Document:

EX-10.4

 

Exhibit
10.4

FORM OIL AND GAS DEED, ASSIGNMENT, AND ASSUMPTION

FOR

CONVEYANCE OF OIL AND GAS (INCLUDING CBM AND CMM) RIGHTS

(INCLUDES LEASES, ASSOCIATED RIGHTS AND BOOKS AND RECORDS)

FROM

PEABODY ENTITIES TO CNX GAS COMPANY LLC

 

 

	 	 	 	 	 	 
	Recording Request by and Return to:
	 	 	 	 	 
	CNX Gas Company LLC
	 	 	 	 	 
	5 Penn Center West, Suite 401
	 	 	 	 	 
	Pittsburgh, Pennsylvania 15276-0102
	 	 	 	 	 
	 
	 	 	 	 	 
	 

	 	 	(For recording purposes only)	 	 
	 	 	 

     OIL AND GAS DEED, ASSIGNMENT, AND ASSUMPTION

     THIS OIL AND GAS DEED, ASSIGNMENT, AND ASSUMPTION (together with all exhibits hereto, this
"Deed”), effective as of 12:00 a.m. Central Time on the 1st day of April, 2007 (“Effective Time”),
is made between Peabody Entity (holding oil and gas and CBM/CMM interests in the county), a
Delaware                     , whose address is 701 Market Street, St. Louis, Missouri 63101
(“Grantor”) and CNX Gas Company LLC, a Virginia limited liability company, whose address is 5 Penn
Center West, Suite 401, Pittsburgh, PA 15276-0102 (“Grantee”). Grantor and Grantee are sometimes
referred to individually as “Party” or collectively as “Parties”.

     WHEREAS, on the terms and conditions set forth herein, Grantor desires to grant, sell, convey,
transfer, and assign to Grantee, its successors and assigns forever, those oil and gas rights,
title, interests, estates and claims and other assets and rights described in this Deed;

     WHEREAS, Grantor, its successors and assigns forever, shall retain those reserved rights and
minerals expressly described in this Deed;

     WHEREAS, Grantee has agreed to purchase and accept those oil and gas rights, title, interests,
estates and claims, and other assets described in this Deed, and to assume, pay, discharge and
perform certain obligations and liabilities with regard to such assets; and

     WHEREAS, the Parties agree that the obligations and covenants contained herein are intended to
run with the land and bind the Parties and their respective successors and assigns forever.

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     NOW THEREFORE, for Ten Dollars ($10.00) and other good and valuable consideration, the receipt
and sufficiency of which is acknowledged, Grantor and Grantee agree as follows:

I. Definitions.

     In addition to terms defined elsewhere in this Deed, the following terms with initial capital
letters, when and in this Deed, shall have the meanings set forth below:

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

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

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

     “Contracts” means any written agreement, contract, mortgage, deed of trust, bond, indenture,
lease (other than Oil and Gas leases and Partial Assignment Leases), license, note, joint operating
agreement, division order, Oil and Gas unitization, pooling, or communitization agreement,
declaration, or order, crude oil or gas sales or purchase contract, gathering, transportation or
marketing agreement, easement, right-of-way, surface use or access agreement, service or supply
agreement, certificate, option, warrant, right, or other instrument, document, obligation or
agreement (and any ratifications or amendments to such Contracts whether or not such ratifications
or amendments are described on Exhibit “B”); provided that “Contract” shall not include any
such agreements, contracts or other rights to the extent they relate to any Reserved Rights.

     “ERCs” mean any and all aspects, claims, characteristics or benefits related to the
production, use, capture, flaring, burning, fueling, storage or sequestration of CBM and CMM
produced by Grantee from the Lands containing the Oil and Gas Interests that are capable of being
measured, verified or calculated, and which can produce credits, benefits, offsets,

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

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

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

     “Lands” means that real property overlying or containing the Oil and Gas Interests and
described on Exhibit “A” and depicted on Exhibits “A-1” through “A-___”.

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

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

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

     “Partial Assignment Leases” means certain Oil and Gas leases under which Grantor is lessor
that cover part of the Oil and Gas Interests and are further described on Exhibit “B”.

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

II. Grant of Subject Property

     Grantor hereby grants, sells, conveys, transfers, assigns, and delivers to Grantee, [confirm
language on a jurisdiction-by-jurisdiction basis] subject to the covenants, terms, exceptions,
conditions, restrictions, and Reserved Rights set forth herein, all of Grantor’s rights, title,
interests, estates and claims in and to the following real and personal property as the same exist
as of the Effective Time or as of such other date expressly set forth herein (all of the following,
collectively, the “Subject Property”):

     A. Oil and Gas Interests: All of Grantor’s fee, leasehold, mineral, royalty and other
rights and interests in and to Oil and Gas, in, on or under approximately [___] acres of land
described on Exhibit “A” attached hereto and depicted on the maps attached hereto as
Exhibits [“A-1” through “A-___"] (including, without limitation, landowners’ or reserved
royalties, overriding royalties, rights to free gas either reserved in favor of or granted to
Grantor and its Affiliates, as well as any right to vent CBM and CMM or stimulate coal seams except
as otherwise provided in this Deed) (collectively, the “Oil and Gas Interests”); provided, however,
that the Oil and Gas Interests shall include all Oil and Gas rights and interests owned by Grantor
or any of Grantor’s Predecessors or Affiliates (each as hereinafter defined) as of the Effective
Time in the lands depicted on the maps attached hereto as Exhibits [“A-1” through “A- “],
whether or not such Oil and Gas rights and interests are described on Exhibit “A”.

     B. Other Agreements: All of Grantor’s rights, title, and interests in, to, under, or
derived from all Contracts, Partial Assignment Leases, and Permits (collectively, the “Other
Agreements”), including without limitation those described on Exhibit “B” attached hereto,
in each case only to the extent they relate solely to any of the Oil and Gas Interests or the
production and sale of Oil and Gas attributable to such Oil and Gas Interests, and, in the case of
the Partial Assignment Leases, subject to and reserving in favor of Grantor (i) all rights,
interests, benefits, duties and obligations under such Partial Assignment Leases that are not
incident to the ownership, operation or exploitation of Oil and Gas including, without limitation,
the rights to explore for, develop, mine, produce, transport and sell coal, and any other rights to
develop any surface or mineral rights from the Lands subject to the Partial Assignment Leases,
surface owner compensation, enforcement of surface use restrictions, and the rights to enforce such
reserved rights and interests and to pursue all claims and remedies (including termination) under

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applicable Legal Requirements against lessees, operators, agents, contractors, successors and
assigns for any breach or default of the provisions of a Partial Assignment Lease, and (ii) all
rights to sequester carbon dioxide and other gases which are not Oil and Gas conveyed hereby to
Grantee; provided that such reservation does not include any right to prohibit or restrict
Grantee’s ability to assign or otherwise transfer Grantee’s rights with respect to the underlying
Oil and Gas to a third party, subject to the Reserved Rights.

     C. Associated Rights: All nonexclusive express or implied rights at law associated
with ownership or control of Oil and Gas in and under the Land that Grantor may currently have
(collectively, the “Associated Rights”):

          1. to use and occupy so much of the surface of the Land, and develop, produce, and consume so
much of the available surface or groundwater on or under the Land not otherwise subject to
Grantor’s Reserved Rights, as are reasonable and necessary to explore for, develop, produce,
process, store, transport, and sell Oil and Gas from the Land;

          2. except as limited by the provisions of Sections III and IV hereof, to: (i) stimulate coal
seams on or under the Land for the extraction of Oil and Gas, and (ii) vent, flare or use any CBM
or CMM produced or recovered from coal seams or any existing mines on the Land; and

          3. except to the extent constituting a Reserved Right, to claim (or hereafter acquire the
right to claim): (i) any ERCs (as hereinafter defined) associated with Grantee’s production and
sale, use or flaring of CBM and CMM from the Lands containing the Oil and Gas Interests in lieu of
venting such CBM or CMM to the atmosphere or otherwise disposing of or using such gases; and (ii)
any other credits or allowances (including any tax credits or allowances) relating to production
and sale, use or flaring of CBM or CMM by Grantee in advance of coal mining operations by Grantor,
or its successors and assigns, on the Lands containing the Oil and Gas Interests (the rights
described in clauses (i) and (ii) collectively, the “ERC Rights”); provided, however, that in
exercising any ERC Rights, Grantee shall not take any action that results or would reasonably be
expected to result in additional costs, impairment or interference (all such additional costs,
impairment or interference as determined by Grantor in good faith) to Grantor in connection with
any operations conducted pursuant to the Reserved Rights. In the event that Grantee takes any
action that results or would reasonably be expected to result in additional costs, impairment or
interference (all such additional costs, impairment or interference as determined by Grantor in
good faith) to Grantor in connection with any operations conducted pursuant to the Reserved Rights,
promptly upon Grantor’s request, Grantee shall relinquish and reassign, for no additional
consideration, all such ERC Rights to Grantor who shall then have the right to deal with such ERC
Rights for its own account; provided, however, that such relinquishment and reassignment only shall
apply to ERC Rights on a site-specific basis, in an area reasonably defined by Grantor and only to
the extent necessary for the exercise of its Reserved Rights.

It is expressly agreed that the Associated Rights shall not include any ownership interest in or
title to surface of the Land or to the Reserved Minerals owned or hereafter acquired by Grantor.

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     D. Tax Credits: All rights Grantor may now have or later acquire to claim any tax
credits, except for any such tax credits which may arise from the exercise of the Reserved Rights,
relating to the exploration and production by Grantee of Oil and Gas after the Effective Time with
respect to the Subject Property.

     E. Books and Records: Copies of all accounting, land and Contracts files and records,
and all drilling, engineering, geologic and technical records, files, maps, data, analyses,
drawings, blueprints, financial assurances, bonds, and insurance policies (only to the extent an
outstanding claim has been filed under any such policy with respect to any of the Oil and Gas
Interests), schematics, reports, lists, and plans and processes to the extent the same were
obtained or prepared for the sole purpose of evaluating and developing the oil and gas potential of
the Oil and Gas Interests (collectively, “Books and Records”), which are in the physical possession
of Grantor, or with respect to which Grantor has the right of access and the ability to obtain
copies, as of April 1, 2007 or as of June 20, 2007; provided, however, that Grantor shall use
commercially reasonable efforts to obtain and make available to Grantee Books and Records that are
not in the physical possession of Grantor as of April 1, 2007 or as of June 20, 2007. It is agreed
by the Parties that the Books and Records shall not include: (i) any general accounting, financial
or tax records, (ii) any books, files, records and other materials and data that are subject to
confidentiality obligations or other similar restrictions under agreements with third persons who
are not Affiliates of Grantor, or (iii) any books, files, records and other materials and data that
were obtained, prepared or received by Grantor or any of its agents, consultants or representatives
in connection with: (a) purposes other than evaluating and developing the Oil and Gas potential of
the Oil and Gas Interests, (b) Grantor’s exercise of its Reserved Rights, (c) Grantor’s internal
evaluation of the Subject Property for management purposes, or (d) marketing the Subject Property
to Grantee and others.

     F. Insurance Claims: All rights to insurance proceeds receivable after the Effective
Time with respect to any Assumed Liabilities (as defined below) insured on a “claims made” basis,
and all insurance proceeds (to the extent not already expended by Grantor to restore or replace a
lost or damaged asset, which replacement asset shall be a Subject Property) received prior to June
20, 2007 with respect to any asset which, if held by Grantor as of the Effective time, would be a
Subject Property.

III. Limitation on Grant of Subject Property

     A. The Oil and Gas Interests and Associated Rights are subject to, limited by, junior and
subordinate to all conveyances, leases, easements, encumbrances (other than encumbrances arising
from or relating to mortgages, deeds of trust, pledges or similar encumbrances designed to
collateralize indebtedness in favor of lenders to Grantor or Grantor’s current or former Affiliates
unrelated to the Oil and Gas Interests and Associated Rights covering any of the Land), licenses,
options, and rights-of-way of which Grantee has actual notice, or as to which Grantee is deemed to
have received record notice or notice through reasonable inquiry as of the Effective Time. As used
herein, the term “Affiliates” shall mean with respect to either Grantor or Grantee, any person or
entity controlling, controlled by, or under common control with Grantor or Grantee, as applicable.
The term “control” as used in the immediately preceding sentence, means the possession, directly or
indirectly, of the power to direct or cause the direction of the

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management or policies of the controlled person or entity, whether through the ownership of
voting securities or voting interests, by contract or otherwise. For purposes of the definition,
an Affiliate includes not only present Affiliates but former Affiliates during the period of time
each was an Affiliate.

     B. Grantor’s grant, sale, conveyance, transfer, and assignment of the Subject Property to
Grantee in Section II hereof, and the manner in which the Parties shall hereafter conduct their
respective activities and operations on or with respect to the Land, the Subject Property, and the
Reserved Minerals are expressly subject to and bound by the covenants, terms, exceptions,
conditions, promises, undertakings, reservations, and restrictions specified in this Deed (whether
or not so captioned) including all exhibits hereto (collectively, “Covenants”). The Covenants are
intended to touch and concern the Land, and run with the Land, so as to bind Grantor and Grantee
and their respective lessees, successors, and assigns in perpetuity.

     C. The Subject Property shall not include, and Grantor specifically excludes from this Deed:
(i) any accounts receivable accruing or attributable to the Subject Property for the period prior
to the Effective Time; (ii) all production of Oil and Gas from or attributable to the Subject
Property with respect to all periods prior to the Effective Time and all proceeds attributable
thereto; (iii) any refund of Taxes, costs or expenses borne by Grantor or its predecessors in title
attributable to the period prior to the Effective Time; (iv) any rights, titles, estates or
interests owned, leased, held or otherwise controlled by Grantor in the Lands that are not
otherwise described or included in Section II hereof; (v) all Oil and Gas rights, estates,
interests, and claims in and to properties other than the Lands except as otherwise expressly
provided herein, as well as all Reserved Rights and data, books, maps, records and other
information relating thereto; (vi) except for common law or statutory rights to use the surface as
an incident or right appurtenant to the Oil and Gas Interests, all surface rights and estates in
the Lands, and all roads, ditches and other surface improvements on such Lands; and (vii) other
than the Grantor Reviewable Data (as defined herein), all books, records, files, material,
information and data that were obtained, prepared or received by Grantor or any of its agents,
consultants or representatives (w) for purposes other than evaluating and developing the oil and
gas potential of the Oil and Gas Interests, (x) in connection with Grantor’s exercise of the
Reserved Rights, (y) in connection with internal evaluations of the Subject Property for management
purposes, or (z) in connection with the marketing of the Subject Property or the evaluation and
negotiation of transfer contemplated herein (collectively, the “Excluded Assets”). For purposes of
this Deed, the term “Taxes” means all levies and assessments of any kind or nature imposed by any
Governmental Authority, including all income, sales, use, ad valorem, value added, franchise,
severance, production, net or gross proceeds, withholding, payroll, employment, F.I.C.A., excise or
property taxes, levies production, or other payment required to be made to any state abandoned
property administrator or other public official pursuant to an abandoned property, escheat or
similar law, together with any interest thereon and any penalties, additions to tax or additional
amounts applicable thereto.

IV. Grantor’s Reserved Rights and Subordination

     A. Reserved Rights: In addition to the Excluded Assets, Grantor hereby excludes from
this Deed and reserves and retains to itself and its successors and assigns all rights, title,

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interests, and estates now held or hereafter acquired in, under, or with respect to the Lands
not expressly assigned, conveyed, or transferred to Grantee in Section II hereof, which include,
without limitation, the following rights, estates and interests which shall exist in perpetuity,
shall be senior to the rights and interests granted, sold, conveyed, transferred and assigned in
this Deed to Grantee, and may be exercised by Grantor without creating any duty or obligation
(including any obligation to compensate Grantee for lost or vented CBM or CMM) to Grantee except as
otherwise provided in Exhibit “C” hereto (collectively, the “Reserved Rights”):

          1. all minerals and other substances, other than Oil and Gas including, without limitation,
coal and minerals mixed with the coal (other than CBM or CMM), gravel, limestone, hardrock and
metallic minerals, rock, and their constituent products (collectively, “Reserved Minerals”) and all
strata containing such Reserved Minerals; provided, however, Grantee shall have the right to drill
into, through, over, or under any coal seam or other Reserved Minerals as provided in this Deed and
Exhibit “C” attached hereto;

          2. to explore for, test, drill, develop, mine (by surface mining and any other current or
future mining method), remove, process, store, transport, load, market, and sell all Reserved
Minerals;

          3. to exercise any other rights, interests, benefits, and perform duties and obligations,
relating to the development of the surface estate owned or held by Grantor covering any part of the
Land;.

          4. to own, use, develop (including the right to change the permitted use or zoning for any
purposes described in this Section IV except to the extent that such zoning would prohibit
exploration and production of Oil and Gas hereby conveyed), lease, option, or sell all or any part
of the surface estate of the Land;

          5. all facilities, fixtures, improvements, and personal property owned or held by Grantor
located on, in or under the Land;

          6. use the surface or subsurface of the Land (including any underground mine workings or
voids) for any and all purposes relating to prospecting, drilling for, developing, mining, taking
out, removing, processing, storing, transporting, loading, or disposing of Reserved Minerals or
mine wastes including, without limitation, injection of slurry produced from the Land or other real
property; removal of topsoil and subsurface rock, construction, operation, and removal or
abandonment of shafts, airways, mine openings, drainage systems, drifts, passageways, pits,
platforms, roads, railways, reservoirs and surface impoundments, and utilities, dewatering of
Reserved Minerals and strata in communication therewith, and utilization of all underground
workings and facilities in furtherance of sequestering carbon dioxide and other gases (other than
Oil and Gas conveyed hereby to Grantee); provided that no such subsurface (other than seams of
coal, active or inactive coal mines or gob) shall be used for storage, injection or sequestration
in strata designed or reasonably expected to migrate into or communicate with sands, shales or
other zones or formations in the Lands, with respect to which natural gas and oil wells drilled
into such sands, shales or other zones or formations reasonably could be expected to produce
natural gas or oil in paying quantities or commercial quantities;

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          7. to use the surface or subsurface of the Land to perform any reclamation, remediation, or
restoration activities associated with Grantor’s exercise of its other Reserved Rights (including,
without limitation, any pre-mining or post mining operations) in this Section IV.A. on or with
respect to the Land or other real property as required under applicable agreements, laws,
regulations, Permits regardless of when the events occurred necessitating such uses;

          8. to remove subjacent support in or adjacent to the Land and allow the surface and other
strata to subside; without any liability of any kind to Grantee except as otherwise expressly
provided in Exhibit “C” attached hereto;

          9. to remove, vent, dissipate, or dilute CBM or CMM from a coal seam or underground mine
workings to the extent necessary to operate coal mines in such underground mine workings in an
unimpeded and uninterrupted manner consistent with state and federal mine safety standards,
applicable permits or Grantor’s operating procedures and practices, consistently applied, without
any obligation to recover such CBM or CMM or compensate Grantee for such loss; provided, however,
except as otherwise set forth in Section II.C.3, Grantor shall not have the right to capture,
process, sell or flare such CBM or CMM, unless Grantee is unwilling or unable to do so in a manner
that does not interfere with Peabody’s exercise of the Reserved Rights;

          10. to appropriate, own, discharge, or use surface and groundwater in, on, under, or
appurtenant to the Land;

          11. to utilize all access agreements, easements and rights-of-way, licenses, surface use
agreements, and other approvals and authorizations now held or hereafter obtained by Grantor in
connection with exercising any of its other Reserved Rights in this Section IV.A.;

          12. to mortgage, pledge, or secure financing by encumbering or leasing, any of the Reserved
Rights in this Section IV.A. in connection with activities or operations of Grantor or its
Affiliates on the Land or other real property;

          13. to prohibit any stimulation of CBM or CMM or any other Oil and Gas in any Workable Coal
Bed (as defined in Exhibit “C” hereto) if determined by Grantor (or any Affiliate,
successor, transferee, licensee or assignee then producing or having the right to produce the
Reserved Minerals) to materially impede production, give rise to material safety or regulatory
concerns, or materially increase the costs of mining operations with respect to the Reserved
Minerals; and

          14. to conduct any agricultural, commercial, industrial (including, without limitation,
coal-to-gas or liquefaction facilities, power plants, subsurface commercial gas storage in zones,
underground mine workings, or sealed areas not containing commercially recoverable Oil and Gas, or
sequestration of carbon dioxide or other gases (provided that such sequestration is not designed or
reasonably expected to migrate into or communicate with zones or formations in the Lands containing
paying or commercial quantities of Oil and Gas hereby conveyed to

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Grantee)), residential, recreational, or other surface or subsurface activities or operations
on or in the Land.

     B. Subject Property is Subordinate to Reserved Rights: Except to the extent otherwise
agreed in Development Plans (as defined in Section V) or as expressly provided in Other Agreements,
all Oil and Gas Interests and Associated Rights assigned, conveyed, or transferred to Grantee by
this Deed and Grantee’s exercise of such rights and the subsequent conduct of all operations
relating thereto shall be junior, subordinated and subject to Grantor’s exercise of its senior
Reserved Rights in accordance with the terms and conditions of this Deed. Grantee acknowledges
that: (i) the timing for Oil and Gas development on some of the Land may be delayed due to the
exercise of the Reserved Rights by Grantor and its lessees, successors and assigns, and (ii) some
of the Land may be unsuitable for Oil and Gas development for various reasons including unnatural
and unstable surface, inadequate subjacent or lateral support, restrictions by governmental
authorities pending completion of mining reclamation and remediation, or other conditions arising
out of the prior use of the Lands or Grantor’s or its lessees’, successors’ or assigns’ exercise of
the Reserved Rights.

     C. Exercise of the Parties’ Rights: Except as expressly set forth in this Deed and
Exhibit “C”, in the event of an irreconcilable conflict or dispute between the Parties
following a good faith effort by the Parties to resolve any such irreconcilable conflict or
dispute, Grantor’s Reserved Rights shall be senior to and have absolute priority over Grantee’s
rights, title, and interests set forth in this Deed and shall supersede any implied rights at
common law or, to the extent allowed by applicable law, statutory rights Grantee would otherwise
have. In exercising its Reserved Rights, and subject to the provisions of this Deed (including,
without limitation, as expressly set forth in Exhibit “C”), Grantor shall have the right to
suspend, mine-through or remove Grantee’s Oil and Gas assets and operations whether now existing or
hereafter developed without qualification, limitation or restriction except as expressly set forth
in this Deed or Exhibit “C” hereto.

V. Cooperative Development Plans and Operations

     A. Development Plans: Prior to September 1st of each year after the date hereof,
Grantor’s and Grantee’s designated representatives, acting on behalf of each Party and its lessees,
successors, and assigns, shall meet and confer at a mutually acceptable time and place in good
faith for the purposes of exchanging information as to reasonably foreseeable Oil and Gas, mining,
or other activities or operations on the Land and formulating mutually acceptable written
cooperative development plans (“Development Plans”) that will provide for the orderly and safe
development and production of both Reserved Minerals and Oil and Gas from the Land, avoid or
minimize future land use and operational conflicts between the Parties, and establish an exclusive
process for promptly resolving all causes of action (at law or equity) and claims by one Party
against the other Party arising directly or indirectly from the Parties’ exercise of their
respective rights and interests herein. From time to time, upon the written request of either
Party, Grantor and Grantee and their respective lessees, successors, and assigns shall each
designate in writing no more than a total of three (3) representatives representing all Oil and Gas
Interests and three (3) representatives representing all Reserved Rights. The designated
representatives will be responsible for formulating all Development Plans for the Oil and Gas

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Interests and Reserved Rights in each county in which this Deed is recorded. Either Party may
designate information disclosed during such meetings as confidential and proprietary. Development
Plans shall be executed by the Parties, be promptly recorded in the appropriate government land
records, and be binding on Grantor and Grantee and their respective lessees, successors and
assigns. Absent an approved Development Plan as to any county, and provided that the Parties have
complied with the obligation in this Section V.A. to meet and confer in good faith, all of the
Parties’ respective operations conducted on or with respect to the Land located in such county
shall be subject to the terms and conditions of this Deed and Exhibit “C”.

     B. Information Sharing:

          1. Subject to the terms and conditions set forth herein, on or before December 31, 2007,,
Grantor covenants and agrees to provide, and Grantee shall be entitled to review, regional maps of
coal drill hole data showing the depths and thickness of mineable coal seams relating to the Oil
and Gas Interests (“Reviewable Data”). Grantee shall submit a site-specific request relating to
the Oil and Gas Interests to review the Reviewable Data in writing not less than ten (10) business
days in advance of the requested view date. Grantor shall make the Reviewable Data available to
Grantee at Grantee’s sole cost and expense during normal business hours at Grantor’s offices in St.
Louis, Missouri.

          2. Beginning on January 1, 2008, on or before March 31st of each year, Grantee (as long as
Grantee is not an entity whose primary business is coal production) may submit a request for
specific drill hole data (including gas content and desorption information, but excluding coal
quality information) (each a “Drill Hole Data Request”) from one or more Grantee areas of interest
with respect to the Oil and Gas Interests (each an “AOI”) that Grantee is reasonably likely to use
for Oil and Gas exploration and development within the next following twenty four (24) months, the
location information for which shall be presented on a coordinate system basis; provided,
however, that Grantee only may submit Drill Hole Data Requests for AOIs of not more than an
aggregate amount of 16,000 acres annually. The size of each AOI will be calculated based on the
number of anticipated wells in any given AOI multiplied by (i) forty (40) acres per vertical well
or (ii) one hundred sixty (160) acres per horizontal well. Within ninety (90) days of a Drill Hole
Data Request, Grantor shall provide Grantee with all drill hole data for an area surrounding each
AOI, where such area is approximately five (5) times the size of the AOI (for example, a fifty (50)
vertical well program affects 2,000 acres (fifty (50) wells multiplied by forty (40) acres per
well); therefore, drill hole data will be requested for a 10,000 acre area that includes, and is
centered on, the 2,000 acre AOI).

          3. Beginning on January 1, 2008, on or before June 30th of each year, Grantor (as long as
Grantor is not an entity whose primary business is Oil and Gas production) may submit a Drill Hole
Data Request with respect to any AOI in which Grantee is contemplating test drilling and has
delivered a Drill Hole Data Request pursuant to Section V.B.2 above. In the event that Grantor
requests any additional drilling and testing work while Grantee is in the process of conducting its
test drilling on any AOI, and Grantor’s request results in incremental work or cost to Grantee,
Grantor shall pay Grantee for such incremental cost for such drilling and testing. Within ninety
(90) days of Grantee’s completion of such drilling and

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testing work, Grantee shall provide Grantor with the results of Grantee’s standard testing
program, in addition to the results of any incremental work requested by Grantor.

