CONFIDENTIAL TREATMENT

INTERNATIONAL COAL GROUP, INC. HAS REQUESTED THAT THE

MARKED PORTIONS OF THIS DOCUMENT BE ACCORDED

CONFIDENTIAL TREATMENT PURSUANT TO RULE 24b-2 OF THE

SECURITIES EXCHANGE ACT OF 1934

Exhibit 10.34

PENN VIRGINIA OPERATING CO., LLC

TO

GREYMONT MINING CORP.

PREPARED: JULY 7, 2005

LESSOR: PENN VIRGINIA OPERATING CO., LLC

LESSEE: GREYMONT MINING CORP.

DATE OF LEASE: JULY 7, 2005

TABLE OF CONTENTS TO LEASE:

 

          Page ARTICLE (1):    LEASED PREMISES    2 ARTICLE (2):    LESSEE’S
RIGHTS    2 ARTICLE (3):    NO WARRANTY    5 ARTICLE (4):    LESSOR’S RIGHTS   
5 ARTICLE (5):    LANDLORD-TENANT RELATIONSHIP    6 ARTICLE (6):    TERM OF
LEASE    7 ARTICLE (7):    ESSENTIAL RELIANCE    7 ARTICLE (8):    MINIMUM
RENTAL    8 ARTICLE (9):    TONNAGE ROYALTY    9 ARTICLE (10):    MINING
OPERATIONS    13 ARTICLE (11):    SURVEYS, MAPS AND PERMITS    17 ARTICLE (12):
   TAXES    20 ARTICLE (13):    ENGINEERING AUDIT    21 ARTICLE (14):    DAMAGES
   21 ARTICLE (15):    PUBLIC LIABILITY AND INSURANCE    22 ARTICLE (16):   
NOTICES    23 ARTICLE (17):    REMEDIES, DEFAULT, FORFEITURE    24 ARTICLE (18):
   NO ASSIGNMENT, TRANSFERS AND ENCUMBRANCES    26 ARTICLE (19):    MODIFICATION
AND ALTERATION    27 ARTICLE (20):    WAIVER    28 ARTICLE (21):    POSSESSION
   28 ARTICLE (22):    COMPLIANCE WITH LAWS    28 ARTICLE (23):    ENVIRONMENTAL
OBLIGATIONS    28 ARTICLE (24):    REMOVAL OF EQUIPMENT    29 ARTICLE (25):   
DISPUTE SETTLEMENT AND ARBITRATION    29 ARTICLE (26):    INDEMNIFICATION    31
ARTICLE (27):    PERFORMANCE BOND, PERFORMANCE ESCROW ACCOUNT    32 ARTICLE
(28):    MISCELLANEOUS    35

 

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LEASE AND SUBLEASE AGREEMENT

THIS LEASE AND SUBLEASE AGREEMENT (this “Lease”) made and entered into this 7th
day of July, 2005 by and by and between PENN VIRGINIA OPERATING CO., LLC, a
Delaware limited liability company, hereinafter called Lessor, and GREYMONT
MINING CORP., a Kentucky corporation, hereinafter called Lessee.

ARTICLE (1): LEASED AND SUBLEASED PREMISES

That for and in consideration of the sum of [            *            ], cash in
hand paid by Lessee unto Lessor, the receipt of which is hereby acknowledged,
and in further consideration of the minimum rentals and tonnage royalties to be
paid by Lessee to Lessor as hereinafter stipulated, and of the covenants,
provisions, stipulations and agreements hereinafter contained and on part of
Lessee to be kept, performed and observed, Lessor does hereby give, grant, and
sublease unto Lessee, under and subject to all of the exceptions, reservations,
terms and conditions hereinafter contained, for the period of time hereinafter
mentioned, the exclusive right and privilege to (i) mine and take away by the
deep mining method only coal in the [            *            ] and the
[            *            ] and on certain parcels of real property lying in
Knott & Floyd Counties, Kentucky and (ii) remove, process, if necessary, and
sell the refuse material from the Huff Branch refuse pile, all of which is
identified more particularly on the map (the “Lease Map”) attached hereto as
Exhibit A (the “Leased Premises”). To the extent any of the Leased Premises are
held by Lessor under the leases identified on Exhibit B attached hereto (the
“Prime Leases”), the Prime Leases are hereby subleased to Lessee on the terms
contained herein and subject to the terms contained therein.

ARTICLE (2): LESSEE’S RIGHTS

 

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(a) Lessee shall have all the mining rights and privileges, including surface
rights, reasonably necessary to mine and take away the coal from the Leased
Premises by the deep mining method only, as well as the right to remove and sell
the refuse material in the Huff Branch refuse pile area identified on the Lease
Map owned by Lessor on the date of this Lease, and no additional rights or
privileges. Lessee covenants and agrees to ascertain the accurate boundary line
of the Leased Premises before conducting any mining operations under this Lease.

(b) It is distinctly understood and agreed that Lessor grants only such mining
rights and privileges as it possesses or has acquired in connection with the
ownership of the coal covered by this Lease and that in mining, removing and
carrying away such coal Lessee shall be limited to the exercise of the aforesaid
rights and privileges.

(c) Lessor does hereby grant unto Lessee all of the rights and privileges
granted to Lessor under and by virtue of the Prime Leases, and Lessee does
hereby accept this Lease upon all of the terms, conditions, covenants,
stipulations, exceptions, reservations and agreements contained in the Prime
Leases. Notwithstanding the foregoing, Lessee shall not be entitled to exercise
any right or privilege under any of the Prime Leases to the extent that such
right or privilege is not granted under this Lease. Lessee covenants and agrees
with Lessor that it will perform and will be bound by each and every covenant,
term, condition and provision binding upon the Lessor under the Prime Leases to
the same extent as though Lessee had been the original lessee; provided,
however, that Lessor shall pay each installment of royalty and all other sums
due under each of the Prime Leases. Lessee acknowledges that is has received,
read and is familiar with each of the Prime Leases. Lessee acknowledges and
agrees that it will be a co-sublessor with respect to the Leased Premises
governed by the Prime Leases, with the same rights and privileges as the other
co-sublessor.

 

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(d) Lessee shall have the right, at any time and from time to time, but shall
not be obligated, to make any payment or take any action reasonably necessary to
prevent a default under the terms of any of the Prime Leases so long as Lessor
in not engaged in a good faith effort to dispute or cure such default for that
period of time deemed necessary by Lessor. Except as caused directly or
indirectly by any default of Lessee hereunder, Lessor shall not amend, modify or
surrender any of the Prime Leases so as to adversely and materially affect the
subleased portion of the Leased Premises, without the prior written consent of
Lessee, and any such amendment, modification or surrender made without such
consent shall be null and void and shall have no effect or the rights of Lessee
hereunder.

(e) Lessee and Lessor recognize that Lessee is only one of multiple coal lessees
operating on Lessor’s properties, including the Leased Premises where surface
mine operators may mine the same coal seams which Lessee is mining hereunder,
and that there are also timber and oil and gas operations conducted on the
Leased Premises. Recognizing that there will be increased demand for surface
areas and roads on Lessor’s property, Lessor and Lessee agree to cooperate with
each other to coordinate and plan the development and use of the coal, surface
and roads so the interference to the operations of each is minimized. Lessee
acknowledges and agrees that its leasehold interest and estate created hereby is
not dominant to the interest or estate of any other lessee of any of Lessor’s
properties, whether above, below or adjacent to the Leased Premises, and Lessee
and all such other lessees shall be subject to and benefit from the cooperation
provisions herein. Lessee agrees to coordinate and plan its activities with any
surface mine lessees operating on the Leased Premises so that interference to
each is minimized.

(f) Lessee is hereby advised that there may be utility power lines, gas lines,
water lines or other obstructions in and on the Leased Premises. Lessor will use
commercially

 

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reasonable efforts to relocate or cause the relocation of such lines where
necessary, upon being given sufficient notice; provided, however, that Lessor
assumes no responsibility for any loss or delay resulting from Lessor’s
relocation of such lines.

ARTICLE (3): NO WARRANTY

(a) Nothing herein contained shall be deemed or construed to be a covenant for
quiet enjoyment or a warranty of title on the part of Lessor, either express or
implied, but Lessee must respect and observe all limitations or defects in the
title of Lessor in and to the Leased Premises, and all mining, surface and other
rights appurtenant thereto. It is likewise understood by Lessee that Lessor
gives no warranty as to the quality or quantity of the coat contained in the
Leased Premises and assumes no liability due to any deficiency which may exist
or develop therein.

(b) In the event any part of the Leased Premises is lost to the holder of any
outstanding superior title, if Lessee has mined and removed a part or all of the
coal therefrom and paid Lessor Tonnage Royalties (as defined herein) therefore,
Lessor agrees to repay to Lessee the amount of Tonnage Royalties so paid,
without interest, but Lessor shall not be otherwise liable for any damage on
account of the mining and removing of such coal by Lessee.

