indebtedness among Sellers and their Affiliates (including the Acquired Companies), on the one hand, and any other Acquired Companies, on the other hand, shall be satisfied and discharged, without any post-Closing Adverse Consequences to Buyer, its Affiliates or the Acquired Interests. Except for those agreements described on Section 2.6 of the Disclosure Schedule, all such intercompany transactions or arrangements between Sellers or any of their Affiliates (including the Acquired Companies), on the one hand, and any other Acquired Companies, on the other hand, shall be terminated as of the Closing, in such manner as Sellers shall specify, without imposing Adverse Consequences upon Buyer, its Affiliates or the Acquired Interests, and none of the parties shall have any further Liability in respect of any such transaction or arrangement.

     2.7 Closing . The closing of the transactions contemplated by this Agreement with respect to the sale by Sellers of the Acquired Interests (“Closing”) shall take place at the offices of Buyer in Abingdon, Virginia commencing at 9:00 a.m., local time on the tenth Business Day following the satisfaction or waiver of all conditions to the obligations of the Parties to consummate the transactions contemplated by this Agreement (other than conditions with respect to actions each Party will take at the Closing itself), or such other date as the Parties may mutually determine (the “Closing Date”).

     2.8 Deliveries at Closing . At Closing, (i) Buyer will deliver to Sellers Representative the various certificates, instruments, and documents referred to in Section 8.2, (ii) Sellers Representative will deliver to Buyer the various certificates, instruments, and documents referred to in Section 8.1, (iii) each Seller will deliver or cause to be delivered to Buyer such stock powers, endorsements, special warranty deeds and assignments, bills of sale and other good and sufficient instruments of conveyance and assignment as shall be necessary to vest in the appropriate Subsidiaries of Buyer all

of such Seller’s right, title and interest in, to and under the Acquired Interests to be sold by such Seller, (iv) Buyer will deliver to Sellers Representative, on behalf of and for the benefit of Sellers, the consideration specified in Section 2.2, (v) [reserved], (vi) Sellers Representative will deliver to Buyer a certified copy of the Organizational Documents of, and a certificate of good standing, existence or similar document with respect to, each Subject Company and each Seller that is an Entity, in each case issued by the appropriate Governmental Authority of the jurisdiction of formation as of a date not more than ten days prior to the Closing Date, (vii) Buyer will deliver to Sellers Representative a certified copy of Buyer’s Organizational Documents and a certificate of good standing, existence or similar document with respect to Buyer, in each case issued by the appropriate Governmental Authority of the jurisdiction of formation as of a date not more than ten days prior to the Closing Date, (viii) Sellers will deliver the written resignations of each manager and director of the Subject Companies designated in writing by Buyer at least five Business Days prior to the Closing Date, such resignations to be effective concurrently with the Closing on the Closing Date, (ix) each Seller will deliver resolutions of the Board of Directors or other managing body of each Seller authorizing the execution, delivery and performance of this Agreement and a certificate of an officer of each Seller, dated as of the Closing Date, to the effect that such resolutions were duly adopted and are in full force and effect, and (x) each Seller will deliver such other certificates, instruments of conveyance and documents as may be reasonably requested by Buyer prior to the Closing Date to consummate the transactions contemplated by this Agreement.

     2.9 Assets Not Disclosed . Except for the Retained Assets, in the event within one year after the Closing, Buyer or Sellers discover or determine that Seller or any of its Affiliates own or control any Real Property or rights associated therewith or any Permits or Equipment related to the Business that are not identified in this Agreement as Acquired Assets or assets of any of the Acquired Companies (“Assets Not Disclosed”), such determination shall be communicated in writing to the other Party and Buyer shall have the option, to be exercised with 30 days after such notice, to acquire or lease from Seller or its Affiliates, upon terms and conditions contained in this Agreement, as if originally conveyed at Closing, all or any part of such Assets Not Disclosed that are the subject of such notice, at no additional cost or consideration from Buyer.

ARTICLE III
REPRESENTATIONS AND WARRANTIES SELLERS REGARDING THE TRANSACTION

     Each Seller represents and warrants to Buyer that the statements contained in this Article III are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Article III) with respect to itself, except as set forth in Annex I attached hereto.