          4. Grantee covenants and agrees that any Grantor Reviewable Data, Books and Records or the
results of any Drill Hole Data Request reviewed or received by Grantee from Grantor shall be for
Grantee’s sole use, and under no circumstances shall any Affiliate of Grantee, whose primary
business relates to coal, be permitted to review or receive such Grantor Reviewable Data, Books and
Records or the results of any Drill Hole Data Request. In the event that any officer, director,
member or manager of any Affiliate of Grantee, whose primary business relates to coal, also serves
as an officer, director, member or manager of Grantee, Grantee shall employ reasonable measures to
ensure that such officer, director, member or manager is not made privy to any Grantor Reviewable
Data, Books and Records or the results of any Drill Hole Data Request.

     C. Cooperative Development: Subject to the terms and conditions of this Deed,
Exhibit “C” and any applicable Development Plan, each Party agrees to reasonably cooperate
with, execute written consents or other agreements in favor of, and not oppose or raise any
objections to, the other Party’s permit applications or requests for government or other approvals
required for activities or operations conducted pursuant to any rights granted or reserved
hereunder or in any approved Development Plan.

     D. Confidentiality: All information (whether written, electronic, or oral) provided
by the Parties to each other pursuant to the Deed or in connection with the preparation of a
Development Plan, including any Grantor Reviewable Data, Books and Records or Drill Hole Data
Requests, shall be maintained strictly confidential as more fully set forth in a Confidentiality
Agreement substantially in the form attached hereto as Attachment “C-1” to Exhibit
“C” to the Deed (each a “Confidentiality Agreement”).

VI. Title to Subject Property and Disclaimers

     A. Conveyance with Limited Warranty: The Subject Property is being conveyed by
Grantor “as is” and “where is” and without any representations and warranties of title, express or
implied, except as otherwise expressly provided herein. Except for Permitted Liens, Grantor
warrants that title to the Subject Property is free and clear of all claims, liens and encumbrances
arising by, through or under Grantor and any of its Affiliates who are predecessors-in-title to
Grantor (collectively, “Grantor’s Predecessors”). The term “Permitted Liens” means with respect to
any asset or assets that comprise the Subject Property, as the context requires: (i) any lien
securing taxes, assessments and governmental charges not yet due and payable or being contested in
good faith (and for which adequate accruals or reserves have been established); (ii) any customary
zoning law or ordinance or any similar Legal Requirement; (iii) any customary right reserved to any
Governmental Authority to regulate the affected asset or assets; (iv) any Lien (other than Liens
securing indebtedness or arising out of the obligation to pay money) which does not and shall not
individually or in the aggregate with one or more other Liens materially interfere with the right
or ability to own, use, enjoy, produce, mine, or operate the assets, or to convey good title to the
same, or materially detract from their value; (v) any inchoate materialmen’s, mechanic’s,
workmen’s, repairmen’s or other like liens arising in the

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ordinary course of business relating to the assets; (vi) the reservations, reverters and other
rights granted or reserved herein; (vii) any Partial Assignment Lease; (viii) any joint operating
agreement, crude oil or gas sales or purchase agreement, division order or Other Agreement; (ix)
easements, conditions, covenants, restrictions, servitudes, permits, rights-of-way, surface leases,
existing deed or water rights restrictions, historic preservation restrictions and ordinances,
building restrictions and ordinances, zoning, planning and land use restrictions, and other rights
and interests required for surface operations, roads, railways, pipelines, powerlines, transmission
and transportation lines and other like uses, or for the common use of real estate, rights-of-way,
facilities and equipment; (x) all claims, liens and encumbrances to the extent Grantee has received
actual notice or record notice; (xi) any third-party consents which are obtained and in force and
effect on the date hereof; (xii) all rights to consent by, required notices to, filings with, or
other actions by Governmental Authorities in connection with the sale and conveyance of such asset
or assets if the same are customarily sought subsequent to such sale and conveyance; (xiii) all
rights of reassignment upon surrender or any expiration of any lease; (xiv) environmental and title
defects as have been waived by Grantee; (xv) Liens that Grantor shows by affirmative evidence have
been released as of June 20, 2007; (xvi) defects in the early chain of title consisting of mere
failure to recite marital status in a document or omissions of successors of heirship proceedings,
unless Grantee provides affirmative evidence that such failure or omission has resulted in another
person’s or entity’s superior claim of title to the relevant asset; (xvii) defects that have been
cured by possession under applicable statutes of limitation for adverse possession or prescription;
(xviii) defects based solely on lack of information in Grantor’s files; and (xix) all burdens on
Oil and Gas production of which Grantee has actual notice (as set forth on Exhibit “D”
hereto) or record notice; provided that “Permitted Liens” shall not include any Lien securing any
debt, encumbrance or monetary claim, or any pledge, deed of trust, mortgage, security interest or
similar lien, caused, created or allowed by Grantor or its Affiliates, which could prevent or
interfere with the conduct of the business of Grantee. Classification of any Lien as a “Permitted
Lien” shall not affect any liability which Grantor may otherwise have under this Deed, including
any indemnity obligation hereunder.

     B. Grantor’s Authorization: Grantor represents that its representative executing this
Deed is duly authorized to execute this Deed and all other related documents on behalf of Grantor.
Grantor hereby assigns to Grantee, to the extent assignable and without warranty of any kind, all
covenants of title, warranties and representations relating to the Oil and Gas Interests and
Associated Rights received by Grantor from Grantor’s Predecessors, however, Grantor shall have no
duty or obligation to assert any rights under such covenants, warranties, or representations.

     C. Subsequent Conveyances: For no additional consideration, Grantor shall hereafter
execute and deliver to Grantee, or secure from Grantor’s Predecessors or Affiliates, if necessary,
a deed, assignment, and assumption with a warranty of title by, through, or under Grantor,
Grantor’s Predecessors or Affiliates, as the case may be, but without any other warranties or
representations, express or implied, assigning, delivering and transferring to Grantee any Oil and
Gas Interests and/or Associated Rights that are determined after the date hereof to be owned or
held by Grantor or Grantor’s Predecessors as of the Effective Time. All subsequent conveyances by
Grantor or any of Grantor’s Predecessors or Affiliates of such additional Oil and Gas Interests
shall be made using this Deed form unless otherwise mutually

13

 

agreed by the Parties. However, Grantee agrees that Grantor shall have no duty or obligation
to convey, or to cause Grantor’s Predecessors or Affiliates to convey, any Oil and Gas Interests
acquired by Grantor or any of Grantor’s Predecessors or Affiliates in the Lands after the Effective
Time that are not described on Exhibit “A” or depicted on Exhibits “A-1” through
“A-    .”

     D. DISCLAIMERS: THE PARTIES AGREE THAT, TO THE EXTENT REQUIRED BY APPLICABLE LAW,
REGULATIONS OR ORDERS, TO BE OPERATIVE, THE DISCLAIMERS OF WARRANTIES CONTAINED IN THIS SECTION VI.
ARE “CONSPICUOUS” DISCLAIMERS. GRANTOR EXPRESSLY DISCLAIMS ANY AND ALL REPRESENTATIONS OR
WARRANTIES, EXPRESS OR IMPLIED, WHATSOEVER WITH RESPECT TO THE SUBJECT PROPERTY EXCEPT AS OTHERWISE
PROVIDED IN THIS DEED. EXCEPT AS EXPRESSLY SET FORTH IN THIS DEED OR THE ATTACHMENTS HERETO, WITH
RESPECT TO THE PEABODY OIL AND GAS INTERESTS, PEABODY MAKES NO, AND HEREBY DISCLAIMS, ANY
REPRESENTATION OR WARRANTY WITH RESPECT TO (1) ITS RIGHTS TO OR OWNERSHIP OF CBM OR CMM IN OR
ASSOCIATED WITH THE PEABODY OIL AND GAS INTERESTS; (2) THE QUANTITY OR QUALITY OF OIL AND GAS
CONTAINED IN THE OIL AND GAS INTERESTS; (3) ANY AND ALL GEOLOGIC, LAND OR TECHNICAL DATA AND
INFORMATION PROVIDED TO GRANTEE REGARDING THE OIL AND GAS INTERESTS; (4) THE GEOLOGY OR OPERATIONAL
CONDITIONS EXISTING OR TO BE ENCOUNTERED ON OR WITH RESPECT TO THE LAND CONTAINING THE OIL AND GAS
INTERESTS BUT NOT LIMITED TO, ADEQUATE SUBJACENT OR LATERAL SUPPORT OF THE LAND OR ADJACENT LAND,
OR THE ENVIRONMENTAL CONDITION OF THE LAND, OR OTHER CONDITIONS ARISING OUT OF THE PRIOR USE OF THE
LAND; OR (5) GRANTOR’S RIGHTS TO OBTAIN ACCESS TO OR OVER THE SURFACE OF THE LAND CONTAINING THE
OIL AND GAS INTERESTS, TO UTILIZE THE SURFACE OF SUCH LANDS IN CONNECTION WITH OIL AND GAS
ACTIVITIES OR OPERATIONS CONTEMPLATED BY THIS DEED, OR TO APPROPRIATE OR USE WATER PRODUCED IN
CONNECTION WITH CBM OPERATIONS.

VII. Oil and Gas Production

     If done in compliance with the provisions of this Deed and Exhibit “C”, Grantee shall
have the right to drill into, through, over, or under the Reserved Minerals, and to fracture coal
seams and surrounding rock to produce and vent CBM from any coal seam owned, all or in part, by
Grantor in, on, or underlying the Land. In addition, subject to complying with the provisions of
this Deed and Exhibit “C”, Grantee shall also have the right to explore for, produce,
market, and sell and/or vent, flare or beneficially use CMM from inactive or sealed underground
mine workings, gob zones or voids created by the past, present, or future mining of coal under the
Land subject, however, to Grantor’s Reserved Rights and all applicable Legal Requirements and
Permits. Grantee, at its sole cost and expense, shall obtain and fully comply with all Permits
required to discharge, process, or reinject water produced during Oil and Gas operations. Except
in connection with the exercise of Reserved Rights or as set forth in Exhibit “C” hereto or
in any Development Plan, Grantor shall not interfere with Grantee’s legal, Permit, or regulatory
obligations.

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VIII. Surface Rights

     A. Without in any way limiting Grantee’s common law or statutory rights (if any) to use the
surface overlying the Oil and Gas Interests arising from, or incident or appurtenant to its
ownership of the Oil and Gas Interests and Associated Rights, with respect to any part of the
surface estate of the Lands as of June 8, 2007 that is or was owned by Grantor or its Affiliates,
upon the written request of Grantee, Grantor and each of its successors and assigns (as the case
may be) covenant and agree to execute and deliver, and Grantor agrees to cause its Affiliates to
execute and deliver, to Grantee (or any entity with whom Grantee has entered into a joint operating
agreement, pursuant to which Grantee is participating or has a right to participate in the subject
operations) one or more Surface Use Agreements (each a “Surface Use Agreement”), in the form
previously agreed to by the Parties, under which Grantee shall have the non-exclusive right to use
so much of the surface of the Land on a site-specific basis as is reasonable and necessary for the
exploration, testing, venting, flaring, use, production, processing, storage, and transportation of
Oil and Gas, or the installation of equipment, fixtures, improvements, pipelines, and electrical
lines associated with such operations. Each Surface Use Agreement entered into pursuant to this
Section VIII shall be executed and delivered in recordable form, and upon execution and delivery of
such Surface Use Agreement, the Parties immediately shall record such Surface Use Agreement in the
recorder’s office or office for land records of the applicable county.

     B. Transfers; Relation to Surface Use Agreements:

          1. Prior to June 20, 2012, Grantor covenants and agrees that it shall not sell, assign, or
otherwise permanently transfer, and Grantor shall cause its Affiliates not to sell, assign or
otherwise permanently transfer, any interest in the surface estate overlying the Oil and Gas
Interests that is owned or leased by Grantor or an Affiliate as of June 8, 2007 except by a
recordable instrument which makes such sale, assignment or other permanent transfer under and
subject to the obligation to enter into a Surface Use Agreement, consistent with the terms hereof,
with Grantee (or any entity with whom Grantee has entered into a joint operating agreement,
pursuant to which Grantee is participating or has a right to participate in the subject
operations); provided that such obligation shall expire as to Grantor, its Affiliates, and/or
Grantor’s successors, assigns and transferees on such fifth anniversary. After June 20, 2012,
Grantor or its Affiliates and/or Grantor’s successors, assigns and transferees to the surface
estate (as the case may be), shall be permitted to sell, assign, transfer, or otherwise deal with
any portion of such surface overlying the Oil and Gas Interests which is not then subject to a
valid Surface Use Agreement, free of any obligation to Grantee to enter into a Surface Use
Agreement.

          2. If at any time Grantor or any Grantor Affiliate desires to transfer an estate in the
surface overlying the Oil and Gas Interests (then owned by Grantee) that is owned or leased by
Grantor or such Affiliate as of June 8, 2007 in a transaction which is less than a sale, assignment
or other permanent transfer, Grantor shall make, and Grantor shall cause its Affiliates to make,
such transfer under and subject to the duty to enter into a Surface Use Agreement with Grantee.

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IX. Coal Mine Liability

     A. Coal Mine Conditions: Grantee shall have no duty or liability to clean up or
remediate any hazardous or toxic substance or other environmental condition caused, produced, or
generated during Grantor’s or Grantor’s Predecessors’ or its successors’ coal mining operations,
except as otherwise agreed by the Parties in writing.

     B. Coal Mine Ownership: Grantor shall retain ownership of any existing vent hole or
well bore which penetrates any underground mine workings. For inactive mines and sealed areas, to
the extent permitted by applicable Legal Requirements, upon posting the required bond for such well
bore and a written assignment and assumption of full responsibility by Grantee for such vent hole
or well bore, Grantee may commence using such well bore or vent for the capture and sale of CBM or
CMM. Thereafter, except as otherwise directed by Grantor in writing, Grantee shall have sole
responsibility for the plugging and abandonment of any well bore or vent hole in accordance with
applicable rules and regulations.

X. Release of Grantor Liability

     Grantee acknowledges that Grantor has held rights, interests and estates in the Lands for coal
mining and other purposes and agrees that, except as provided in Section XIII of this Deed, no
causes of action, claims, or demands shall ever be asserted by Grantee against Grantor or any of
its Affiliates and their respective members, directors, officers, employees, and agents for
damages, injunctive relief, or regulatory relief arising out of any air quality, surface,
subsurface, or water quality condition or occurrence, known or unknown, now existing or hereafter
occurring or discovered on, at, or under the Lands or other properties and whether or not such
condition or occurrence arises out of or is the result of mining related activities on the Land or
other properties prior to the Effective Time.

XI. Assessments and Taxes

     A. Grantee’s Tax Obligations: Any Taxes due or assessed on or with respect to the
Subject Property or Oil or Gas production therefrom by a Governmental Authority shall be pro-rated
to the Effective Time and all such assessments, charges, fees, or other Taxes that thereafter come
due and payable with respect to such Subject Property or the development, production, and sale of
Oil and Gas from the Lands and all lands pooled therewith shall be the sole responsibility of
Grantee.

     B. Grantor’s Tax Obligations: Grantor, as owner of the Reserved Rights, shall be
solely responsible for any Taxes assessed by a Governmental Authority or that come due and payable
with respect to such rights, the development, production, and sale of Reserved Minerals from the
Lands, and all fixtures, improvements, or other assets thereon owned by Grantor prior to or after
the Effective Time hereof.

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XII. Liens

     Each Party shall take such actions as may be necessary to ensure that its activities and
operations do not result in any encumbrances or liens upon any right, title, or interest held by
the other Party.

XIII. Assumption and Indemnification

     A. Definitions: For purposes of this Deed, the following definitions apply:

          1. “Assumed Liabilities” means:

               a. All obligations and liabilities to the extent attributable to actions occurring or
conditions first occurring after the Effective Time under or with respect to the Subject Property,
including, without limitation, all duties, obligations, and liabilities to the extent Grantee has
received actual notice or record notice, with respect to: (i) all rights-of-way, easements,
agricultural or other leases, surface access or use agreements, deed and plat restrictions,
reservations, severances, Legal Requirements, building and use restrictions, or partitions,
relating in any way to the Oil and Gas Interests or Associated Rights; (ii) all rights of persons
in possession, physical conditions, encroachments and possessory rights which would be evident from
an inspection or a current survey of the Lands; (iii) operation of any title curative or
prescription statutes; and (iv) any buy-back or reversionary rights or interests applicable to the
Oil and Gas Interests or Associated Rights;

               b. All other obligations and liabilities to the extent attributable to actions, events or
conditions first occurring after the Effective Time and relating to, arising out of or attributable
to the ownership or operation of the Subject Property after the Effective Time, except to the
extent such obligations or liabilities relate to, arise out of or are attributable to any Reserved
Right; and

               c. All risks and responsibilities associated with the conduct after the Effective Time of Oil
and Gas exploration, development, production, treatment, compression, gathering, storing,
transporting, marketing, and selling operations on the Lands and lands pooled therewith.

          2. “Claims” means any and all causes of action (at law or in equity), claims, damages,
demands, liens, liabilities, losses, penalties, fines, settlements, and costs or expenses
(including, without limitation, reasonable attorney’s and consultant’s fees, investigation costs,
court costs and other costs of defense).

          3. “Grantee Group” means Grantee and Grantee’s joint venturers and Affiliates, and their
respective partners, members, directors, officers, employees, agents, representatives, contractors
and subcontractors, lessees, invitees, successors and assigns.

          4. “Grantee Indemnified Parties” means Grantee and Grantee’s Affiliates, and their respective
officers, directors, managers, employees, agents, representatives, contractors

17

 

and subcontractors, successors and assigns, and any person or entity claiming by or through
any of them.

          5. “Grantor Group” means Grantor and Grantor’s Affiliates, and their respective partners,
members, directors, officers, employees, agents, representatives, lessees, and invitees.

          6. “Grantor Indemnified Parties” means Grantor and Grantor’s Affiliates, and their respective
officers, directors, managers, employees, agents, representatives, contractors and subcontractors,
successors and assigns, and any person or entity claiming by or through any of them.

     B. Assumption by Grantee: In addition to the other Covenants, assumptions and
obligations of Grantee under this Deed and Exhibit “C” hereto, Grantee shall assume and
timely pay, discharge and perform the Assumed Liabilities.

     C. Assumption by Grantor: In addition to the other Covenants, assumptions and
obligations of Grantor under this Deed and Exhibit “C” hereto, except to the extent
constituting Assumed Liabilities or as otherwise provided in clause F. below or in Exhibit
“C” hereto, Grantor shall assume and timely pay, discharge and perform all risks and
responsibilities associated with its exercise of the Reserved Rights.

     D. Indemnification by Grantee: Grantee shall protect, defend, indemnify and hold
harmless the Grantor Indemnified Parties from, against and with respect to any and all Claims:

          1. of or by third parties made against any Grantor Indemnified Party and relating to, arising
out of or attributable to any Assumed Liabilities or any act or omission of any member of the
Grantee Group in connection with any activities or operations on the Lands or the exercise of any
rights, duties or obligations under this Deed which result in personal injury, including death, or
real or personal property damage;

          2. relating to, arising out of or attributable to any Assumed Liabilities;

          3. relating to, arising out of or attributable to the exercise by any member of the Grantee
Group of its rights with respect to the Subject Property or on the Lands after the Effective Time;

          4. relating to, arising out of or attributable to the presence, disposal, release or
threatened release of any toxic or hazardous waste or substance, solid waste, petroleum products,
or drilling and mining wastes caused by or resulting from any member of the Grantee Group’s
exercise of the rights granted to it under this Deed on, under, from or affecting the Lands, or
ambient air, soil, water, vegetation, personal property, persons or animals thereon, including
Claims based upon personal injury, including death, and damages to real or personal property;

          5. relating to, arising out of or attributable to any act or omission of any member of the
Grantee Group in connection with the conduct of Oil and Gas operations under

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this Deed, Exhibit “C” hereto or any approved Development Plan which results in
personal injury, including death, or damages to real or personal property;

          6. relating to, arising out of or attributable to any violation of any Legal Requirement or
Permit applicable to the conduct of Oil and Gas operations by any member of the Grantee Group on
the Lands and pursuant to this Deed, Exhibit “C” hereto or any approved Development Plan;
or

          7. relating to, arising out of or attributable to any breach by any member of the Grantee
Group of any covenant contained in or other violation of this Deed, Exhibit “C” hereto or
any approved Development Plan.

     E. Indemnification by Grantor: Grantor shall protect, defend, indemnify and hold
harmless the Grantee Indemnified Parties from, against and with respect to any and all Claims:

          1. of or by third parties made against any Grantee Indemnified Party and relating to, arising
out of or attributable to any act or omission of any member of the Grantor Group in connection with
the exercise of the Reserved Rights which results in personal injury, including death, or damage to
real or personal property;

          2. except to the extent constituting an Assumed Liability or as provided in clause F. below or
in Exhibit “C” hereto, relating to, arising out of or attributable to any act or omission
of any member of the Grantor Group in connection with the exercise of the Reserved Rights which
results in personal injury, including death, or damage to real or personal property;

          3. relating to, arising out of or attributable to the presence, disposal, release or
threatened release of any toxic or hazardous waste or substance, solid waste, petroleum products,
or drilling or mining wastes caused by or resulting from any member of the Grantor Group’s exercise
of the Reserved Rights on, under, from or affecting the Lands, or ambient air, soil, water,
vegetation, personal property, persons or animals thereon, including Claims based upon personal
injury, including death, or damages to real or personal property;

          4. relating to, arising out of or attributable to any violation of any Legal Requirement or
Permit applicable to the exercise of the Reserved Rights by any member of the Grantor Group; or

          5. relating to, arising out of or attributable to any breach by any member of the Grantor
Group of any covenant contained in or other violation of this Deed, Exhibit “C” hereto or
any approved Development Plan.

     F. Mutual Indemnification: Except as otherwise provided in Exhibit “C”
hereto, each Party shall protect, defend, indemnify and hold harmless the other Party’s Indemnified
Parties from, against and with respect to any and all Claims relating to, arising out of or
attributable to any gross negligence or willful misconduct of the indemnifying Party. For
avoidance of doubt, it is the intention of the Parties that the sole and exclusive remedies for any
Claims suffered or incurred by any Grantee Indemnified Party relating to the temporary or permanent
suspension of those of Grantee’s Oil and Gas operations that are located on or within

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(i) a Mine-Through Area (as hereinafter defined) or (ii) Lands covered by a Notice of
Subordination, due to any member of the Grantor Group’s exercise of the Reserved Rights are set
forth in Exhibit “C” hereto.

     G. No Indemnity for Certain Conduct: Notwithstanding anything to the contrary in this
Section XIII, neither Party shall have any indemnification obligation to the other Party’s
Indemnified Parties for their own negligence, recklessness or willful misconduct. In the event of
any such negligence, recklessness or willful misconduct the respective rights and duties of the
Parties shall be governed by the substantive law of the jurisdiction in which such negligence,
recklessness or willful misconduct occurred.

XIV. Miscellaneous

     A. Deed Interpretation: In the event of a conflict between the provisions of this
Deed and Exhibit “C”, the provisions of Exhibit “C” shall control. If there is a
conflict between the provisions of this Deed (including Exhibit “C”) and a Development Plan
executed by the Parties or their respective successors and assigns, the provisions of the
Development Plan with respect to specific operational matters shall control.

     B. Assignment and Conveyance: If a Party assigns, conveys, leases, sells, donates or
otherwise transfers all or any part of the rights, title, or interests granted or reserved herein,
all Covenants in this Deed including Exhibit “C” pertaining to such rights, title, or
interests shall be covenants running with the Land in perpetuity and shall be fully binding on such
Party’s lessees, successors, assigns, or grantees; provided, however, any conveyance, or transfer
of such rights, title, or interests shall relieve and discharge the grantor or assignor thereof
from any liability for performance of such terms, conditions, duties, and restrictions that accrue
after such conveyance but only to the extent of the specific rights conveyed or transferred.
Concurrently with assigning, conveying, leasing, selling, or transferring all or any part of the
rights, title, or interests granted or reserved in this Deed, the transferring Party agrees to
obtain from each lessee, successor, assignee, or grantee written ratification of the obligation to
comply with and be bound by Covenants of this Deed (including, without limitation, those provisions
with respect to confidentiality), and to provide a written designation of representative as
required under Section V.A. Such requirement to obtain written ratification to comply with and be
bound by all terms, conditions, and covenants of this Deed shall run with the land and bind all
subsequent lessees, successors, assigns, and grantees of the Parties.

     C. Severability: Whenever possible, each provision of this Deed will be interpreted
in such manner as to be effective and valid under applicable law, but if any provision of this Deed
is held to be prohibited by or invalid under applicable law, such provision will be ineffective
only to the extent of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Deed.

     D. Headings: All descriptive headings are provided for reference only and shall not
affect the construction or interpretation of this Deed.

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     E. Execution and Counterparts: This Deed will be executed in counterparts all of
which are identical, except that to facilitate recordation, in certain counterparts hereof portions
of Exhibit “A” which contain specific descriptions of real and personal properties located
in the recording jurisdiction in which the particular counterpart is to be recorded are included,
and other portions of Exhibit “A” are included by reference only. All of such counterparts
together shall constitute one and the same instrument. Complete copies of the Deed containing the
entire Exhibit “A” have been retained by Grantor and Grantee. Grantor and Grantee have
executed, or may execute, certain separate assignments of individual Oil and Gas leases or
interests which are included in the Oil and Gas Interests, for filing with and approval by
government entities or agencies who are lessors of such leases, or who administer such leases on
behalf of such lessors. Such separate assignments are on forms prescribed or suggested by said
governmental entities and agencies, evidence the conveyance and assignment of the applicable Oil
and Gas Interests covered thereby, and are not intended to modify and shall not modify any of the
terms and conditions contained herein. Such separate assignments shall be deemed to contain all of
the terms and provisions hereof, as fully and to all intents and purposes as though the same were
set forth in such separate assignments.

     F. Entire Agreement: This Deed, together with the exhibits attached hereto,
constitutes the entire agreement of the Parties relating to the subject matter of this Deed and
supersedes all previous agreements, promises, representations, understandings, and negotiations,
whether written or oral, among the Parties with respect to the subject matter hereof.

     G. No Waiver: The failure of either Party to enforce at any time or for a period of
time, any term or condition of this Deed, including the exhibits attached hereto, shall not be
construed as a waiver of the same or the right thereafter to enforce such term or condition.

     H. Incorporation: The provisions and Covenants contained in this Deed, including
without limitation those contained in Exhibit “C”, shall be deemed to touch and concern the
Land and shall be deemed to be a covenant running with and burdening the Land in perpetuity.

     I. Rule Against Perpetuities: If a court of competent jurisdiction shall hold that the
Rule Against Perpetuities or any similar Legal Requirement applies to any transfer of an interest
contemplated herein, any right to receive, and obligation to make, such transfer shall terminate on
the last day of the period allowed for vesting under such rule or other Legal Requirement, such
that the transfer shall thereby be deemed valid under the rule or Legal Requirement.