ARTICLE (4): LESSOR’S RIGHTS

All rights, title and interest not herein specifically granted to Lessee are
excepted from this grant and reserved to Lessor, its successors, assigns and
licensees, together with the right to utilize the same. This Lease embraces only
coal that can be mined by the deep mining method from the Leased Premises as
welt as the refuse material from the Huff Branch refuse pile, and, without
limiting the generality of this reservation, there are hereby expressly excepted
from this Lease and reserved to Lessor, its successors, assigns and licensees:

 

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(a) All oil, gas, timber (other than that necessary to permit orderly mining on
the Leased Premises) and other minerals other than coal, all accumulations
(commercially valuable slate, refuse, gob and similar mining by-products), all
coal not leased herein, all coal bed methane not released in the normal course
of mining hereunder, all water, and all other estates and rights in and with
respect to the Leased Premises, together, with all rights necessary to the
development and use thereof;

(b) The right of access at any time to enter upon the Leased Premises, over
existing roadways or otherwise, and to drill, bore, excavate, cut, remove, mine,
develop, transport and market (or to lease or license to others said rights) all
such oil, gas, timber, water, coal, coal bed methane, accumulations and other
minerals hereinabove reserved to Lessor;

(c) The right to use all roads (including roads made by Lessee) and to construct
roads, conveyors, structures and appurtenances (or to tease or license to others
said rights) which may be necessary in Lessor’s opinion for the development,
removal, transportation or processing of such oil, gas, timber, water, coal,
coal bed methane, accumulations and other minerals, rights and estates;

(d) The right to grant licenses, rights of way and easements as may be necessary
or desirable in Lessor’s opinion:

(e) The right to currently be party to and to enter into mining leases with
third parties to surface mine the coal seams covered by this Lease; and

(f) All rights-of-way, easements and agreements with third parties existing on
the date hereof.

ARTICLE (5): LANDLORD-TENANT RELATIONSHIP

Anything in this Lease to the contrary notwithstanding, it is expressly
understood, stipulated and agreed that the relationship between Lessor and
Lessee shall be that of

 

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Landlord and Tenant and nothing herein shall be construed or interpreted as
establishing between Lessor and Lessee a relationship of partners, joint
venturers, principal and agent, vendor and purchaser, or any other relationship
except that of Landlord and Tenant. Lessor shall not direct or control the
operations of Lessee and hereby waives and disclaims any right to exercise any
supervision, operation or control with respect to the operations of Lessee.

ARTICLE (6): TERM OF LEASE

This Lease will take effect as of July 7, 2005, and shall continue for an
initial period of ten (10) years (“Initial Term”). If Lessee is in compliance
with all terms and conditions of this Lease and Lessee, together with any of its
owners or other affiliated entities, is in compliance with all terms and
conditions of any additional tease or other agreement in effect with Lessor at
the time of the expiration of the Initial Term, then Lessee may renew this
Lease, subject to the same terms and conditions herein stated, for an additional
five (5) year term or for a period ending when all merchantable and mineable
coal which is the subject of the Lease shall have been mined and removed from
the Leased Premises pursuant to the provisions of the Lease, whichever occurs
first, by giving Lessor written notice of Lessee’s intention to renew this Lease
at least three (3) months prior to expiration of the Initial Term.

ARTICLE (7): ESSENTIAL RELIANCE

It is understood that it is the essence of this Lease that Lessor enters into
this Lease expressly relying upon the demonstrated skill, experience, character,
substance, credit and ability of Lessee and its present management. Lessor and
Lessee hereto expressly recognize and acknowledge that the obligations of Lessee
hereunder are “personal services” of a lessee whom Lessor considers to be
uniquely competent and qualified to perform those services. Recognizing such
unique competence, qualification, skill, credit, character and substance of
Lessee, Lessor enters into this Lease because of the special trust and
confidence that Lessor

 

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has in the ability of Lessee to perform its obligations hereunder. For these
reasons, Lessor demands, and Lessee specifically agrees that Lessee alone, and
no other person or entity, will perform all of Lessee’s obligations hereunder.
Lessor and Lessee expressly recognize and acknowledge that performance by some
person or entity other than Lessee would, by the very nature of the services to
be rendered by Lessee hereunder, constitute something essentially different from
the performance contemplated by Lessor and Lessor’s reliance upon Lessee under
this Lease. Therefore, Lessor and Lessee hereto expressly agree that the
obligations of Lessee contemplated hereunder shall be performed only by Lessee.
Nothing in this Article (7) is intended to prevent Lessee from using reputable
contractors to mine the coal leased herein.

ARTICLE (8): MINIMUM RENTAL

(a) Lessee shall pay to Lessor, by wire transfer of immediately available
federal funds to such account as Lessor may from time to time designate in
writing to Lessee, or in such other manner as Lessor may from time to time
designate in writing, as a minimum monthly rental (the “Minimum Rental”) for the
Leased Premises, whether Lessee mines any coal therefrom or not, the following
sums:

Year 2005: [            *            ] per month first due and payable on
July 25, 2005 for the previous month of June and continuing to be payable on the
25th day of each month with the last payment for 2005 due on January 25, 2006
for the previous month of December. Notwithstanding the foregoing, Lessor agrees
to waive the Minimum Rental until the earlier of (i) 30 days after the Lessee
signs a contract for term business and begins delivering coal on the contract or
(ii) 80 days after the preparation plant being constructed on the Leased
Premises becomes fully operational.

Year 2006 and Beyond: [            *            ] per month due and payable on
the 25th day of each month for the previous month throughout the Initial Term
and any extensions or renewals thereof.

(b) Each month’s Tonnage Royalty (as defined below) shall be credited against
the Minimum Rental due so that no Minimum Rental payment shall be due in any
month where Tonnage Royalties due equal or exceed the Minimum Rental. In any
month where the

 

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Tonnage Royalty due does not exceed the Minimum Rental, the difference between
the Minimum Rental paid and the Tonnage Royalty due for that month shall be
credited to Lessee’s account for subsequent months. Lessee shall then have the
right to produce and ship, without paying any Tonnage Royalty, such quantities
of coal as would produce, at the royalty rates prevailing at that time, a
Tonnage Royalty equal to that credit. This right of recoupment may be exercised
within twenty-four (24) months from the time the credit accrues. In no event
will Lessee pay less during any month than the Minimum Rental. This right of
recoupment shall expire upon the expiration or termination of this Lease.

ARTICLE (9): TONNAGE ROYALTY

(a) Lessee shall render to Lessor at its office in Kingsport, Tennessee, or such
other place as Lessor may from time to time designate in writing to Lessee on or
before the 25th day of each month, a true and correct statement of the tonnage
of coal shipped from the Leased Premises during the preceding month in a form
satisfactory to Lessor. Such statement shall show the number of tons of coal
mined, in inventory and shipped from the Leased Premises and the number of tons
of coal taken away, hauled or sold by Lessee and its affiliates, agents and
contractors to persons or entities, including its own employees, as well as the
number of tons used by Lessee on the Leased Premises, as hereinafter provided.

(b) Lessee agrees that it will furnish to Lessor, on or before the 25th day of
each month, weigh sheets, accurately and truthfully showing the quantity of coal
shipped from the Leased Premises during the preceding calendar month.

(c) For the purpose of ascertaining accurate tonnages removed, Lessee agrees
that the quantity or weight of coal removed from the Leased Premises shall be
determined by actual weight, as determined in accordance with paragraph (f).
Upon request by Lessor, Lessee shall furnish copies of actual weigh ticket
summary reports for specific periods of time.

 

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Weights shown upon such tickets shall be prima facie presumed to be correct.
Each payment of royalty shall be accompanied by a statement showing the coal
mined during the period for which such payment is tendered, the persons or
entities to whom sold, the gross sales price per ton as that term is defined in
paragraph (h) herein and the royalty due thereon certified to by Lessee. Upon
request by Lessor, Lessee shall provide copies of the buyers’ vouchers of
payment for such coal indicating the total price paid for such coal, whether
stated as a price per ton or in some other form.

(d) (i) Lessee agrees that, if requested in writing at any time by Lessor, it
will furnish to Lessor on or before the 25th day of each month a true and
correct statement of the tonnage of coal mined by Lessee, its affiliates, agents
or contractors during the preceding calendar month on the Leased Premises and in
and on adjoining, adjacent and neighboring premises.

(ii) Lessee agrees that Lessor shall have the right to determine for itself,
from time to time, the tonnage of coal mined on the Leased Premises and in and
on adjoining, adjacent and neighboring premises owned, leased or operated by
Lessee, and to require Lessee, its affiliates, agents or contractors to so
designate the tonnage mined, held in inventory and shipped from each of such
premises.

(e) Lessee agrees that the records and accounting of Lessee relating to the
tonnages of coal mined, proceeds received and taxes paid on account of coal
mined, in inventory and shipped from the Leased Premises and from any other
premises owned, leased or operated by Lessee, in instances where this coal is to
be commingled with coal mined from the Leased Premises, shall be kept open for
the inspection of Lessor at all reasonable times

 

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and shall be kept in accordance with generally accepted accounting principles
consistently applied.

(f) Lessee agrees that the quantity of coal shall be determined by the weigh
scales of the railroad which carries the coal to market and if any coal is taken
from the Leased Premises by other means, or used thereon, the quantity so taken
or used shall be determined by the mine weigh scales and according to the sales
books and accounts of Lessee. If the coal is gasified, liquefied or otherwise
utilized in place so that it cannot be conveniently and economically weighed,
the weight of the coal so taken shall be estimated by the most modern and
equitable means then available and such estimated weights shall be used in place
of scale weights. Coal mined and shipped from the Leased Premises, and loaded
and mixed in railroad cars with coal from the properties or sources other than
the Leased Premises, shall be paid for in such proportion of the railroad scale
weights as the scale weights of coal from the Leased Premises bear to the total
mine scale weights of coal so loaded and mixed. Lessee agrees to conform to any
and all other reasonable requirements of Lessor to insure the accurate
ascertainment of the actual weight of coal taken from the Leased Premises.

