STOCK PURCHASE AGREEMENT

1.

DEFINITIONS

the sale of the Shares held by each Seller to Buyer;

the execution, delivery, and performance of the Consulting Agreements, the Lease, the Sellers’ Releases and the Registration Rights Agreement;

the performance by Buyer and Sellers of their respective covenants and obligations under this Agreement; and

Buyer’s acquisition and ownership of the Shares and exercise of control over the Acquired Companies.

all indebtedness for borrowed money, including, all principal, interest or other obligations evidenced by or under a note, bond, debenture, letter of credit, draft or similar instrument;

that portion of obligations with respect to capitalized or synthetic leases that is properly classified as a liability on a balance sheet in accordance with GAAP;

liabilities under or pursuant to interest rate cap contracts, swap contracts, foreign currency exchange contracts and other hedging or similar contracts (including breakage or associated fees);

all obligations to pay the deferred purchase price of property or services (including the earned portion of any so-called “earn-out” obligations);

all indebtedness created or arising under any conditional sale or other title retention agreement with respect to acquired property;

all indebtedness and obligations of the types described in the foregoing clauses (a) through (e) to the extent secured by any Encumbrance on any property or asset owned or held by that Person, regardless of whether the indebtedness secured thereby shall have been incurred or assumed by that Person or is otherwise nonrecourse to the credit of that Person; and

all guarantees of any of the foregoing.

any environmental, health, or safety matters or conditions (including on-site or off-site contamination, occupational safety and health, and regulation of chemical substances or products) other than routine compliance;

fines, penalties, judgments, awards, settlements, legal or administrative proceedings, damages, losses, claims, demands and response, investigative, remedial, or inspection costs and expenses arising under Environmental Law or Occupational Safety and Health Law;

financial responsibility under Environmental Law or Occupational Safety and Health Law for cleanup costs or corrective action, including any investigation, cleanup, removal, containment, or other remediation or response actions (“Cleanup”) required by applicable Environmental Law or Occupational Safety and Health Law (whether or not such Cleanup has been required or requested by any Governmental Body or any other Person) and for any natural resource damages; or

any other compliance, corrective, investigative, or remedial measures required under Environmental Law or Occupational Safety and Health Law, other than routine compliance;

advising appropriate authorities, employees, and the public of intended or actual releases of Hazardous Materials, violations of discharge limits, or other prohibitions and of the commencements of activities, such as resource extraction or construction, that could have significant impact on the Environment;

preventing or reducing to acceptable levels the release of Hazardous Materials into the Environment;

reducing the quantities, preventing the release, or minimizing the hazardous characteristics of wastes that are generated;

protecting natural resources or species;

reducing to acceptable levels the risks inherent in the transportation of Hazardous Materials;

cleaning up Hazardous Materials that have been released, preventing the threat of release, or paying the costs of such clean up or prevention;

making responsible parties pay private parties, or groups of them, for damages done to human health from Hazardous Materials, for damages done to the Environment, or permitting self-appointed representatives of the public interest to recover for injuries done to natural resources; or

protecting human health from Hazardous Materials or protecting the Environment;

nation, state, county, city, town, village, district, or other jurisdiction of any nature;

federal, state, local, municipal, foreign, or other government;

governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official, or entity and any court or other tribunal);

multi-national organization or body; or

body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory, or taxing authority or power of any nature.

such individual is actually aware of such fact or other matter; or

a prudent individual could be expected to discover or otherwise become aware of such fact or other matter in the course of conducting a reasonably comprehensive investigation concerning the existence of such fact or other matter.

such action is consistent with the past practices of such Person and is taken in the ordinary course of the normal day-to-day operations of such Person;

such action is not required to be authorized by the board of directors of such Person (or by any Person or group of Persons exercising similar authority); and

such action is similar in nature and magnitude to actions customarily taken, without any authorization by the board of directors (or by any Person or group of Persons exercising similar authority), in the ordinary course of the normal day-to-day operations of other Persons that are in the same line of business as such Person.

Encumbrances arising by operation of law in the Ordinary Course of Business, such as mechanics’ liens, materialmen’s liens, carriers’ liens, warehousemen’s liens, and similar liens, none of which materially detract from the value or materially interfere with the present use of the asset to which such Encumbrance attaches;

pledges or deposits under worker’s compensation (or similar) laws, unemployment insurance or other types of insurance or compensation plans participation in which is mandatory in connection with the operation of the business of any of the Acquired Companies;

pledges or deposits which secure the performance of tenders, statutory obligations, bonds, bids, leases, Contracts and similar obligations;

with respect to any lease, Encumbrances arising pursuant to the terms of the applicable lease;

minor imperfections of title and Encumbrances, if any, which (i) do not materially detract from the value of the property subject thereto, impair the operations of the business of any of the Acquired Companies, or the use or license of certain of the assets of the Acquired Companies, and (ii) have arisen in the Ordinary Course of Business;

ad valorem taxes not yet due and payable; and

zoning laws and other land use restrictions that do not impair the present or anticipated use of the property subject thereto or that do not have a material adverse effect on the ownership, operation or maintenance of such property or the conduct of Mining Activities thereon.