21

 

     IN WITNESS WHEREOF, this Oil and Gas Deed, Assignment, and Assumption has been executed by the
Parties as of the Effective time set forth above.

	 	 	 	 	 	 	 
	 	 	CNX GAS COMPANY LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	[PEABODY ENTITIES]	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 

[notarizations conforming to each state to be added]

22

 

EXHIBIT C

TO

OIL AND GAS DEED, ASSIGNMENT, AND ASSUMPTION (“DEED”)

EFFECTIVE APRIL 1, 2007

BETWEEN

PEABODY ENTITIES (“GRANTOR”)

AND

CNX GAS COMPANY LLC (“GRANTEE”)

     The Deed to which this Exhibit “C” is attached and made a part contemplates Grantor’s
and Grantee’s execution and implementation of one (1) or more written Development Plans to provide
for the orderly conduct of Grantee’s Oil and Gas operations and the exercise of Grantor’s Reserved
Rights on and with respect to the Land. The procedure for preparing a Development Plan and its
general elements are set forth in this Exhibit “C”. If the Parties are unable to agree
upon a Development Plan and there is a conflict between Grantor’s and Grantee’s respective
operations on the Lands, the sole remedies for resolving such conflict are provided in the Deed and
this Exhibit “C”. All capitalized terms in this Exhibit “C” shall have the
meanings set forth in the Deed unless otherwise expressly provided herein.

     I. Cooperative Development. As part of Grantor’s agreement to accept, and Grantee’s
willingness to pay, the consideration for executing the Deed, the Parties agree to use their
respective reasonable and good faith efforts consistent with the provisions of this Exhibit
“C” to enter into mutually acceptable Development Plans. Unless otherwise agreed in a
Development Plan, the following is the exclusive procedure for resolving all conflicts between
Grantor’s and Grantee’s respective operations on the Lands and, if applicable, to compensate
Grantee for any and all causes of action, claims (at law or equity), damages, or losses resulting
from Grantor’s exercise of its senior Reserved Rights set forth below.

     A. Exchange of Information and Preparation of Development Plans. Prior to
submitting any applications for Permits for operations on the Land conducted pursuant to the
rights granted or reserved under the Deed, each Party shall provide advance written notice
to the other Party advising of proposed operations (“Notice of Proposed Operations”).
Thereafter, from time to time, the Parties’ designated representatives shall meet and confer
(prior to September 1st each year) to (i) identify areas in which Grantee’s planned Oil and
Gas operations may conflict with, impede or otherwise affect Grantor’s exercise of its
Reserved Rights, (ii) exchange information regarding existing or reasonably foreseeable
mineral development or other activities or operations on the Land, and (iii) formulate one
or more mutually acceptable written Development Plans to provide for orderly and safe
mineral development on the Lands, avoid future operational conflicts, and minimize potential
damage claims arising under this Exhibit “C”. Each Development Plan shall include
detailed work schedules, operating procedures, site maps for all proposed operations, and
any other terms and conditions agreed to by the Parties. In each Development Plan, the
Parties will attempt to identify areas on the Lands which will be: (A) joint use areas; (B)
exclusive surface areas for mining and other operations

C-1

 

conducted pursuant to the Reserved Rights; (C) exclusive surface areas for wells and
equipment, and other related assets (collectively, “Oil and Gas Assets”); and (D) access and
easement areas (in which Grantee will be permitted to exercise its nonexclusive surface
rights granted under the Deed as part of the Associated Rights). All information (whether
written, electronic, or oral) provided by the Parties to each other pursuant to the Deed or
in connection with the preparation of a Development Plan, including any Grantor Reviewable
Data, Books and Records or Drill Hole Data Requests, shall be maintained strictly
confidential as more fully set forth in a Confidentiality Agreement substantially in the
form attached hereto as Attachment “C-1” (each a “Confidentiality Agreement”).

     1. A Notice of Proposed Operations must be provided during the planning stage
for any contemplated future operations or activities, and in any event at least
thirty (30) days in advance of the date the proposing Party files an application for
or otherwise takes any action to obtain any Permit with respect to such proposed
operations or activities so as to maximize the Parties’ ability to prepare, in a
timely manner, a written Development Plan.

     2. In order to facilitate delivery of a Notice of Proposed Operations, not more
than thirty (30) days following the effective date of any assignment, conveyance,
lease, sublease, or transfer by either Party to a third party of an Oil and Gas
Interest, right to Reserved Minerals, or title to the surface of the Land, such
Party shall notify the other of the name, address, and phone number of the
transferee and provide a copy of the transfer instrument. Neither Party will be
obligated to deliver a Notice of Proposed Operations to the other Party’s
successors, assigns or other transferees if the non-transferring Party was not
notified of the transfer. All notices shall be made in writing and delivered via US
mail, return receipt requested, or by private courier service. Notwithstanding
anything herein or in the Deed to the contrary, neither Party shall assign, convey,
lease, sublease or transfer any Oil and Gas Interest or right to any Reserved
Minerals unless the assignee, lessee or transferee shall have executed a
Confidentiality Agreement.

     3. All meetings shall be by conference call or in person at mutually agreed
upon dates, times, and places. Each Party shall bear its costs and expenses for
participating in or attending conference calls or meetings. The Parties and their
respective employees, agents, and consultants shall deal with each other reasonably
and in good faith. At least three (3) business days prior to a scheduled meeting,
each Party shall, to the extent available, provide the other Party with copies of
information including, without limitation, maps and surveys relating to its proposed
plans and general locations of access routes, utility corridors, facilities, and
operations on those portions of the Lands that are the subject matter of the
meeting. Each Party shall provide sufficient information to enable the other Party
to understand and evaluate the duration and extent of the potential impacts of the
proposed operations. The Parties shall cooperate with each other in preparing a
Development Plan based on the information disclosed and any understandings reached
during the meetings. Grantor, however, may withhold its

C-2

 

consent to any term of a proposed Development Plan if Grantor believes such
term will materially interfere with or impede the exercise of its Reserved Rights or
result in either Party having to comply with material safety, environmental
(including post mining reclamation), or regulatory requirements relating to the
conduct of multiple mineral development or other operations on the Land.

     4. At least thirty (30) days prior to filing any application for a Permit to
conduct Oil and Gas operations on the Lands (such as seismic surveys, drilling, or
constructing any powerlines, pipelines or roads), Grantee shall consult with
Grantor, and provide information for Grantor’s confidential review, regarding its
proposed operations. Except as otherwise expressly provided below, Grantee shall
obtain Grantor’s written consent as to the location of all Oil and Gas Assets unless
such locations are specifically identified in an existing approved Development Plan;
provided, however, that Grantor’s written consent shall not be required for Lands in
which Grantor does not own or control the surface rights, or which contains Reserved
Minerals that are not reasonably likely to be commercially mined or extracted within
fifteen (15) years of the proposed commencement date of Grantee’s Oil and Gas
operations (such determination being made based upon reasonable assumptions and
industry practice in effect as of the commencement date of the proposed Oil and Gas
operations by Marshall Miller & Associates, or its successor, unless otherwise
determined by the mutual agreement of the Parties at any Development Plan meeting;
provided, however, that in the event that the original Grantor and Grantee no longer
retain any interest with respect to the Deed to which this Exhibit “C” is
attached, the entity which is not instigating the dispute shall have discretion with
respect to who shall make such determination). Prior to or at each meeting, Grantee
shall provide Grantor with copies of: all available Permit applications, including
maps and survey plats, and site specific plans and locations for Oil and Gas Assets
proposed to be constructed or placed on the Lands. Any of such materials or
information not provided at the meeting will be promptly delivered to Grantor upon
Grantee’s receipt, including, without limitation, copies of all Permits and
approvals and any bonds, letters of credit, or financial assurances required under
applicable laws, rules, regulations, or Permits. If Grantee’s proposed operations
are reasonably expected to materially conflict with or impede Grantor’s current or
future operations (in the case of future operations, only to the extent identified
in a Development Plan) or result in material safety, environmental or regulatory
issues with respect to conducting multiple operations on the Lands, the Parties
shall, in good faith, use all reasonable efforts to resolve the conflict prior to
commencement of any Oil and Gas operations on the Lands. If Grantor is preparing
Permit applications with respect to a particular area on the Land, upon Grantee’s
written request, Grantor shall provide Grantee for its confidential review copies of
maps depicting all proposed mine site and facility locations, and, when and as
received, relevant portions of all Permits and approvals (including any maps)
indicating the location of all mining and other operations to be conducted by
Grantor on the Lands pursuant to the Reserved Rights.

C-3

 

     5. If the Parties are unable to resolve the dispute with respect to Grantee’s
proposed operations pursuant to Section I.A.4., the dispute shall be settled by
arbitration administered by a single arbitrator, with at least ten (10) years of
natural resources and mineral extraction experience. The arbitration shall be
conducted pursuant to the Commercial Arbitration Rules and Mediation Procedures of
the American Arbitration Association; provided, however, that the Commercial
Mediation Procedures provided for therein shall not apply unless the parties to the
arbitration mutually agree. The final decision by the arbitrator shall be
consistent with the provisions of this Exhibit “C”. Any arbitral decision
or award may be enforced against the Parties or their assets wherever they may be
located and a judgment on an arbitral award may be entered by any court having
jurisdiction thereof and, for such purpose, each Party hereby submits to the
jurisdiction of any such court and waives any objections based on inconvenient forum
or lack of jurisdiction.

     B. General Operating Provisions.

     1. Each Party and its employees, contractors, and agents shall (i) take all
necessary and appropriate action and measures to minimize safety, health, and
environmental hazards and risks associated with its operations conducted in or
adjacent to areas of the Lands used in common by the Parties, and (ii) use all
reasonable efforts to manage, cooperate with, and coordinate its activities with the
other Party so as to be in compliance with all applicable agreements, laws, rules,
regulations, and Permits. If there is a conflict in the Parties’ respective
standard operating procedures for active or planned operations in a common area on
the Lands, then, unless otherwise prohibited by applicable law or Permits, Grantee
shall comply with Grantor’s operating procedures and requirements.

     2. Each Party shall abstain from committing waste, causing unnecessary damage,
or discarding or disposing of any materials, supplies, or litter on the Lands.

     3. Each Party shall conduct its operations on the Lands in accordance with the
highest standard practices in its industry and shall maintain all equipment,
facilities, infrastructure, roads, storage areas, utilities, and other improvements
in good working and operating condition.

     4. On Lands in which Grantor has no surface ownership or control or the
Reserved Minerals are not reasonably likely to be commercially mined or extracted
within fifteen (15) years of the proposed commencement date of Grantee’s Oil and Gas
operations (such determination being made by Marshall Miller & Associates based upon
reasonable assumptions and industry practice in effect as of the commencement date
of such proposed Oil and Gas operations), Grantee shall properly post and mark all
active construction and drilling operations in compliance with applicable mining
and oil and gas Legal Requirements, Permit requirements, and surface use agreements.
With respect to

C-4

 

all operations conducted on Lands other than those described above, each Party
shall enclose with an adequate fence all equipment and open excavations, and
immediately install cattle guards or steel gates upon cutting a fence.

     5. Each Party, at its sole cost and expense, shall fully comply with all
applicable environmental laws, regulations, rules, orders, or Permits relating to
the conduct and completion of all investigations, studies, sampling and testing, and
all remedial and other actions necessary to clean up or remove any toxic or
hazardous substance or any solid waste, including, but not limited to, petroleum
products and all drilling and mine waste on, under, from, or affecting the Lands,
and caused in any manner by the rights granted or reserved in this Deed. The costs
and expenses associated with the aforementioned activities and operations shall
include, without limitation, all reasonable attorneys’ and consultants’ fees,
investigation and laboratory fees, court costs, and litigation expenses relating to
any investigations, actions, claims, or enforcement proceedings arising under this
Section I.B.5.

     C. Specific Provisions Relating to Oil and Gas. In addition to other
requirements set forth herein, Oil and Gas operations on or with respect to the Lands shall
be conducted by Grantee in accordance with the following standards:

     1. Surface access and use of the surface of any Lands owned or controlled by
Grantor in connection with Grantee’s Oil and Gas operations shall be conducted in
accordance with the terms and conditions of a mutually acceptable Surface Use
Agreement and Development Plan entered into between the Parties.

     2. To the extent reasonably practicable, all pipelines will be buried to a
depth greater than one foot (1’) below plow depth on tillable land and two feet (2’)
below surface on non-tillable land.

     3. Unless otherwise set forth in a Development Plan, Grantee shall use its
reasonable best efforts to ensure that all vertical wells and test holes on the
Lands will be drilled in such manner as not to deviate by more than four feet (4’)
from vertical to a point of 800’ feet below the surface of the Lands, and Grantee
shall perform a downhole survey to a depth of 800’ in any well drilled which,
despite Grantee’s use of its reasonable best efforts, deviates by more than four
feet (4’) from vertical at such depths, and provide Grantor with a copy of the
survey. In the case of the horizontal well, Grantee shall perform a downhole survey
of the vertical hole and all laterals and provide Grantor with copies thereof.
Grantee shall provide Grantor with gamma ray data or other information demonstrating
where all wells drilled on the Lands intersect with Workable Coal Beds (as defined
below).

     4. Without Grantor’s prior written consent, Grantee shall not permit any
infiltration of Oil or Gas, brine, water, or other fluids into any “Workable

C-5

 

Coal Bed” except by way of hydraulic “frac” or stimulation treatment for the
improvement of Oil and Gas operations. A detailed description of the procedure for
completing a hydraulic “frac” or stimulation treatment must be set forth in an
approved Development Plan. The term “Workable Coal Bed” shall mean any seam of coal
which is either: (i) twenty six inches (26”) or more in thickness, or (ii)
reasonably likely to be commercially mined or extracted within ten (10) years of the
proposed commencement date of such Oil and Gas operations (such determination being
made by a nationally recognized mining engineering firm selected by the Parties)
based upon reasonable assumptions and industry practice in effect as of such
commencement date. Within thirty (30) days after completing a frac or stimulation
of a coal seam (or such earlier date as may be required by applicable law), Grantee
shall furnish Grantor with a written description of the actual stimulation procedure
used including, but not limited to, the fluid injection rate, the injection
pressure, the volume and components of fluid injected, and the amount and components
of the proppants, if any.

     5. Except with respect to Lands which do not contain a Workable Coal Bed, all
abandoned vertical wells, vertical segments of any horizontal wells not completed in
a Workable Coal Bed, and dry holes will be plugged by setting an adequate permanent
plug 100’ below the lowest Workable Coal Bed drilled. All horizontal wells
completed in any Workable Coal Bed shall be drilled, completed, plugged, and
abandoned in accordance with all applicable legal, regulatory, and Permit
requirements as well as Grantor’s then-current drilling and plugging procedures,
consistent with industry customs and practice related to mine safety, to assure the
future safe conduct of all mining operations.

     6. Grantee shall pay any third party surface owner, lessee, licensee, or
permittee of the Land for actual damages to the surface, timber, growing crops,
fences, livestock, and any other fixtures or improvements thereon arising from any
Oil and Gas operations in accordance with applicable agreements, laws, and
regulations. Any other payment obligations relating to access on and over and use
of the Land in which Grantor owns or controls all or part of the surface shall be
set forth in the applicable Surface Use Agreement.

     7. With respect to all Oil and Gas operations conducted by or on behalf of
Grantee on Lands which are covered by any mining and related permits held by
Grantor, Grantee shall (A) ensure that such operations do not adversely impact,
violate or cause Grantor to be in violation of any mining and related permits, (B)
ensure such operations comply with all applicable Legal Requirements including any
applicable coal mining Legal Requirements, and with Grantor’s operating standards
and procedures applicable to such area, and (C) promptly abate or remediate any
notice of violation, notice of noncompliance or similar notice issued by a
Governmental Authority directly or indirectly based upon or relating to such Oil and
Gas operations. In the event that any specific Oil and Gas operations conducted by
or on behalf of Grantee result in any violation of Grantor’s mining and related
permits, or the issuance to Grantor of any notice of

C-6

 

violation, notice of noncompliance or similar notice, Grantee shall,
immediately upon the written request of Grantor, suspend such specific Oil and Gas
operations that have resulted in the permit violation or issuance of notice(s),
until such permit violations, notices of violation, notices of noncompliance or
similar notices have been fully abated or remediated as required by applicable Legal
Requirements and otherwise to the reasonable satisfaction of Grantor; provided,
however, notwithstanding any such request, Grantee shall not be required to suspend
such specific Oil and Gas operations if such suspension would (i) result in a
violation of any Legal Requirement, (ii) make it impracticable to abate or remediate
any such permit violations, notices of violation, notices of noncompliance or
similar notices, or (iii) result in an imminent threat of harm to the environment or
to the health, safety and welfare of those working on such specific Oil and Gas
operations.

     D. Notice of Subordination. Grantor shall provide Grantee no less than one
hundred twenty (120) days’ prior written notice (“Notice of Subordination”) of its intent to
conduct material field operations on any areas within the Lands in which Grantee is then
conducting Oil and Gas operations. Separate Notices of Subordination shall be submitted by
Grantor to Grantee for Category I Lands and Category II Lands. The Notice of Subordination
shall include: (i) the location and commencement date of Grantor’s operations; (ii) a
description of actions Grantee must take in advance of Grantor’s operations (examples
include, without limitation, temporarily or permanently shutting in or plugging any well or
moving, relocating, or removing any of Grantee’s Oil and Gas Assets (such as powerlines and
pipelines) from the area or path of Grantor’s operations) (collectively, “Subordination
Actions”); and (iii) the date by which Grantee must complete all Subordination Actions.
Grantee may be entitled to be compensated or reimbursed by Grantor for taking the
Subordination Actions pursuant to and under the conditions set forth in Section I.F.
Grantor covenants that (x) no Notice of Subordination shall be premature in relation to the
time that Grantor’s subject operations are scheduled to take place and that each Notice of
Subordination shall be reasonably necessary for timing and scope of the Grantor’s operations
that will necessitate the Subordination Actions and (y) if Grantor’s plans that precipitated
any such Notice of Subordination change or are delayed it shall promptly notify Grantee
whereupon Grantor and Grantee shall meet and confer and determine whether and to what extent
Grantee may delay or postpone the corresponding Subordination Actions. GRANTEE ACKNOWLEDGES
THAT TIME IS OF THE ESSENCE WITH RESPECT TO COMPLETION OF THE SUBORDINATION ACTIONS SET
FORTH IN THE NOTICE OF SUBORDINATION, THAT GRANTOR COULD BE DAMAGED IRREPARABLY IF ANY SUCH
SUBORDINATION ACTIONS ARE NOT PERFORMED IN A TIMELY MANNER AND IN ACCORDANCE WITH GRANTOR’S
SPECIFIC TERMS, AND THAT THE REMEDIES AT LAW WOULD NOT BE ADEQUATE TO COMPENSATE GRANTOR.
ACCORDINGLY, CONSISTENT WITH THE PROVISIONS OF SECTION II.C., GRANTOR MAY SEEK TO ENFORCE
SPECIFICALLY THE TERMS OF THIS EXHIBIT “C” IN ADDITION TO ANY OTHER REMEDY TO WHICH
IT MAY BE ENTITLED, AT LAW OR IN EQUITY. GRANTEE HEREBY EXPRESSLY WAIVES ANY DEFENSE THAT A

C-7

 

REMEDY AT LAW OR MONETARY DAMAGES ARE ADEQUATE AND AGREES THAT GRANTOR WILL BE ENTITLED
TO SEEK SPECIFIC PERFORMANCE AND/OR AN INJUNCTION OR INJUNCTIONS TO ENSURE THAT GRANTEE
TIMELY PERFORMS ITS OBLIGATIONS WITH RESPECT TO ALL SUBORDINATION ACTIONS. IN ADDITION TO
ANY SPECIFIC PERFORMANCE OR INJUNCTIVE RELIEF, GRANTOR SHALL BE ENTITLED TO RECOVER ALL
REASONABLE ATTORNEYS’ FEES, EXPERT WITNESS CHARGES, AND ALL OTHER OUT OF POCKET LITIGATION
RELATED COSTS AND EXPENSES INCURRED AS PROVIDED HEREIN, IF GRANTOR IS THE SUBSTANTIALLY
PREVAILING PARTY.

     E. Grantee’s Development of Category I Lands.

     1. The Parties hereby agree that as of the Effective Time certain areas of the
Lands have been designated as “Category I Land” on maps delivered to Grantee
concurrently with this Deed (collectively, “Land Status Maps”). All areas of the
Land not designated as Category I Land are hereby designated as “Category II Land”;
provided, however, that Grantor may from time to time designate certain Category II
Land as Category I Land. In the event that Grantor, or any successor to Grantor,
desires to designate certain Category II Land as Category I Land, Grantor shall
notify Grantee of such designation (each such notification a “Category I Land
Notification”) on or before September 1 of any calendar year. Each such Category I
Land Notification shall be effective on January 1 of the calendar year immediately
following the calendar year in which such Category I Land Notification was delivered
to Grantee; provided, however, that in the event Grantor, or any
successor to Grantor shall transfer any interest in any Category II Land to any
entity which is not an Affiliate of Grantor, no Category I Land Notification with
respect to such transferred parcel or tract shall be effective until (a) in the case
of Category II Land to be converted into Category I Land which is above drainage
levels in the Appalachian Basin, above the top of the Herrin Coal Seam in Illinois,
Indiana and Kentucky, above the top of the Menefee Formation in New Mexico, above
the base of the Wasatch Formation in Wyoming, or less than a depth of 350 feet below
the surface, whichever is deeper, two (2) years following the otherwise applicable
January 1 and (b) in the case of Category II Land to be converted into Category I
Land which is below drainage levels in the Appalachian Basin, below the top of the
Herrin Coal Seam in Illinois, Indiana and Kentucky, below the top of the Menefee
Formation in New Mexico, below the base of the Wasatch Formation is Wyoming, or more
than a depth of 350 feet below the surface, whichever is deeper, five (5) years
following the otherwise applicable January 1. Subject to the foregoing, Grantor may
hereafter designate the following Category II Land as Category I Land: (i) any Land
identified in Grantor’s then current five (5) year Strategic Plan and reasonably
estimated to be mined (or reclaimed or remediated) within fifteen (15) years of the
date of such Strategic Plan; (ii) any Land within planned or current project
development areas (such as residential, commercial, or industrial developments
(including Btu conversion facilities or power plants) identified in Grantor’s then

C-8

 

current five (5) year Strategic Plan that are both designated for uses
incompatible with Oil and Gas operations and estimated to be developed within
fifteen (15) years of the date of such Strategic Plan; and (iii) any Oil and Gas
Interests subsequently acquired by Grantee within Category I Land (including,
without limitation, “window tracts”) as depicted on the Land Status Maps. The term
“Strategic Plan” shall mean all existing and future mining operations and other
business activities being conducted or developed under Grantor’s then current five
(5) year budget. Maps depicting Category I Lands will be included in agreed upon
Development Plans, which maps shall be updated by Grantor at least annually.

     2. The development and operation of Oil and Gas Assets by Grantee on or within
any Lands that, at the time of spudding a well or the construction or installation
of Oil and Gas Assets other than wells, has been properly designated Category I Land
by Grantor, will be at Grantee’s sole risk.

     3. Notwithstanding anything foregoing to the contrary, Grantor shall make all
transfers of Category II Lands in good faith, and under no circumstances shall
Grantor make a transfer of Category II Lands to any third party or Affiliate, the
principal purpose of which transfer is to unnecessarily interfere with Grantee’s
ability to develop such Category II Lands in accordance with the terms of the Deed
or this Exhibit “C”. In the event that Grantor breaches the requirements of
this Section I.E.3., Grantee’s remedy for such breach shall be limited to seeking
injunctive relief and the prevailing party in any proceeding for injunctive relief
shall be entitled to payment of its reasonable attorneys’ fees by the non-prevailing
party.

     F. Grantee’s Development of Category II Lands. If Grantee develops, owns, or
holds interests in Oil and Gas Assets on Category II Land, Grantor shall have the right to
request that Grantee move, relocate, remove, or shut-in any such Oil and Gas Assets on a
temporary or permanent basis in the event and to the extent Grantor reasonably believes such
Oil and Gas Assets may or will: (i) materially interfere with its Reserved Rights, (ii)
materially impede permitting efforts in connection with its Reserved Rights, or (iii) create
a material safety or environmental hazard in connection with the exercise of its Reserved
Rights. Grantor’s request shall be in the form of a Notice of Subordination submitted to
Grantee pursuant to Section I.D. As directed in such Notice, Grantee shall promptly take
all necessary and appropriate action to temporarily or permanently move, relocate, suspend,
shut-in, or abandon any existing Oil and Gas Assets or operations producing and selling Oil
and Gas from the Lands or lands pooled therewith, and Grantor shall compensate Grantee
therefore in accordance with this Section I.F. Grantee’s sole and exclusive remedy for such
removal, relocation, delay, suspension, shut-in or interruption of, or any other losses
(including lost production) relating to, any or all of Grantee’s interests in such Oil and
Gas Assets or Oil and Gas production shall be monetary compensation as set forth in this
Section I.F and determined by a nationally recognized petroleum engineering firm selected by
mutual agreement of the Parties (“Engineer”) whose fees shall be paid by Grantor. Grantor
shall have no obligation to

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pay any compensation whatsoever to Grantee for causes of action, losses (including lost
production), claims, or demands relating to or based upon any Oil and Gas Assets or
operations that are suspended or shut-in upon the request of Grantor for less than thirty
(30) days during a period of sixty (60) consecutive days in response to one (1) or more
Notices of Subordination submitted by Grantor. The terms of this Section I.F. shall be
applicable in the case of any Oil and Gas Assets owned by Grantee on Category II Land even
where Grantor subsequently issues a Category I Land Notification.

     1. If, upon receipt of and pursuant to a Notice of Subordination from Grantor,
Grantee suspends or shuts-in (which shall include any period following re-start
during which any well is de-watering prior to attaining average daily production
equal to that observed and documented immediately prior to suspension or shut-in)
Oil and Gas operations for more than thirty (30) days during a period of sixty (60)
consecutive days but less than one hundred eighty (180) days during a one (1) year
period (“Temporary Suspense Period”), then, not later than thirty (30) days
following the termination of the Temporary Suspense Period, Grantee shall be
entitled to receive from Grantor a payment consisting of:

     a. a reimbursement of all actual and direct out-of-pocket costs and
expenses incurred by Grantee to suspend, shut-in and re-start (including
incremental de-watering costs) the affected Oil and Gas Assets during the
Temporary Suspense Period as well as any shut-in or similar payments made by
Grantee to third parties that would otherwise not be made but for the
temporary suspension of operations in order to extend or maintain any leases
or agreements on which are located or are held by the shut-in wells or other
Oil and Gas Assets. The reimbursable costs and expenses shall be limited to
costs and expenses Grantee incurs and pays directly in connection with the
temporary suspension requested by Grantor and shall not include costs and
expenses customarily or routinely incurred by Grantee to maintain or operate
the Oil and Gas Assets or conduct daily operations; and

     b. an amount representing the estimated interest on projected Oil and
Gas sales revenues Grantee and Grantee’s partners, joint venturers,
co-owners, or royalty and overriding royalty owners (net of lease operating
expenses) would otherwise reasonably expect to receive from such suspended
or shut-in Oil and Gas Assets during the entire Temporary Suspense Period.
The Engineer shall determine the interest on projected on Oil and Gas sales
revenues using: (i) actual prices for Oil and Gas determined under the
applicable sales contract at the point of sale for the period in which the
Oil and Gas Assets are suspended or shut-in; (ii) projected volumes of Oil
and Gas production during the suspense or shut-in period based on the
historic actual Oil and Gas production and sales from the suspended or
shut-in Oil and Gas Assets adjusted by normal decline curve analysis; (iii)
historic actual charges to the Oil and Gas

C-10

 

Assets for lease operating, gathering, processing, transporting, and
marketing expenses; and (iv) the then current prime interest rate on the
first business day of the Temporary Suspense Period published in The Wall
Street Journal or comparable daily financial publication which shall be the
deemed interest rate Grantee would have otherwise received on its working
interest share of suspended net revenues.