     3.1 Organization . For any Seller that is an Entity, such Seller is duly organized, validly existing, and in good standing under the Laws of the jurisdiction of its formation.

     3.2 Authorization of Transaction . Such Seller has the requisite power and authority to execute and deliver this Agreement and to perform its obligations under this Agreement. This Agreement has been duly executed by such Seller and constitutes the valid and legally binding

obligation of such Seller enforceable against it in accordance with its terms and conditions, subject to applicable bankruptcy, insolvency, reorganization, moratorium and other similar Laws affecting creditor’s rights generally and general principals of equity. Such Seller need not give any notice to, make any filing with, or obtain any authorization, consent, or approval of any Governmental Authority in order to consummate the transactions contemplated by this Agreement.

     3.3 Noncontravention . Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will (a) violate any Law, Decree, or other restriction of any Governmental Authority to which such Seller is subject or, if such Seller is an Entity, any provision of its Organizational Documents, (b) conflict with, result in a material breach of, constitute a default under, result in the acceleration of, create in any Person the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement, contract, lease, license, instrument, or other arrangement to which such Seller is a party or by which it is bound or to which any of its assets are subject or (c) result in the imposition or creation of an Encumbrance upon or with respect to the Acquired Interests owned by such Seller.

     3.4 Brokers’ Fees . Such Seller has no Liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which Buyer or the Acquired Interests could become liable or obligated.

     3.5 Ownership . The Equity Interests issued by the Subject Companies owned beneficially or of record by such Seller are held free and clear of any Encumbrances or Taxes and there are no Commitments with respect to such Equity Interests. At Closing, such Seller will transfer and deliver to the designated Subsidiaries of Buyer (i) good and valid title to the Equity Interests of the Acquired Companies owned by it as set forth in Section 5.2 of the Disclosure Schedule and (ii) good and valid title to the Acquired Assets, each of which will be free and clear of any Encumbrances, Commitments and Taxes. Seller is not a party to any voting trust, proxy, or other agreement or understanding with respect to voting any Equity Interests of the Subject Companies.

     3.6 Investment . Such Seller (A) understands that the Buyer Notes have not been, and will not be, registered under the Securities Act, or under any state securities laws, and are being offered and sold in reliance upon federal and state exemptions for transactions not involving any public offering, (B) is acquiring the Buyer Notes solely for his or its own account for investment purposes, and not with a view to the distribution thereof, (C) is a sophisticated investor with knowledge and experience in business and financial matters, (D) has received certain information concerning the Buyer and has had the opportunity to obtain additional information as desired in order to evaluate the merits and the risks inherent in holding the Buyer Notes, (E) is able to bear the economic risk and lack of liquidity inherent in holding the Buyer Notes, and (F) is an Accredited Investor for the reasons set forth on Section 3.6 of the Disclosure Schedule.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF BUYER REGARDING THE TRANSACTION

     Buyer represents and warrants to Sellers that the statements contained in this Article IV are correct and complete as of the date of this Agreement and will be correct and complete as of the

Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Article IV), except as set forth in Annex II attached hereto.

     4.1 Organization of Buyer . Buyer is a limited liability company duly organized, validly existing, and in good standing under the Laws of the State of Delaware.

     4.2 Authorization of Transaction . Buyer has the requisite power and authority to execute and deliver this Agreement and to perform its obligations under this Agreement. This Agreement has been duly executed by Buyer and constitutes the valid and legally binding obligation of Buyer, enforceable against it in accordance with its terms and conditions, subject to applicable bankruptcy, insolvency, reorganization, moratorium and other similar Laws affecting creditor’s rights generally and general principals of equity. Other than with respect to the Permits, Buyer need not give any notice to, make any filing with, or obtain any authorization, consent, or approval of any Governmental Authority in order to consummate the transactions contemplated by this Agreement.

     4.3 Noncontravention . Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will (a) violate any Law, Decree, or other restriction of any Government Authority to which Buyer is subject or any provision of its Organizational Documents or (b) other than as set forth in Section 4.2 of Annex II, conflict with, result in a material breach of, constitute a default under, result in the acceleration of, create in any Person the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement, contract, lease, license, instrument, or other arrangement to which Buyer is a party or by which it is bound or to which any of its assets is subject.