(g) Lessee shall on or before the 25th day of each calendar month, pay to Lessor
by wire transfer of immediately available federal funds to such account as
Lessor may from time to time designate in writing to Lessee, or in such other
manner as Lessor may from time to time designate in writing, a royalty on each
and every ton of coal mined, shipped and sold from the Leased Premises (“Tonnage
Royalty”) in the preceding month, calculated as follows:

Coal Mined by the Deep Mining Method

[        *        ] of the Gross Sales Price (as defined herein) per ton of
2,000 pounds or [        *        ] per ton of 2,000 pounds, whichever is
greater (“Lease Royalty Rate”)

 

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Refuse Material

[        *        ] of the Gross Sale Price per ton of 2,000 pounds or
[        *        ] per ton of 2,000 pounds, whichever is greater on all
material removed from the refuse pile and sold

(h) Lessee agrees that for the purpose of calculating the Tonnage Royalty above
provided, the term “Gross Sales Price” as used herein shall mean the sales price
(gross proceeds) received by Lessee or its parent company or any of their
affiliates, associates or subsidiaries from an independent third party buyer
F.O.B. the loading point in an arm’s length transaction after final preparation
and loading, without the deduction of any costs whatsoever (other than, in the
case of the sale of any refuse material from the Huff Branch refuse pile,
reasonable trucking costs actually incurred and paid by Lessee), such sales
price upon which said Tonnage Royalty shall be based to include all amounts paid
by such third party buyer for such coal, whether stated as a part of the price
per ton or not, and whether paid in cash or otherwise.

If any coal mined under this Lease shall be consumed on or off the Leased
Premises by Lessee, or sold as coal for domestic use or sold and delivered to
any other location, the Gross Sales Price of such coal for the purpose of
computing the Tonnage Royalties set forth above shall be the sales price which
would have been received by Lessee or its parent company or any of their
affiliates, associates or subsidiaries for the coal so consumed from any
independent third party buyer F.O.B. the loading point in an arm’s length
transaction after final preparation and loading.

(i) Lessee shall pay full Tonnage Royalty at the rate herein stipulated upon all
mineable and merchantable coal, whether in place or mined, which is burned,
lost, destroyed, abandoned or injured by fire or explosion (“Lost Coal”), when
such loss is caused by negligence of Lessee or any of its agents, contractors or
employees or the fail Lessee to properly mine

 

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or provide for the mining of such coal by standard met mining. Lost Coal shall
be paid for according to the following formula:

(Lease Royalty Rate) x (Average Gross Sales Price) x (Recoverable tons)

The Lease Royalty Rate is provided in paragraph (g). The Average Gross Sales
Price as used in this paragraph is the average of the Gross Sales Prices for all
coal sold during the month preceding the month of the occurrence of Lost Coal
during which coal was actually sold pursuant to this Lease. Recoverable tons is
defined as [            *            ] of tons in place for deep mined coal. The
number of tons of Lost Coal in place is calculated by multiplying
[            *            ] times the square foot area of Lost Coal times the
thickness in feet for the Lost Coal. Payment for Lost Coal shall be made by
Lessee to Lessor within one (1) month following such loss.

(j) All Minimum Rentals or Tonnage Royalties becoming due and payable by Lessee
to Lessor under the terms hereof shall be paid promptly by Lessee unto Lessor by
wire transfer in the same manner as specified in paragraph (a) of Article
(8) without previous demand for same, and all payments shall be treated as rents
reserved for the use of the Leased Premises.

(k) Lessee shall pay interest to Lessor at the rate of
[            *            ] compounded annually on all amounts not paid when
due.

ARTICLE (10): MINING OPERATIONS

(a) Lessee shall no later than January 1, 2006, enter upon the Leased Premises
and begin, and diligently continue, to mine and remove coal from the Leased
Premises in an energetic, approved, skillful and workmanlike manner, utilizing a
mine plan reviewed by Lessor, so as to recover the greatest possible amount of
mineable and merchantable coal from the Leased Premises employing modern
machinery and equipment and good mining and land

 

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development practices and in accordance with the plans submitted by Lessee to
Lessor pursuant to Article (11) hereunder, having due regard for the value of
the Leased Premises as a coal producing property so as to avoid damage to and
waste of any seams of coal, whether granted as a part of the Leased Premises or
not so granted. Lessee shall continue mining the same with due diligence and
without interruptions of any nature during the term of this Lease, subject only
to force majeure as provided below.

If Lessee is unable, wholly or in part, by reason of force majeure, as
hereinafter defined, to carry out any of its obligations under this Lease, other
than financial obligations when due, then during the continuance of the force
majeure, but not exceeding three (3) aggregate months in any calendar year,
Lessee shall give Lessor prompt written notice reasonably detailing such force
majeure. Thereupon, the obligations of Lessee, so far as they are affected by
such force majeure, shall be suspended during the continuance of such force
majeure.

For the purpose of this Lease, the term “force majeure” shall mean any act or
occurrence, beyond Lessee’s control, that reasonably prevents the mining,
processing, transportation or delivery of coal including fire, natural flood,
damage to or destruction of Lessee’s mines, improvements or machinery, riot,
strikes, acts of God, serious accident or other cause beyond the reasonable
control of the Lessee and to which Lessee, it agents or employees have not
willfully or negligently contributed. Lessee shall, however, upon the happening
of any event of force majeure, use all reasonable efforts to remove as promptly
as possible the cause of the inability to mine and ship coal.

(b) Lessor shall at all times have the right to enter the Leased Premises and
the workings and mines of Lessee in order to audit, review, examine, survey
and/or measure the same, or any part thereof, to determine that all the terms
and conditions of this Lease have been fully complied with. In furtherance of
the foregoing, Lessor shall have the right to freely

 

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use any means of access to the Leased Premises and workings and mines thereon
without let, hindrance or molestation, provided that such use does not
unreasonably to interfere with Lessee’s operations.

(c) If Lessor finds and reports to Lessee in writing that, in the progress of
the work, any areas of merchantable and mineable coal of workable thickness have
been passed by with the result that coal has not been removed, which, in
accordance with good mining practices should have been removed, Lessee agrees to
return to such areas and remove the coal therefrom or pay for the coal under the
Lost Coal provision set forth in Article (9).

(d) The term “mineable and merchantable coal”, wherever used in this Lease,
means coal which can be ordinarily mined and sold, at a profit by the use of
such then current modern mining methods and cleaning machinery and equipment as
are reasonably adapted to practical, efficient and economical mining under the
conditions found and in conformity with prudent mining practices and diligent
and skillful management.

(e) Lessee shall maintain such possession and control of the mines operated
hereunder as may be necessary to prevent trespass thereon or therein and shall,
at its own expense, do whatever is necessary to prevent such trespass, and shall
also at its own expense and in its own name (and in the name of Lessor when
specifically authorized by Lessor), initiate and conduct all proceedings
necessary to that end.

(f) Lessee shall use all reasonable care and precaution to (i) prevent the
occurrence of fires in timber or forest growth on the surface overlying the
Leased Premises; (ii) prevent mine fires in the coal seams on the Leased
Premises; and (iii) pursue the prompt extinguishment of any such fires caused by
its activities. Lessee shall also cooperate with Lessor and Lessor’s other
lessees or agents in extinguishing such fires on adjoining lands that may be
liable to spread to or over the Leased Premises. Lessee shall be responsible for
all

 

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injuries and damages caused by fire, including but not limited to, damages to
timber, forest growth and property and injuries to persons on the Leased
Premises or adjoining lands due to the negligence of Lessee or any of its
employees when on duty, subcontractors, agents or assigns.

(g) Lessee shall not transport into, over, through or under the Leased Premises
or ship (or otherwise transport for purposes of blending or otherwise) onto or
from the Leased Premises any coal mined from other lands, without the express
written consent of Lessor.

(h) Lessee agrees that, if in the prosecution of its mining operations
hereunder, it encounters or leaves unmined, as unmineable and unmerchantable
coal or coal which may be inaccessible, any part or portion of the coal covered
hereby (it being understood that such coal can only be left as unmineable and
unmerchantable with the consent of Lessor or after it has been determined as a
matter of fact to be unmineable and unmerchantable) and the operations of Lessee
hereunder have advanced to the point where it is no longer practicable to mine
such coal, or the coal is inaccessible to the Lessee, and to the point where
such removal of such coal will not injure or damage Lessee’s mine operations,
then in such event, Lessor at its election, may declare in writing such coal so
left as no longer being a part of the Leased Premises and may mine and remove
such coal or lease and sublease the same to another for the purpose of mining
and removing the same as though it had not been included in this Lease in the
first instance; provided that such mining is done in such a manner as not to
unreasonably interfere with Lessee’s mining operations under this Lease. Lessor
shall give Lessee at least sixty (60) days advance written notice of its
intention to invoke this paragraph (h), identifying the areas to be deleted from
the Leased Premises.

 

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(i) Lessee shall mine through portions of the coal seams that are faulty or
would yield unmerchantable coal if the amount and quality of coal lying beyond
the fault appears economically justifiable.

(j) During the term of this Lease, if a third party proposes to develop a mine
on the Leased Premises, and after 30 days notice of such third party’s proposal
to Lessee, Lessee determines that the area proposed to be mined by such third
party is not in its two year horizon and not a part of an established long term
mine plan, then Lessee promptly, upon Lessor’s request, shall surrender from the
Lease Premises and this Lease the area of such coal seams and appurtenances, if
any, necessary for such third party to develop such mine. If Lessor elects to
require Lessee to surrender such coal to allow Lessor to lease to a third party,
Lessee, upon request of Lessor, shall promptly transfer to such third party any
of its permits that uniquely apply to such coal and otherwise shall grant such
permit rights as are necessary to allow such third party to develop a mine as
proposed. Lessee will be entitled to fair market value for money spent on
acquiring the permits.

ARTICLE (11): SURVEYS, MAPS AND PERMITS

(a) Lessee shall at its expense employ a competent, registered professional
mining engineer, whose duty it shall be to plan and project in advance the coal
mining operations to be conducted on the Leased Premises in an efficient and
practicable manner, according to accepted and approved engineering practices for
the development of coal mines by the methods of mining herein provided for.