each other member of such individual’s Family;

any Person that is directly or indirectly controlled by such individual or one or more members of such individual’s Family;

any Person in which such individual or members of such individual’s Family hold (individually or in the aggregate) a Material Interest; and

any Person with respect to which such individual or one or more members of such individual’s Family serves as a director, officer, partner, executor, or trustee (or in a similar capacity).

any Person that directly or indirectly controls, is directly or indirectly controlled by, or is directly or indirectly under common control with such specified Person;

any Person that holds a Material Interest in such specified Person;

each Person that serves as a director, officer, partner, executor, or trustee of such specified Person (or in a similar capacity);

any Person in which such specified Person holds a Material Interest;

any Person with respect to which such specified Person serves as a general partner or a trustee (or in a similar capacity); and

any Related Person of any individual described in clause (b) or (c).

2.

SALE AND TRANSFER OF SHARES; CLOSING

2.1

SHARES

2.2

PURCHASE PRICE

Sixty Four Million Dollars ($64,000,000) of the Purchase Price shall be paid in cash; and

Sellers shall be issued, in the aggregate, shares of Buyer’s Common Stock having a market value equal to Eleven Million Dollars ($11,000,000) (the “Buyer Shares”) based upon the average closing price of Buyer’s Common Stock as set forth on The Nasdaq Stock Market for the fifteen (15) consecutive trading days ending two (2) trading days prior to the Closing Date.

2.3

CLOSING

2.4

CLOSING OBLIGATIONS

Sellers will deliver to Buyer:

certificates representing the Shares, duly endorsed (or accompanied by duly executed stock powers);

releases in the form of Exhibit 2.4(a)(ii) executed by Sellers, and in the case of trusts, the underlying beneficiaries (collectively, “Sellers’ Releases”);

consulting agreements in substantially the form of Exhibit 2.4(a)(iii), executed by Joseph A. Aull and Timothy R. Aull, respectively (collectively, the “Consulting Agreements”);

a real property lease agreement in substantially the form of Exhibit 2.4(a)(iv) executed by Joseph A. Aull and Timothy R. Aull (the “Lease”);

a certificate executed by Sellers representing and warranting to Buyer that each of Sellers’ representations and warranties in this Agreement was accurate in all respects as of the date of this Agreement and is accurate in all respects as of the Closing Date as if made on the Closing Date (giving full effect to any supplements to the Disclosure Letter that were delivered by Sellers to Buyer prior to the Closing Date in accordance with Section 5.5); and

the other documents required to be delivered pursuant to Section 7.4; and

Buyer will deliver to Sellers:

the cash consideration payable pursuant to Section 2.2 by wire transfer to such accounts, and in the percentages, as set forth in Part 2.2 of the Disclosure Letter;

the Buyer Shares;

a registration rights agreement in the form of Exhibit 2.4(b)(iii), executed by Buyer (the “Registration Rights Agreement”);

a certificate executed by Buyer to the effect that, except as otherwise stated in such certificate, each of Buyer’s representations and warranties in this Agreement was accurate in all respects as of the date of this Agreement and is accurate in all respects as of the Closing Date as if made on the Closing Date; and

the other documents required to be delivered pursuant to Section 8.4.

2.5

NET WORKING CAPITAL ADJUSTMENT

Not later than five (5) business days prior to the Closing Date, Sellers will deliver to Buyer the most recently prepared month-end consolidated balance sheet of the Acquired Companies setting forth the Net Working Capital of the Acquired Companies (the “Most Recent Balance Sheet”). If the Net Working Capital shown on the Most Recent Balance Sheet exceeds the Adjusted Net Working Capital, the cash portion of the Purchase Price payable to Sellers shall be increased by such amount. If the Net Working Capital shown on the Most Recent Balance Sheet is less than the Adjusted Net Working Capital, the cash portion of the Purchase Price payable at Closing shall be decreased by such amount.