     2. If Grantee’s compliance with Grantor’s Notice of Subordination causes a
suspension or shut-in of Oil and Gas Assets or operations for: (i) more than one
hundred eighty (180) days during a one (1) year period, or (ii) more than one (1)
Temporary Suspense Period in which operations are suspended for more than a total of
one hundred seventy-five (175) days in any two (2) consecutive years, or (iii) are
permanently suspended due to permanent abandonment or removal of Oil and Gas Assets
from Category II Land, which action results in a reduction or loss of Grantee’s
ability to produce and sell proved developed producing Oil and Gas (excluding CMM)
reserves (“PDP Reserves”) at then current production levels, then Grantee’s sole and
exclusive remedy for the abandonment or loss of its interests in such Oil and Gas
Assets and all associated PDP Reserves shall be determined by the Engineer pursuant
to this Section I.F. The term “PDP Reserves” shall mean proved developed producing
oil and gas reserves as defined by the Society of Petroleum Engineers in
Guidelines for the Evaluation of Petroleum Reserves and Resources 136
(2001). The Engineer shall calculate the compensation due Grantee as follows (and
shall provide to Grantee and Grantor with copies of all appraisals, reports,
analyses and other documentation supporting the compensation amounts in clauses (a)
through (c) below):

     a. a reimbursement of all reasonable actual and direct costs to remove,
transport, relocate and/or protect from subsidence the affected Oil and Gas
Assets; provided, however, that Grantor shall have no obligation to
reimburse Grantee for any costs or charges to relocate or transport affected
Oil and Gas Assets outside of the state in which such assets are located
unless such distance is less than fifty (50) miles;

     b. an amount equal to the then current market value of Grantee’s
interests in all Oil and Gas Assets abandoned on Category II Land (excluding
any gathering systems, trunk lines, or water disposal pipelines abandoned
in-place, all of which shall be valued based on Grantee’s calculated book
value using IRS allowed depreciation rates for such assets) in their then
current condition as determined based on the average of at least two (2)
written appraisals or offers received from independent third parties
selected in good faith by Grantor and Grantee; provided, however,
that Grantor shall have no duty or obligation to compensate Grantee for any
Oil and Gas Assets sold in response to Grantor’s Notice of Subordination,
even if sold for less than their then current fair market value or book
value, as applicable;

C-11

 

     c. an amount equal to all reasonable and customary third party costs
and expenses incurred by Grantee to reclaim any surface damage or
disturbance attributable to operation or removal of such Oil and Gas Assets
from Category II Land; provided, however, that Grantor, in
its sole discretion, may elect to assume, discharge and perform all or any
part of Grantee’s reclamation duties and obligations for such property and
to indemnify and hold Grantee harmless for all such assumed reclamation
obligations;

     d. an amount equal to the then current net present value of Grantee’s
working interest in any remaining PDP Reserves in each drilling unit on
Category II Land in which Oil and Gas Assets are abandoned, removed,
suspended or shut-in beyond the Temporary Suspense Period (provided that
Grantee shall have first been compensated under Section I.F.1 with respect
to the Temporary Suspense Period), discounted at the rate of ten percent
(10%), as determined by the Engineer as of the date each well is permanently
shut-in in preparation for permanent plugging and abandonment. For the
avoidance of doubt, in the case of a deemed permanent suspension or shut-in
resulting from more than one (1) Temporary Suspense Period totaling more
than one hundred and seventy-five (175) days in any two (2) consecutive
years, the date of determination shall be the date on which the relevant Oil
and Gas well is first shut-in in response to a Notice of Subordination;
provided, however, that Grantor shall be entitled to set-off
any payment made to Grantee pursuant to Section I.F.1 in respect of any
Temporary Suspense Period and deduct any net revenues received by Grantee
from the well during the relevant period from any payments required pursuant
to this Section I.F.2.d. In order to qualify as PDP Reserves for purposes
of determining any payments due pursuant to this Section I.F.2.d, the
affected Oil and Gas wells and related Oil and Gas Assets must have been
drilled and completed, and have commenced dewatering or production
operations prior to abandonment. To the extent commercially practicable,
Grantee shall keep all wells and equipment in good operating condition and
diligently produce and sell Oil and Gas from such wells until they are
plugged and abandoned. The value of PDP Reserves for each drilling unit
will be established based on the actual well spacing in the field or as
determined by applicable law, regulation, rule, or order or, in the absence
of the foregoing, Grantee’s reasonable field practices. The Engineer shall
determine the net present value of the PDP Reserves in accordance with
standard Oil and Gas industry accounting and operating practices, and taking
into account, among other factors: (i) actual prices for Oil and Gas
determined under the applicable sales contract at the point of sale on the
first business day following the day the well is plugged and abandoned by
Grantee; and (ii) projected volumes of Oil and Gas production for the
remainder of the life of the well based on PDP Reserve estimates and decline
curve analysis or other similar types of analysis and modeling then
currently used in the Oil

C-12

 

and Gas industry which shall take into account, among other factors,
historic operating costs (unescalated), gas quality, well operating history,
gas processing, fuel usage, gas gathering, compression, transportation, and
marketing charges and expenses and all taxes, assessments and other similar
charges that would otherwise be due on the Oil and Gas Assets and production
during the remaining projected well life. It is expressly agreed by the
Parties that the valuation of Grantee’s PDP Reserves shall not include any
value for (1) any class of reserves or resources that would not qualify as
PDP Reserves at the time the Oil and Gas Assets are abandoned, removed, or
shut-in beyond the Temporary Suspense Period, or (2) any CBM or CMM lost due
to venting in advance of, or during, mining prior to plugging and abandoning
any well; and

     e. an amount equal to all actual reasonable and customary third party
costs and expenses incurred by Grantee to plug and abandon (to Grantor’s
standards) any well subject to a Notice of Subordination; it being expressly
agreed that Grantee shall have complete discretion with regard to plugging
wells on Lands in which the Reserved Minerals are not reasonably likely to
be commercially mined or otherwise commercially extracted within ten (10)
years of the proposed commencement date of the affected Oil and Gas
operations (such determination being made based upon reasonable assumptions
and industry practice in effect as of the date of the Notice of
Subordination).

Grantee shall make available to Grantor, the Engineer, and appraisers copies of all
data, information, and records reasonably requested to determine any payments to be
made to Grantee pursuant to this Section I.F.2.

     3. Concurrently with the delivery of the payments described in Section I.F,
Grantee shall execute and deliver to Grantor executed releases pursuant to Section
I.G., and a mine-through agreement, consisting of a deed and license in
substantially the form attached hereto as Attachment “C-2” (the
“Mine-Through Agreement”) by which Grantee shall, subject to the reversion of
rights, titles, interests, estates and claims in and to CMM, convey, assign, and
transfer to Grantor AS IS, WHERE IS, but free and clear of all liens, claims or
encumbrances created by, through or under Grantee, all of Grantee’s interests in all
Oil and Gas Assets and Oil and Gas Interests (limited by formation and depth),
including all Other Agreements and Associated Rights relating to or associated with
such interests, containing PDP Reserves within each drilling unit described in the
Notice of Subordination for Category II Lands (such geographic area, the
“Mine-Through Area”). Subject to the terms and conditions contained therein, the
Mine-Through Agreement shall also license, grant and deliver to Grantor for its
exclusive use and control AS IS, WHERE IS: (i) all of Grantee’s interests in Oil and
Gas Assets and Oil and Gas Interests (including operating rights), including all
Other Agreements and Associated Rights relating to or associated with such
interests, in the Mine-Through Area which do not contain PDP

C-13

 

Reserves; and (ii) any data, files, records and information, leases, Permits,
operating agreements, surface access agreements or rights-of-way, service contracts,
sales and transportation contracts, and any other agreements relating to the
operation of any Oil and Gas Assets and Oil and Gas Interests described in subclause
(i) (collectively, “Licensed Interests”). Among other things, the Mine-Through
Agreement shall also license and grant to Grantor (a) at its sole cost and expense,
the right to use, operate, remove, relocate, shut-in, transfer, abandon, or sell
(upon obtaining Grantee’s prior written approval which shall not unreasonably be
withheld) any Licensed Interests, (b) the right to block or oppose the drilling or
operation of any Oil and Gas well or injection well used for fluids or gas storage
that would penetrate the Licensed Interests, (c) the right to block and oppose the
issuance of any permit, license or authorization issued by any Governmental
Authority for testing, exploration, drilling, production or operation of any Oil and
Gas well or injection well used for fluids or gas storage that would penetrate the
Licensed Interests, and (d) to exercise any other rights, interests, benefits
granted to Grantee pursuant to this Deed that otherwise would in any way interfere
with Grantor’s mining or other operations in the exercise of its Reserved Rights in
the Mine-Through Area. Grantor, however, shall have no other duty or obligation
with respect to any Licensed Interests except as otherwise provided in the
Mine-Through Agreement. It is agreed that under the terms of the Mine-Through
Agreement, Grantor shall not have the right to produce and sell Oil and Gas from any
Licensed Interests; provided, however, Grantor shall have the right to produce and
sell Oil and Gas from Oil and Gas Interests containing PDP Reserves and to vent CBM
or CMM in connection with its mining operations with no obligation to Grantee. Each
Mine-Through Agreement shall automatically terminate as to the Licensed Interests
upon the occurrence of certain events specified in the Mine-Through Agreement. Upon
Grantor’s delivery of a Notice of Subordination covering Category I Lands, Grantor
and Grantee shall execute a Mine-Through License in substantially the form attached
hereto as Attachment “C-3”.

     4. All of Engineer’s calculations and valuations and Grantor’s payments made
pursuant to this Section I.F. shall be based on the then current working interest of
Grantee and any co-owner, working interest partner, or joint venturer, and on the
interest of any royalty or overriding royalty owner, in and with respect to the Oil
and Gas Interests, Oil and Gas Assets, and all Oil and Gas production from each
drilling unit within the Mine-Through Area.

     5. To the extent Grantee’s Oil and Gas Interests in any tract of the Land are
less than 100%, Grantee acknowledges and agrees that the terms of any approved
Development Plan or the Deed and this Exhibit “C” shall apply to any right,
title, or interest in the Lands Grantee may hereafter acquire from any third party.
Grantee further covenants and agrees that to the extent there are oil and gas
interest owners other than Grantor and Grantee in the Lands, Grantee will diligently
cooperate with Grantor to secure from all such Oil and Gas working

C-14

 

interest owners in such Lands and Governmental Authorities all Permits required
to fully exercise the Reserved Rights consistent with the terms of any approved
Development Plan, the Deed, this Exhibit “C”, and applicable Legal
Requirements. The Parties covenant and agree to work in good faith to perform their
respective obligations hereunder, and to implement the transactions and performance
contemplated hereby.

     G. Payment to Grantee and Delivery of Transfer Documents. Within thirty (30)
days of receiving the Engineer’s and appraiser’s reserve report and valuations together with
copies of all supporting documentation (including documentation to be provided by Grantee),
Grantor shall pay Grantee, as its sole and exclusive remedy, all amounts determined to be
due under Section I.F. At Grantor’s election, exercisable in its sole discretion, it may
pay any royalties, overriding royalties, or production payments proportionately allocated to
Grantee’s working interest in the Oil and Gas Interests containing the PDP Reserves directly
to the appropriate party as identified in writing by Grantee, and deduct such amounts from
amounts otherwise payable to Grantee under Section I.F. Otherwise, Grantee shall be solely
responsible for all third party claims relating to its working interest in the Oil and Gas
Assets and Oil and Gas Interests containing PDP Reserves, and for all amounts payable to
partners, co-owners, joint venturers, other working interest owners, and royalty, overriding
royalty and production payment owners, and shall defend and indemnify Grantor from all
claims, demands, and causes of action relating to such claims. Upon receipt of Grantor’s
payments pursuant to Section I.F., and as a condition to such payments, in addition to the
Mine-Through Agreement, Grantee shall deliver to Grantor releases executed by Grantee and
any creditors, lien holders, owners of royalties, overriding royalties, or production
payments (other than such owners as have been paid directly by Grantor) releasing Grantor
from all causes of action, claims, demands, losses, and damages arising from Grantor’s
exercise of the Reserved Rights with respect to all of Grantee’s rights, title, and
interests in such property. The Parties agree that to the extent the interests of federal
or state entities are or could be implicated in connection with any payments to be made
hereunder, that the Parties shall seek the prior approval of any applicable governmental
agency or authority before such payments are made.

     II. Dispute Resolution.

     A. If the Parties are unable to agree upon an Engineer, the Engineer shall be selected
by the arbitrator selected pursuant to Section II.B.

     B. Notwithstanding any claim or dispute by either Party that the Engineer’s or
appraiser’s valuation is not made in accordance with the terms of this Exhibit “C”,
Grantee shall fully and timely comply with Grantor’s Notice of Subordination in carrying out
the Subordination Actions described therein. Such claims and disputes regarding either the
selection of the Engineer or the Engineer’s or appraiser’s valuations of amounts due
hereunder shall be resolved solely through binding arbitration by one petroleum engineer (or
engineer of similar qualifications) or oil and gas accountant each with at least ten (10)
years experience in field operations or marketing, purchasing, or selling Oil

C-15

 

and Gas Assets including, without limitation, Oil and Gas Interests containing PDP
Reserves, as the case may be. Grantor and Grantee shall cooperate to select the single
arbitrator. Decisions by the arbitrator shall be issued within one hundred twenty (120)
days of the selection of the arbitrator. The arbitration shall be conducted in accordance
with the Commercial Arbitration Rules and Mediation Procedures of the American Arbitration
Association; provided, however, that the Commercial Mediation Procedures provided for
therein shall not apply unless the parties to the arbitration mutually agree. The final
decision by the arbitrator shall be consistent with the provisions of this Exhibit
“C”. Any arbitral decision or award may be enforced against the Parties or their assets
wherever they may be located and a judgment on an arbitral award may be entered by any court
having jurisdiction thereof and, for such purpose, each Party hereby submits to the
jurisdiction of any such court and waives any objections based on inconvenient forum or lack
of jurisdiction.

     C. For all other matters or disputes not subject to the provisions of Section II.B. or
Section I.A.5, and for which the jurisdiction of the federal courts is available, each Party
submits to the exclusive jurisdiction of the federal court for the district where the
affected Land is located and agrees that all claims in respect of the action or proceeding
may be heard and determined in any such court. Assuming federal jurisdiction exists, each
Party also agrees not to bring any action or proceeding arising out of or relating to this
Exhibit “C” in any other court. To the extent federal jurisdiction does not exist
with respect to any such dispute or claim, the Parties agree that any such dispute shall be
brought in state district (circuit) or county court of general jurisdiction where the
affected Lands and Oil and Gas Assets subject to the dispute are located. Each of the
Parties waives any defense of inconvenient forum or lack of jurisdiction to the maintenance
of any action or proceeding so brought and waives any bond, surety, or other security that
might be required of any other Party with respect to any such action or proceeding. The
Parties agree that either or both of them may file a copy of this paragraph with any court
as written evidence of the knowing, voluntary, and bargained agreement between the Parties
to irrevocably waive any objections to venue, convenience of forum or jurisdiction.

     III. Integration. The Deed, together with the exhibits attached thereto, including
this Exhibit “C”, constitute the entire agreement of the Parties relating to the subject
matter of this Exhibit “C” and supersede all previous agreements, promises,
representations, understandings, and negotiations, whether written or oral, among the Parties with
respect to the subject matter hereof.

C-16

 

Attachment C-1

Form of Confidentiality Agreement

C-17

 

Attachment C-2

Form of Mine-Through Agreement

C-18

 

Attachment C-3

Form of Mine-Through License

C-19EX-10.5

 

Exhibit
10.5

Execution Version

Asset Purchase Agreement

AMONG

CNX Gas Company LLC

Buyer

and

American Land Holdings of Indiana, LLC; Beaver Dam Coal

Company; Black Beauty Coal Company, LLC; Caballo Coal

Company; Central States Coal Reserves of Indiana, LLC;

Coal Reserve Holding Limited Liability Company #1;

Hayden Gulch Terminal, Inc.; Midwest Coal Reserves of

Indiana, LLC; Peabody Coal Company, LLC; Peabody

Development Company, LLC; Peabody Natural Gas, LLC; and

Peabody Natural Resources Company 

Seller

Dated as of April 1, 2007

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 	 	 
	Recitals	 	 	1	 
	 
	 	 	 	 	 	 	 	 	 	 
	Agreements	 	 	1	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE I. Definitions	 	 	1	 
	 

	 	 	1.1	 	 	Defined Terms
	 	 	1	 
	 

	 	 	1.2	 	 	Other Definitions
	 	 	8	 
	 

	 	 	1.3	 	 	Rules of Construction
	 	 	10	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE II. Sale and Purchase	 	 	10	 
	 

	 	 	2.1	 	 	Sale and Purchase of Assets
	 	 	10	 
	 

	 	 	2.2	 	 	Purchase Price
	 	 	13	 
	 

	 	 	2.3	 	 	Buyer Assumed Liabilities; Seller Retained Liabilities
	 	 	13	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE III. Adjustments; Actions Prior to Closing	 	 	14	 
	 

	 	 	3.1	 	 	Purchase Price Adjustments
	 	 	14	 
	 

	 	 	3.2	 	 	Adjusted Purchase Price Calculation
	 	 	15	 
	 

	 	 	3.3	 	 	Allocated Values; Post-Closing Allocations
	 	 	16	 
	 

	 	 	3.4	 	 	Updated Schedules and Exhibits
	 	 	17	 
	 

	 	 	3.5	 	 	Taxpayer Identification Numbers
	 	 	17	 
	 

	 	 	3.6	 	 	Consents
	 	 	17	 
	 

	 	 	3.7	 	 	Asset Due Diligence
	 	 	17	 
	 

	 	 	3.8	 	 	Adjustments for Environmental Defects
	 	 	18	 
	 

	 	 	3.9	 	 	Adjustments for Title Defects
	 	 	19	 
	 

	 	 	3.10	 	 	Seller’s Response to Title Defect Notice
	 	 	20	 
	 

	 	 	3.11	 	 	Liens
	 	 	21	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE IV. Surface Use and Other Activities	 	 	21	 
	 

	 	 	4.1	 	 	Surface Use Agreements
	 	 	21	 
	 

	 	 	4.2	 	 	Cooperative Development
	 	 	22	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE V. Closing and Actions Prior to Closing	 	 	22	 
	 

	 	 	5.1	 	 	Closing
	 	 	22	 
	 

	 	 	5.2	 	 	Seller’s Closing Deliveries
	 	 	23	 
	 

	 	 	5.3	 	 	Buyer’s Closing Deliveries
	 	 	23	 
	 

	 	 	5.4	 	 	Transfer Documents
	 	 	23	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE VI. Transfer Period Covenants	 	 	24	 
	 

	 	 	6.1	 	 	Transfer Period
	 	 	24	 
	 

	 	 	6.2	 	 	Further Assurances
	 	 	24	 
	 

	 	 	6.3	 	 	Obtaining Consents and Delivery of Notices
	 	 	24	 
	 

	 	 	6.4	 	 	Governmental Filings
	 	 	25	 
	 

	 	 	6.5	 	 	Recording Fees, Transfer Taxes and Similar Costs
	 	 	25	 
	 

	 	 	6.6	 	 	Transition Services
	 	 	25	 

i

 

	 	 	 	 	 	 	 	 	 	 	 
	ARTICLE VII. Buyer’s Representations and Warranties	 	 	26	 
	 

	 	 	7.1	 	 	Organization and Standing
	 	 	26	 
	 

	 	 	7.2	 	 	Power
	 	 	26	 
	 

	 	 	7.3	 	 	Authorization and Enforceability
	 	 	26	 
	 

	 	 	7.4	 	 	Liability for Brokers’ Fees
	 	 	26	 
	 

	 	 	7.5	 	 	Alien Status
	 	 	26	 
	 

	 	 	7.6	 	 	Litigation
	 	 	26	 
	 

	 	 	7.7	 	 	Orders
	 	 	26	 
	 

	 	 	7.8	 	 	No Conflicts
	 	 	26	 
	 

	 	 	7.9	 	 	Regulatory Approvals
	 	 	27	 
	 

	 	 	7.10	 	 	Buyer Due Diligence
	 	 	27	 
	 

	 	 	7.11	 	 	Disclosure
	 	 	27	 
	 

	 	 	7.12	 	 	Effectiveness of Representations and Warranties
	 	 	27	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE VIII. Seller’s Representations and Warranties	 	 	27	 
	 

	 	 	8.1	 	 	Organization and Standing
	 	 	28	 
	 

	 	 	8.2	 	 	Power
	 	 	28	 
	 

	 	 	8.3	 	 	Authorization and Enforceability
	 	 	28	 
	 

	 	 	8.4	 	 	Liability for Brokers’ Fees
	 	 	28	 
	 

	 	 	8.5	 	 	Alien Status
	 	 	28	 
	 

	 	 	8.6	 	 	Litigation
	 	 	28	 
	 

	 	 	8.7	 	 	Orders
	 	 	28	 
	 

	 	 	8.8	 	 	Rentals and Royalties
	 	 	28	 
	 

	 	 	8.9	 	 	No Conflicts
	 	 	29	 
	 

	 	 	8.10	 	 	Compliance with Laws
	 	 	29	 
	 

	 	 	8.11	 	 	Environmental Conditions
	 	 	30	 
	 

	 	 	8.12	 	 	Taxes
	 	 	30	 
	 

	 	 	8.13	 	 	Regulatory Approvals
	 	 	30	 
	 

	 	 	8.14	 	 	Limited Title Warranty as to Assets
	 	 	30	 
	 

	 	 	8.15	 	 	Material Contracts
	 	 	31	 
	 

	 	 	8.16	 	 	Employees
	 	 	31	 
	 

	 	 	8.17	 	 	No Material Adverse Change
	 	 	31	 
	 

	 	 	8.18	 	 	Undisclosed Material Liabilities
	 	 	32	 
	 

	 	 	8.19	 	 	Insurance
	 	 	32	 
	 

	 	 	8.20	 	 	Intellectual Property
	 	 	32	 
	 

	 	 	8.21	 	 	Conveyance by Seller
	 	 	32	 
	 

	 	 	8.22	 	 	Disclosure
	 	 	32	 
	 

	 	 	8.23	 	 	Effectiveness of Representations and Warranties
	 	 	32	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE IX. Other Covenants	 	 	32	 
	 

	 	 	9.1	 	 	Certain Affirmative Covenants of Peabody Subs
	 	 	32	 
	 

	 	 	9.2	 	 	Certain Negative Covenants of Seller
	 	 	33	 
	 

	 	 	9.3	 	 	Confidentiality and Publicity
	 	 	34	 
	 

	 	 	9.4	 	 	DISCLAIMERS
	 	 	35	 
	 

	 	 	9.5	 	 	Indiana Dormant Minerals Act Filings
	 	 	36	 

ii

 

	 	 	 	 	 	 	 	 	 	 	 
	ARTICLE X. Conditions Precedent	 	 	36	 
	 

	 	 	10.1	 	 	Conditions to Buyer’s Obligations
	 	 	36	 
	 

	 	 	10.2	 	 	Conditions to Seller’s Obligations
	 	 	37	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE XI. Termination, Effect of Termination and Specific Performance	 	 	38	 
	 

	 	 	11.1	 	 	Termination
	 	 	38	 
	 

	 	 	11.2	 	 	Effect of Termination
	 	 	38	 
	 

	 	 	11.3	 	 	Specific Performance
	 	 	38	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE XII. Indemnification	 	 	39	 
	 

	 	 	12.1	 	 	Indemnification by Seller
	 	 	39	 
	 

	 	 	12.2	 	 	Indemnification by Buyer
	 	 	40	 
	 

	 	 	12.3	 	 	Procedure for Certain Indemnified Claims
	 	 	40	 
	 

	 	 	12.4	 	 	Determination of Indemnification Amounts and Related Matters
	 	 	41	 
	 

	 	 	12.5	 	 	Time and Manner of Certain Claims
	 	 	41	 
	 

	 	 	12.6	 	 	Peabody Guaranty
	 	 	42	 
	 

	 	 	12.7	 	 	Other Indemnification
	 	 	42	 
	 

	 	 	12.8	 	 	Exclusivity
	 	 	42	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE XIII. Miscellaneous Provisions	 	 	42	 
	 

	 	 	13.1	 	 	Data and Information Review
	 	 	42	 
	 

	 	 	13.2	 	 	Expenses
	 	 	43	 
	 

	 	 	13.3	 	 	Brokers
	 	 	43	 
	 

	 	 	13.4	 	 	Waivers
	 	 	43	 
	 

	 	 	13.5	 	 	Notices
	 	 	43	 
	 

	 	 	13.6	 	 	Entire Agreement; Prior Representations; Amendments; No Merger
	 	 	44	 
	 

	 	 	13.7	 	 	Jurisdiction
	 	 	45	 
	 

	 	 	13.8	 	 	WAIVER OF JURY TRIAL
	 	 	45	 
	 

	 	 	13.9	 	 	Binding Effect; Benefits
	 	 	45	 
	 

	 	 	13.10	 	 	Headings, Exhibits and Schedules
	 	 	45	 
	 

	 	 	13.11	 	 	Counterparts
	 	 	45	 
	 

	 	 	13.12	 	 	GOVERNING LAW
	 	 	46	 
	 

	 	 	13.13	 	 	Severability
	 	 	46	 
	 

	 	 	13.14	 	 	Third Persons; Joint Ventures
	 	 	46	 
	 

	 	 	13.15	 	 	Construction
	 	 	46	 
	 

	 	 	13.16	 	 	Attorneys’ Fees
	 	 	46	 
	 

	 	 	13.17	 	 	Risk of Loss
	 	 	46	 
	 

	 	 	13.18	 	 	Tax Consequences
	 	 	47	 
	 

	 	 	13.19	 	 	Commercially Reasonable Efforts
	 	 	47	 
	 

	 	 	13.20	 	 	Time
	 	 	47	 
	 

	 	 	13.21	 	 	Reserved Rights
	 	 	47	 
	 

	 	 	13.22	 	 	Rule Against Perpetuities
	 	 	47	 
	 
	 	 	 	 	 	 	 	 	 	 
	List of Exhibits and Schedules	 	 	50	 

iii

 

Asset Purchase Agreement

     THIS ASSET PURCHASE AGREEMENT (“Agreement”) is made and entered into on June 20, 2007,
but effective as of April 1, 2007, among American Land Holdings of Indiana, LLC, a Delaware limited
liability company, Beaver Dam Coal Company, a Delaware corporation, Black Beauty Coal Company, LLC,
a Delaware limited liability company, Caballo Coal Company, a Delaware corporation, Central States
Coal Reserves of Indiana, LLC, a Delaware limited liability company, Coal Reserve Holding Limited
Liability Company #1, a Delaware limited liability company, Hayden Gulch Terminal, Inc., a Delaware
corporation, Midwest Coal Reserves of Indiana, LLC, a Delaware limited liability company, Peabody
Coal Company, LLC, a Delaware limited liability company, Peabody Development Company, LLC, a
Delaware limited liability company, Peabody Natural Gas, LLC, a Delaware limited liability company,
and Peabody Natural Resources Company, a Delaware general partnership (collectively, the “Peabody
Subs” or “Seller”), each with their principal place of business located at 701 Market Street, St.
Louis, Missouri 63101, and CNX Gas Company LLC, a Virginia limited liability company, ( “CNX” or
“Buyer”), with its principal place of business located at 5 Penn Center West, Suite 401,
Pittsburgh, Pennsylvania 15276.