     4.4 Brokers’ Fees . Buyer has no Liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which any Seller could become liable or obligated.

     4.5 Investment . Buyer is an Accredited Investor and is not acquiring the Equity Interests of the Acquired Companies with a view to or for sale in connection with any distribution thereof within the meaning of the Securities Act.

     4.6. Financial Ability to Perform . As of the Closing Date, Buyer shall have available to it (a) funds sufficient to enable it to deliver the Purchase Price (substantially as provided in the correspondence from Buyer’s financing sources concurrently furnished to Seller) and (b) the credit capacity sufficient to post new bonds to cause the replacement of bonds in accordance with Section 7.6.

     4.7 Permit Blocking . None of Buyer, any Person “owned or controlled” by Buyer or any Person which “owns or controls” Buyer has been notified (and there is no Basis to believe that such notification is forthcoming) by OSM or state agency administering SMCRA or any comparable state Law, that it is: (i) ineligible to receive additional surface mining permits; or (ii) under investigation to determine whether their eligibility to receive such permits should be revoked, i.e. “permit blocked.” As used in this Agreement, the terms “owns or controls” or “owned or controlled” shall be defined as set forth in 30 C.F.R. §773.5.

ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLERS REGARDING THE ACQUIRED INTERESTS

     Sellers represent and warrant to Buyer that the statements contained in this Article V are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Article V), except as set forth in the disclosure schedule delivered by Sellers to Buyer on the date of this Agreement (the “Disclosure Schedule”):

     5.1 Organization, Qualification, and Power . Each of the Subject Companies is a corporation or limited liability company, as the case may be, that is duly organized, validly existing, and in good standing under the Laws of the jurisdiction of its incorporation. Each of the Subject Companies is duly authorized to conduct business and is in good standing under the Laws of each jurisdiction where such qualification is required. Each of the Subject Companies has full corporate power and authority and all material licenses, permits, and authorizations necessary to carry on the Business in which it is engaged and in which it presently proposes to engage and to own and use the properties owned and used by it. Section 5.1 of the Disclosure Schedule lists the directors and officers of each of the Subject Companies. Sellers have delivered to Buyer correct and complete copies of the Organizational Documents of each of the Subject Companies (as amended to date). The minute books (containing the records of meetings of the stockholders, members, partners, or other governing bodies, and any committees of such governing bodies), the ownership certificates and record books of each of the Subject Companies are correct and complete in all material respects. No Subject Company is in default under or in violation of any provision of its Organizational Documents.

     5.2 Capitalization . Section 5.2 of the Disclosure Schedule sets forth a complete and correct listing of the record and beneficial ownership of the Equity Interests issued by each of the Subject Companies and the entire Equity Interests each of the Subject Companies is authorized to issue. All of the issued and outstanding Equity Interests of the Subject Companies have been duly authorized, are validly issued, fully paid, and non-assessable, and are held of record by the respective Sellers as set forth in Section 5.2 of the Disclosure Schedule. There are no Commitments that could require any Subject Company to issue, sell, or otherwise cause to become outstanding any Equity Interests. There are no outstanding or authorized stock appreciation, phantom stock, profit participation, or similar rights with respect to the Subject Companies. All Equity Interests issued by Subject Companies have been issued substantially in compliance with the Securities Act and applicable state securities Laws. Other than as set forth in Organizational Documents previously provided to Buyer, there are no voting trusts, proxies, or other agreements or understandings with respect to the voting of the Equity Interests of the Subject Companies.

     5.3 Noncontravention . Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will (a) violate any Law, Decree, or other restriction of any Governmental Authority to which any of the Subject Companies is subject, or any provision of the Organizational Documents of the Subject Companies, or (b) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any Person the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement, contract, lease,

license, instrument, or other arrangement to which any of the Subject Companies is a party or by which any of them is bound or to which any of the Acquired Assets or the assets of the Acquired Companies is subject (or result in the imposition of any Encumbrance upon any of the Acquired Assets or the assets of the Acquired Companies). None of the Subject Companies is required to give any notice to, make any filing with, or obtain any authorization, consent, or approval of any Governmental Authority in order for the Parties to consummate the transactions contemplated by this Agreement.