Within forty-five (45) days after the Closing Date, Buyer will prepare (to the extent not already prepared), or review and make any adjustments it deems necessary and appropriate, and deliver to Sellers a consolidated balance sheet setting forth the Net Working Capital of the Acquired Companies as of the Calculation Date (the “Calculation Date Balance Sheet”). “Calculation Date” shall mean either: (i) the last day of the month prior to month in which the Closing Date occurs, in the event the Closing Date occurs on one of the first fifteen days of a month; or (ii) the last day of the month in which the Closing Date occurs, in the event the Closing Date occurs on a day after the fifteenth day of such month. If Sellers have any objections to the Calculation Date Balance Sheet, they shall notify Buyer in writing within twenty (20) days of receipt of the Calculation Date Balance Sheet and deliver a detailed written statement describing their objections. Buyer and Sellers shall use their reasonable efforts to resolve any such objections themselves. If Buyer and Sellers cannot resolve any such objections within thirty (30) days after Buyer receives Sellers’ statement of objections, such dispute shall be referred to the Nashville office of Ernst & Young, LLP, each party hereby represents that such firm through its Nashville office has not provided material services for the benefit of such party or its Related Persons within the preceding three years, for conclusive and binding resolution. The Buyer and the Sellers shall direct such firm to render a determination within thirty (30) days after its retention and the Buyer, the Sellers and their respective agents shall cooperate with the such firm during its engagement. Such firm may consider only those items and amounts in the Calculation Date Balance Sheet and related computation and the written objection from Sellers that the Buyer and the Sellers are unable to resolve. In resolving any disputed item, such firm may not ultimately assign a value to any item greater than the greatest value for such item claimed by a party or less than the smallest value

for such item claimed by either party. The determination of such firm shall be conclusive and binding upon the Buyer and the Sellers, with no right of appeal. The Buyer and the Sellers shall bear the costs and expenses of such firm based on the percentage that the portion of the contested amount not awarded to each party bears to the amount actually contested by such party. If there is a dispute as to the Net Working Capital adjustment required hereunder, the Buyer and the Sellers shall promptly pay to the other, as appropriate, such amounts as are not in dispute pending final determination of such dispute.

If the Net Working Capital shown on the Calculation Date Balance Sheet (as prepared by Buyer) exceeds the Net Working Capital shown on the Most Recent Balance Sheet as prepared by Sellers, Buyer will pay Sellers in cash within five (5) business days an amount equal to the amount by which Net Working Capital shown on the Calculation Date Balance Sheet exceeds the Net Working Capital shown on the Most Recent Balance Sheet. If the Net Working Capital shown on the Calculation Date Balance Sheet is less than the Net Working Capital shown on the Most Recent Balance Sheet, Sellers will pay Buyer in cash within five (5) business days an amount equal to the amount of such deficit.

3.

REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND SELLERS

3.1

ORGANIZATION AND GOOD STANDING

Part 3.1 of the Disclosure Letter contains a complete and accurate list for each Acquired Company of its name, its jurisdiction of incorporation or formation, other jurisdictions in which it is authorized to do business, and its capitalization (including the identity of each stockholder or member (as applicable) and the number of shares or membership percentage (as applicable) held by each). Each Acquired Company is a corporation or limited liability company (as applicable) duly organized, validly existing, and in good standing under the laws of its jurisdiction of incorporation or formation, with full corporate or limited liability company power and authority (as applicable) to conduct its business as it is now being conducted, to own or use the properties and assets that it purports to own or use, and to perform all its obligations under Applicable Contracts. Each Acquired Company is duly qualified to do business as a foreign corporation or limited liability company (as applicable) and is in good standing under the laws of each state or other jurisdiction in which either the ownership or use of the properties owned or used by it, or the nature of the activities conducted by it, requires such qualification.

Sellers have delivered to Buyer copies of the Organizational Documents of each Acquired Company, as currently in effect.

3.2

AUTHORITY; NO CONFLICT

This Agreement has been duly authorized by all necessary corporate action on the part of the Company and constitutes the legal, valid, and binding obligation of the Company and the Sellers, enforceable against the Company and the Sellers in accordance with its terms, except as such may be limited by bankruptcy, insolvency, reorganization or other laws affecting creditor’s rights generally, and by general equitable principles. Upon the execution and delivery by Sellers of the Sellers’ Releases, the Sellers’ Releases will constitute the legal, valid, and binding obligations of Sellers, enforceable against Sellers in accordance with their respective terms. The Company and the Sellers have the absolute and unrestricted right, power, authority, and capacity to execute and deliver this Agreement to perform their obligations under this Agreement. The Sellers have the absolute and unrestricted right, power, authority, and capacity to execute and deliver the Sellers’ Releases and to perform their obligations under the Sellers’ Releases.

Except as set forth in Part 3.2 of the Disclosure Letter, neither the execution and delivery of this Agreement nor the consummation or performance of any of the Contemplated Transactions will, directly or indirectly (with or without notice or lapse of time):

contravene, conflict with, or result in a violation of (A) any provision of the Organizational Documents of the Acquired Companies, or (B) any resolution adopted by the board of directors, stockholders or members (as applicable) of any Acquired Company;

contravene, conflict with, or result in a violation of, or give any Governmental Body or other Person the right to challenge any of the Contemplated Transactions or to exercise any remedy or obtain any relief under, any Legal Requirement or any Order to which any Acquired Company or any of the Sellers, or any of the assets owned or used by any Acquired Company, may be subject;

contravene, conflict with, or result in a violation of any of the terms or requirements of, or give any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental Authorization that is held by any Acquired Company or that otherwise relates to the business of, or any of the assets owned or used by, any Acquired Company;

contravene, conflict with, or result in a violation or breach of any provision of, or give any Person the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel, terminate, or modify, any Applicable Contract; or

result in the imposition or creation of any Encumbrance upon or with respect to any of the assets owned or used by any Acquired Company.