Recitals

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

     B. Seller has agreed to assign, convey, sell, and transfer to Buyer, and Buyer has agreed to
purchase and assume, Seller’s rights, title, interests, estates, duties, and obligations in, to,
under or derived from, the Assets on the terms and subject to the conditions set forth in this
Agreement.

Agreements

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

ARTICLE I.

Definitions

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

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

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

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

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

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

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

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

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

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

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

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

     “Contract” means any written agreement, contract, mortgage, deed of trust, bond, indenture,
lease, license, note, joint operating agreement, division order, crude oil or gas sales or purchase
contract, gathering, transportation or marketing agreement, easement, right-of-way, surface use or
access agreement, service or supply agreement, certificate, option, warrant, right or other
instrument, document, obligation or agreement, and any ratifications or amendments to

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any of the foregoing, which relates to the Assets or Seller’s right to conduct Oil and Gas
operations on or with respect to any Asset; provided that “Contract” shall not include any such
agreements, contracts or other rights to the extent they relate to any Reserved Rights.

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

     “Environmental Defect” means an adverse environmental condition of the Assets as to which both
of the following are true: (a) the environmental condition is required to be remediated under
Environmental Laws in effect at the Closing Date; and (b) the total cost to remediate such
environmental condition to levels required by Environmental Laws in effect at the Closing Date,
when combined with the total cost to remediate all other environmental conditions of which Buyer
has given Seller notice to levels required by Environmental Laws in effect at the Closing Date, is
reasonably estimated to exceed $1,000,000 (net to Seller’s interest); provided, however, that
“Environmental Defect” shall not include any adverse environmental condition relating to, or any
plugging, abandonment or reclamation obligation that may exist under applicable Legal Requirements
on or with respect to, any Wells or Equipment or the surface areas on which Wells and Equipment are
located.

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

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

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event that any Governmental Authority imposes any tax, levy surcharge or other imposition on
emissions of air pollutants, including greenhouse gases, or on products or services that are
related to such emissions, including, without limitation, any “carbon tax.”

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

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

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

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

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

     “Knowledge” means, the actual knowledge of each of the persons as specified in Schedule
1.1a; provided that no person specified on Schedule 1.1a shall have any personal
liability or obligation hereunder.

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

     “Lien” means, with respect to any Asset, any security agreement, financing statement filed
with any Governmental Authority, conditional sale agreement, capital lease or other title retention
agreement relating to such Asset, any lease, consignment or bailment given for

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purposes of security, any right of first refusal, equitable interest, lien, mortgage,
indenture, pledge, option, charge, encumbrance, adverse interest, constructive trust or other
trust, claim, attachment, exception to or defect in title or other ownership interest (including
reservations, rights of entry, possibilities of reverter, encroachments, easements, rights-of-way,
restrictive covenants, leases and licenses) of any kind, which otherwise constitutes an interest in
or claim against Seller’s title to such Asset, whether arising pursuant to any Legal Requirement,
Contract or otherwise.

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

     “Losses” means any claims, losses, liabilities, damages, Liens, penalties, costs and expenses,
including interest which may be imposed in connection therewith, expenses of investigation,
reasonable fees and disbursements of counsel and other experts and the reasonable cost to any
Person making a claim or seeking indemnification under this Agreement with respect to funds
expended by such Person by reason of the occurrence of any event with respect to which
indemnification is sought, but shall in no event include special, incidental or consequential
damages or lost profits.

     “Net Mineral Acre” means, with respect to the Oil and Gas Interests, the product obtained by
multiplying (a) each surface acre of land listed on Exhibit “A” and depicted or described
in Exhibits “A-1” through “A-19”, by (b) Seller’s percentage fee Oil and Gas Interest (with
CBM or CMM accounted for separately in such lands to the extent located in the states of Illinois
or Kentucky), or Seller’s percentage interest in CBM or CMM, as the case may be, in such lands, or,
in the case of Oil and Gas or CBM or CMM leasehold interests, by (c) Seller’s percentage working
interest in the coal or Oil and Gas or coal mineral estate, as the case may be, in such lands. For
purposes of this Agreement, the Parties agree that in Illinois CBM and CMM shall deemed to be owned
by the owner of the coal estate and that in Kentucky CBM and CMM shall be deemed to be owned by the
owner of the “other minerals” estate. In such states, as to each surface acre under which Seller
owns all minerals rights in fee, or Oil and Gas rights acquired separately from the Oil and Gas
estate, or CBM or CMM rights acquired through the coal or other minerals estate, Seller shall be
credited with a separate Net Mineral Acre (based on Seller’s actual percentage ownership in the
applicable mineral estate and reduced in accordance with the formula set forth above) for each of
the Oil and Gas Interests and CBM or CMM Interests which shall be aggregated in calculating the Net
Mineral Acre Threshold and the Mineral Acre Compensation Threshold in Section 3.10.

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

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

     “Party” and “Parties” means either Seller or Buyer, or both collectively.

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

     “Permitted Lien” means with respect to any Asset or Assets, as the context requires: (a) any
Lien securing Taxes, assessments and governmental charges not yet due and payable or being
contested in good faith (and for which adequate accruals or reserves have been established); (b)
any customary zoning law or ordinance or any similar Legal Requirement; (c) any customary right
reserved to any Governmental Authority to regulate the affected Asset or Assets; (d) any Lien
(other than Liens securing indebtedness or arising out of the obligation to pay money) which does
not and shall not individually or in the aggregate with one or more other Liens materially
interfere with the right or ability to own, use, enjoy, produce, mine, or operate the Assets, or to
convey good title to the same, or materially detract from their value; (e) any inchoate
materialmen’s, mechanic’s, workmen’s, repairmen’s or other like Liens arising in the ordinary
course of business relating to the Assets; (f) the reservations, reverters and other rights granted
or reserved herein or in the Transfer Documents; (g) any Partial Assignment Leases; (h) any joint
operating agreement, crude oil or gas sales or purchase agreement, division order, or other
Contract disclosed on Schedule 2.1(c)(iii) hereto; (i) easements, conditions, covenants,
restrictions, servitudes, permits, rights-of-way, surface leases, existing deed or water rights
restrictions, historic preservation restrictions and ordinances, building restrictions and
ordinances, zoning, planning and land use restrictions, and other rights and interests for the
purpose of surface operations, roads, railways, pipelines, transmission and transportation lines
and other like uses, or for the common use of real estate, rights-of-way, facilities and equipment;
(j) any Third-Party Consents which are obtained and are in force and effect on the Closing Date;
(k) all rights to consent by, required notices to, filings with, or other actions by Governmental
Authorities in connection with the sale and conveyance of an Asset if the same are customarily
sought subsequent to such sale and conveyance; (l) rights of reassignment upon the surrender or
expiration of any lease; (m) such Environmental Defects and Title Defects as Buyer has waived
pursuant to Sections 3.8(a), 3.9(a)(ii) or 3.9(b)(ii), as applicable; (n) any Liens that Seller
shows by affirmative evidence are to be released at Closing; (o) defects in the early chain of
title consisting of the mere failure to recite marital status in a document or omissions of
successors of heirship proceedings, unless Buyer provides affirmative evidence that such failure or
omission has resulted in another Person’s actual and superior claims of title to the relevant
Asset; (p) defects that have been cured by possession under applicable statutes of limitation for
adverse possession or for prescription; (q) defects bases solely on lack of information in Seller’s
files; and (r) all Burdens on Production of which Buyer or any successor or assign has actual
notice (as set forth on Schedule 1.1b) or record notice; provided that “Permitted Liens”
shall not include any Lien securing any debt, encumbrance or monetary claim, or any pledge, deed of
trust, mortgage, security interest or similar lien, caused, created or allowed, with respect to the
Assets, by Seller or their respective Affiliates, which could prevent or interfere with the conduct
of the business of Buyer. Classification of any Lien as a “Permitted Lien” shall not affect any
liability which Seller may otherwise have under this Agreement, including any indemnity obligation
under this Agreement.

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

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

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

     “Taxes” means all levies and assessments of any kind or nature imposed by any Governmental
Authority, including all income, sales, use, ad valorem, value added, franchise, severance,
production, net or gross proceeds, withholding, payroll, employment, F.I.C.A., excise or property
taxes, levies, production, and any other payment required to be made to any state abandoned
property administrator or other public official pursuant to an abandoned property, escheat or
similar law, together with any interest thereon and any penalties, additions to tax or additional
amounts applicable thereto.

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

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

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

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     “Transfer Documents” means the instruments and documents described in Section 5.4 which are to
be executed and delivered by or on behalf of Seller in connection with the transaction contemplated
in this Agreement.

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

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

	 	 	 
	TERM	 	SECTION
	Adjusted Purchase Price

	 	2.2
	Adjustment Period

	 	3.1(a)
	Agreement

	 	Preamble
	Allocated Values

	 	3.3(a)
	Assets

	 	2.1(c)
	Assumed Liabilities

	 	2.3(a)
	Buyer

	 	Preamble
	Buyer ERC Actions

	 	2.1(c)(v)(B)
	Buyer Group

	 	3.7(e)
	CNX

	 	Preamble
	Cap

	 	12.4(a)
	Closing

	 	5.1
	Confidential Information

	 	9.3(a)
	Contract Operating Agreement

	 	6.6
	Deed

	 	5.4(a)
	Environmental Defects Amount

	 	3.8(b)(ii)
	Environmental Defects Deadline

	 	3.8(a)
	Equipment

	 	2.1(c)(ii)
	ERC Rights

	 	2.1(c)(v)(B)

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	TERM	 	SECTION
	Excess Title Defects Amount

	 	3.10(c)
	Excluded Assets

	 	2.1(d)
	Final Adjustment Certificate

	 	3.2(b)(i)
	Final Purchase Price

	 	3.2(b)(i)
	Final Title Defect Notice Deadline

	 	3.9(b)(i)
	Indemnified Losses

	 	3.7(e)
	Indemnitee

	 	12.3
	Indemnitor

	 	12.3
	Initial Adjustment Certificate

	 	3.2(a)
	Initial Title Defect Notice Deadline

	 	3.9(a)(i)
	Litigation Matter

	 	12.3
	Material Contracts

	 	2.1(c)(iii)
	Mineral Acre Compensation Threshold

	 	3.10(b)
	Minimum Damage Requirement

	 	12.4(a)
	Net Mineral Acre Threshold

	 	3.10(a)
	Oil and Gas Books and Records

	 	2.1(c)(vii)
	Oil and Gas Interests

	 	2.1(c)(i)
	Partial Assignment Leases

	 	2.1(c)(iv)
	Peabody Guaranty

	 	12.6
	Peabody Predecessors

	 	8.6
	Peabody Subs

	 	Preamble
	Post-Closing Consent

	 	6.3(a)
	Purchase Price

	 	2.2
	Replacement Interests

	 	3.8(b)(iii)
	Reviewable Data

	 	13.1
	Right of First Refusal

	 	5.2(d)
	Seller Group

	 	3.7(e)

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	TERM	 	SECTION
	Seller Retained Liabilities

	 	2.3(b)
	Surface Use Agreement (SUA)

	 	4.1(a)
	Taking

	 	13.17(b)
	Title Defect Notice

	 	3.9(a)(i)
	Transfer Period

	 	6.1
	Wells

	 	2.1(c)(ii)

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

ARTICLE II.

Sale and Purchase

     2.1 Sale and Purchase of Assets.

          (a) Sale and Purchase. For the consideration set forth herein, subject to the terms,
conditions, exceptions and reservations set forth in this Agreement, at Closing but effective as of
the Effective Time, Seller agrees to grant, sell, convey, transfer, assign and deliver, free and
clear of all Liens (other than Permitted Liens), all of its rights, title, estates, interests and
claims in, to, under or derived from, and Buyer agrees to purchase and assume, pay, discharge and
perform the duties and obligations associated with, the Assets; provided that this Agreement shall
not constitute an agreement to assign or transfer any Asset or any claim or right or any benefit
arising thereunder or resulting therefrom without the consent of a third Person thereto if such
assignment or transfer without such consent would constitute a breach or other contravention of
such Asset or in any way adversely affect the rights of Buyer thereunder.

          (b) Transfer of Beneficial Title. Subject to the terms, conditions, exceptions and
reservations of this Agreement, at Closing beneficial title to, and all other rights and

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obligations relating to, the Assets shall be transferred to Buyer. The transfer of beneficial
title shall be effective as of the Effective Time, notwithstanding that transfer of record title to
the Assets under the Transfer Documents may not be complete until the end of the Transfer Period.

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

               (i) Oil and Gas Interests. All of Seller’s fee, leasehold, mineral, royalty and other
rights and interests in and to Oil and Gas, in, on or under approximately Two Hundred Seventy Three
Thousand Nine Hundred Twenty One (273,921) acres of land listed on Exhibit “A” and depicted
on the maps attached hereto as Exhibits “A-1” through “A-19” (including without limitation,
landowners’ or reserved royalties, overriding royalties, rights to free gas either reserved in
favor of or granted to Seller and its Affiliates, as well as any right to vent CBM and CMM or to
stimulate coal seams except as otherwise provided in Section 5.4(a)) (collectively, the “Oil and
Gas Interests”);

               (ii) Wells and Equipment. All of Seller’s rights and interests in and to the Oil and
Gas wells, test wells, and water injection wells (collectively, the “Wells”), as described on
Exhibit “B” attached hereto, together with (a) all related wellhead equipment, pumps,
machinery, materials and supplies, and (b) only to the extent solely related to the Wells, all
surface facilities, flowlines, tanks, buildings, injection facilities, water and gas gathering
systems, compression facilities, metering devices, saltwater disposal facilities, powerlines, and
other similar infrastructure, the material items of which are described on Exhibit “B”
(collectively, the “Equipment”);

               (iii) Contracts. All of Seller’s rights, title, and interests in, to, under, or
derived from all Contracts and Permits to the extent they relate solely to any of the Oil and Gas
Interests or the production and sale of Oil and Gas attributable to such Oil and Gas Interests,
including, without limitation, those described on Schedule 2.1(c)(iii) attached hereto (the
“Material Contracts”);

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

               (v) ERC Rights and Other Credits.

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

                    (B) all rights that Seller may now have or later acquire to claim any other credits or
allowances (including any tax credits or allowances) relating to production of

11

 

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

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

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

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

          (d) Excluded Assets.

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               The Assets shall not include, and Seller specifically excludes from this transaction: (i) all
Reserved Rights; (ii) any accounts receivable accruing or attributable to the Assets for the period
prior to the Effective Time; (iii) all production of Oil and Gas from or attributable to the Assets
with respect to all periods prior to the Effective Time and all proceeds attributable thereto; (iv)
any refund of Taxes, costs or expenses borne by Seller or its predecessors in title attributable to
the period prior to the Effective Time; (v) and any rights, titles, estates or interests owned,
leased, held or otherwise controlled by Seller in the lands described on Exhibits “A-1” through
“A-19” that are not described or included in Section 2.1(c) hereof; (vi) all Oil and Gas
rights, estates, interests, and claims in and to properties not depicted on the attached
Exhibits “A-1” through “A-19” except as otherwise expressly provided herein as well as all
Reserved Rights and data, books, maps, records and other information relating thereto; (vii) except
for common law or statutory rights to use the surface as incident or right appurtenant to the Oil
and Gas Interests, all surface rights and estates in the lands listed on Exhibit “A” and
depicted on the maps attached hereto as Exhibits “A-1” through “A-19”, and all roads,
ditches and other surface improvements on such lands; and (viii) subject to Buyer’s review rights
under Section 13.1, all books, records, files, material, information and data that were obtained,
prepared or received by Seller or any of its agents, consultants or representatives (A) for
purposes other than evaluating and developing the oil and gas potential of the Oil and Gas
Interests, Wells and Equipment, (B) in connection with Seller’s exercise of its Reserved Rights,
(C) in connection with internal evaluations of the Assets for management purposes, or (D) in
connection with marketing of the Assets or the evaluation and negotiation of the transaction
contemplated herein (collectively, the “Excluded Assets”).

     2.2 Purchase Price. In consideration for the sale and delivery of the Assets by
Seller to Buyer, Buyer shall pay to Seller at Closing the agreed-upon purchase price for the Assets
of Fifteen Million Dollars ($15,000,000.00) (the “Purchase Price”), adjusted as provided in Section
3.1 (the “Adjusted Purchase Price”). Seller shall be solely responsible for determining the
allocation of the Adjusted Purchase Price among the Peabody Subs.

     2.3 Buyer Assumed Liabilities; Seller Retained Liabilities.

          (a) Buyer Assumed Liabilities. After Closing, Buyer shall assume, pay, discharge and
perform the following (the “Assumed Liabilities”):

               (i) obligations and liabilities to the extent attributable to actions occurring or conditions
first occurring after the Effective Time on, under or with respect to the Assets;

               (ii) obligations and liabilities arising from or attributable to any operations conducted by
or on behalf of any Peabody Sub or any Peabody Predecessor on or with respect to any Wells or
Equipment (including unreclaimed Well sites and all related surface facilities), irrespective of
whether such obligation or liability arose before or after the
Effective Time, including without limitation all plugging, abandonment, and other similar
obligations and liabilities relating to the Wells and Equipment; and

               (iii) all other obligations and liabilities to the extent attributable to actions or
conditions first occurring after the Effective Time and arising out of or relating to the

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ownership
of the Assets or operation of the Assets after the Effective Time, except to the extent that such
obligations or liabilities relate to any Excluded Asset or Reserved Rights.

          (b) Seller Retained Liabilities. All obligations and liabilities arising out of or
relating to the Assets other than the Assumed Liabilities, and all obligations and liabilities to
the extent attributable to the Reserved Rights, shall remain and be the obligations and liabilities
solely of Seller (the “Seller Retained Liabilities”), including, but not limited to, any long-term
debt (including the current portion thereof) and any obligation or liability with respect to
periods prior to and including the Effective Time for payment of rentals, royalties or Taxes
related to the Assets.

ARTICLE III.

Adjustments; Actions Prior to Closing

     3.1 Purchase Price Adjustments. The Purchase Price shall be adjusted as set forth
below. All adjustments to the Purchase Price shall be made (i) according to factors set forth in
this Section, (ii) in accordance with GAAP, and (iii) without duplication.

          (a) Revenue Adjustment. The Purchase Price shall be adjusted downward by an amount
equal to the sum of all proceeds received by Seller between the Effective Time and the Closing Time
(the “Adjustment Period”) attributable to the Assets and that are, in accordance with GAAP,
attributable to the period of time after the Effective Time including: (i) proceeds from the sale
of Oil and Gas (net of any production royalties or other Burdens on Production, transportation
costs and of any Taxes on production including severance, conservation, and ad valorem Taxes, not
reimbursed to Seller by the purchaser of production) produced from such Assets during the
Adjustment Period and proceeds attributable to prepayments, and (ii) subject to Article IX hereof,
proceeds from the sale, salvage or other disposition during the Adjustment Period of any property,
equipment or rights included in such Assets; provided that there shall be no downward adjustment of
the Purchase Price for proceeds received by Seller after the Effective Time in the form of checks
deposited to Seller’s lockbox and which are either: (A) delivered and endorsed over to Buyer, or
(B) negotiated by Seller and remitted to Buyer as part of the Final Purchase Price.

          (b) Cost Adjustment. The Purchase Price shall be adjusted upward by an amount equal
to the sum of all costs attributable to the Assets that were incurred in the ordinary course of
business, that are, in accordance with GAAP, attributable to times after the Effective Time, and
that have accrued to and been paid by Seller during the Adjustment Period, or that were incurred by
Seller pursuant to the Contract Operating Agreement: (i) as costs of the ordinary course of
production, processing or other operations directly related to the Assets, (ii) as costs incurred
with respect to staking, surveying, title examination, surface grading and similar activities
directly related to the Assets, (iii) as costs for the maintenance of any of the Assets, (iv)
as costs for the extension or renewal during the Adjustment Period of any of the Assets, (v)
subject to Article IX hereof, as costs of any exploration or development activities related to its
Assets or related to drilling, completion, recompletion, or workover activities, or mining or
reclamation activities, and conducted during the Adjustment Period, (vi) the aggregate amount of
all other expenditures made by Seller prior to the Effective Time for costs and expenses directly

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attributable to the Assets after the Effective Time, and (vii) otherwise from the ownership of the
Assets during the Adjustment Period.

          (c) Prepaid and Accrued Expenses. The Purchase Price shall be adjusted upward by an
amount equal to prepaid expenses of or relating to the Assets, and downward by an amount equal to
the accrued expenses of or relating to the Assets, all as determined in accordance with GAAP, to
reflect the principle that (A) all expenses attributable to the Assets for periods on or prior to
the Effective Time are for the account of Seller, and (B) all expenses attributable to the Assets
for periods after the Effective Time are for the account of Buyer (but, with respect to prepaid
expenses, only to the extent such prepaid expenses shall accrue to the benefit of Buyer upon and
after the Effective Time). Without limiting the generality of the foregoing, the following
expenses shall be prorated as described in the preceding sentence:

               (i) all payments and charges under Contracts and Permits;

               (ii) Taxes levied or assessed against any Assets;

               (iii) Taxes levied or assessed against or based upon production from any Assets, excepting
Taxes arising from the transfer of Assets pursuant to this Agreement; and

               (iv) charges for utilities or other goods and services furnished to the Assets.

     3.2 Adjusted Purchase Price Calculation.

          (a) Initial Adjustment Certificate. Seller shall deliver to Buyer, no later than
three (3) Business Days preceding the Closing Date, a certificate executed by an authorized
representative of Seller (“Initial Adjustment Certificate”), setting forth Seller’s estimate of the
Adjusted Purchase Price. The Initial Adjustment Certificate shall be based on actual information
available to Seller at the time of its preparation and upon Seller’s good faith estimates and
assumptions. The Initial Adjustment Certificate shall be accompanied by appropriate documentation,
in summary form, supporting the adjustments proposed in such Certificate. Seller and Buyer shall
mutually agree on the Adjusted Purchase Price prior to Closing, with any disagreements to be
handled in the Final Adjustment Certificate.

          (b) Final Adjustment Certificate; Final Purchase Price.

               (i) On or before November 17, 2007, Buyer shall prepare and deliver to Seller a certificate
executed by an authorized representative of Buyer (the “Final Adjustment Certificate”) setting
forth each adjustment or payment that was not finally determined as of Closing and showing the
calculation of each such adjustment, including any Environmental
Defect Amount under Section 3.8 and any Excess Title Defect Amount under Section 3.10, and the
resulting final purchase price (the “Final Purchase Price”). The Final Adjustment Certificate
shall be accompanied by appropriate documentation supporting the adjustments proposed in such
Certificate. Each Party shall provide to the other reasonable access to all records in its
possession which were used in the preparation of the Initial and Final Adjustment Certificates or
may otherwise be necessary for the preparation or review thereof.

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               (ii) Seller shall review Buyer’s Final Adjustment Certificate and shall give written notice to
Buyer of any objections it has to the calculations shown in such Certificate within ten (10) days
after receipt. If Seller does not deliver a notice of objection within such 10-day period, then
the Final Adjustment Certificate shall be deemed to be conclusive, final and binding on the
Parties. Seller and Buyer shall endeavor in good faith to resolve any such objections within ten
(10) days after the receipt by Buyer of Seller’s timely objections. If any objections or disputes
have not been resolved at the end of such 10-day period, the disputed portion of the Final
Adjustment Certificate shall be determined within the following ten (10) days by a partner in a
major, national accounting firm with substantial Oil and Gas audit experience and which is not the
auditor of either Seller or Buyer and is mutually acceptable to the Parties, and the determination
of such auditor shall be final and binding upon the Parties. Notwithstanding anything to the
contrary in this Agreement, the Parties agree that KPMG may serve as auditor despite its
performance of any internal auditing services for Seller, if KPMG is not at the relevant time also
performing accounting services for Seller, and has not between the Effective Time and the relevant
time performed accounting services for Seller, and is not at the relevant time contemplated to be
engaged to perform accounting services for Seller. If Seller and Buyer cannot agree with respect
to the selection of an auditor, Seller and Buyer each shall select an auditor and those two
auditors shall select a third auditor whose determination shall be final and binding upon the
Parties. Such auditor shall have the right, if necessary, to retain a qualified environmental
consulting firm and/or legal counsel with Oil and Gas experience to assist in making determinations
and advising with respect to disputed portions of the Final Adjustment Certificate. The
determination of the auditor as to each item in dispute shall be within the range for such item as
proposed in the Final Adjustment Certificate, on the one hand, and in Seller’s notice of objection,
on the other hand. Seller and Buyer shall bear equally the expenses of such auditor (including
those of any professional retained by such auditor in accordance with this clause (ii)) incurred in
connection with such determination. Within two (2) days after the Final Adjustment Certificate has
been conclusively determined as provided above, Buyer shall pay Seller the amount, if any, by which
the Final Purchase Price exceeds the Adjusted Purchase Price, or, if applicable, Seller will pay
Buyer the amount, if any, by which the Adjusted Purchase Price exceeds the Final Purchase Price, in
each case with interest thereon at the Prime Rate, from and including the Closing Date but
excluding the date of payment.