(b) The registered mining engineer shall lay out plans for development of the
mining and cause maps on a scale of four hundred (400) feet to one (1) inch, or
such other scale as Lessor may deem acceptable, to be made, which maps shall
show thereon, fully and accurately, mining plans and proposals for mining, all
improvements and surface structures to

 

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be made in conjunction with the mining of the coal, reclamation methods after
removal of said coal, elevation of the coal seam, total coal thickness, total
seam thickness, contour above sea level and 1983 State Plane Coordinate grids,
and Lessee shall, thirty (30) days before the commencement of any mining
operation, furnish a copy of such maps and electronic files in a format
acceptable to Lessor, together with a copy of all mine permit applications to
Lessor. Lessor shall, within fifteen (15) days after receipt of the plan, notify
Lessee of Lessor’s acceptance or rejection of such plan. Lessor’s review of such
plans shall be for the purpose of maximizing the recovery of coal, and if any
difference shall arise as to Lessee’s plan which cannot be mutually resolved to
both parties’ satisfaction, then such plan may be submitted to arbitration as
provided for in Article (25) of this Lease.

(c) Any future revisions to Lessee’s mining, reclamation or other plans and all
permit applications, amendments, completions and maps must be reviewed with
Lessor as provided in the preceding paragraph (b) before submittal to any
governmental agency.

(d) Lessee agrees that the event of partial or total surrender of any part of
the Leased Premises, or to facilitate professional, orderly and workmanlike
development of all coal reserves on the Leased Premises, Lessee shall within a
reasonable period of time, and at the option of Lessor, take all actions
reasonably necessary to transfer any permits that have been obtained associated
with the terminated or surrendered portion of the Leased Premises to another
lessee, if any. In order to implement the assignment of these permits, Lessee
shall execute an irrevocable power of attorney granting to Lessor or others
which Lessor may designate, the right to execute a permit transfer form and all
other applicable forms necessary to transfer any mining permits and any other
permits associated with the respective surrendered or terminated areas or
operations of Lessee.

 

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(e) Lessee agrees to give Lessor reasonable notice of its or any contractor’s
intention to permit (under applicable state law) any area on or in the Leased
Premises and agrees to cooperate in good faith with Lessor in this regard to the
mutual benefit of both Lessor and Lessee.

(f) No later than March 1 and August 1 of each year, Lessee shall furnish to
Lessor maps and/or electronic files in a format acceptable to Lessor which
accurately show workings and extension of Lessee’s mining operations on the
Leased Premises during the six (6) month period ending December 31 and June 30,
respectively, and any other reasonable information requested by Lessor. The maps
shall be on a scale of four hundred (400) feet to one (1) inch or such other
scale as requested in writing by Lessor and shall be based on tied surveys of
all workings utilizing the Lessor’s Base State Plane Coordinate System and shall
be delivered to Lessor at its designated office.

(g) Lessor itself, or through its agents, shall at all times have access to the
plans, permit applications (amendments and completions), maps, electronic files,
exploration and quality data in a form acceptable to Lessor, and tracings of
Lessee and may take therefrom copies of such portions as Lessor or its agents
may desire, if Lessee fails to furnish maps or other records as herein provided
for and continues not to furnish such maps or documents for a period of ten
(10) days after written demand by Lessor, Lessor may employ a competent engineer
to make a survey of the mining developments of Lessee as herein provided and the
expense thereof shall be paid by Lessee.

(h) Lessee shall furnish Lessor on or before March 1 of each year and at such
other times as may be fixed by law or required for fax assessments, a statement
of, and maps showing, the acreage of the Leased Premises that was mined,
abandoned and/or lost by tax tract during the preceding year and the estimated
remaining leased reserves. Lessee shall

 

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cooperate fully with Lessor in any effort by Lessor during a reappraisal or
otherwise to reduce or minimize any taxes, fees, levies or other assessments on
all or any part of the Leased Premises.

ARTICLE (12): TAXES

Lessee shall promptly and properly, in accordance with all statutes,
regulations, rulings and case law, pay at the times they become due and payable,
all taxes, fees, levies, assessments, including, but not limited to, Black Lung
benefits and assessments, ad valorem, excise, license, privilege or severance
taxes, and any other charges whether imposed by the United States, any State or
any political subdivision thereof, or by any municipal corporation upon or with
respect to: (1) the fee estate or other interests of Lessor in the Leased
Premises; (2) Lessee’s interest in this Lease; (3) the leasehold estate hereby
created; (4) all coal mined and produced from the Leased Premises and the
products thereof; (5) all buildings, structures, improvements, equipment and
property of any kind used in, on or about the Leased Premises, whether owned by
Lessee or Lessor; and (6) the exercise of any right or privileges in connection
with Lessee’s operations hereunder so that Lessor shall be entirely relieved
from such charges; provided, however, that if any other seam or seams of coal
upon the Leased Premises shall be operated by Lessor or leased to others for
operation, proper allowances shall be made for Lessee in settlement of the tax
to be paid by it under this Article (12).

If Lessor makes any payment, either voluntarily or as required by law, on
account of any or all of the above, then the amount thereof shall be repaid by
Lessee to Lessor within ten (10) days after the date Lessor submits a written
statement to Lessee.

It is not intended that Lessee shall pay, or be required to pay, any so-called
income, profits, excise, occupational or privilege taxes levied or assessed upon
the income of Lessor,

 

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nor is it intended that Lessee shall pay any taxes attributable to the oil and
gas estate, nor to the timber on the Leased Premises.

ARTICLE (13): ENGINEERING AUDIT

(a) Lessor, its agents, engineers or other persons on Lessor’s behalf, with
their assistants, shall have the right to enter at all times the Leased Premises
and mining operations of Lessee in order to audit, examine, select samples of
coal, survey or measure the same or any part thereof for the purpose of
ascertaining the condition of the mines, the methods practiced or the amount of
coal removed, or for any other lawful purpose, and Lessor shall have the right
to place and keep an auditor or other representative upon any tipples, docks or
loading facilities at the mines of Lessee for the purpose of checking the
weights, measures, accounts and mining methods of Lessee. In furtherance of the
foregoing, Lessor shall have the right to freely use any means of access to the
Leased Premises and the mining operations of Lessee without let, hindrance or
molestation.

(b) Lessor, or any person acting on its behalf, shall also have the right to
enter the Leased Premises at all reasonable times to inspect for or prevent any
trespass; provided, however, that Lessor shall not be obligated to make such
inspections, and Lessor will not be responsible in any manner for any such
trespass. Lessee will use its best efforts to keep trespassers off of the Leased
Premises.

ARTICLE (14): DAMAGES

Lessee shall conduct its mining operations so as not to violate any rights of
lateral and subjacent support or other rights belonging to the owners of other
estates on, adjacent to and near the Leased Premises and shall assist Lessor in
the defense of any action instituted against Lessor for the recovery of any
damages resulting from its operations hereunder. Lessee shall notify Lessor
within twenty-four (24) hours of any action instituted against Lessee

 

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for the recovery of damages, so that a proper defense against such suit may be
arranged for and agreed upon. Lessee alone shall be responsible for any injury
to any person or property caused by the mining, handling or preparation of coal
produced hereunder and for any mining or operations outside of the Leased
Premises.

ARTICLE (15): PUBLIC LIABILITY AND INSURANCE

(a) Lessee shall take the Leased Premises as it finds it at Lessee’s own risk
and shall be deemed to be an independent contractor solely liable for damage on
account of injuries to persons or damage to property arising directly or
indirectly from Lessee’s operations under this Lease.

(b) Lessee shall carry comprehensive general liability insurance and property
damage insurance with both Lessor and Lessee as additional insureds thereon in
such amounts as Lessor shall require, but in no case less than THREE MILLION
DOLLARS ($3,000,000) general aggregate; TWO MILLION DOLLARS ($2,000,000) bodily
injury each occurrence; TWO MILLION DOLLARS ($2,000,000) property damage each
occurrence; and FIVE MILLION DOLLARS ($5,000,000) umbrella liability above the
primary coverage yielding a total coverage for each of bodily injury and
property damage of SEVEN MILLION DOLLARS ($7,000,000), such umbrella liability
policy to provide the same coverage as the underlying policies for bodily injury
and property damage. Such insurance shall have a specific clause insuring
Lessee’s assumption of liability and indemnification as herein contained and
shall provide that the same may not be cancelled by the insurance carrier until
after thirty (30) days written notice to Lessor of the insurance carrier’s
intention to cancel. Lessee shall furnish Lessor evidence of such insurance in
the form of copies of such insurance policies and of the payment of the premiums
therefore.

 

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It is distinctly understood and agreed by Lessee that the furnishing by Lessee
of such policies or certificates of insurance and acceptance of the same by
Lessor is not intended to and shall not, limit, affect or modify the obligations
or liabilities of Lessee hereunder.

Lessee covenants and agrees that Lessee will carry and pay for worker’s
compensation insurance or coverage and the appropriate Black Lung benefits
insurance covering all of its employees (including truck drivers, whether the
vehicles are owned or leased) working upon the Leased Premises or in connection
therewith and all employees for any subcontractor(s) permitted by this Lease.
Lessee covenants that Lessee will keep such insurance continuously in force and
effect for such period of time as necessary to comply with the terms and
provisions of this Lease and will furnish Lessor a certificate of such
insurance.

Whenever if appears that any provision of this Article (15) has not been or is
not being complied with by Lessee, Lessor may, in Lessor’s sole discretion,
suspend and/or terminate Lessee’s operations under this Lease in accordance with
the terms of this Article (15) and/or Article (17). Upon notice by Lessor to
Lessee that Lessee is in violation of any of the provisions of this Article
(15), Lessee agrees to immediately suspend its operations hereunder, pending
Lessor’s decision regarding termination of this Lease as provided in Article
(17).