3.3

CAPITALIZATION

3.4

FINANCIAL STATEMENTS

3.5

BOOKS AND RECORDS

3.6

TITLE TO PROPERTIES; ENCUMBRANCES; PERSONAL PROPERTY; REAL PROPERTY

The Acquired Companies own (with Good and Marketable Title in the case of real property, subject only to the matters permitted by the following sentence) all the properties and assets (whether real, personal, or mixed and whether tangible or intangible) reflected in the Balance Sheet and the Interim Balance Sheet (except for assets held under capitalized leases disclosed or not required to be disclosed in Part 3.6(d) of the Disclosure Letter and personal property sold since the date of the Balance Sheet and the Interim Balance Sheet, as the case may be, in the Ordinary Course of Business), and all of the properties and assets purchased or otherwise acquired by the Acquired Companies since the date of the Balance Sheet (except for personal property acquired and sold since the date of the Balance Sheet in the Ordinary Course of Business and consistent with past practice). Except as set forth in Part 3.6(a) of the Disclosure Letter, all material properties and assets reflected in the Balance Sheet and the Interim Balance Sheet are free and clear of all Encumbrances except for Permitted Encumbrances. All buildings, plants, and structures owned by the Acquired Companies lie wholly within the boundaries of the real property owned by the Acquired Companies and do not encroach upon the property of, or otherwise conflict with the property rights of, any other Person. To the Knowledge of the Sellers and the Company, there are no claims of adverse ownership to any of the properties occupied or used by any of the Acquired Companies.

Part 3.6(b) of the Disclosure Letter sets forth a true and complete list of all the material machinery, equipment, vehicles and other tangible personal property now owned or leased by each Acquired Company and indicates which of the Acquired Companies owns or leases such asset. As to each asset shown in Part 3.6(b) of the Disclosure Letter, each Acquired Company has Good and Marketable Title to, or holds by a valid and enforceable lease or license with respect to, such asset. Except as set forth

in Part 3.6(b) of the Disclosure Letter, no rights of the Acquired Companies under such leases or licenses have been assigned or otherwise transferred as security for any obligation of the Acquired Companies.

The title or leasehold interests to the assets set forth in Part 3.6(b) of the Disclosure Letter includes all material tangible assets used by the Acquired Companies to conduct the business of the Acquired Companies as currently conducted.

Part 3.6(d) of the Disclosure Letter is a true and complete list of all capital leases of the Acquired Companies, indicating which of the Acquired Companies is a party to such captial leases and the payoff amount under each such capital lease that, if paid to the lessor thereunder, would fully satisfy the Acquired Companies’ remaining obligations under such capital lease as a primary obligor.

Part 3.6(e) of the Disclosure Letter lists all parcels (or portions thereof) of real property owned or leased by the Acquired Companies (including all other interests in land owned, leased, licensed to, or otherwise held by, the Acquired Companies). The Acquired Companies own, lease, license or otherwise hold all rights necessary to conduct Mining Activities on such parcels of real property, and any other activities permitted on such parcels of real property will not interfere with such Mining Activities.

Sellers have heretofore made available to Buyer copies of the deeds and other instruments (as recorded) by which the Acquired Companies acquired such real property that is owned by any of the Acquired Companies and copies of all title insurance policies, opinions, abstracts, and surveys in the possession of Sellers or the Acquired Companies and relating to such owned real property. With respect to each such parcel of real property owned by any of the Acquired Companies, except as otherwise specified in Part 3.6(e) of the Disclosure Letter:

(i) the identified owner has Good and Marketable Title to such parcel of real property and all fixtures and improvements on such real property, including all preparation plants or other coal processing facilities, loadout and other transportation facilities (the “Owned Fixtures and Improvements”);

(ii) there are no pending or, to the Knowledge of the Company or Sellers, threatened condemnation Proceedings, eminent domain or requisition Proceedings; and

(iii) there are no other matters that materially adversely affect the title of any Acquired Company to such real property or the Owned Fixtures and Improvements.