               (iii) All payments to be made pursuant to this Section 3.2 shall be paid by wire or accounts
transfer of immediately available funds to the accounts designated by the recipient by written
notice to the Party owing such payment. The Party receiving any such payment shall be responsible
for allocating it among its Affiliates as appropriate.

     3.3 Allocated Values; Post-Closing Allocations.

          (a) Schedule 3.3(a) attached hereto sets forth an allocation of values among the
Assets (the “Allocated Values” of the respective Assets, as applicable). The Parties agree that,
to the extent possible, the Allocated Values shall be used for calculating adjustments based on
Environmental Defects, if any.

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          (b) In addition, Seller and Buyer shall each use commercially reasonable efforts to reach
agreement on the allocated value of each class of the Assets in accordance with the Code. Such
allocations shall be consistent with the Allocated Values, to the extent possible, Seller and Buyer
each shall file all tax returns and schedules thereto, including those returns and forms required
by Section 1060 (if applicable) of the Code, consistent with any such agreed-upon allocations,
unless otherwise required by applicable Legal Requirements. In the event the Parties do not reach
agreement on such allocations, Seller and Buyer shall each reflect the Assets acquired by such
Party on its books for tax reporting purposes in accordance with such Party’s own determination of
such allocations.

     3.4 Updated Schedules and Exhibits. Each Party shall, immediately prior to Closing,
supplement the Schedules and Exhibits to this Agreement with additional information that, if
existing or known to it on the date of this Agreement, would have been required to be included in
one or more Schedules or Exhibits to this Agreement. For purposes of determining the satisfaction
of any of the conditions to the obligations of the Parties and the liability of the Parties
following Closing for breaches of its representations, warranties, and covenants under this
Agreement, the Schedules to this Agreement shall be deemed to include only (a) the information
contained therein on the date of this Agreement, and (b) information added to such Schedules and
Exhibits by written supplements to this Agreement delivered prior to Closing by the Party making
such amendment that (i) are accepted in writing by the other Party or (ii) reflect actions
permitted by this Agreement to be taken prior to Closing.

     3.5 Taxpayer Identification Numbers. At or prior to Closing, Seller and Buyer will
provide one another with their respective U.S. taxpayer identification numbers.

     3.6 Consents. Seller shall promptly take such reasonable actions necessary to obtain
and deliver at Closing any Third Party Consents which are required to consummate the transactions
contemplated hereby. The form and content of all of Seller’s solicitations for such Consents
affecting the Assets shall be subject to Buyer’s approval.

     3.7 Asset Due Diligence. Between the date of this Agreement and the end of the
Transfer Period, Buyer and/or its designees shall have the right of ingress and egress to the real
property containing the Assets so that Buyer may make any inspections, tests, surveys and studies
of the Assets that it may desire, including environmental surface sampling or other tests of air,
soils, water, groundwater, and other liquids as part of a Phase I environmental analysis. If any
such investigation should include any drilling,
trenching, or other invasive surface disturbing tests, Seller’s prior written consent, which
can be withheld for any reason, must be obtained.

          (a) If Buyer engages an environmental contractor to conduct such inspections and tests, Buyer
shall provide to Seller a detailed scope of work and/or work plan pursuant to which the assessment
work will take place.

          (b) After giving Seller such advance notice as is reasonably possible, which notice, except as
provided herein, may be oral (in person or by telephone), Buyer and/or its designee may enter the
real property containing the Assets during normal business hours and may also make arrangements to
enter the real property containing the Assets at other times upon agreement from Seller. Buyer
shall make such inspections, tests, surveys and studies with a

17

 

minimum of interference to Seller’s
business. Seller may have a representative present (at Seller’s expense) at all phases of Buyer’s
work on the real property containing the Assets.

          (c) At Seller’s written request, Buyer shall promptly deliver to Seller a copy of every report
of findings obtained by Buyer as a result of the activities described in this Section 3.7.

          (d) Buyer’s inspections, tests, surveys and studies conducted pursuant to this Section 3.7
shall be at Buyer’s sole expense. However, unless otherwise agreed in writing, Buyer shall not be
obligated to pay for or reimburse Seller for any costs or expenses that may be incurred by Seller
in connection with such tests, including costs associated with production being temporarily shut-in
(e.g., time value of money).

          (e) Seller hereby releases, acquits and forever discharges Buyer and its representatives,
agents, employees, attorneys, assigns, officers, directors, shareholders, insurers, Affiliates, and
all others for whom Buyer may be vicariously liable (the “Buyer Group”) from and against Losses
arising out of, resulting from, or in any manner related to Buyer’s inspection or testing of the
Assets and the real property containing such Assets under the terms of this Agreement, unless such
Losses are the result of the gross negligence or willful misconduct of the Buyer Group (such
Losses, “Indemnified Losses”). Buyer hereby agrees to indemnify Seller and its representatives,
agents, managers, employees, attorneys, assigns, officers, members, insurers, Affiliates, and all
others for whom Seller may be vicariously liable (the “Seller Group”) from and against any
Indemnified Losses arising out of, resulting from, or in any manner related to Buyer’s inspection
or testing of the Assets or the real property containing such Assets under the terms of this
Agreement. The provisions of this Section 3.7(e) shall survive termination of this Agreement;
provided that Buyer’s indemnity obligation herein shall expire as to any claims of the Seller Group
hereunder that are not delivered to Buyer in writing on or before the third anniversary of the
Closing Date.

          (f) Except as to the books, records, data and other information excluded pursuant to Sections
2.1(c)(vii) or 2.1(d), Seller agrees (i) to give Buyer and its representatives full access to, and
the right to copy, the Oil and Gas Books and Records and (ii) furnish or make available to Buyer
such financial and operating data and other information relating solely to the Oil and Gas business
and properties comprising the Assets as Buyer shall from time to time reasonably request, but in
either case only to the extent that Seller may do so without violating
any confidentiality or contractual obligation to a third Person. Except as provided in
Section 13.1, it is expressly understood and agreed that Seller shall not have any duty or
obligation to provide Buyer with copies of geologic or technical data and information collected or
developed to evaluate any of the Reserved Rights.

     3.8 Adjustments for Environmental Defects.

          (a) Notice of Environmental Defects. Buyer may provide Seller with a detailed
written notice describing any Environmental Defect which Buyer’s due diligence reveals and will
provide evidence thereof. Such notice and evidence shall be given on or before the date which is
ten (10) days before end of the Transfer Period (the “Environmental Defects Deadline”). Buyer
shall be deemed to have waived all rights under this Section 3.8, but not its

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rights and remedies
under Articles VIII and XII hereof or under any other provisions of this Agreement, with respect to
Environmental Defects unless such Environmental Defects are included in a written notice delivered
on or before the Environmental Defects Deadline.

          (b) Defect Adjustments. Upon timely delivery of written notice of an Environmental
Defect, the Parties shall proceed as follows:

               (i) Seller shall have the option to attempt to remediate such Environmental Defect to the
satisfaction of Buyer on or before the end of the Transfer Period, or by mutual consent of the
Parties, Seller shall have the option to attempt to remediate such Environmental Defects to the
satisfaction of Buyer within thirty (30) days after the end of the Transfer Period.

               (ii) if Seller does not elect to cure or is unable to cure such Environmental Defects to the
reasonable satisfaction of Buyer on or before the end of the Transfer Period or such later date as
is mutually agreed to by the Parties, Buyer shall have the option to either accept assignment of
the Assets affected by such Environmental Defects or to exclude such Assets from this Agreement.
If Buyer elects to accept assignment of the Assets affected by such Environmental Defects, the cost
to remediate such Environmental Defects (as determined by agreement of the Parties or, failing such
agreement, by a mutually acceptable third party environmental consultant) shall be included in the
Final Adjustment Certificate. If Buyer elects to exclude such Assets, an amount equal to the
aggregate Allocated Value of the Assets affected by such Environmental Defect, but in no event more
than the difference, if any, between Two Million Dollars ($2,000,000.00) and the Excess Title
Defects Amount, shall be included in the Final Adjustment Certificate. Such remediation cost, or
aggregate Allocated Value, is referred to herein as the “Environmental Defects Amount.”

               (iii) Notwithstanding anything in clause (ii) to the contrary, in the event Seller receives a
timely written notice of Environmental Defects from Buyer, Seller shall have the right but not the
obligation, in lieu of the remedies available to Buyer under clause (ii), to offer Buyer mutually
acceptable replacement Oil and Gas Interests reasonably proximate, and similar in kind and nature,
to the Oil and Gas Interests effected by the Environmental Defect (“Replacement Interests”).
Replacement Interests include, without limitation, an Oil and Gas (or CBM and/or CMM) lease or
leases with a minimum primary term of five (5) years (which
primary term must begin no earlier than the date of substitution of such Replacement
Interest), with no development commitments during the primary term and covering a total number of
Net Mineral Acres equivalent to the number of Net Mineral Acres of Oil and Gas Interests affected
by the Environmental Defect.

     3.9 Adjustments for Title Defects.

          (a) Initial Notice of Title Defects.

               (i) Up to and including ten (10) days before the end of the Transfer Period (the “Initial
Title Defect Notice Deadline”), Buyer may deliver to Seller written notice of Title Defects, if
any. Such notice (“Title Defect Notice”) shall include (A) a description of the specific Assets
affected by the Title Defect, (B) the factual and legal basis for each Title Defect

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that Buyer
believes affects such Assets, and (C) the total Net Mineral Acres Buyer believes are affected by
the Title Defect.

               (ii) Buyer will be deemed to have waived all rights under Section 3.10, but not its rights and
remedies under Articles VIII and XII hereof, or under other provisions hereof, or the Transfer
Documents, with respect to any Title Defects of which it has Knowledge as of the Initial Title
Defect Notice Deadline unless such Title Defects are specifically identified in a Title Defect
Notice delivered on or before the Initial Title Defect Notice Deadline.

          (b) Final Notice of Title Defects.

               (i) Up to and including thirty (30) days after the end of the Transfer Period (the “Final
Title Defect Notice Deadline”), Buyer may deliver to Seller a Title Defect Notice describing Title
Defects, if any, of which it first obtained Knowledge after the Initial Title Defect Notice
Deadline.

               (ii) Buyer will be deemed to have waived all rights under Section 3.10, but not its rights and
remedies under Articles VIII and XII, or under other provisions hereof, or the Transfer Documents,
with respect to any such Title Defect unless such Title Defect is included in a Title Defect Notice
delivered on or before the Final Title Defect Notice Deadline.

     3.10 Seller’s Response to Title Defect Notice. Following timely delivery by Buyer of
a Title Defect Notice, the Parties shall proceed as follows with respect to Oil and Gas Interests
affected by Title Defects:

          (a) Above the Net Mineral Acre Threshold. If the total Net Mineral Acres to be
conveyed to Buyer under this Agreement, after taking into account the effect of Title Defects for
which Buyer timely delivered a Title Defect Notice under Section 3.9 hereof, is more than Two
Hundred and Sixty-Seven Thousand, Six Hundred and Eighty-Nine (267,689) Net Mineral Acres (the “Net
Mineral Acre Threshold”), Seller shall provide reasonable assistance, as requested by Buyer, at
Buyer’s cost and expense, to cure all such Title Defects but shall have no further obligations
hereunder.

          (b) Below the Net Mineral Acre Threshold. If the total Net Mineral Acres to be
conveyed to Buyer under this Agreement, after taking into account the effect of Title Defects for
which Buyer timely delivered a Title Defect Notice under Section 3.9 hereof, are less than the Net
Mineral Acre Threshold, but more than Two Hundred and Sixty-One Thousand, Four Hundred and
Sixty-Four (261,464) Net Mineral Acres (the “Mineral Acre Compensation Threshold”), Seller, at its
election, and sole cost and expense shall, no later than the 30th day following receipt of a Title
Defect Notice, except as to those Title Defects which Buyer has agreed to waive and acquire the
affected Oil and Gas Interests notwithstanding the Title Defects, promptly undertake one or more of
the following with respect to each identified Title Defect: (i) diligently attempt to cure such
Title Defect; or (ii) offer Buyer mutually acceptable replacement Replacement Interests covering a
total number of Net Mineral Acres equivalent to the number of Net Mineral Acres of Oil and Gas
Interests affected by the Title Defect.

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          (c) Below Mineral Acres Compensation Threshold. If the total Net Mineral Acres to be
conveyed to Buyer under this Agreement, after taking into account the effect of Title Defects of
which Buyer timely delivered a Title Defect Notice under Section 3.9 hereof, are less than the
Mineral Acre Compensation Threshold, Seller, at its election, and sole cost and expense shall, no
later than the 30th day following receipt of a Title Defect Notice, except as to those Title
Defects which Buyer has agreed to waive and acquire the affected Oil and Gas Interests
notwithstanding the Title Defects, promptly undertake one or more of the following with respect to
each identified Title Defect: (i) diligently attempt to cure such Title Defect; (ii) offer Buyer
mutually acceptable Replacement Interests; or (iii) pay Buyer an amount equal to One-Hundred
Dollars ($100.00) per Net Mineral Acre for each Net Mineral Acre less than the Mineral Acre
Compensation Threshold after taking into account Title Defects which were waived by Buyer, cured or
removed by Seller, or as to which Seller has provided Replacement Interests, and such amount (the
“Excess Title Defects Amount”) shall be included in the Final Adjustment Certificate; provided
however, that in no event shall the Excess Title Defects Amount, when added together with any
Environmental Defects Amount, exceed Two Million Dollars ($2,000,000.00).

     3.11 Liens. Notwithstanding anything to the contrary herein, Seller shall exercise
its reasonable best efforts to cause the termination, release, or waiver, prior to the end of the
Transfer Period, of any Liens (other than Permitted Liens) encumbering or affecting the Assets of
which it has received actual notice not less than ten (10) days prior to the end of the Transfer
Period.

ARTICLE IV.

Surface Use and Other Activities

     4.1 Surface Use Agreements.

          (a) Surface Use Agreements. Subject to applicable Legal Requirements and to valid
restrictions contained in Contracts with third Persons, upon the written request of Buyer, Seller
shall execute and deliver, and Seller shall cause its Affiliates to execute and deliver, to Buyer
(or any entity with whom Buyer has entered into a joint operating agreement, pursuant to which
Buyer is participating or has a right to participate in the subject operations) one or more
non-exclusive site-specific surface access and use agreements covering portions of the surface
estate overlying the Oil and Gas Interests, that is owned or leased by Seller or an Affiliate
as of the date hereof, in substantially the form agreed to by the Parties prior to the Closing Date
(a “Surface Use Agreement” or “SUA”). Any SUA shall include specific terms and conditions that,
among other things, take into account any existing operations or planned activities to be conducted
pursuant to the Reserved Rights or the cooperative development plans referred to in Section 4.2.
Subject to the expiration period set forth in Section 4.1(b)(i) hereof, the obligation of Peabody
to enter into SUAs shall be binding upon all of Seller’s or its Affiliates’ successors and assigns
to that portion of the surface estate overlying the Oil and Gas Interests and that is owned or
leased by Peabody or an Affiliate as of the date hereof, shall be incorporated into the Transfer
Document by which the Oil and Gas Interests are transferred, and shall be deemed a covenant running
with the land.

          (b) Transfers; Relation to Surface Use Agreements.

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               (i) Prior to the fifth anniversary of the Closing Date, Seller shall not sell, assign, or
otherwise permanently transfer, and Seller shall cause its Affiliates not to sell, assign or
otherwise permanently transfer, any of its interest in the surface estate overlying the Oil and Gas
Interests that is owned or leased by Seller or an Affiliate as of the date hereof except by a
recordable instrument which makes such sale, assignment or other permanent transfer under and
subject to the obligation to enter into a SUA, consistent with the terms hereof, with Buyer (or any
entity with whom Buyer has entered into a joint operating agreement, pursuant to which Buyer is
participating or has a right to participate in the subject operations), provided that such
obligation shall expire as to Seller, its Affiliates, and/or Seller’s successor, assign or
transferee (as the case may be) on such fifth anniversary. After the fifth anniversary of the
Closing Date, Seller or its Affiliates and/or Seller’s successors, assigns, and transferees to the
surface estate (as the case may be), shall be permitted to sell, assign, transfer, or otherwise
deal with any portion of such surface overlying the Oil and Gas Interests which is not then subject
to a valid Surface Use Agreement, free of any obligation to Buyer to enter into a Surface Use
Agreement.

               (ii) If at any time Seller or its Affiliates desire to transfer an estate in the surface
overlying the Oil and Gas Interests (then owned by Buyer) that is owned or leased by Seller or such
Affiliate as of the date hereof in a transaction which is less than a sale, assignment or other
permanent transfer, Seller shall make, and Seller shall cause its Affiliates to make, such transfer
under and subject to the duty to enter into a Surface Use Agreement with Buyer.

          (c) Surface Use Agreement Terms. Each such SUA shall be site-specific and shall cover
only those portions of Seller’s or its Affiliates’ surface estate that are (i) owned or leased by
Seller or an Affiliate as of the date hereof, (ii) included within surveyed locations for specific
drill sites and related facilities and infrastructure for which Buyer has prepared development
plans with proposed work schedules, and (iii) covered by drilling or similar permits or other
applications filed or to be filed by Buyer with applicable Governmental Authorities for wells and
related facilities and infrastructure. Each of Buyer’s requests for a SUA shall be accompanied by
reasonably detailed documentation demonstrating that the conditions set forth in clauses (ii) and
(iii) hereof have been satisfied. Notwithstanding the foregoing, nothing in this Agreement shall
be interpreted or construed to restrict Buyer’s common law or statutory rights to
use the surface overlying the Oil and Gas Interests as an incident or right appurtenant to the
Oil and Gas Interests acquired by it under this Agreement.

     4.2 Cooperative Development. Each Party shall negotiate in good faith and enter into
cooperative development plans with the other Party for coal mining and Oil and Gas exploration and
production activities on the real property containing the Oil and Gas Interests consistent with the
provisions set forth in the Transfer Documents.

ARTICLE V.

Closing and Actions Prior to Closing

     5.1 Closing. Subject to the satisfaction or waiver of the conditions set forth in
Article X, the consummation of the transactions contemplated hereby (the “Closing”) shall occur on
or before 4:00 P.M. Central Daylight Time on Wednesday, June 20, 2007, at a place mutually agreed
to by Seller and Buyer in writing, or at such other date and time as the Parties may agree in
writing.

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     5.2 Seller’s Closing Deliveries. At Closing, Seller shall deliver or cause to be
delivered to Buyer the following:

          (a) Officer’s Certificate. The certificate described in Section 10.1(c).

          (b) FIRPTA Certificate. A FIRPTA Non-Foreign Seller Certificate certifying that
Seller is not a foreign Person within the meaning of Section 1445 of the Code, reasonably
satisfactory in form and substance to Buyer.

          (c) Contract Operating Agreement. An executed counterpart of the Contract Operating
Agreement.

          (d) Right of First Refusal Agreement. Seller shall execute and deliver a right of
first refusal agreement in form and substance reasonably acceptable to Buyer, whereby Buyer shall
have a right of first refusal to acquire certain interests in Oil and Gas located in, on or under
the lands described on the maps attached hereto as Schedule 5.2(d) (the “Right of First
Refusal”).

          (e) Peabody Guaranty. Peabody shall execute and deliver the Peabody Guaranty.

          (f) Other. Such other documents and instruments as may be necessary to effect the
intent of this Agreement and consummate the transactions contemplated hereby.

     5.3 Buyer’s Closing Deliveries. At Closing, Buyer shall deliver or cause to be
delivered to Seller the following:

          (a) Adjusted Purchase Price. The Adjusted Purchase Price, by bank or wire transfer of
immediately available funds to an account or accounts designated by Peabody Natural Gas, LLC on
behalf of Seller and in the proportions to the Peabody Subs as designated by
Peabody Natural Gas, LLC on behalf of Seller no later than the Business Day preceding the
Closing Date.

          (b) Officer’s Certificate. The certificate described in Section 10.2(c).

          (c) Contract Operating Agreement. An executed counterpart of the Contract Operating
Agreement.

          (d) Right of First Refusal Agreement. An executed counterpart of the Right of First
Refusal.

          (e) Other. Such other documents and instruments as may be necessary to effect the
intent of this Agreement and consummate the transactions contemplated hereby.

     5.4 Transfer Documents. At or prior to Closing, Seller and Buyer shall use their
respective best efforts to agree on the form and substance of the following instruments, each to be
effective as of the Effective Time (collectively, the “Transfer Documents”):

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          (a) Oil and Gas Deed, Assignment, Assumption, and Bill of Sale. A deed, bill of sale,
and assignment, containing a special warranty of title by, through and under Seller and the Peabody
Predecessors (as hereafter defined), but not otherwise, by which Seller transfers and conveys the
Assets, and by which Buyer agrees to assume, pay, discharge and perform the Assumed Liabilities
(the “Deed”), subject to and reserving in favor of Seller the Reserved Rights more fully set forth
in the form deed attached hereto as Exhibit “D”.

          (b) Other Transfer Documents. Such other documents and instruments, including without
limitation notices to operators and letters in lieu of transfer orders, as shall be reasonably
requested by Buyer to effect the intent of this Agreement and consummate the transaction
contemplated hereby. To the extent any of the Oil and Gas Interests are located on federal, state,
or tribal lands, the Parties will execute and deliver officially approved federal, state, or tribal
assignment forms, and such forms shall be deemed to be subject to and incorporate the terms of the
other corresponding Transfer Documents.

ARTICLE VI.

Transfer Period Covenants 

     6.1 Transfer Period. During the period ending on the ninetieth (90th) day following
the Closing Date (the “Transfer Period”), the Parties shall finalize, execute, and deliver any
Transfer Documents that were not executed and delivered at Closing together with such other
documents as may be necessary to convey, assign, and transfer the Assets in accordance with Legal
Requirements in a form acceptable to Buyer.

     6.2 Further Assurances.

          (a) At or after Closing, each of Seller and Buyer, at the reasonable request of the other,
shall promptly execute and deliver, or cause to be executed and delivered, to the other
all such documents and instruments, in addition to those otherwise required by this Agreement,
in form and substance reasonably satisfactory to the other, and take all actions necessary or
desirable and consistent with this Agreement, in order to carry out or evidence the terms of this
Agreement.

          (b) In the event that, on or prior to December 31, 2007, either Party discovers that any
Transfer Document inaccurately describes the Assets, the applicable Party shall promptly prepare,
execute, and deliver such additional transfer or corrective documents as necessary to effectuate
the intent of the Parties in this Agreement that Seller assign, sell and transfer, free and clear
of all Liens (other than Permitted Liens), all of its rights, titles, estates and interests in, to,
under or derived from the Assets described at Section 2.1(c) hereof.

     6.3 Obtaining Consents and Delivery of Notices.

          (a) During the Transfer Period, Seller shall continue to use commercially reasonable efforts
to obtain in writing as promptly as possible any Third Party Consent, or other authorization or
approval required to be obtained by Seller in connection with the transactions contemplated
hereunder, which was not obtained on or before Closing (a “Post-Closing

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Consent”) in form and
substance reasonably satisfactory to Buyer. A true and complete copy of any such Post-Closing
Consent shall be delivered to Buyer promptly after it has been obtained.

          (b) If any Post-Closing Consent or other required authorization or approval shall not have
been obtained prior to the end of the Transfer Period, Seller and Buyer shall cooperate in a
mutually agreeable arrangement under which Buyer would obtain the benefits and be responsible for
the obligations in accordance with this Agreement in respect of any Asset of Seller or any claim,
right, or benefit arising hereunder the assignment of which without the consent of the third Person
thereto would constitute a breach or other contravention of such Asset or in any way adversely
affect the rights of the Buyer thereunder, including sub-contracting, sub-licensing, or sub-leasing
to Buyer, or under which Seller would enforce for the benefit of Buyer, with Buyer assuming
Seller’s obligations, any and all rights of Seller against the third Person in question. Seller
shall promptly pay to Buyer when received all monies received by Seller in respect of any such
Asset or any claim, right, or benefit arising thereunder.

          (c) During the Transfer Period, each Party shall deliver such notices of this Agreement and
the transaction contemplated hereby as shall be required by applicable Legal Requirements or
Contracts.

     6.4 Governmental Filings. The Parties shall, as promptly as practicable and in any
event before the end of the Transfer Period:

          (a) make all required filings, if any, with, and prepare applications to and conduct
negotiations with, each Governmental Authority as to which such filings, applications or
negotiations are necessary or appropriate in the consummation of the transactions contemplated
hereby, and

          (b) provide such information as each may reasonably request to make such filings, prepare such
applications and conduct such negotiations. Each Party shall cooperate with and use all reasonable
efforts to assist the other with respect to such filings, applications and negotiations.

     6.5 Recording Fees, Transfer Taxes and Similar Costs. Any documentary, filing and
recording fees and similar costs incurred and imposed upon, or with respect to the transfers of the
Assets contemplated under this Agreement shall be borne by Buyer. All real estate transfer or sale
taxes which are incurred with respect to the Assets shall be paid by the Buyer.

     6.6 Transition Services. During the Transfer Period, Seller shall provide certain
operating and transition services to Buyer with respect to the Assets pursuant to a contract
operating agreement in substantially the form agreed to by the Parties prior to the Closing Date
(the “Contract Operating Agreement”) and on such other terms and conditions as the Parties may
agree.

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ARTICLE VII.

Buyer’s Representations and Warranties

     As a material inducement to Seller to enter into this Agreement and to consummate the
transactions contemplated hereby, Buyer represents and warrants to Seller that:

     7.1 Organization and Standing. Buyer is a limited liability company, duly organized
and validly existing under the laws of the state of Virginia, and is or, by the end of the Transfer
Period, will be duly qualified to carry on its business in all states in which are located the
Assets.

     7.2 Power. Buyer has all requisite corporate power and authority to carry on its
business as presently conducted and to enter into this Agreement and the Transfer Documents and to
perform its obligations hereunder and thereunder. The execution and delivery of this Agreement or
the Transfer Documents do not, and the fulfillment of and compliance with the terms and conditions
hereof will not, contravene, violate, or be in conflict with, any provision of its organizational
or governing documents or resolutions adopted by Buyer’s governing body.

     7.3 Authorization and Enforceability. The execution, delivery and performance of this
Agreement and the transactions contemplated hereby have been duly and validly authorized by all
requisite limited liability company action on Buyer’s part. This Agreement constitutes, and all
agreements and instruments delivered by Buyer pursuant hereto constitute, legal, valid and binding
obligations upon Buyer, enforceable in accordance with their respective terms, subject, however, to
the effects of bankruptcy, insolvency, reorganization, moratorium and other laws for the protection
of creditors, as well as to general principles of equity, regardless of whether such enforceability
is considered in a proceeding in equity or at law.

     7.4 Liability for Brokers’ Fees. Buyer has incurred no liability, contingent or
otherwise, for brokers’ or finders’ fees relating to the transactions contemplated by this
Agreement for which Seller shall have any responsibility whatsoever.