ARTICLE (16): NOTICES

Until written notice of a different address, all notices required by this Lease
shall be served upon, mailed by certified mail, return receipt requested, or
sent by express delivery service or facsimile (with written notice of
transmission) to Lessor at 2550 East Stone Drive, Suite 200, Kingsport,
Tennessee 37660, and to Lessee at P. O. Box 1349, 106 4th Street, Pikeville,
Kentucky 41502. Any communication sent as hereinabove provided shall be deemed
effectively given or received on the date of delivery, if delivered by hand, by
express delivery service or by facsimile, or on the date indicated on the return
receipt, if mailed. If any notice

 

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mailed or sent is properly addressed but returned for any reason, such notice
shall be deemed to be effective notice and to be given on the date of mailing.

ARTICLE (17): REMEDIES, DEFAULT, FORFEITURE

All payments and royalties hereunder required to be made by Lessee to Lessor
shall be deemed and considered as rent reserved upon contract, and all remedies
now or hereafter given by the laws of the Commonwealth of Kentucky for the
collection of rent are reserved to Lessor in respect of the sums so retained or
payable, and a lien is hereby reserved and imposed upon all the personal
property of Lessee at any time acquired for use in connection with Lessee’s
operations on the Leased Premises and remaining thereon or having been removed
no more than thirty (30) days previously to the time of any default under this
Lease, as well as upon this Lease and the leasehold estate hereby created, to
secure the payment of any and all sums.

If Lessee shall fail to pay any sums due hereunder (including, but not limited
to, Minimum Rentals, Tonnage Royalties and sums due for taxes or insurance) at
the times herein fixed for such payments, Lessor may give to Lessee written
notice specifying in what respect Lessee has defaulted in payment and should
Lessee fail to correct such default within fifteen (15) days after receipt of
such notice, Lessor may forfeit and terminate this Lease. If Lessee shall fail
to perform or observe any of the terms, provisions, conditions, covenants,
stipulations and agreements herein contained to be performed or observed by it
(other than failure to make payments), specifically including without
limitation, submission of adequate and proper operating and production records,
compliance with federal state and local laws and regulations governing Lessee’s
operations, and conduct of operations in a workmanlike manner, and such failure
continues for a period of thirty (30) days after Lessor has given written notice
of default to Lessee, Lessor may declare this Lease forfeited and terminate this
Lease. If that certain

 

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Coal Facility Lease and Operating Agreement (the “Facility Lease”) dated as of
the date hereof between Loadout LLC (“Loadout”) and Elk Ridge, Inc. (“Elk
Ridge”) is terminated pursuant to the terms thereof, Lessor may immediately
declare this Lease forfeited and terminate this Lease.

Lessee further agrees that if (i) the interest of Lessee in the Leased Premises
shall be sold on execution or judicial sale, (ii) bankruptcy proceedings are
begun by Lessee, (iii) Lessee is adjudged a bankrupt, (iv) Lessee makes an
assignment for the benefit of creditors, (v) a receiver is appointed for Lessee
or for the Leased Premises, or (vi) any assignment occurs by operation of law,
then and in any such event, this Lease shall forthwith terminate and be
forfeited and the Leased Premises and all improvements thereon shall forthwith
become the property of Lessor without compensation to Lessee and without refund
of any royalties paid or credit for any royalties retained.

Upon forfeiture and termination of this Lease, without further notice, Lessor
may reenter the Leased Premises and take possession thereof, exclude Lessee
therefrom, and hold and possess the Leased Premises as if this Lease had never
been made. In making any such reentry or taking possession of the Leased
Premises, no writ of detinue or act of ejectment against Lessee shall be
necessary. Such reentry shall not impair the right of Lessor to recover
royalties and other sums due up to the time of such reentry, nor the right of
Lessor to pursue any and all other remedies available under the laws of the
Commonwealth of Kentucky for violation of any terms, provisions, conditions or
covenants.

All of the foregoing powers of reentry and all other provisions for enforcement
of the rights of Lessor are remedies cumulative to one another and to all other
remedies, suits, actions and proceedings at law or in equity that Lessor may
choose to exercise or be entitled.

 

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IN THE EVENT OF ELECTION BY LESSOR TO ENFORCE ITS LIEN BY DISTRAINT OR OTHER
LEGAL PROCESS, LESSEE HEREBY EXPRESSLY WAIVES ANY RIGHT TO PRIOR NOTICE OR ANY
JUDICIAL PROCESS OTHER THAN THE ISSUANCE OF THE WARRANT OF DISTRAINT AND FURTHER
EXPRESSLY WAIVES ANY RIGHT TO HEARING PRIOR TO THE LEVY OF SUCH WARRANT AND SALE
THEREUNDER.

In the event of notice of termination for default under this Article (17),
unless the default is for payment of rents or royalties, Lessee may contest the
existence of grounds for termination under the provisions of Article (25). No
forfeiture or termination shall occur pending the conclusion of arbitration.

ARTICLE (18): NO ASSIGNMENT, TRANSFERS AND ENCUMBRANCES

(a) Lessor and Lessee agrees that Lessee shall not assign, encumber, pledge,
lease, sublease, license or set over any of its estate, interest, right to
operate or any other right, or any part thereof, under this Lease, to any person
or entity. None of this Lease, the leasehold estate hereby created, nor the
right of Lessee hereunder shall be subject to sale or disposition or possession
thereof, in whole or in part, by or under any judgment or decree of any court or
by or through any judicial process of law, equity or bankruptcy, except for the
purpose of enforcing Lessor’s rights hereunder. Any assignment, transfer,
sublease, lien or encumbrance, either voluntary, involuntary or by operation of
law, of this Lease or any rights therein, shall cause an immediate forfeiture of
this Lease, and the rights and interests of Lessee shall forthwith cease and
terminate.

(b) In the event of (i) a sale or merger of Lessee, (ii) a transfer other than
by death, of a controlling interest in Lessee (i.e. 50% or more of the issued
and outstanding stock or other equity interests of Lessee) to a person, entity
or group not in control thereof as of the date of this Lease or (iii) an
unauthorized assignment, encumbrance, lease, sublease or substitution of

 

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another lessee by whatever means, then Lessor shall have the option to terminate
this Lease forthwith and immediately by serving written notice of its election
so to do. Any transfer by operation of law or proceedings in equity or
bankruptcy shall be deemed an assignment within the meaning of this provision
and a violation of this covenant.

(c) Lessee covenants and agrees that this Lease and all or any part of the
Leased Premises are not intended to be an “equitable servitude” or any other
property interest for the benefit of a third party. Lessee further covenants and
agrees that it shall not create an equitable servitude upon the Leased Premises
by virtue of any collective bargaining agreement, agreement of understanding,
contract, subcontract, license, sublease, assignment, employment practice,
successorship clause or any other contract with a third party which has no
interest in the Leased Premises, but which would attempt to burden the Leased
Premises. Lessor shall have the right, at its option, to terminate this Lease
and immediately forfeit the leasehold estate without any further action by
Lessor upon any attempt to create an equitable servitude against the Leased
Premises.

(d) Notwithstanding any assignment, encumbrance, pledge, lease, contract,
sublease or other substitution of the parties to this Lease by operation of law
or proceedings in equity or bankruptcy, Lessee shall remain liable for the
performance of each and every one of Lessee’s obligations hereunder including
without limitation, the payment of Minimum Rentals and Tonnage Royalties.

(e) Nothing herein shall be construed to prohibit the Lessee from using
reputable contract miners to mine the coal from the Leased Premises and deliver
it to Lessee for Lessee to prepare the coal for market and market it; provided,
however, that if Lessee shall use contract miners, Lessee shall nevertheless be
liable for the performance of all of the terms of this Lease and it shall not
delegate to contract miners the marketing of the coal from the Leased Premises.

(f) Lessor may freely assign all or any part of its interest in this Lease.

ARTICLE (19): MODIFICATION AND ALTERATION

No modification, alteration, waiver or addition to this Lease or any part
thereof shall be valid or binding or be set up or relied upon by either party
unless the same is in writing signed by Lessee and Lessor. No evidence of any
such modification, alteration, waiver or additions shall be considered in any
controversy rising out of this Lease, unless it is in writing signed as
aforesaid.

 

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ARTICLE (20): WAIVER

Neglect, inadvertence or refusal of Lessor at any time to avail itself of any of
its rights or remedies hereunder shall not be construed as a waiver of any of
Lessor’s rights, remedies and/or privileges whensoever and as often as any new
ground therefore may arise.

ARTICLE (21): POSSESSION

Lessee shall deliver up peaceable possession of the Leased Premises to Lessor
upon expiration or earlier termination of this Lease.

ARTICLE (22): COMPLIANCE WITH LAWS

Lessee shall be solely responsible for complying with all present and future
federal, state, local or other laws and governmental regulation controlling
mining and related operations on the Leased Premises, obtaining all required
permits, furnishing all required bonds and restoring of the surface of the
Leased Premises as is required by any appropriate United States or Commonwealth
of Kentucky regulatory authority.

ARTICLE (23): ENVIRONMENTAL OBLIGATIONS

(a) At the termination of this Lease, Lessee shall leave the drifts, shafts,
slopes and all other openings in a secure and proper state, consistent with good
mining practice and in compliance with applicable mining regulations.

(b) Lessee recognizes the importance of environmental protection and the
necessity for proper ecological balance and, to further these objectives, Lessee
agrees to conduct with utmost caution all of its operations under this Lease for
the purpose of, as nearly as possible, preserving or improving conditions as
they previously existed by minimizing any adverse alteration of the topography
and interfering with, polluting or impeding water courses

 

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as little as possible. Lessee further agrees, in order to promote these
objectives, that upon the expiration or termination of this Lease, and in
addition to all other terms and conditions thereof, it will leave the Leased
Premises in a clean and sanitary condition, free of debris, and shall be
responsible for compliance with all environmental laws and regulations now in
effect or hereinafter enacted affecting the Leased Premises (including
retroactive regulations) or any activity carried on by Lessee thereon,
regardless of whether any such laws or regulations impose liability of such
condition or activity on Lessor as owner of the Leased Premises.