Set forth opposite each parcel or portion of real property or other interest in land identified in Part 3.6(e) of the Disclosure Letter is a list of all leases, subleases, licenses and Contracts applicable to such parcel or portion of real property or other interest in land (including, without limitation, all leases, subcontracts, licenses or Contracts pursuant to which any of the Acquired Companies are, or may become, responsible for the payment of annual minimum, production or overriding royalties or other consideration). Sellers have heretofore made available to Buyer true and complete copies of all such leases, subleases, licenses and Contracts (as amended to the date of this Agreement and the date of Closing). With respect to each such lease, sublease, license and Contract and except as otherwise specified in Part 3.6(e) of the Disclosure Letter:

(i) such lease, sublease, license or Contract is in full force and effect in all material respects and enforceable in accordance with its terms;

(ii) to the extent provided in the respective leases or subleases, the Acquired Companies have a valid leasehold interest in all leased or subleased real property and all fixtures and improvements on such property, including all preparation plants or other coal processing facilities, loadout and other transportation facilities (the “Leased Fixtures and Improvements”), in each case, free and clear of any Encumbrances other than Permitted Encumbrances;

(iii) (A) none of the Acquired Companies is in default under any such lease, sublease, license or Contract and no event has occurred which, with the passage of time or expiration of any grace period would constitute a default of any Acquired Company’s obligations under such lease,

sublease, license or Contract, (B) to the Knowledge of the Company and the Sellers, no other party to any such lease, sublease, license or Contract is in default thereunder and (C) none of the Acquired Companies has received a written or other notice of default with respect to such lease, sublease, license or Contract;

(iv) there are no unwritten or oral modifications to such leases, subleases, licenses or Contracts or any course of dealing or business operations that are modifications to such leases, subleases, licenses or Contracts;

(v) no such lease, sublease, license or Contract has been mortgaged, deeded in trust or subjected to an Encumbrance by any Acquired Company; and

(vi) there are no other matters that materially adversely affect the rights of any Acquired Company to such real property or other interest in land or the Leased Fixtures and Improvements.

The Acquired Companies hold or control adequate ingress and egress to the real property identified in Part 3.6(e) of the Disclosure Letter and any facilities located on such real property and all material rights, easements and rights-of-way necessary for the continued operation in their present manner of any facilities located on such real property.

Except as set forth in Part 3.6(g) of the Disclosure Letter, none of the Acquired Companies nor any Seller has received any written or other notice of claims that any Acquired Company 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 and, to Sellers’ and the Company’s Knowledge, no facts exist upon which such a claim could be based. Sellers have made available to Buyer the most recent complete and correct version of each of the following items to the extent such items are (a) in the possession of the Acquired Companies, (b) relate to or affect the real property identified in Part 3.6(e) of the Disclosure Letter, including the coal reserves, coal ownership, mining conditions, mines, and mining plans of the Acquired Companies and (c) material to the conduct of the business of any Acquired Company: geological data, reserve data, existing mine maps, surveys, 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 all other books and records, information, maps, reports and data.

3.7

CONDITION AND SUFFICIENCY OF ASSETS

3.8

ACCOUNTS RECEIVABLE

3.9

INVENTORY

3.10

NO UNDISCLOSED LIABILITIES

3.11

TAXES

The Acquired Companies have filed or caused to be filed on a timely basis all material Tax Returns that are or were required to be filed by or with respect to any of them, either separately or as a member of a group of corporations, pursuant to applicable Legal Requirements. Sellers have delivered to Buyer copies of, and Part 3.11 of the Disclosure Letter contains a complete and accurate list of, all such Tax Returns filed since January 1, 2001. Except as listed in Part 3.11 of the Disclosure Letter, none of the Acquired Companies is the beneficiary of any extension of time within which to file any Tax Return. The Acquired Companies have paid, or made provision for the payment of, all Taxes that have or may have become due pursuant to those Tax Returns (whether or not shown on any Tax Return) or otherwise, or pursuant to any assessment received by Sellers or any Acquired Company, except such Taxes, if any, as are listed in Part 3.11 of the Disclosure Letter and are being contested in good faith and as to which adequate reserves (determined in accordance with GAAP) have been provided in the Balance Sheet and the Interim Balance Sheet.

To the knowledge of any Seller or director or officer, no claim has ever been made by an authority in a jurisdiction where any of the Acquired Companies does not file Tax Returns that it is or may be

subject to taxation by that jurisdiction. There are no Encumbrances for Taxes (other than Taxes not yet due and payable) upon any of the assets of the Acquired Companies.

Except as listed in Part 3.11 of the Disclosure Letter, no foreign, federal, state or local tax audits or administrative or judicial Tax proceedings are pending or being conducted with respect to any of the Acquired Companies. Except as listed in Part 3.11 of the Disclosure Letter, none of the Acquired Companies has received from any foreign, federal, state or local taxing authority (including jurisdictions where the Acquired Companies have not filed Tax Returns) any (i) notice indicating an intent to open an audit or other review, (ii) request for information related to Tax matters, or (iii) notice of deficiency or proposed adjustment for any amount of Tax proposed, asserted or assessed by any taxing authority against any of the Acquired Companies. Part 3.11 of the Disclosure Letter contains a complete and accurate list of those Tax Returns that have been audited, and indicates those Tax Returns that currently are the subject of audit, including a reasonably detailed description of the nature and outcome of each audit. All deficiencies proposed as a result of such audits have been paid, reserved against, settled, or, as described in Part 3.11 of the Disclosure Letter, are being contested in good faith by appropriate proceedings. Part 3.11 of the Disclosure Letter describes all adjustments to the United States federal income Tax Returns filed by any Acquired Company or any group of corporations including any Acquired Company for all taxable years since January 1, 2001, and the resulting deficiencies proposed by the IRS. Except as described in Part 3.11 of the Disclosure Letter, no Seller or Acquired Company has given or been requested to give waivers or extensions (or is or would be subject to a waiver or extension given by any other Person) of any statute of limitations relating to the payment of Taxes of any Acquired Company or for which any Acquired Company may be liable.