     5.4 Brokers’ Fees . No Subject Company has any Liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement.

     5.5 Real Property .

          (a) Section 5.5(a) of the Disclosure Schedule lists all tracts, parcels, lots and real property interests which constitute Acquired Assets or in which any Acquired Company has (i) an ownership interest and/or (ii) a leasehold interest, including a description of all Real Property leases. The Real Property listed in Section 5.5(a) of the Disclosure Schedule includes all Real Property necessary or required to operate the Business in the manner currently conducted by Sellers.

          (b) The Subject Companies have (i) marketable title to all Real Property listed as owned by each of them on Section 5.5(a) and (ii) a valid leasehold interest in all Real Property listed as leased by them on Section 5.5(a) of the Disclosure Schedule, in each case, free and clear of any Encumbrances, except for Permitted Encumbrances, it being understood that Sellers shall transfer the Real Property to Buyer only with a covenant of special warranty being made by Sellers.

          (c) No Subject Company is in default under any lease or other agreement relating to the Real Property, and no Subject Company has received any written notice alleging that any Subject Company is in default under any lease.

          (d) Each of the leases listed on Section 5.5(a) of the Disclosure Schedule is, and, subject to obtaining any requisite third party consents, all of which are specified in Section 5.5(d) of the Disclosure Schedule, will be on and immediately following the Closing, valid and enforceable against the lessor or other parties thereto in accordance with its terms. There are no unwritten or oral modifications to such leases or any course of dealing or business operations that can be construed as a modification to such leases other than those between or among the Subject Companies, which modifications are described in Section 5.5(d) of the Disclosure Schedule. To the Knowledge of Sellers, the lessors under each of the leases have good and marketable title to the leased Real Property.

          (e) No Subject Company has received (and no Subject Company has a Basis to believe that it will receive) any notice of claims that its has mined any coal that it did not have the right to mine or mined any coal in such reckless and imprudent fashion as to give rise to any claims for loss, waste or trespass.

          (f) No condemnation or eminent domain Proceeding against any part of the Real

Property is pending or, to the Knowledge of Sellers, threatened.

          (g) Sellers have made available to Buyer all Books and Records, including but limited to the geological data, reserve data, material existing mine maps, surveys, title insurance policies, title insurance, abstracts and other evidence of title core hole logs and associated data, coal measurements, coal samples, lithologic data, coal reserve calculations or reports, washability analyses or reports, mine plans, mining permit applications and supporting data, engineering studies and information, maps, reports and data in the possession of the Subject Companies and relating to or affecting the Real Property, including the coal reserves, coal ownership, coal leases to Subject Companies, coal leases from the Subject Companies to third parties, mining conditions, mines, and mining plans of the Subject Companies (collectively, “Mining Data”). Notwithstanding anything in this Agreement to the contrary, Buyer accepts the coal reserves in or under the Real Property, as is, where is, together with the mining data, free of any warranty (express or implied) with regard to the mineability, washability, recoverability, volume, or quantity or quality of any coal reserve. To the Knowledge of Sellers, the coal reserves mined by the Subject Companies owned or leased by the Subject Companies are not subject to any mining rights of any other Person with respect to such coal reserves, except for surface use and other appurtenant rights for the mining of the coal seams that are not owned or leased by the Subject Companies or are not a part of the Acquired Assets.

     5.6 Other Assets .

          (a) The Acquired Assets and the assets of the Acquired Companies constitute all of the assets, tangible and intangible, of any nature whatsoever, necessary to operate the Business in the manner presently operated.

          (b) The Subject Companies (A) have good and marketable title to all of their respective assets (other than Real Property, which is addressed in Section 5.5), free and clear of any Encumbrance, except for Permitted Encumbrances, or (B) leases, if applicable, such assets under valid and enforceable leases. No rights of the Subject Companies under such leases have been assigned or otherwise transferred as security for any obligation of the Subject Companies or any of their Affiliates.