ARTICLE (24): REMOVAL OF EQUIPMENT

Upon the expiration or termination of this Lease, if all of the terms,
conditions, covenants and stipulations of this Lease shall have been complied
with, Lessee shall have the right, within three (3) months after the expiration
or termination of this Lease, to remove any and all mobile mining equipment and
personal property owned by Lessee and shall have the right, within six
(6) months after the expiration or termination of the Lease, to remove from the
surface overlying the Leased Premises and all improvements, buildings or other
structures placed thereon by Lessee during the term hereof. If Lessee shall fail
to remove any of the mobile mining equipment and personal property or buildings
and other structures within the applicable periods described above, then the
same shall, at Lessors’ discretion and with written notice to Lessee, thereupon
become the absolute property of Lessor.

ARTICLE (25): DISPUTE SETTLEMENT AND ARBITRATION

If at any time during the continuance of this Lease, or any renewal thereof, any
dispute shall arise between Lessor and Lessee under this Lease or under any of
the terms and provisions hereof which cannot be agreed upon by the parties
hereto, then such dispute shall be referred to a board of arbitrators (the
“Board”). The Board shall be composed of one representative of Lessor and one
representative of Lessee, to be selected by Lessor

 

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and Lessee, respectively, and a third arbitrator who shall be chosen by the two
arbitrators herein provided for. Each arbitrator shall have at least ten
(10) years experience in the coalmining and/or coal land management business. In
the event that the two arbitrators are unable to agree within ten (10) days upon
a third arbitrator, then the American Arbitration Association shall designate a
disinterested person to act as such arbitrator; and, in the event that the
Receiving Party (as defined below) should, for a period of ten (10) days after
receipt of an Arbitration Notice (as defined below), fail to select and make
known in writing to the Notifying Party (as defined below) the arbitrator
selected by the Receiving Party, the Board shall be comprised of the one sole
arbitrator chosen by the Notifying Party. Either party (the “Notifying Party”)
may at any time serve upon the other (the “Receiving Party”) a notice (an
“Arbitration Notice”) setting forth the point or points upon which the decision
of said Board is desired. Within ten (10) days after the date of such
Arbitration Notice, the Receiving Party shall deliver a counter-notice to the
Notifying Party which shall identify the arbitrator chosen by the Receiving
Party and which may specify any additional points or differences arbitrable
hereunder upon which the Receiving Party may desire a decision. The Board shall
give ten (10) days written

 

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notice of the time and place of hearing to the respective parties, and shall
determine questions submitted to it for arbitration and make its decision and
award in writing. The decision and award of a majority of the arbitrators (or
the sole arbitrator as the case may be) shall be final, conclusive and
obligatory upon the said parties to this Agreement and their successors and
assigns, and without appeal, and each party hereto agrees to abide by and comply
with every such decision and award. Judgment on the award of the Board may be
entered and enforced by a court of competent jurisdiction. The costs of each
party in connection with any such arbitration shall in the first instance be
paid by such party but if such party substantially prevails therein it shall be
reimbursed therefor by the other party, and the question of costs shall in each
case be determined by the Board when it renders its decision on the question or
questions submitted to it. Notwithstanding foregoing, the costs of arbitration
in respect of the imposition or adjustment of Minimum Rentals, Tonnage Royalties
or charges for transporting coal on the Leased Premises, and valuation upon
termination, shall be shared equally by the parties hereto. Should the award of
the Board declare that any violation hereof or default hereunder exists, it
shall also provide the time within which the party committing such default shall
pay the award and cure the breach which it decrees. Notwithstanding the
requirement to arbitrate any dispute, any party may apply to a court for interim
measures such as injunctions, attachments and conservation orders, which
measures may be immediately enforced by court order. Any decision with respect
to such interim measures shall promptly be referred to the Board for review and
final decision.

ARTICLE (26): INDEMNIFICATION

Lessee agrees to indemnify and save Lessor harmless against any and all claims,
suits, actions, losses or damages arising directly or indirectly from the
Lessee’s operation of the Leased Premises. This shall include, but not be
limited to, indemnification against claims

 

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arising directly or indirectly from any of the following: the working or
management of the Leased Premises by the Lessee; any debt or expense contracted
or incurred by Lessee; any condition of the Leased Premises or the improvements
thereon; any breach or default by Lessee under this Lease, including without
limitation, any failure to comply with the provisions of Articles (12), (14),
(15) and (22); any act or omission by Lessee or any of Lessee’s employees,
agents, sublessees, contractors or other occupants; and any accident, injury or
damages from any cause. This indemnification shall also cover all costs,
expenses and other liabilities incurred in connection with any of these claims,
including without limitation, attorney’s fees and expenses. Lessee agrees that
upon request from Lessor it will defend any claim or action covered by this
Article (26) and will employ counsel which is reasonably satisfactory to Lessor.
This Article (26) and all other covenants of liability and indemnification
contained anywhere in this Lease shall survive the expiration or termination of
this Lease and shall be enforceable against Lessee after the expiration or
termination of this Lease, without limitation.

ARTICLE (27): PERFORMANCE BOND, PERFORMANCE ESCROW ACCOUNT

Lessee shall either (i) obtain and maintain in effect for the term of this Lease
a performance bond in a form prescribed by or otherwise acceptable to Lessor and
in such amount (which shall not be less than [        *        ]) and upon such
conditions as Lessor may require, to secure Lessee’s performance of its
environmental, reclamation and all other obligations hereunder and all
obligations of Elk Ridge pursuant to the Facility Lease or (ii) pay the amounts
hereinafter provided into an interest bearing account or into such other
investment account acceptable to Lessor (hereinafter referred to as the “Escrow
Fund”) to be established and maintained by Lessee and Lessor at a national
banking institution or brokerage firm acceptable to Lessor. Lessee shall bear
all risk of loss in the Escrow Fund and Lessee agrees that the amount of monies
available from the Escrow Fund shall never be less than the sum

 

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total of all contributions required to be deposited at such time in the Escrow
Fund by Lessee, except for withdrawals authorized hereunder. In the event that
the total value of the Escrow Fund decreases at any time below the amount of
contributions required to have been deposited into the Escrow Fund hereunder,
Lessee shall immediately make such additional contributions as may be required
to bring the value of the Escrow Fund equal to such required amount. The Escrow
Fund is established to ensure, in part, that Lessee fully complies with all
environmental and reclamation obligations on the Leased Premises as required by
any permit and/or applicable federal or state statute or regulation and to
secure all other obligations of Lessee due and owing to Lessor under this Lease
and all obligations of Elk Ridge due and owing to Loadout under the Facility
Lease. The Escrow Fund shall be established with the investment institution such
that withdrawals from the Escrow Fund may be made only upon written
authorization of Lessor. All interest and dividends paid on the Escrow Fund
shall be for the account of Lessee but shall remain in or be reinvested in the
Escrow Fund subject to the provisions hereof. If Lessee fails within ten
(10) days of Lessor’s written request to comply with any of Lessee’s obligations
and requirements hereunder or under the Facility Lease, including but not
limited to, the environmental and reclamation requirements, Lessee does hereby
authorize and grant Lessor the right to withdraw such sums and amounts from the
Escrow Fund sufficient to (i) fully pay Lessor for any payments due and owing by
Lessee to Lessor or (ii) reimburse Lessor for all costs of performing such
obligations and requirements.

The Escrow Fund shall be held until such time as this Lease is terminated,
Lessee has fully complied with all of its obligations under this Lease and
Facility Lease and Lessee has no further liability to Lessor, whereupon Lessor
shall agree to have the remaining balance of the Escrow Fund released to Lessee.
Notwithstanding the foregoing, if this Lease is terminated for any reason prior
to the mining and removal by Lessee of all mineable and merchantable coal in

 

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the leased seams of coal in, on and under the Leased Premises, then in such
event, and at Lessor’s sole option, the Escrow Fund shall remain in place until
all such coal has been mined and removed by Lessor or its designee and
reclamation is completed, or in the event Lessor elects not to have all mineable
and merchantable coal removed, until reclamation is completed, and Lessee
expressly agrees that the Escrow Fund may be utilized by Lessor or its designees
to perform and complete any and all reclamation of the Leased Premises.

If Lessee elects to secure its performance of environmental and reclamation
obligations hereunder by the establishment of an Escrow Fund, then within 30
days of the date hereof, Lessee shall pay [        *        ] into the Escrow
Fund, and thereafter during the Initial Term shall pay [        *        ] into
the Escrow Fund on the first of each month until the first Tonnage Royalty is
paid. Then, Lessee shall pay into the Escrow Fund at the same time Tonnage
Royalties are due hereunder a sum equal to the greater of [        *        ]
per month or [        *        ] per ton of coal mined from the Leased Premises.
Such payments shall continue until the Escrow Fund Balance is
[        *        ]. Such amount shall not be a limitation of the amounts for
which Lessee may be obligated under this Lease,

Provided Lessee is in compliance with all the terms and conditions of this
Lease, from time to time, at the request of Lessee, Lessor agrees to authorize
withdrawal, payable to Lessee, from the Escrow Fund in such amounts as are in
said fund in excess of [        *        ]. If, after the Escrow Fund balance
reaches [        *        ], the balance therein at any time thereafter falls
below [        *        ], then Lessee shall resume the payments into the Escrow
Fund at the times and in the amounts set out in the next preceding paragraph
until the Escrow Fund balance again is [        *        ].

As Lessee performs its reclamation work upon completion of its mining
activities, Lessee may apply to Lessor for reimbursement of its reclamation
expenses and Lessor shall

 

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authorize such reimbursement commensurate with the amount of work completed
thereon; provided, however, that the Escrow Fund may not be drawn down below
that amount necessary, in Lessor’s reasonable judgment, to complete Lessee’s
obligations on the Leased Premises.