The charges, accruals, and reserves with respect to Taxes on the respective books of each Acquired Company are adequate (determined in accordance with GAAP) and are at least equal to that Acquired Company’s liability for Taxes. To the knowledge of any Seller or director or officer, there exists no proposed tax assessment against any Acquired Company. All Taxes that any Acquired Company is or was required by Legal Requirements to withhold or collect have been duly withheld or collected and, to the extent required, have been paid to the proper Governmental Body or other Person.

All Tax Returns filed by any Acquired Company are true, correct, and complete in all material respects. There is no tax sharing agreement that will require any payment by any Acquired Company after the date of this Agreement.

At all times since July 1, 1995, the Company (and any predecessor of the Company) has been a validly electing S corporation within the meaning of Sections 1361 and 1362 of the IRC at all times during its existence and the Company will be an S corporation up to and including the day before the Closing Date.

None of the Acquired Companies is a “qualified subchapter S subsidiary” within the meaning of Section 1361(b)(3)(B) of the IRC.

None of the Acquired Companies has been a United States real property holding corporation within the meaning of Section 897(c)(2) of the IRC during the applicable period specified in Section 897(c)(1)(A)(ii).

None of the Acquired Companies (or any entity purchased by, merged with or into, acquired pursuant to a share exchange or other reorganization with either of the Acquired Companies) has been a member of an Affiliated Group filing a consolidated federal income Tax Return (other than a group the common parent of which was the Company).

None of the Acquired Companies (or any entity purchased by, merged with or into, acquired pursuant to a share exchange or other reorganization with either of the Acquired Companies) will be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any: (A) change in the method of accounting for a taxable period ending on or prior to the Closing Date; (B) “closing agreement”

as described in Section 7121 of the IRC (or any corresponding or similar provision of state, local or foreign income Tax law) executed on or prior to the Closing Date; (C) installment sale or open transaction disposition made on or prior to the Closing Date; or (D) prepaid amount received on or prior to the Closing Date.

None of the Acquired Companies is a party to any agreement, contract, arrangement or plan that has resulted or would result, separately or in the aggregate, in the payment of any “excess parachute payment” within the meaning of Section 280G of the IRC (or any corresponding provision of state, local or foreign Tax law).

Each Acquired Company has collected all material sales and use Taxes required to be collected, and has remitted or will remit on a timely basis, such amounts to the appropriate taxing authorities, or have been furnished properly completed exemption certificates. Each Acquired Company (i) has in its (or its affiliates’) possession all material records and supporting documents required by all applicable sales and use Tax statutes and regulations regarding the collection and payment of sales and use Taxes required to be collected and paid over by such Acquired Company and regarding all exempt transactions by such Acquired Company for all periods open under the applicable statute of limitations, and (ii) has maintained all such records and supporting documents in material compliance with all sales and use Tax statutes and regulations applicable thereto.

3.12

BANK ACCOUNTS

3.13

EMPLOYEE BENEFITS

As used in this Section 3.13, the following terms have the meanings set forth below.

Part 3.13(i) of the Disclosure Letter contains a complete and accurate list of all Company Plans, Company Other Benefit Obligations, and Company VEBAs, and identifies as such all Company Plans that are (A) defined benefit Pension Plans, (B) Qualified Plans, (C) Title IV Plans, or (D) Multi-Employer Plans.

Part 3.13(ii) of the Disclosure Letter contains a complete and accurate list of (A) all ERISA Affiliates of each Acquired Company, and (B) all Plans of which any such ERISA Affiliate is or was a Plan Sponsor, in which any such ERISA Affiliate participates or has participated, or to which any such ERISA Affiliate contributes or has contributed.

Part 3.13(iii) of the Disclosure Letter sets forth, for each Multi-Employer Plan, as of its last valuation date, the amount of potential withdrawal liability of the Acquired Companies and the Acquired Companies’ other ERISA Affiliates, calculated according to information made available pursuant to ERISA Section 4221(e).

Part 3.13(iv) of the Disclosure Letter sets forth a calculation of the liability of the Acquired Companies for post-retirement benefits other than pensions, made in accordance with Financial Accounting Statement 106 of the Financial Accounting Standards Board, regardless of whether any Acquired Company is required by this Statement to disclose such information.

Part 3.13(v) of the Disclosure Letter sets forth the financial cost of all obligations owed under any Company Plan or Company Other Benefit Obligation that is not subject to the disclosure and reporting requirements of ERISA.