          (c) Each material tangible asset used in the Business or owned or leased by the Acquired Companies (including all Equipment) is in good repair and operating condition, ordinary wear and tear excepted, and has been maintained in accordance with normal industry practice and is suitable for the purposes for which the Subject Companies are presently using such Equipment, normal wear and tear excepted. No item of Equipment is in need of repair or replacement other than as part of routine maintenance in the Ordinary Course of Business. All of the Equipment is in the possession of the Subject Companies.

          (d) All Books and Records (including income and non-income Tax Returns and relating workpapers) have been adequately maintained for all periods ending after December 31, 1998 (or for periods that the statute of limitations remains open).

     5.7 Subsidiaries . None of the Subject Companies owns any Equity Interests in another Person or controls directly or indirectly any Person.

     5.8 Financial Statements . Attached to this Agreement as Exhibit C are the following financial statements (collectively, the “Financial Statements”): (i) reviewed, compiled (or, in the case of Powers Shop and Mate Creek, internally generated) balance sheets and statements of income, changes in stockholders’ equity and/or members’ and cash flow of each Subject Company (other than Nicewonder Contracting) as of and for the fiscal years ended December 31, 2004, 2003 and 2002; (ii) reviewed or compiled balance sheets and statements of income, changes in stockholders’ equity and/or members’ and cash flow of Nicewonder Contracting for the fiscal year ended December 31, 2004 (collectively, (i) and (ii) are referred to as the “Year End Financial Statements”); and (iii) balance sheets and statements of income of each Subject Company (the “Most Recent Financial Statements”) as of and for the period beginning January 1, 2005 and ended as of August 31, 2005 (the “Most Recent Fiscal Month End”). The Year End Financial Statements (including the notes thereto) have been prepared in accordance with the Subject Companies’ accounting policies, and such policies have been applied consistently throughout all periods covered thereby. The Most Recent Financial Statements have been prepared in accordance with the Subject Companies’ past practices and principles for preparing financial statements for interim periods, and such past practices and principles have been applied consistently throughout all periods covered thereby. The Financial Statements (including the notes thereto) (x) present fairly the financial condition of the Subject Companies as of such dates and the results of operations of the Subject Companies for such periods, and (y) are consistent with the books and records of the Subject Companies. The Subject Companies have maintained systems of internal accounting controls sufficient to provide reasonable assurances that (A) all transactions are executed in accordance with management’s general or specific authorization, (B) all transactions are recorded as necessary to permit the preparation of annual and interim financial statements and to maintain proper accountability for items, and (C) access to their property and assets is permitted only in accordance with management’s general or specific authorization.

     5.9 Events Subsequent to Most Recent Fiscal Month End . Except as otherwise contemplated by this Agreement, since the Most Recent Fiscal Month End, the Subject Companies have conducted the Business only in the Ordinary Course of Business and there has not been any Material Adverse Change. Without limiting the generality of the foregoing, since that date, no Subject Company has:

          (a) made any capital investment in, any loan to, or any acquisition of the securities or assets of, any other Person (or series of related capital investments, loans or acquisitions) either involving more than $25,000 or outside the Ordinary Course of Business;

          (b) issued any note, bond, or other debt security or created, incurred, assumed or guaranteed any indebtedness for borrowed money or capitalized lease obligation either involving more than $25,000 singly or $100,000 in the aggregate, other than equipment financing arrangements approved by Buyer;

          (c) imposed any Encumbrance upon any of its assets, tangible or intangible;

          (d) sold, assigned, leased or transferred any of its tangible assets, except for sales of Inventory in the Ordinary Course of Business;

          (e) sold, assigned or transferred any patents, trademarks or trade names or any material copyrights, trade secrets or other intangible assets, except in the Ordinary Course of Business;

          (f) suffered any extraordinary losses or waived any rights material to the conduct of the Business as presently conducted;

          (g) made any capital expenditure (or series of related capital expenditures) either involving more than $1,000,000 or outside the Ordinary Course of Business;

          (h) entered into, amended or extended (i) any coal sales commitment or obligations unless such coal sales commitment is for less than 30 days and involves less than 20,000 tons of coal, or (ii) any other agreement, contract (other than a coal sales commitment), lease or license (or series of related agreements, contracts, leases or licenses) either involving more than $25,000 or outside the Ordinary Course of Business;