Lessee hereby grants to Lessor a security interest under the Uniform Commercial
Code of Kentucky in and to the Escrow Fund and Lessee’s interest in the Escrow
Fund to secure Lessee’s performance of its obligations hereunder and, in
connection therewith, Lessee shall execute and deliver to Lessor from time to
time such documents (including, without limitation, UCC forms) as may reasonably
be required to perfect of record such security interest.

ARTICLE (28): MISCELLANEOUS

(a) This Lease shall be governed by the laws of the Commonwealth of Kentucky.
This Lease shall bind and inure to the benefit of the parties hereto and their
respective heirs, executors, administrators, successors, assigns and personal
representatives.

(b) In computing any period of time pursuant to this Lease, the day of the act
or event from which the designated period of time begins to run will not be
included. The last day of the period so computed will be included, unless it is
a Saturday, Sunday or legal national holiday, in which event the period runs
until the end of the next day which is not a Saturday, Sunday or such legal
holiday.

(c) This Lease shall not be recorded by either party hereto and any such
recording shall constitute a default hereunder. The parties may record a
mutually satisfactory memorandum of this Lease.

(d) All times, wherever specified herein for the performance by Lessor or Lessee
of their respective obligations hereunder, are of the essence of this Lease.

 

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(e) The headings preceding the text of the Articles hereof are inserted solely
for convenience of reference and shall not constitute a part of this Lease, nor
shall they affect its meaning, construction or effect.

(f) This Lease and the Exhibits hereto set forth all of the promises, covenants,
agreements, conditions and undertakings between the parties hereto with respect
to the subject matter hereof and supersede all prior and contemporaneous
agreements and understandings, inducements or conditions, express or implied,
oral or written, except as contained herein. This Lease may not be changed
orally but only by an agreement in writing, duly executed by or on behalf of the
party or parties against whom enforcement of any waiver, change, modification,
consent or discharge is sought. Lessor and Lessee acknowledge and agree that
this Lease is the result of negotiations between the parties, each with the
benefit of counsel, and therefore this Lease shall not be construed against the
maker hereof.

(g) If any provision in this Lease or the application thereof shall to any
extent be invalid, illegal or otherwise unenforceable, the remainder of this
Lease, and the application of such provision other than as invalid, illegal or
unenforceable, shall not be affected thereby, and each provision in this Lease
shall be valid and enforceable to the fullest extent permitted by law.

[Signature Pages Follow]

 

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IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease as of the day and
year first above written.

 

LESSOR: PENN VIRGINIA OPERATING CO., LLC By:  

/s/ Stephen F. Looney

Name:   Stephen F. Looney Title:   Vice President – Virginia Operations LESSEE:
GREYMONT MINING CORP. By:  

/s/ Henry E. Cook Jr.

Name:   Henry E. Cook Jr. Title:   President

STATE OF TENNESSEE

COUNTY OF SULLIVAN

The foregoing instrument was acknowledged before me on this the 7th day of July,
2005, by Stephen F. Looney, Vice President-Virginia Operations, of Penn Virginia
Operating Co., LLC, a Delaware limited liability company, on behalf of the
company.

My commission expires: 3-27-06

 

/s/ Pamela P. Fields

NOTARY PUBLIC

[SEAL]

 

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STATE OF TENNESSEE

COUNTY OF SULLIVAN

The foregoing instrument was acknowledged before me on this the 7th day of July
2005, by Henry E. Cook Jr., President, of Greymont Mining Corp., a Kentucky
corporation, on behalf of the corporation.

My commission expires: 3-27-06

 

/s/ Pamela P. Fields

NOTARY PUBLIC

[SEAL]

 

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EXHIBIT B

Surface Lease dated April 1, 1994 by and between Charles R. Collins and Donna
Collins and Knott Floyd Land Company, Inc.

Surface Lease dated April 7, 2000 by and among Myrte Porter, Afton Stone,
Barbara Thornberry, Christine Slone, Alger Jent and Wilma Jent, Melissa Stone
and Knott Floyd Land Company, Inc.

 

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FIRST AMENDMENT TO LEASE AND SUBLEASE AGREEMENT

(COAL LEASE)

This First Amendment to Lease and Sublease Agreement (this “First Amendment”)
made and entered into this 11th day of November, 2005, by and between PENN
VIRGINIA OPERATING CO., LLC, a Delaware limited liability company (“Lessor”),
and GREYMONT MINING CORP., a Kentucky corporation (“Lessee”).

RECITALS

A. Lessor and Lessee have entered into that certain Lease and Sublease Agreement
dated July 7, 2005 (the “Original Lease”).

B. Lessor and Lessee have agreed to amend certain provisions of the Original
Lease as set forth herein.

W I T N E S S E T H:

NOW THEREFORE, for and in consideration of the foregoing recitals and the mutual
agreements contained in this Amendment, the parties agree as follows:

1. Lessee’s Rights. Article (2)(a) is amended and restated in its entirety as
follows:

“Lessor grants, to the extent it has the right to grant, to Lessee the right to
exercise and enjoy all rights in or relating to the Leased Premises as may be
reasonably necessary for the deep mining of coal from the Leased Premises, as
well as for the preparation, loading, removal, transportation and shipping, of
the coal mined from the Leased Premises (“Leased Coal”) or from any lands other
than the Leased Premises (“Foreign Coal”), including the products and
by-products of each and synthetic fuel produced from each and the reclamation of
the Leased Premises in connection therewith, in accordance with applicable law.
In addition, Lesser grants to Lessee the right to remove and sell the refuse
material in the Huff Branch refuse pile area identified on the Lease Map owned
by Lessor on the date of this Lease. Subject to paragraph (e) of this Article
(2) and the limitations contained above and without limiting the foregoing,
Lessee shall have the right to use as much of the surface and the underground
workings of the Leased

 

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Premises, and the right to take and use stone, soil, timber and water thereon,
as may be reasonably necessary for (a) the deep mining, preparation, loading,
removal, transportation and shipping of Leased Coal and Foreign Coal; (b) the
construction, maintenance and use of all structures, fixtures, equipment, plant
or facilities deemed necessary or convenient by Lessee, including without
limitation, preparation facilities, synthetic fuel facilities, buildings,
offices, impoundments, valley fills, tipples, roads, railroads, utilities,
pipelines, conveyors and other structures, facilities and improvements necessary
for, or incident to, the purposes of this Lease; (c) the storage of all such
coal, any mine refuse and any equipment, materials and supplies; (d) the dumping
of rock, slate, overburden, fill material and other refuse (including foreign
coal refuse); (e) the pumping, discharge, deposit, treatment, diversion and
draining of water; and (f) the right of ingress and egress to and from the
Leased Premises for any purposes incidental to the above.”

2. Co-sublessee. Article (2)(c) is amended by deleting “co-sublessor” from two
places in the last sentence and substituting “co-sublessee” in both places.

3. Water. Article (4)(a) is amended by inserting, immediately after “water”, the
following: “(other than that necessary for mining and processing on the Leased
Premises and other than that removed in dewatering during the normal course of
mining here under)”.

4. Initial Term. Article (6) is amended by deleting “ten (10)” in the first
sentence and inserting “eleven (11)” in its place,

5. Remainder Term. Article (6) is further amended by adding a second paragraph
that reads as follows:

“The “Remainder Term” shall commence at the end of the Initial Term, or any
extended term, as applicable, and shall continue until Lessee shall have fully
complied with all of its reclamation, environmental and other obligations
hereunder. During the Remainder Term, Lessee shall continue to comply with the
terms hereof, although Lessee shall have no rights to mine, transport, load,
remove, ship or process coal on or from the Leased Premises. Lessee shall pay to
Lessor as rental during the Remainder Term the

 

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sum of [    *    ] per year, payable on the first day of each year, until all
permits are released and this Lease is terminated.”

6. Minimum Rental. Article (8)(a) is amended to clarify that the waiver of the
Minimum Rental may extend beyond year 2005 by removing the second sentence from
the paragraph beginning “Year 2005” and placing it as a separate paragraph at
the end of Article (8)(a).

7. Wheelage. A new Article (9A) shall be inserted to read as follows:

“ARTICLE (9A): TRANSPORTATION OF FOREIGN COAL

(a) Lessor grants, to the extent it has the right to grant, to Lessee the right
to transport, through workings in or otherwise through, under, over or across
the Leased Premises, Foreign Coal, and persons, materials, supplies and
equipment in connection with mining of Foreign Coal.

(b) In addition to the Minimum Rental and the Tonnage Royalty, Lessee shall pay
to Lessor a charge (the “Wheelage Charge”) for each ton of two thousand
(2,000) pounds of Foreign Coal mined by Lessee from the [    *    ] (the
[    *    ]) that is transported underground through the Leased Premises during
the twelve (12) months beginning sixty (60) days after the preparation plant
being constructed on the Leased Premises (the “Facility”) becomes fully
operational and during each twelve (12) months thereafter (each a “Mining
Year”), calculated as follows:

(1) During any Mining Year prior to the time that Lessee has mined
[    *    ] or more tons of Leased Coal in a Mining Year for any five (5) Mining
Years,

(A) If Lessee mined less than [    *    ] tons of Leased Coal during the Mining
Year, the Wheelage Charge shall be [    *    ] for each ton of [    *    ]
transported underground through the Leased Premises during the Mining Year;

(B) If Lessee mined [    *    ] or more tons but less than [    *    ] tons of
Leased Coal during the Mining Year, the Wheelage Charge shall be [    *    ] for
each ton of [    *    ] transported underground through the Leased Premises
during the Mining Year; or

(C) If Lessee mined [    *    ] or more tons of Leased Coal during the Mining
Year, no Wheelage Charge shall be

 

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payable for any [    *    ] transported underground through the Leased Premises
during the Mining Year.