Part 3.13(vi) of the Disclosure Letter sets forth any obligation and potential liability of the Acquired Companies and the Acquired Companies’ other ERISA Affiliates under the Coal Act.

Sellers have delivered to Buyer:

all documents that set forth the current terms of each Company Plan, Company Other Benefit Obligation, or Company VEBA and of any related trust, including (A) the most recent plan descriptions and summary plan descriptions of Company Plans for which Sellers or the Acquired Companies are required to prepare, file, and distribute plan descriptions and summary plan descriptions, and (B) the most recent summaries and descriptions furnished to participants and beneficiaries regarding Company Plans, Company Other Benefit Obligations, and Company VEBAs for which a plan description or summary plan description is not required;

all current personnel, payroll, and employment manuals and policies;

all collective bargaining agreements pursuant to which contributions have been made or obligations incurred (including both pension and welfare benefits) by the Acquired Companies and the ERISA Affiliates of the Acquired Companies, and all collective bargaining agreements pursuant to which contributions are being made or obligations are owed by such entities;

a written description of any Company Plan or Company Other Benefit Obligation that is not otherwise in writing;

all registration statements filed with respect to any Company Plan;

all insurance policies currently in effect purchased by or to provide benefits under any Company Plan;

all contracts with third party administrators, actuaries, investment managers, consultants, and other independent contractors that relate to any Company Plan, Company Other Benefit Obligation, or Company VEBA;

all reports submitted within the four years preceding the date of this Agreement by third party administrators, actuaries, investment managers, consultants, or other independent contractors with respect to any Company Plan, Company Other Benefit Obligation, or Company VEBA;

all notifications provided during the three year period preceding the date of this Agreement to employees of their rights under ERISA Section 601 et seq. and IRC Section 4980B;

the Form 5500 filed in each of the most recent three plan years with respect to each Company Plan, including all schedules thereto and the opinions of independent accountants;

all notices relating to any Company Plan that were given by any Acquired Company or any ERISA Affiliate of an Acquired Company or any Company Plan to the IRS, the PBGC, or any participant or beneficiary, pursuant to statute, within the four years preceding the date of this Agreement, including notices that are expressly mentioned elsewhere in this Section 3.13;

all notices that were given by the IRS, the PBGC, or the Department of Labor to any Acquired Company, any ERISA Affiliate of an Acquired Company, or any Company Plan within the four years preceding the date of this Agreement;

with respect to Qualified Plans and VEBAs, the most recent determination letter for each Plan of the Acquired Companies that is a Qualified Plan or IRS opinion letter in the case of any Qualified Plan that is a prototype plan; and

with respect to Title IV Plans, the Form PBGC-1 filed for each of the three most recent plan years.

Except as set forth in Part 3.13(vi) of the Disclosure Letter:

The Acquired Companies have performed all of their respective obligations under all Company Plans, Company Other Benefit Obligations, and Company VEBAs. The Acquired Companies have made appropriate entries in their financial records and statements for all obligations and liabilities under such Plans, VEBAs, and Obligations that have accrued but are not due.

No statement, either written or oral, has been made by any Acquired Company to any Person with regard to any Plan or Other Benefit Obligation that was not in accordance with the Plan or Other Benefit Obligation and that could have an adverse economic consequence to any Acquired Company or to Buyer.

The Acquired Companies, with respect to all Company Plans, Company Other Benefits Obligations, and Company VEBAs, are, and each Company Plan, Company Other Benefit Obligation, and Company VEBA is, in full compliance with ERISA, the IRC, and other applicable Laws including the provisions of such Laws expressly mentioned in this Section 3.13, and with any applicable collective bargaining agreement.

No transaction prohibited by ERISA Section 406 and no “prohibited transaction” under IRC Section 4975(c) have occurred with respect to any Company Plan.

No Seller or Acquired Company has any liability to the IRS with respect to any Plan, including any liability imposed by Chapter 43 of the IRC.

No Seller or Acquired Company has any liability to the PBGC with respect to any Plan or has any liability under ERISA Section 502 or Section 4071.

All filings required by ERISA and the IRC as to each Plan have been timely filed, and all notices and disclosures to participants required by either ERISA or the IRC have been timely provided.

All contributions and payments made or accrued with respect to all Company Plans, Company Other Benefit Obligations, and Company VEBAs are deductible under IRC Section 162 or Section 404. No amount, or any asset of any Company Plan or Company VEBA, is subject to tax as unrelated business taxable income.

Each Company Plan can be terminated within thirty days, without payment of any additional contribution or amount and without the vesting or acceleration of any benefits promised by such Plan.

Since December 31, 2004, there has been no establishment or amendment of any Company Plan, Company VEBA, or Company Other Benefit Obligation.