     7.5 Alien Status. Buyer is not a non-resident alien, foreign corporation, foreign
partnership, foreign trust or foreign estate alien, as those terms are defined in the Code.

     7.6 Litigation. There is no Litigation pending or, to its Knowledge, threatened in
writing, against it, or any of its assets in any court or by or before any Governmental Authority
or arbitration or mediation that would impair its ability to consummate, or that would reasonably
be expected to prevent, delay or make illegal the transactions contemplated hereby.

     7.7 Orders. There are no Orders against Buyer or affecting any of its assets, that
would impair its ability to consummate, or that would reasonably be expected to prevent, delay or
make illegal the transactions contemplated hereby.

     7.8 No Conflicts. The execution and delivery of this Agreement does not, and the
fulfillment of and compliance with the terms and conditions hereof will not:

          (a) contravene, violate, or be in conflict with or breach any material provision of, or give
any Person the right to declare a default or exercise any remedy under, or to cancel,

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terminate or
modify, any Contract to which it is a party or by which it or any of its assets are bound or its
governing documents; or

          (b) contravene, violate, be in conflict with, or give any Governmental Authority or other
Person the right to challenge any of the transactions contemplated herein or to exercise any remedy
or obtain any relief under, any Legal Requirements or any Order applicable to it, except such
contraventions, violations, challenges, conflicts or claims for or exercises of any remedy or
relief as would not, individually or in the aggregate, have a material adverse effect on its
ability to consummate this Agreement or the transactions contemplated hereby.

     7.9 Regulatory Approvals. Except for the Transfer Approvals, no governmental notice,
filing, authorization, approval, order or consent is required to be given, filed or obtained by it
with respect to a Governmental Authority in connection with the execution, delivery and performance
by it of this Agreement or the transactions contemplated hereby.

     7.10 Buyer Due Diligence. Buyer has conducted such due diligence investigations
concerning the Assets as it has determined to be appropriate. It has not relied upon any estimates
by Seller concerning any Oil or Gas reserves included in the Assets or concerning the nature,
quantity or quality or costs of producing such Oil and Gas, and with respect to such matters and
other matters concerning the Assets which are not specifically addressed by Seller’s
representations and warranties in Article VIII of this
Agreement, it has relied exclusively upon its own due diligence investigation of the Assets,
including the advice of such experts or consultants as it has determined to be necessary or
desirable in its sole discretion. Buyer acknowledges that Seller’s records and files concerning
the Assets which have been made available for inspection by it contain valuative and interpretive
reports, studies and other material, and that it has not relied upon such reports, studies or other
material in electing to purchase the Assets, but has undertaken such independent analysis and other
due diligence inquiries concerning the Assets as it has determined to be necessary or desirable in
its sole discretion.

     7.11 Disclosure. To its Knowledge, none of the statements, representations or
warranties made by it in this Agreement or in any Exhibit, Schedule, Transfer Document, or
certificate delivered with or pursuant to this Agreement contains any untrue statement of fact or
omits to state any material fact necessary to be stated in order to make the statements,
representations or warranties contained herein or therein not misleading.

     7.12 Effectiveness of Representations and Warranties. The representations and
warranties contained in the foregoing Article VII are made as of the Effective Time, the Closing
Time, and the last day of the Transfer Period.

ARTICLE VIII.

Seller’s Representations and Warranties

     As a material inducement to Buyer to enter into this Agreement and to consummate the
transactions contemplated hereby, each Peabody Sub, represents and warrants severally, but not
jointly, with respect to itself and to the Assets, if any, owned, leased, controlled, or claimed by
it, to Buyer that:

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     8.1 Organization and Standing. It is a limited liability company, corporation, or
general partnership duly organized and validly existing under the laws of the state of Delaware,
and is duly qualified to carry on its business in all states in which are located that portion of
the Assets owned, leased, controlled, or claimed by it.

     8.2 Power. It has all requisite power and authority to carry on its business as
presently conducted and to enter into this Agreement and the Transfer Documents and to perform its
obligations hereunder and thereunder. The execution and delivery of this Agreement or the Transfer
Documents do not, and the fulfillment of and compliance with the terms and conditions hereof will
not, contravene, violate, or be in conflict with, any provision of its organizational or governing
documents or resolutions adopted by its governing body.

     8.3 Authorization and Enforceability. The execution, delivery and performance of this
Agreement and the transactions contemplated hereby have been duly and validly authorized by all
requisite action on its part. This Agreement constitutes, and all agreements and instruments
delivered by it pursuant hereto constitute, the legal, valid and binding obligations of it,
enforceable in accordance with their respective terms, subject, however, to the effects of
bankruptcy, insolvency, reorganization, moratorium and other
laws for the protection of creditors, as well as to general principles of equity, regardless
of whether such enforceability is considered in a proceeding in equity or at law.

     8.4 Liability for Brokers’ Fees. It has incurred no liability, contingent or
otherwise, for brokers’ or finders’ fees relating to the transactions contemplated by this
Agreement for which Buyer shall have any responsibility whatsoever.

     8.5 Alien Status. It is not a non-resident alien, foreign corporation, foreign
partnership, foreign trust or foreign estate alien, as those terms are defined in the Code.

     8.6 Litigation. There is no Litigation pending or, to its Knowledge, threatened in
writing, against it, or any of its Affiliates who are its predecessors-in-title with respect to its
Assets (collectively, the “Peabody Predecessors”), or any of its Assets in any court or by or
before any Governmental Authority or arbitration or mediation that would materially adversely
affect its Assets, or impair its ability to consummate, or that would reasonably be expected to
prevent, delay or make illegal the transactions contemplated hereby.

     8.7 Orders. There are no Orders against it, or its Peabody Predecessors, or affecting
any of its Assets that would materially adversely affect such Assets, or impair its ability to
consummate, or that would reasonably be expected to prevent, delay or make illegal the transactions
contemplated hereby.

     8.8 Rentals and Royalties. All rentals, royalties and overriding royalties payable by
it or, to its Knowledge, payable by any third-party operator with respect to its Assets and due and
payable with respect to periods ending on or prior to the Effective Time have been duly and
properly paid in each case in accordance with applicable Contracts and Legal Requirements.

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     8.9 No Conflicts. Except as otherwise expressly provided in Section 6.3 regarding
Consents, the execution and delivery of this Agreement does not, and the fulfillment of and
compliance with the terms and conditions hereof will not:

          (a) result in the imposition or creation of any Lien, charge or other encumbrance (other than
a Permitted Lien) upon or with respect to any of its Assets;

          (b) contravene, violate, or be in conflict with or breach any material provision of, or give
any Person the right to declare a default or exercise any remedy under, or to cancel, terminate or
modify, any Contract to which it is a party or by which it or any of its Assets are bound or its
governing documents; or

          (c) contravene, violate, be in conflict with, or give any Governmental Authority or other
Person the right to challenge any of the transactions contemplated herein or to exercise any remedy
or obtain any relief under, any Legal Requirements or any Order applicable to it or to any of its
Assets, except such contraventions, violations, conflicts, challenges, or claims for or exercises
of any remedy or relief as would not, individually or in the aggregate,
have a material adverse effect on its Assets, or its ability to consummate this Agreement or
the transactions contemplated hereby.

     8.10 Compliance with Laws. Except as would not have a material adverse effect on any
of its Assets, to its Knowledge:

          (a) its and its Peabody Predecessors’ ownership and operation of, and any third-party
operator’s operation of, its Assets is and has been in compliance with all applicable Legal
Requirements;

          (b) all Permits and Bonds applicable to its Assets are specified in the attached Schedule
8.10(b), and:

               (i) it, or any third-party operator of its Assets, has acquired and maintains all Permits and
Bonds from appropriate Governmental Authorities necessary to conduct any operations now being
performed in compliance with all applicable Environmental Laws and other Legal Requirements and
Orders;

               (ii) it, or any third-party operator of its Assets, is in compliance with all such Permits and
Bonds, and all such Permits and Bonds are in full force and effect; and

               (iii) there is no Litigation, pending or threatened, challenging or seeking revocation or
limitation of any such Permits and Bonds;

          (c) all plans, applications, reports, certificates and other instruments filed by it or any
third-party operator of its Assets with any Governmental Authority with respect to its Assets do
not:

               (i) contain any untrue statement of fact; or

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               (ii) omit any statement of fact necessary to make the statements therein not misleading.

     8.11 Environmental Conditions.

          (a) To its Knowledge, with respect to its Assets, it, its Peabody Predecessors, and each
third-party operator of Oil and Gas operations on its Assets have been in material compliance with,
and have not been and are not in any material respect in violation of or liable under, any
Environmental Law in effect on the date hereof. It has no Knowledge of any facts relating to the
condition, use, or the conduct of Oil and Gas operations on any of its Assets that are reasonably
likely to constitute or result in a violation of any Environmental Law in effect on the date
hereof, or result in a suit, action, claim, investigation or inquiry under or with respect to such
Environmental Law.

          (b) With respect to its Assets, it has not, and to its Knowledge, its Peabody Predecessors and
each third-party operator of its Assets have not, received any actual or threatened Order, notice
or other communication from a Governmental Authority or other Person
of any actual or potential violation or failure to comply with any Environmental Law in effect
on the date hereof pertaining to Oil and Gas operations on its Assets.

          (c) None of the estates in land containing the Assets is a “Superfund” site and, to its
Knowledge, none of the estates in land containing the Assets is being investigated or evaluated by
any Governmental Authority as a “Superfund” site. To its Knowledge, no substances or wastes have
been disposed of or released onto the estates in land containing the Assets in violation of any
applicable Environmental Laws.

     8.12 Taxes. Except as set forth on Schedule 8.12, all Taxes due and payable
on or before the date hereof applicable to its, or its Peabody Predecessors’, ownership of or
operation of its Assets prior to the Effective Time have been duly and timely paid except as may be
contested by it or a third-party operator of its Assets in good faith. All reports and returns
required to be filed by it, or its Peabody Predecessors, prior to the Effective Time with respect
to such Taxes have been duly and timely filed. There are no Liens or encumbrances on any of its
Assets that arose in connection with any failure or alleged failure to pay any Taxes, and it has no
Knowledge of any basis for assertion of any claims attributable to Taxes which, if adversely
determined, would result in any such Liens or encumbrances.

     8.13 Regulatory Approvals. Except for the Transfer Approvals, no governmental notice,
filing, authorization, approval, order or consent is required to be given, filed or obtained by it
with respect to a Governmental Authority in connection with the execution, delivery and performance
by it of this Agreement or the transactions contemplated hereby.

     8.14 Limited Title Warranty as to Assets. Except for Permitted Liens, its Assets are
free and clear of valid claims or rights of any Person claiming rights or interests therein by,
through or under it or any of its Peabody Predecessors. To its Knowledge, other than claims based
on dormant mineral interest or similar title curative statutes pertaining to mineral interests, no
Person claims an interest in or Lien upon its Assets except for the Permitted Liens. To its
Knowledge, it acquired from its Peabody Predecessors all rights, title, and interests to such

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Assets that were owned by such Peabody Predecessors on the date of acquisition, free and clear of
all Liens created by, through or under such Peabody Predecessor, except for any Permitted Liens.
It hereby expressly disclaims all other representations and warranties, express or implied, with
respect to its title to its Assets except as set forth in Section 8.18 below, or in the Transfer
Documents.

     8.15 Material Contracts. Schedule 2.1(c)(iii) contains a complete and
accurate list of all Material Contracts to which it is a party, all of which have been provided to
Buyer.

          (a) To its Knowledge, each of such Material Contracts is valid and in full force and effect
and is enforceable in accordance with its terms against the parties thereto.

          (b) It has not received any written notice of an asserted material default by it thereunder.

          (c) It is not in material default or in arrears in any material respect in the performance or
satisfaction of their obligations thereunder and, to its Knowledge, it and its Peabody
Predecessors, have fulfilled when due, or have taken all action necessary to enable them to fulfill
when due, all of their obligations thereunder.

          (d) To its Knowledge, Persons other than it, or its Peabody Predecessors, who are parties to
any such Material Contracts are not in material default or in arrears in any material respect in
the performance or satisfaction of their obligations thereunder.

     8.16 Employees. Except as specified in Schedule 8.16,

          (a) it is not a party to or subject to any pending labor union or collective bargaining
agreement or arrangement in connection with its Assets; and

          (b) to its Knowledge, it is not party to any material labor or employment dispute involving
any employees employed in connection with its Assets.

     8.17 No Material Adverse Change.

          (a) To its Knowledge, since the Effective Time, there has not been any material adverse change
in the operations or condition of its Assets, and no event has occurred or circumstance exists that
may result in such a material adverse change; provided, however, that in no event shall any change
resulting from conditions affecting the coal or Oil and Gas industry generally, changes in
commodity prices, or changes in general business or economic conditions constitute a material
adverse change in the operations or condition of its Assets.

          (b) Since the Effective Time, it has not sold, transferred or abandoned any part of its Assets
or terminated any of the Material Contracts, or voluntarily permitted any of its Assets or any
material rights with respect thereto to expire, and has not waived or released any material rights
with respect to its Assets.

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     8.18 Undisclosed Material Liabilities. Except (a) for the Seller Retained
Liabilities, (b) as set forth in Schedule 8.18, (c) liabilities arising in the ordinary
course of business since the Effective Time, (d) Permitted Liens, or (e) liabilities which,
individually or in the aggregate, are not material to its Assets, there are no liabilities relating
to its Assets of any kind whatsoever, whether accrued, contingent, absolute, determined,
determinable or otherwise, and there is no existing condition, situation or set of circumstances
which would reasonably be expected to result in such a liability.

     8.19 Insurance. All of its material Assets are covered by self insurance or currently
effective insurance policies of such types and amounts as are consistent with customary practices
and standards in the Oil and Gas or coal industry, as applicable; provided, however, that with
respect to Oil and Gas in the ground, no insurance is in place. It does not know of any threatened
termination of, premium increase with respect to, or material alteration of coverage under any such
policies.

     8.20 Intellectual Property. Except as would not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on the ownership or operation of its
Assets after Closing, all activities relating to its Assets since April 1, 2001, have been
conducted in such a manner so as not to violate or infringe upon the rights, or give rise to any
rightful claim of any Person for copyright, trademark, service mark, patent, license or other
intellectual property right infringement.

     8.21 Conveyance by Seller. Seller is not conveying all, or substantially all, of its
assets pursuant to this Agreement.

     8.22 Disclosure. To its Knowledge, none of the statements, representations or
warranties made by it in this Agreement or in any Exhibit, Schedule, Transfer Document, or
certificate delivered with or pursuant to this Agreement contains any untrue statement of fact or
omits to state any material fact necessary to be stated in order to make the statements,
representations or warranties contained herein or therein not misleading.

     8.23 Effectiveness of Representations and Warranties. The representations and
warranties contained in the foregoing Article VIII are made as of the Effective Time, the Closing
Time, and the last day of the Transfer Period.

ARTICLE IX.

Other Covenants

     9.1 Certain Affirmative Covenants of Peabody Subs. Except as Buyer may otherwise
consent in writing, between the Effective Time and the end of the Transfer Period, each Peabody
Sub, with respect to its Assets (or, with respect to the Assets such Peabody Sub transfers to Buyer
at Closing, during the period between the Closing Date and the end of the Transfer Period, such
Peabody Sub acting as Buyer’s agent), shall:

          (a) operate or cause to be operated such Assets only in the usual, regular and ordinary course
and in accordance with applicable Legal Requirements (including paying all royalties and rentals
when due) and, to the extent consistent with such operation, (i) use its

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commercially reasonable
efforts to preserve existing relationships with Governmental Authorities, suppliers, lessors,
lessees, customers and others having business dealings involving such Assets, unless Buyer requests
otherwise, and (ii) use commercially reasonable efforts to keep available the services of its
employees providing services in connection with such Assets;

          (b) perform all of its obligations under all of the Material Contracts without material breach
or default, and in material compliance with all Legal Requirements;

          (c) maintain or cause to be maintained (i) such Assets in good condition and repair, ordinary
wear excepted, and (ii) in full force and effect all existing policies of insurance with respect to
such Assets, in such amounts and with respect to such risks as are customarily maintained in the
Oil and Gas industries;

          (d) maintain or cause to be maintained its Oil and Gas Books and Records, as applicable, with
respect to its Assets in the usual, regular and ordinary manner on a basis consistent with past
practices; and

          (e) (i) give or cause to be given to Buyer, and its counsel, accountants and other
representatives, reasonable access during normal business hours to all of its Assets, the Oil and
Gas Books and Records (including all account books of original entry, general ledgers and financial
records used in connection with its Assets), as applicable, and appropriate personnel, and (ii)
furnish or cause to be furnished to Buyer and such representatives all such additional documents,
financial information and other information as the other from time to time reasonably may request;
provided that no investigation shall affect or limit the scope of any of the representations and
warranties; and any investigation pursuant to this subsection shall be conducted in such manner as
not to interfere unreasonably with the conduct of the business of Seller.

     9.2 Certain Negative Covenants of Seller. Except as Buyer may otherwise consent in
writing, or as contemplated by this Agreement, between the Effective Time and the end of the
Transfer Period, each Peabody Sub, with respect to its Assets (or, with respect to the Assets the
Peabody Sub transfers to Buyer at Closing, during the period between the Closing Date and the end
of the Transfer Period, such Peabody Sub acting as Buyer’s agent), shall not:

          (a) modify, terminate, renew, suspend or abrogate any Material Contract other than in the
ordinary course of business;

          (b) enter into any Contract or commitment of any kind relating to its Assets which would be
binding on Buyer after Closing and which is not being entered into in the usual regular and
ordinary course and in accordance with past practices, is not on arm’s-length terms, or is with an
Affiliate of Seller;

          (c) Enter into any transaction or take any action that would result in any of its
representations and warranties in this Agreement or in any Transfer Document not being true and
correct in all material respects when made or at Closing (unless and to the extent that any such
representation or warranty speaks specifically as of an earlier date, in which case, at such
earlier date);

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          (d) sell, assign, transfer or otherwise dispose of any of its Assets except in the ordinary
course of business and except for (i) the disposition of obsolete or worn-out equipment, or (ii)
dispositions with respect to which such Assets are replaced with assets of at least equal value; or

          (e) mortgage, pledge or subject to any material Lien that would survive the Closing any of its
Assets other than Permitted Liens.

     9.3 Confidentiality and Publicity.

          (a) Any non-public information that either Party may obtain from the other in connection with
this Agreement shall be confidential. Each Party shall keep confidential any non-public
information that such Party may receive from another Party unrelated to the Assets transferred
hereunder. All information that a Party is required to keep confidential pursuant to this Section
shall be referred to as “Confidential Information”.

          (b) Each Party shall not disclose any Confidential Information to any other Person (other than
its Affiliates and its Affiliates’ directors, officers and employees, and representatives of its
advisers and lenders, in each case, whose knowledge thereof is necessary in order to facilitate the
consummation of the transactions contemplated hereby, in which case such Party shall be responsible
for any breach by any such Person) or use such information to the detriment of the other; provided
that:

               (i) such Party may use and disclose any Confidential Information once it has been publicly
disclosed (other than by such Party in breach of its obligations under this Section 9.3) or which,
to its knowledge, rightfully has come into the possession of such Party (other than from the other
Party); and

               (ii) to the extent that such Party may, in the reasonable judgment of its counsel, be
compelled by Legal Requirements to disclose any of such information, such Party may disclose such
information if it has used commercially reasonable efforts, and has afforded the other the
opportunity, to obtain an appropriate protective order, or other satisfactory assurance of
confidential treatment, for the information compelled to be disclosed.

          (c) In the event of termination of this Agreement by mutual agreement of the Parties as
provided in Section 11.1:

               (i) the obligation set forth in this Section 9.3 shall continue for a period of two (2) years
after such termination; and

               (ii) each Party shall use commercially reasonable efforts to cause to be delivered to the
other, and shall retain no copies of, any documents, work papers or other materials obtained by
such Party or on its behalf from the other, whether so obtained before or after the execution of
this Agreement.

          (d) Each Party shall consult with and cooperate with the other with respect to the content and
timing of all press releases and other public announcements concerning this

34

 

Agreement and the
transactions contemplated hereby. The Party making the release or public announcement shall
provide a draft of the proposed release or public announcement relating to the transaction
contemplated by this Agreement to the other Party at least two (2) Business Days prior to issuing
such release or making such announcement. Except as required by applicable Legal Requirements or
by any national securities exchange or quotation system, neither Party shall make any such release,
announcement or statement without the prior written consent and approval of the other, which shall
not be unreasonably withheld. Each Party shall each respond promptly to any such request for
consent and approval.

          (e) Upon request by either Party and as necessary in fulfilling their obligations under this
Agreement, the Parties agree that each Party, including all of its agents, employees, officers,
directors, consultants, and advisors, will execute and deliver separate confidentiality agreements
with the other Party whereby, among other things, such Party will agree to maintain all information
strictly confidential and shall not disclose any information to any Affiliates not required to
execute this Agreement (including its agents, employees, officers, directors, consultants, and
advisors), any Governmental Authority, or any third-persons as designated by the requesting Party.

     9.4 DISCLAIMERS. THE PARTIES AGREE THAT, TO THE EXTENT REQUIRED BY APPLICABLE LEGAL
REQUIREMENTS TO BE OPERATIVE, THE DISCLAIMERS OF WARRANTIES CONTAINED IN THIS SECTION ARE
“CONSPICUOUS” DISCLAIMERS FOR THE PURPOSES OF ANY APPLICABLE LEGAL REQUIREMENT, RULE OR ORDER.
WITHOUT LIMITATION OF THE GENERALITY OF THE IMMEDIATELY PRECEDING SENTENCE, SELLER EXPRESSLY
DISCLAIMS AND NEGATES AS TO ALL PERSONAL PROPERTY, FIXTURES, WELLS, AND EQUIPMENT INCLUDED IN THE
ASSETS: (I) ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY; (II) ANY IMPLIED OR EXPRESS
WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE; (III) ANY IMPLIED OR EXPRESS WARRANTY OF CONFORMITY
TO MODELS OR SAMPLES OF MATERIALS; (IV) ANY RIGHTS OF BUYER UNDER APPLICABLE STATUTES TO CLAIM
DIMINUTION OF CONSIDERATION; AND (V) ANY CLAIM BY BUYER FOR DAMAGES BECAUSE OF DEFECTS IN ANY
PERSONAL PROPERTY, WELLS, FIXTURES, OR EQUIPMENT INCLUDED WITHIN SUCH ASSETS, WHETHER KNOWN OR
UNKNOWN, IT BEING EXPRESSLY UNDERSTOOD BY BUYER THAT PERSONAL PROPERTY, WELLS, FIXTURES AND
EQUIPMENT INCLUDED WITHIN THE ASSETS ARE BEING CONVEYED TO TRANSFEREE “AS IS,” “WHERE IS,” WITH ALL
FAULTS, AND IN THE PRESENT CONDITION AND STATE OF REPAIR. EXCEPT AS EXPRESSLY SET FORTH IN THIS
AGREEMENT OR IN THE TRANSFER DOCUMENTS, WITH RESPECT TO THE OIL AND GAS INTERESTS, SELLER MAKES NO,
AND HEREBY DISCLAIMS, ANY REPRESENTATION OR WARRANTY WITH RESPECT TO (A) ITS RIGHTS TO OR OWNERSHIP
OF CBM OR CMM IN OR ASSOCIATED WITH THE OIL AND GAS INTERESTS; (B) THE QUANTITY OR QUALITY OF OIL
AND GAS CONTAINED IN THE OIL AND GAS INTERESTS; (C) ANY AND ALL GEOLOGIC, LAND OR TECHNICAL DATA
AND INFORMATION PROVIDED TO BUYER REGARDING THE OIL AND GAS INTERESTS; (D) THE GEOLOGY OR
OPERATIONAL

35

 

CONDITIONS EXISTING OR TO BE ENCOUNTERED ON OR WITH RESPECT TO THE LANDS CONTAINING THE
OIL AND GAS INTERESTS; OR (E) SELLER’S RIGHTS TO OBTAIN ACCESS TO OR OVER THE SURFACE OF THE LANDS
CONTAINING THE OIL AND GAS INTERESTS, TO UTILIZE THE SURFACE OF SUCH LANDS IN CONNECTION WITH OIL
AND GAS ACTIVITIES OR OPERATIONS CONTEMPLATED BY THIS AGREEMENT, OR TO APPROPRIATE OR USE WATER
PRODUCED IN CONNECTION WITH CBM OPERATIONS. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT AND THE
TRANSFER DOCUMENTS, SELLER MAKES NO,
AND HEREBY EXPRESSLY DISCLAIMS AND NEGATES, REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED,
CONCERNING THE ASSETS.

     9.5 Indiana Dormant Minerals Act Filings. After the date hereof, Peabody covenants
and agrees that with respect to future compliance with the Indiana Dormant Minerals Act, if, prior
to December 31, 2007, CNX identifies mineral interests which are subject to lapse at any time
following the date hereof and prior to the date which is twenty-four (24) months from the date of
the end of the Transfer Period, upon written notification by CNX, Peabody will, at Peabody’s
expense, promptly and timely file a statement of claim in accordance with the requirements of the
Indiana Dormant Minerals Act, and reasonably acceptable to CNX in both form and substance, to
preserve such mineral interests for the benefit of CNX; provided, however, that CNX shall have no
duty to notify Peabody with respect to mineral interests which are subject to lapse, which absent a
filing of a statement of claim by Peabody would be a Title Defect.

ARTICLE X.

Conditions Precedent

     10.1 Conditions to Buyer’s Obligations. The obligations of Buyer to proceed with the
Closing of the transaction contemplated by this Agreement shall be subject to the following
conditions, which may be waived by Buyer:

          (a) Accuracy of Representations and Warranties. The representations and warranties of
each Peabody Sub in this Agreement, if qualified by a reference to materiality, are true and, if
not so qualified, are true in all material respects at and as of Closing with the same effect as if
made at and as of Closing, except for changes, if any, permitted or contemplated by this Agreement
and except to the extent a different date is specified therein, in which case such representation
and warranty if qualified by a reference to materiality shall be true and correct as of such date
and, if not so qualified, shall be true and correct in all material respects as of such date.

          (b) Performance of Agreements. Each Peabody Sub has performed in all material
respects all obligations and agreements and has complied in all material respects with all
covenants in this Agreement to be performed and complied with by it at or before Closing.

          (c) Officer’s Certificates. Buyer has received a certificate executed by an executive
officer of each Peabody Sub, dated as of Closing, reasonably satisfactory in form and

36

 

substance to
Buyer, certifying that the conditions specified in Sections 10.1(a) and (b) have been satisfied, as
of Closing.

          (d) Legal Proceedings. There is no Legal Requirement, and no Judgment has been
entered and not vacated by any Governmental Authority of competent jurisdiction in any Litigation
or arising therefrom, which (i) enjoins, restrains, makes illegal or prohibits consummation of the
transactions contemplated by this Agreement or by any Transfer Document, or (ii) requires
separation or divestiture by Buyer of all or any significant portion of the Assets after Closing or
otherwise materially and adversely affects the operation of the Assets,
and there is no Litigation pending which was commenced by any Governmental Authority seeking,
or which if successful would have the effect of, any of the foregoing.