(2) During any Mining Year after the time that Lessee has mined [    *    ] or
more tons of Leased Coal in a Mining Year for five (5) Mining Years,

(A) If Lessee mined less than [    *    ] of Leased Coal during the Mining Year,
the Wheelage Charge shall be [    *    ] for each ton of [    *    ] transported
underground through the Leased Premises during the Mining Year; or

(B) If Lessee mined [    *    ] or more tons of Leased Coal during the Mining
Year, no Wheelage Charge shall be payable for any [    *    ] transported
underground through the Leased Premises during the Mining Year.

(3) During any Mining Year after the time that Lessee has mined an aggregate of
[    *    ] tons of Leased Coal during the term of this Lease, no Wheelage
Charge shall be payable for any [    *    ] transported underground through the
Leased Premises during the Mining Year.

(c) On or before the thirtieth (30th) day after the end of each Mining Year,
(1) Lessee shall render to Lessor at its office in Kingsport, Tennessee, or such
other place as Lessor may from time to time designate in writing to Lessee, a
true and correct statement of tonnage of [    *    ] transported underground
through the Leased Premised during the Mining Year, and (2) Lessee shall pay the
Wheelage Charge for the Mining Year to Lessor by wire transfer of immediately
available federal funds to such account as Lessor may from time to time
designate in writing to Lessee, or in such other manner as Lessor may from time
to time designate in writing to Lessee.”

8. Commencement of Mining. Article (10)(a) is amended by deleting “January 1,
2006” from the first Sine and replacing it with “May 1, 2006”.

9. Force Majeure. Article (10)(a) is amended by deleting “but not exceeding
three (3) aggregate months in any calendar year” from the second paragraph and
replacing it with “but not exceeding six (6) aggregate months in any calendar
year”.

10. Transport. Article (10)(g) is amended and restated in its entirety as
follows:

“(g) After the time that the Facility becomes fully operational, except as
permitted by Lessor in writing, Lessee shall cause all

 

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Leased Coal to be shipped through the Facility; provided, however, that in any
given month Lessor may ship Leased Coal through a facility other than the
Facility so long as Lessee shipped at least [    *    ] tons of coal through the
Facility during the preceding twelve (12) months; provided, further, that Lessee
may ship Leased Coal mined by Lessee from the [    *    ] through a facility
other than the Facility without restrictions at any time.”

11. No Surrender. Article (10)(j) is amended by deleting the entire provision
and substituting “Deleted” in its place.

12. Surrender. Article (11)(d) is amended by:

 

  (A) Deleting “or to facilitate professional, orderly and workmanlike
development of all coal reserves on the Leased Premises,” from the first
sentence; and

 

  (B) Adding another sentence at the end of the paragraph that reads as follows:

“However, no permit shall be transferred unless the transferee replaces Lessee’s
reclamation performance bond simultaneously with the submittal of the transfer
application, and the transferee shall not conduct any mining on the surrendered
part of the Leased Premises until the permit transfer has been approved.”

13. Engineering Audit. Article (13)(a) is amended by adding a sentence at the
end of the paragraph that read as follows:

“Lessor agrees to coordinate such activities with Lessee so that interference
with Lessee’s operations on the Leased Premises is minimized.”

14. Subjacent Support. Article (14) is amended by adding the following
immediately after the first sentence:

“To the extent it has the right to do so, Lessor hereby waives the right to
lateral and subjacent support and any claim or liability for damages to the
surface or subsurface or water thereon or therein,

 

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and grants Lessee the right to subside the overlying strata, including water,
without liability to Lessor therefor.”

15. No Consequential Damages. Article (14) is further amended by adding the
following as a second paragraph:

“Notwithstanding anything herein to the contrary, neither party shall be liable
under this Lease for indirect, consequential or punitive damages arising out of
the breach or non-performance of this Lease (except to the extent that such
damages are required to be paid to a third party and are the subject of an
indemnification claim under this Lease).”

16. Assignment. Article (18)(a) is amended inserting the following immediately
after the first sentence:

Notwithstanding anything herein to the contrary, Lessee may assign, encumber,
pledge, lease, sublease, license or set over any of its estate, interest, right
to operate or any other right, or part thereof, under this Lease, to any direct
or indirect wholly-owned subsidiary of International Coal Group, Inc., ICG, Inc.
or ICG, LLC (an “ICG Affiliate”), without consent of Lessor.

17. Assignment. Article (18)(b) is amended inserting the following at the end of
the paragraph:

Notwithstanding anything herein to the contrary, a transfer of a controlling
interest in Lessee to an ICG Affiliate, a transfer of a controlling interest in
a publicly traded entity that directly or indirectly controls Lessee, or the
issuance of publicly traded stock by Lessee or any entity that directly or
indirectly controls Lessee shall not constitute an assignment hereunder.

18. Lessee Financings. Article (18) is amended by adding paragraph (g) that
reads as follows;

“(g) Upon the request of Lessee, Lessor shall reasonably cooperate with Lessee
and any financing provider to Lessee to enter into consent agreement acceptable
to Lessor allowing Lessee to grant a leasehold mortgage on the Leased Premises
to such financing provider.”

 

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EXCHANGE COMMISSION. BOXES AND ASTERISKS

DENOTE SUCH OMISSION.

 

19. Performance Bond or Escrow. Article (27) is amended by deleting the
provision in its entirety and substituting “Deleted” in its place.

20. Effect of Amendment. Except as specifically amended hereby, the terms of the
Original Lease shall remain in full force and effect and, from and after the
date hereof, all references to the “Lease” shall mean the Original Lease as
amended hereby.

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IN WITNESS WHEREOF, Lessor and Lessee have executed this First Amendment as of
the day and year first above written.

 

LESSOR: PENN VIRGINIA OPERATING CO., LLC By:  

/s/ Stephen F. Looney

Name:   Stephen F. Looney Title:   Vice President – Virginia Operations LESSEE:
GREYMONT MINING CORP. By:  

/s/ Henry E. Cook Jr.

Name:   Henry E. Cook Jr. Title:   President

COMMONWEALTH OF KENTUCKY

COUNTY OF PIKE

The foregoing instrument was acknowledged before me this the 11th day of
November, 2005, by Stephen F. Looney, Vice President—Virginia Operations, of
Penn Virginia Operating Co., LLC, a Delaware limited liability company, on
behalf of the company.

My Commission expires: 10/19/2007

(SEAL)

 

/s/ Andrew Daune Thacher

NOTARY PUBLIC

 

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COMMONWEALTH OF KENTUCKY

COUNTY OF PIKE

The foregoing instrument was acknowledged before me this the 11th day of
November, 2005, by Henry E. Cook Jr., President, of Greymont Mining Corp., a
Kentucky corporation, on behalf of the corporation.

My Commission expires: 10/19/2007

(SEAL)

 

/s/ Andrew Daune Thacher

NOTARY PUBLIC

 

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ASSIGNMENT AND ASSUMPTION AGREEMENT

(Coal Lease)

THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this “Agreement”) is made and entered
into effective as of November 11, 2005, by and between GREYMONT MINING CORP., a
Kentucky corporation (“Greymont”), and ICG KNOTT COUNTY, LLC, a Delaware limited
liability company (“ICG”).

R E C I T A L S:

A. ICG, Greymont and Elk Ridge, Inc. (“Elk Ridge”) have entered into an Asset
Purchase Agreement dated November 11, 2005 (the “Purchase Agreement”), pursuant
to which Greymont and Elk Ridge have agreed to sell to ICG, and ICG has agreed
to purchase from Greymont and Elk Ridge, the Acquired Assets.

B. By the Purchase Agreement, Greymont has agreed to assign to ICG all of
Greymont’s right, title and interest in, to and under that certain Lease and
Sublease Agreement dated July 7, 2005, between Penn Virginia Operating Co., LLC,
as lessor, and Greymont, as lessee, which has been amended by that certain First
Amendment to Lease Agreement dated November 11, 2005 (as amended, the “Coal
Lease”).

C. As partial consideration for the Acquired Assets, ICG has agreed to assume
the Coal Lease.

W I T N E S S E T H:

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto hereby promise and agree as
follows:

1. All capitalized terms used in this Agreement and not otherwise defined herein
shall have the meaning given such terms in the Purchase Agreement.

2. Greymont hereby assigns and transfers to ICG all of Greymont’s right, title
and interest in, to and under the Coal Lease.

3. ICG hereby (i) accepts the assignment of the Coal Lease, and (ii) agrees to
pay, assume, perform and fully and timely discharge, in accordance with their
terms, all of Greymont’s obligations under the Coal Lease arising and accruing
after the date of this Agreement. Except for Greymont’s obligations under the
Coal Lease, ICG assumes no other debt, liability or obligation of Greymont and
it is expressly understood and agreed that such non-assumed debts, obligations
and liabilities shall remain the obligations of Greymont.

4. The provisions of this Agreement are subject, in all respects, to the terms
and conditions of the Purchase Agreement including, without limitation, the
indemnification provisions thereof.

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EXCHANGE COMMISSION. BOXES AND ASTERISKS

DENOTE SUCH OMISSION.

 

5. This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and permitted assigns.

6. This Agreement and all questions arising in connection herewith shall be
governed by and construed in accordance with the laws of the Commonwealth of
Kentucky.

7. This Agreement may be executed in counterparts, each of which shall be deemed
an original but all of which taken together shall constitute but one and the
same document.

IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed by
their thereinto duly authorized officers effective as of the time, day, month
and year first above written.

 

GREYMONT MINING CORP. By:  

/s/ Henry E. Cook, Jr.

Name:   Henry E. Cook, Jr. Title:   President ICG KNOTT COUNTY, LLC By:  

/s/ Verlin Robinson

Name:   Verlin Robinson Title:   President

 

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