No event has occurred or circumstance exists that could result in a material increase in premium costs of Company Plans and Company Other Benefit Obligations that are insured, or a material increase in benefit costs of such Plans and Obligations that are self-insured.

Other than claims for benefits submitted by participants or beneficiaries, no claim against, or legal proceeding involving, any Company Plan, Company Other Benefit Obligation, or Company VEBA is pending or, to Sellers’ Knowledge, is threatened.

No Company Plan is a stock bonus, pension, or profit-sharing plan within the meaning of IRC Section 401(a).

Each Qualified Plan of each Acquired Company is qualified in form and operation under IRC Section 401(a); each trust for each such Plan is exempt from federal income tax under IRC Section 501(a). Each Company VEBA is exempt from federal income tax. No event has occurred or circumstance exists that will or could give rise to disqualification or loss of tax-exempt status of any such Plan or trust.

Each Acquired Company and each ERISA Affiliate of an Acquired Company has met the minimum funding standard, and has made all contributions required, under ERISA Section 302 and IRC Section 402.

No Company Plan is subject to Title IV of ERISA.

The Acquired Companies have paid all amounts due to the PBGC pursuant to ERISA Section 4007.

No Acquired Company or any ERISA Affiliate of an Acquired Company has ceased operations at any facility or has withdrawn from any Title IV Plan in a manner that would subject to any entity or Sellers to liability under ERISA Section 4062(e), Section 4063, or Section 4064.

No Acquired Company or any ERISA Affiliate of an Acquired Company has filed a notice of intent to terminate any Title IV Plan or has adopted any amendment to treat a Title IV Plan as terminated. The PBGC has not instituted proceedings to treat any Company Plan as terminated. No event has occurred or circumstance exists that may constitute grounds under ERISA Section 4042 for the termination of, or the appointment of a trustee to administer, any Company Plan.

No amendment has been made, or is reasonably expected to be made, to any Plan that has required or could require the provision of security under ERISA Section 307 or IRC Section 401(a)(29).

No accumulated funding deficiency, whether or not waived, exists with respect to any Company Plan; no event has occurred or circumstance exists that may result in an accumulated funding deficiency as of the last day of the current plan year of any such Plan.

The actuarial report, if any, that is required to be prepared pursuant to applicable provisions of ERISA for any Pension Plan of each Acquired Company and each ERISA Affiliate of each Acquired Company fairly presents the financial condition and the results of operations of each such Plan in accordance with GAAP.

Since the last valuation date for each Pension Plan of each Acquired Company and each ERISA Affiliate of an Acquired Company, no event has occurred or circumstance exists that would increase the amount of benefits under any such Plan or that would cause the excess of Plan assets over benefit liabilities (as defined in ERISA Section 4001) to decrease, or the amount by which benefit liabilities exceed assets to increase.

No reportable event (as defined in ERISA Section 4043 and in regulations issued thereunder) has occurred.

No Seller or Acquired Company has Knowledge of any facts or circumstances that may give rise to any liability of any Seller, any Acquired Company, or Buyer to the PBGC under Title IV of ERISA.

No Acquired Company or any ERISA Affiliate of an Acquired Company has ever established, maintained, or contributed to or otherwise participated in, or had an obligation to maintain, contribute to, or otherwise participate in, any Multi-Employer Plan.

No Acquired Company or any ERISA Affiliate of an Acquired Company has withdrawn from any Multi-Employer Plan with respect to which there is any outstanding liability as of the date of this Agreement. No event has occurred or circumstance exists that would constitute a withdrawal from any Multi-Employer Plan, nor, to the Knowledge of any Acquired Company or any of the Sellers, has any event occurred that could otherwise result in any liability of either any Acquired Company or Buyer to a Multi-Employer Plan.

No Acquired Company or any ERISA Affiliate of an Acquired Company has received notice from any Multi-Employer Plan that it is in reorganization or is insolvent, that increased contributions may be required to avoid a reduction in plan benefits or the imposition of any excise tax, or that such Plan intends to terminate or has terminated.

No Multi-Employer Plan to which any Acquired Company or any ERISA Affiliate of an Acquired Company contributes or has contributed is, to the Knowledge of any Acquired Company or any Seller, a party to any pending merger or asset or liability transfer or is subject to any proceeding brought by the PBGC.

Neither the Acquired Companies nor the Acquired Companies’ other ERISA Affiliates have any obligation or liability under the Coal Act.

Except to the extent required under ERISA Section 601 et seq. and IRC Section 4980B, no Acquired Company provides health or welfare benefits for any retired or former employee or is obligated to provide health or welfare benefits to any active employee following such employee’s retirement or other termination of service.

Each Acquired Company has the right to modify and terminate benefits (other than pensions) to retirees who receive benefits by reason of having been employed by such Acquired Company and may exercise such rights both with respect to its employees who have not yet retired and with respect to those of its employees who have already retired.

Sellers and all Acquired Companies have complied with the provisions of ERISA Section 601 et seq. and IRC Section 4980B.