          (i) suffered any theft, damage, destruction or casualty loss to its property, whether or not covered by insurance;

          (j) made any change in employment or severance terms for any of its directors, managers or officers, or any material change in the employment or severance terms for any of its other Employees outside the Ordinary Course of Business;

          (k) made any change in its accounting methods, principles or practices for financial accounting (except for those changes required by the Subject Companies’ independent auditors to comply with GAAP) or for IRS reporting purposes;

          (l) adopted, amended, modified or terminated any bonus, profit sharing, incentive, severance or other plan, contract or commitment for the benefit of any of its directors, officers and other Employees (or taken any such action with respect to any other Employee Benefit Plan);

          (m) granted any increase in the base compensation of or bonuses payable to any of its directors, managers, officers and other Employees outside of the Ordinary Course of Business, or made any other change in employment terms for any of its directors, officers, and other Employees outside the Ordinary Course of Business;

          (n) made any payment (including any dividends or other distributions with respect to its Equity Interests) to any Seller or any Affiliate of any Seller (other than compensation otherwise payable in the Ordinary Course of Business to any Seller employed by such Subject Company and other than as contemplated by this Agreement) or forgiven any indebtedness due or owing from any Seller or any Affiliate of any Seller to such Subject Company;

          (o) issued, sold or otherwise disposed of any of its Equity Interests or granted any Commitments;

          (p) (i) accelerated accounts receivable, (ii) delayed or postponed the payment of accounts payable or other Liabilities, or (iii) changed in any material respect its practices in connection with the payment of accounts payable in respect of purchases from suppliers;

          (q) amended its Organizational Documents;

          (r) collected receivables, paid payables, billed customers, or accrued for receivables and payables other than in accordance with its standard practices and procedures with regard to the same (including its standard practices and procedures with respect to the timing of taking such actions);

          (s) received notice of any termination of any Contract to which it is a party;

          (t) entered into an transaction with any Seller or a Seller’s Affiliates (other than another Subject Company); or

          (u) committed to do any of the foregoing.

     5.10 Undisclosed Liabilities . No Subject Company has any Liability except for (i) Liabilities set forth on the face of the Most Recent Financial Statements and (ii) Liabilities which have arisen after the Most Recent Fiscal Month End in the Ordinary Course of Business.

     5.11 Legal Compliance . Each Subject Company and its predecessors and Affiliates has complied in all material respects with all applicable Laws of federal, state, local and foreign Governmental Authorities, and no Proceeding or notice has been filed or commenced against any of them alleging any failure so to comply.

     5.12 Permits and Environmental Compliance .

          (a) The Subject Companies are in substantial compliance with all Environmental Laws. The Subject Companies are not in violation of any Environmental Laws applicable to Mining Activities, including any investigatory, remedial or corrective obligations, that would result in (i) closure, suspension or material restriction of any Mining Activities; (ii) revocation or suspension of any Permits; or (iii) exposure of Buyer or any Subject Company to the imposition of any fines or other civil or criminal monetary penalty reasonably expected to be in excess of $5,000. No Subject Company has received any notification from any Governmental Authority or any other Person alleging, claiming or notifying that a Subject Company is in violation of any Environmental Laws.

          (b) Section 1.6 of the Disclosure Schedule sets forth all Permits and Section 1.2 of the Disclosure Schedule sets forth all Inactive Permits. The Permits and Inactive Permits include all permits, consents, licenses, orders, certificates, registrations and similar approvals necessary or required to conduct the Mining Activities and reclamation activities as currently conducted by the Subject Companies, and the Subject Companies are in substantial compliance with all such Permits and Inactive Permits. No such Permit or Inactive Permit is the subject of any proceeding by or in front of any Governmental Authority, and no such proceeding is pending or, to the Knowledge of

Sellers, threatened.

          (c) Sellers have made available to Buyer true, correct and complete copies of (i) the Permits, together with a description of the permitted property or facility, the amount of the bond for each such Permit and the surety for each such bond or manner in which each such bond has otherwise been posted, (ii) all other licenses, franchises, certificates, concessions and other approvals and authorizations of Government