          (e) No Material Adverse Change. There has been no material adverse change in the
Assets since the Effective Time.

          (f) Documents and Records. Seller has delivered or made available to Buyer all Oil
and Gas Books and Records.

          (g) Consents. Buyer has received evidence, in form and substance reasonably
satisfactory to it, that all Third Party Consents (other than Post-Closing Consents and other Third
Party Consents the absence of which would not have a material adverse effect on the affected Asset)
have been obtained and are in effect.

          (h) Closing Documents. Seller has executed and delivered the Closing Documents.

          (i) Surface Use Agreement. The Parties shall have agreed on the form of a Surface Use
Agreement.

          (j) Peabody Guaranty. Peabody has executed and delivered the Peabody Guaranty.

     10.2 Conditions to Seller’s Obligations. The obligations of Seller to proceed with
the Closing of the transaction contemplated by this Agreement shall be subject to the following
conditions, which may be waived by Seller:

          (a) Accuracy of Representations and Warranties. The representations and warranties of
Buyer in this Agreement, if qualified by a reference to materiality, are true and, if not so
qualified, are true in all material respects at and as of Closing with the same effect as if made
at and as of Closing, except for changes, if any, permitted or contemplated by this Agreement and
except to the extent a different date is specified therein, in which case such representation and
warranty if qualified by a reference to materiality shall be true and correct as

37

 

of such date and,
if not so qualified, shall be true and correct in all material respects as of such date.

          (b) Performance of Agreements. Buyer has performed in all material respects all
obligations and agreements and has complied in all material respects with all covenants in this
Agreement to be performed and complied with by it at or before Closing.

          (c) Officer’s Certificate. Seller has received a certificate executed by an executive
officer of CNX Gas Company LLC, dated as of Closing, reasonably satisfactory in
form and substance to Seller, certifying that the conditions specified in Sections 10.2(a) and
(b) have been satisfied, as of Closing.

          (d) Legal Proceedings. There is no Legal Requirement, and no Judgment has been
entered and not vacated by any Governmental Authority of competent jurisdiction in any Litigation
or arising therefrom, which enjoins, restrains, makes illegal or prohibits consummation of the
transactions contemplated by this Agreement or by any Transfer Document, and there is no Litigation
pending which was commenced by any Governmental Authority seeking, or which if successful would
have the effect of, any of the foregoing.

          (e) Consents. Seller has received evidence, in form and substance reasonably
satisfactory to it, that all material Third Party Consents (other than Post-Closing Consents and
other Third Party Consents the absence of which would not have a material adverse effect on the
affected Asset) have been obtained and are in effect.

          (f) Closing Documents. Buyer has executed and delivered the Closing Documents.

          (g) Surface Use Agreement. The Parties shall have agreed on the form of a Surface Use
Agreement.

ARTICLE XI.

Termination, Effect of Termination and Specific Performance

     11.1 Termination. This Agreement may only be terminated upon the mutual written
agreement of Seller and Buyer.

     11.2 Effect of Termination. If this Agreement is terminated pursuant to Section 11.1,
all obligations of the Parties hereunder shall terminate, except for the obligations set forth in
Sections 3.7(e), 9.3, 13.2, and 13.3. Termination of this Agreement pursuant to Sections 11.1
shall not limit or impair any remedies that either Seller or Buyer may have with respect to a
breach or default of the covenants, agreements or obligations hereunder occurring prior to
termination.

     11.3 Specific Performance. The Parties recognize that their rights under this
Agreement are unique and, accordingly, the Parties shall, in addition to such other remedies as may
be available to any of them at law or in equity, have the right to enforce their rights hereunder
by actions for injunctive relief and specific performance to the extent permitted by

38

 

applicable law
so long as the Party seeking such relief is prepared to consummate the transactions contemplated
hereby. The Parties agree that monetary damages would not be adequate compensation for any loss
incurred by reason of a breach of the provisions of this Agreement and hereby agree to waive the
defense in any action for specific performance that a remedy at law would be adequate. The Parties
waive any requirement (i) for security or the posting of any bond or other surety in connection
with any temporary or permanent award or injunctive, mandatory or other equitable relief and (ii)
the defense that the Party moving for such relief has an adequate remedy at law, but the Parties do
not waive the requirement of such moving party to prove all other elements of any such temporary or
permanent award or injunctive, mandatory or other equitable relief and all other defenses and
objections of the non-moving party are preserved.

ARTICLE XII.

Indemnification

     12.1 Indemnification by Seller. From and after Closing, each Peabody Sub severally,
and not jointly, shall indemnify and hold harmless Buyer and its Affiliates, shareholders,
officers, managers, employees, agents and representatives, and any Person claiming by or through
any of them, as the case may be, from and against any and all Losses, with respect to the Assets
owned, leased, controlled, or claimed by such Peabody Sub, arising out of or resulting from:

               (a) any representations and warranties made by it in this Agreement or in any Transfer
Document not being true and accurate in all respects (determined without regard to any materiality
or material adverse effect qualification contained therein), when made or at Closing (or, in the
case of any representation or warranty made as of a specific date, as of such date);

               (b) any failure by it to perform in all respects any of its covenants, agreements, or
obligations in this Agreement;

               (c) except to the extent constituting an Assumed Liability, the ownership or operation of its
Assets prior to the Effective Time;

               (d) its Excluded Assets;

               (e) the Seller Retained Liabilities relating to its Assets; and

               (f) with respect to its Assets, except to the extent constituting an Assumed Liability, any
violation of any Environmental Law to the extent attributable to actions occurring or conditions
existing on or prior to the Effective Time.

If, by reason of the claim of any third Person relating to any of the matters subject to such
indemnification, a Lien is placed or made upon any of the properties or assets owned or leased by
Buyer or any other Indemnitee under this Section 12.1, in addition to any indemnity obligation
under this Section, the applicable Peabody Sub shall furnish a bond sufficient to obtain the prompt
release thereof within ten (10) days after receipt from Buyer of notice thereof.

39

 

     12.2 Indemnification by Buyer. From and after Closing, Buyer shall indemnify and hold
harmless Seller and its Affiliates, shareholders, members, partners, officers, employees, managers,
agents and representatives, and any Person claiming by or through any of them, as the case may be,
from and against any and all Losses arising out of or resulting from:

          (a) any representations and warranties made by it in this Agreement or in any Transfer
Document not being true and accurate in all respects (determined without regard to any
materiality or material adverse effect qualification contained therein), when made or at
Closing (or, in the case of any representation or warranty made as of a specific date, as of such
date);

          (b) any failure by it to perform in all respects any of its covenants, agreements, or
obligations in this Agreement;

          (c) the Assumed Liabilities; and

          (d) any Asset or any claim or right or any benefit arising thereunder held by Seller for the
benefit of Buyer pursuant to Section 6.3(b).

If, by reason of the claim of any third Person relating to any of the matters subject to such
indemnification, a Lien is placed or made upon any of the properties or assets owned or leased by
Seller or any other Indemnitee under this Section 12.2, in addition to any indemnity obligation of
Buyer under this Section, Buyer shall furnish a bond sufficient to obtain the prompt release
thereof within ten (10) days after receipt from Seller of notice thereof.

     12.3 Procedure for Certain Indemnified Claims. Promptly after receipt by a Party
entitled to indemnification hereunder (the “Indemnitee”) of written notice of the assertion or the
commencement of any Litigation with respect to any matter referred to in Sections 12.1 or 12.2 (the
“Litigation Matter”), the Indemnitee shall give written notice thereof to the Party from whom
indemnification is sought pursuant hereto (the “Indemnitor”) and thereafter shall keep the
Indemnitor reasonably informed with respect thereto; provided that failure of the Indemnitee to
give the Indemnitor notice and keep it reasonably informed as provided herein shall not relieve the
Indemnitor of its obligations hereunder, except to the extent that such failure to give notice
shall prejudice any defense or claim available to the Indemnitor. The Indemnitor shall be entitled
to assume the defense of any such Litigation Matter with counsel reasonably satisfactory to the
Indemnitee, at the Indemnitor’s sole expense. If the Indemnitor assumes the defense of any
Litigation Matter, (i) it shall not settle the Litigation Matter unless the settlement shall
include a full and complete release of the Indemnitee, satisfactory to the Indemnitee, of and from
all liability with respect to such Litigation Matter, and (ii) it shall indemnify and hold the
Indemnitee harmless from and against any and all Losses caused by or arising out of any settlement
or judgment of such claim and may not claim that it does not have an indemnification obligation
with respect thereto. If the Indemnitor does not assume the defense of any Litigation Matter, the
Indemnitee may defend against or settle such claim in such manner and on such terms as it in good
faith deems appropriate and shall be entitled to indemnification in respect thereof in accordance
with Section 12.1 or 12.2, as applicable. Each Party shall cooperate, and cause their respective
Affiliates to cooperate, in the defense or prosecution of any Litigation Matter and shall furnish
or cause to be furnished such records, information and testimony, and

40

 

attend such conferences,
discovery proceedings, hearings, trials or appeals, as may be reasonably requested in connection
therewith.

     12.4 Determination of Indemnification Amounts and Related Matters.

          (a) No Peabody Sub shall have any liability under Section 12.1(a) unless, and only to the
extent that, the aggregate amount of Losses otherwise subject to all of Seller’s indemnification
obligations thereunder exceeds One Hundred Thousand Dollars ($100,000.00) (the “Minimum Damage
Requirement”); provided that for purposes of this subsection, the Minimum Damage Requirement shall
not apply to any Losses resulting from or arising out of (i) the failure by any Peabody Sub to pay
any Tax to any Governmental Authority when due or any other breach of any such Peabody Sub’s
representations, warranties, covenants or agreements with respect to Tax matters contained in this
Agreement, and (ii) breaches of the representations and warranties in Sections 8.1 through 8.5.
The maximum liability of the Peabody Subs in the aggregate under Section 12.1(a) shall not exceed
the difference, if any, between Two Million Dollars ($2,000,000.00) and the sum of the
Environmental Defects Amount and the Excess Title Defects Amount (the “Cap”); provided that the Cap
shall not apply to breaches of the representations and warranties in Sections 8.1 through 8.5.

          (b) Buyer shall have no liability under Section 12.2(a) unless, and only to the extent that,
the aggregate amount of Losses otherwise subject to all of Buyer’s indemnification obligations
thereunder exceeds the Minimum Damage Requirement; provided that for purposes of this subsection,
the Minimum Damage Requirement shall not apply to any Losses resulting from or arising out of (i)
the failure by Buyer to pay any Tax to any Governmental Authority when due or any other breach of
Buyer’s representations, warranties, covenants or agreements with respect to Tax matters contained
in this Agreement, and (ii) breaches of the representations and warranties in Sections 7.1 through
7.5. The maximum liability of Buyer in the aggregate under Section 12.2(a) shall not exceed the
Cap; provided that the Cap shall not apply to breaches of the representations and warranties in
Sections 7.1 through 7.5.

          (c) Amounts payable by the Indemnitor to the Indemnitee in respect of any Losses under
Sections 12.1 or 12.2, as applicable, shall be payable by the Indemnitor as incurred by the
Indemnitee, and shall bear interest at the Prime Rate plus two percent (2%) from the date the
Losses for which indemnification is sought were incurred by the Indemnitee until the date of
payment of indemnification by the Indemnitor.

     12.5 Time and Manner of Certain Claims. The representations and warranties of Seller
and Buyer in this Agreement and any Transfer Document delivered during the Transfer Period shall
survive Closing until December 31, 2007. Notwithstanding the foregoing:

          (a) the liability of the Parties shall extend beyond December 31, 2007 with respect to any
claim which has been asserted in a bona fide written notice before December 31, 2007 specifying in
reasonable detail the facts and circumstances giving rise to such right; provided that any such
liability shall expire on the first anniversary of such notice date unless the Party timely
asserting such claim diligently prosecutes such claim prior to such first anniversary;

41

 

          (b) all such representations and warranties with respect to any federal, state or local Taxes
and with respect to any environmental matters shall survive until the expiration of the applicable
statute of limitations (giving effect to any waiver, mitigation or extension thereof); and

          (c) the representations and warranties of the Parties in Sections 7.1 through 7.5, and 8.1
through 8.5 shall survive Closing and shall continue in full force and effect without limitation.

     12.6 Peabody Guaranty. Peabody Investments Corp. shall guaranty, and act as surety
for, the full payment of any sums due from the Seller under or arising out of the indemnification
provisions set forth in Section 12.1, pursuant to and in accordance with the terms of a guaranty
agreement substantially in the form of Exhibit “E” attached hereto (the “Peabody
Guaranty”). In the event that Buyer receives written notice of the assertion or the commencement
of any Litigation Matter, Buyer shall comply with the notice procedures set forth in Section 12.3
and provide such notice to the applicable Peabody Sub; provided, that Buyer simultaneously shall
provide such notice to Peabody Investments Corp.

     12.7 Other Indemnification. The provisions of Sections 12.3, 12.4, 12.5 and 12.6
shall be applicable to any claim for indemnification made under any other provision of this
Agreement, and all references in Sections 12.3, 12.4, 12.5 and 12.6 to Sections 12.1 and 12.2 shall
be deemed to be references to such other provisions of this Agreement.

     12.8 Exclusivity. Except as specifically set forth in this Agreement and except for
claims against a Party for breach of any provision of this Agreement, each Party waives any rights
and claims it may have against the other Parties to this Agreement, whether in law or in equity,
relating to the Assets or the transactions contemplated hereby. The rights and claims waived by
each Party include claims for contribution or other rights of recovery arising out of or relating
to any Environmental Law, claims for breach of contract, breach of representation or warranty,
negligent misrepresentation and all other claims for breach of duty. After Closing, Article XII
shall provide the exclusive remedy for any misrepresentation, breach of warranty, covenant or other
agreement (other than those contained in Sections 9.3, 13.2, and 13.3 ) or other claim arising out
of this Agreement or the transactions contemplated hereby. Notwithstanding anything to the
contrary in this Agreement, the limitations of this Section 12.8 only shall apply to claims arising
out of, or with respect to, this Agreement, and such limitations shall not bar any claims which
either Party may have against the other arising out of, or with respect to, any of the Transfer
Documents or ancillary documents related thereto.

ARTICLE XIII.

Miscellaneous Provisions

     13.1 Data and Information Review. Subject to Section 9.3, and on the terms and
conditions set forth herein, between the Closing Date and December 31, 2007, Buyer shall be
entitled to review regional maps of coal drill hole data showing the depths and thickness of
mineable coal seams relating to the Oil and Gas Interests and other geologic and coal data and
information (including gas content and desorption information, but excluding coal quality
information) relating to the two pilot test areas referred to as the “Broughton” and “Eagle #3”

42

 

prospect areas (collectively the “Reviewable Data”). Buyer shall submit a site-specific request
(relating to the Oil and Gas Interests conveyed pursuant to the Deed) to review the Reviewable Data
in writing not less than ten (10) Business Days in advance of the requested view date. Seller shall make the Reviewable Data available to Buyer at
Buyer’s sole cost and expense during normal business hours at Seller’s offices in St. Louis,
Missouri.

     13.2 Expenses. Except as otherwise specifically provided in Section 13.16 or
elsewhere in this Agreement, each of the Parties shall pay its own expenses and the fees and
expenses of its counsel, accountants, and other experts in connection with this Agreement.

     13.3 Brokers. Seller shall indemnify and hold Buyer and its Affiliates harmless from
and against any and all Losses arising from any employment by Seller or its Affiliates of, or
services rendered to Seller or its Affiliates by, any finder, broker, agency or other intermediary,
in connection with the transactions contemplated hereby, or any allegation of any such employment
or services. Buyer shall indemnify and hold Seller and its Affiliates harmless from and against
any and all Losses arising from any employment by Buyer or its Affiliates of, or services rendered
to Buyer or its Affiliates by, any finder, broker, agency or other intermediary, in connection with
the transactions contemplated hereby, or any allegation of any such employment or services.

     13.4 Waivers. No action taken pursuant to this Agreement, including any investigation
by or on behalf of any Party hereto, shall be deemed to constitute a waiver by the Party taking the
action of compliance with any representation, warranty, covenant or agreement contained herein or
in any Transfer Document. The waiver by any Party hereto of any condition or of a breach of
another provision of this Agreement or any Transfer Document shall be in writing and shall not
operate or be construed as a waiver of any other condition or subsequent breach. The waiver by any
Party of any of the conditions precedent to its obligations under this Agreement shall not preclude
it from seeking redress for breach of this Agreement other than with respect to the condition so
waived.

     13.5 Notices. All notices, requests, demands, applications, services of process and
other communications which are required to be or may be given under this Agreement or any Transfer
Document shall be in writing and shall be deemed to have been duly given if sent by telecopy or
facsimile transmission, upon answer back requested, or delivered by courier or mailed, certified
first class mail, postage prepaid, return receipt requested, to the Parties at the following
addresses:

	 	 	 	 	 	 	 
	 	 	To Seller:	 	Peabody Natural Gas, LLC
	 	 	 	 	701 Market Street
	 	 	 	 	St. Louis, Missouri 63101
	 

	 	 	 	ATTN:
	 	Land Department
	 

	 	 	 	Fax:
	 	314-342-7597
	 

	 	 	 	Phone:
	 	314-342-3400
	 
	 	 	 	 	 	 
	 	 	Copies (which shall not	 	Peabody Natural Gas, LLC
	 	 	constitute notice)	 	14062 Denver West Parkway Suite 110
	 	 	 	 	Lakewood, Colorado 80401

43

 

	 	 	 	 	 	 	 
	 

	 	 	 	ATTN:
	 	Collon C. Kennedy, Esq.
	 

	 	 	 	Fax:
	 	303-271-9049
	 

	 	 	 	Phone:
	 	303-271-3600
	 
	 	 	 	 	 	 
	 	 	To Peabody Investments	 	Peabody Investments Corp.
	 	 	Corp. under Section 12.6:	 	701 Market Street
	 	 	 	 	St. Louis, Missouri 63101
	 

	 	 	 	ATTN:
	 	Finance Department
	 

	 	 	 	Fax:
	 	314-342-7597
	 

	 	 	 	Phone:
	 	314-342-3400
	 
	 	 	 	 	 	 
	 	 	Copies (which shall not	 	Peabody Natural Gas, LLC
	 	 	constitute notice)	 	14062 Denver West Parkway Suite 110
	 	 	 	 	Lakewood, Colorado 80401
	 

	 	 	 	ATTN:
	 	Collon C. Kennedy, Esq.
	 

	 	 	 	Fax:
	 	303-271-9049
	 

	 	 	 	Phone:
	 	303-271-3600
	 
	 	 	 	 	 	 
	 	 	To Buyer:	 	CNX Gas Company LLC
	 	 	 	 	5 Penn Center West, Suite 401
	 	 	 	 	Pittsburgh, PA 15276-0102
	 

	 	 	 	ATTN:
	 	General Counsel’s Office
	 

	 	 	 	Fax:
	 	412-200-6762
	 

	 	 	 	Phone:
	 	412-200-6700
	 
	 	 	 	 	 	 
	 	 	Copies (which shall not	 	CNX Gas Corporation
	 	 	constitute notice)	 	5 Penn Center West, Suite 401
	 	 	 	 	Pittsburgh, PA 15276-0102
	 

	 	 	 	ATTN:
	 	General Counsel’s Office
	 

	 	 	 	Fax:
	 	412-200-6795
	 

	 	 	 	Phone:
	 	412-200-6778

or to such other address as any Party shall have furnished to the other by notice given in
accordance with this Section. Such notice shall be effective, (i) if delivered in person or by
courier, upon actual receipt by the intended recipient, or (ii) if sent by telecopy or facsimile
transmission, upon confirmation of transmission received, or (iii) if mailed, upon the date of
delivery as shown by the return receipt therefore.

     13.6 Entire Agreement; Prior Representations; Amendments; No Merger. This Agreement,
the Exhibits and Schedules attached hereto, the Transfer Documents delivered after the date hereof
to Buyer, and that certain Confidentiality Agreement dated as of November 22, 2006 between Peabody
Natural Gas, LLC, and CNX Gas Company, LLC, embody the entire agreement between the Parties with
respect to the subject matter hereof and supersedes all prior representations, agreements and
understandings, oral or written, with respect thereto. Notwithstanding any representations which
may have been made by either Party in connection with the transactions contemplated by this
Agreement, each Party acknowledges that it has not

44

 

relied on any representation by the other Party
with respect to such transactions or the Assets
except those contained in this Agreement, the Schedules or the Exhibits hereto. This
Agreement may not be modified orally, but only by an agreement in writing signed by the Party or
Parties against whom any waiver, change, amendment, modification or discharge may be sought to be
enforced. If there is a conflict between the terms of this Agreement and any deed delivered
hereunder, the Agreement and such deed shall be construed in pari materia to determine the intent
of the Parties. Notwithstanding anything to the contrary in this Agreement, this Agreement and the
provisions contained herein shall survive the Closing and shall not be merged into any deed that is
delivered pursuant to this Agreement.

     13.7 Jurisdiction. Except as otherwise expressly provided in this Agreement, the
Parties hereto agree that any suit, action or proceeding seeking to enforce any provision of, or
based on any matter arising out of or in connection with, this Agreement, the Transfer Documents or
the transactions contemplated hereby or thereby may be brought in the United States District Court
for the Southern District of Indiana or any other Indiana State court sitting in Evansville,
Indiana, and each of the Parties hereby consents to the jurisdiction of such courts (and of the
appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably
waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to
the laying of the venue of any such suit, action or proceeding in any such court or that any such
suit, action or proceeding which is brought in any such court has been brought in an inconvenient
forum. Process in any suit, action or proceeding may be served on any Party anywhere in the world,
whether within or without the jurisdiction of any such court.

     13.8 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY
AND ALL RIGHTS TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS
AGREEMENT, THE TRANSFER DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

     13.9 Binding Effect; Benefits. This Agreement shall inure to the benefit of and shall
be binding upon the Parties hereto and their respective heirs, legal representatives, successors,
and permitted assigns. Neither Seller nor Buyer shall assign this Agreement or delegate any of its
duties hereunder to any other Person without the prior written consent of the other, which consent
shall not be unreasonably withheld. For purposes of this Section, any change in control of Seller
or Buyer shall not constitute an assignment by it of this Agreement.

     13.10 Headings, Exhibits and Schedules. The section and other headings contained in
this Agreement are for reference purposes only and shall not affect the meaning or interpretation
of this Agreement. Reference to Exhibits and Schedules shall, unless otherwise indicated, refer to
the Exhibits and Schedules attached to this Agreement, which shall be incorporated in and
constitute a part of this Agreement by such reference.

     13.11 Counterparts. This Agreement may be executed in any number of counterparts,
each of which, when executed, shall be deemed to be an original and all of which together shall be
deemed to be one and the same instrument.

45

 

     13.12 GOVERNING LAW. THE VALIDITY, PERFORMANCE, AND ENFORCEMENT OF THIS AGREEMENT AND
ALL TRANSFER DOCUMENTS, UNLESS EXPRESSLY PROVIDED TO THE CONTRARY, SHALL BE GOVERNED BY THE LAWS OF
THE STATE OF INDIANA, WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAW OF SUCH STATE;
PROVIDED, HOWEVER, THAT ANY DISPUTE THAT TOUCHES OR CONCERNS THE RIGHTS IN AN ESTATE OR INTEREST IN
LAND OR MINERALS SHALL BE GOVERNED BY THE LAW OF THE JURISDICTION IN WHICH SUCH ESTATE OR INTEREST
IN LAND OR MINERALS IS LOCATED.

     13.13 Severability. Any term or provision of this Agreement which is invalid or
unenforceable shall be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining rights of the Person intended to be benefited by
such provision or any other provisions of this Agreement.

     13.14 Third Persons; Joint Ventures. This Agreement constitutes an agreement solely
among the Parties hereto, and, except as otherwise provided herein, is not intended to and shall
not confer any rights, remedies, obligations, or liabilities, legal or equitable, including any
right of employment, on any Person other than the Parties hereto and their respective successors,
or assigns, or otherwise constitute any Person a third-Person beneficiary under or by reason of
this Agreement. Nothing in this Agreement, expressed or implied, is intended to or shall
constitute the Parties hereto partners or participants in a joint venture including, but not
limited to, a mining joint venture.

     13.15 Construction. This Agreement has been negotiated by Seller and Buyer and their
respective legal counsel, and legal or equitable principles that might require the construction of
this Agreement or any provision of this Agreement against the Party drafting this Agreement shall
not apply in any construction or interpretation of this Agreement.

     13.16 Attorneys’ Fees. If any Litigation between Seller and Buyer with respect to
this Agreement, the Transfer Documents or the transactions contemplated hereby or thereby shall be
resolved or adjudicated by a Judgment of any court, the Party prevailing under such Judgment shall
be entitled, as part of such Judgment, to recover from the other Party its reasonable attorneys’
fees and costs and expenses of litigation.

     13.17 Risk of Loss.

          (a) Seller shall bear the risk of any loss or damage to Seller’s Assets resulting from fire,
theft or other casualty (except reasonable wear and tear) at all times prior to the Effective Time.

          (b) If, prior to Closing, any material part of or interest in Seller’s Assets is taken or
condemned as a result of the exercise of the power of eminent domain, or if a Governmental
Authority having such power informs Seller that it intends to condemn or take all or any of
Seller’s Assets (such event being called, in either case, a “Taking”), then (i) Buyer shall have
the sole right, in the name of Seller, if Buyer so elects, to negotiate for, claim contest and
receive all damages with respect to the Taking, (ii) Seller shall be relieved of its
obligation to convey to Buyer Seller’s Assets or interests that are the subject of the Taking,
(iii) at Closing,

46

 

Seller shall assign to Buyer all of Seller’s rights to all payments payable with
respect to such Taking and shall pay to Buyer all payments previously paid to Seller with respect
to the Taking, and (iv) following Closing, Seller shall give Buyer such further assurances of such
rights and assignment with respect to the Taking as Buyer may from time to time reasonably request.

     13.18 Tax Consequences. No Party to this Agreement makes any representation or
warranty, express or implied, with respect to the tax implications of any aspect of this Agreement
on any other Party to this Agreement, and all Parties expressly disclaim any such representation or
warranty with respect to any tax implications arising under this Agreement. Each Party has relied
solely on its own tax and legal advisors with respect to the tax implications of this Agreement.

     13.19 Commercially Reasonable Efforts. For purposes of this Agreement, “commercially
reasonable efforts” shall not be deemed to require a Party to undertake extraordinary measures,
including the initiation or prosecution of legal proceedings or the payment of amounts in excess of
normal and usual filing fees and processing fees, if any.

     13.20 Time. Time is of the essence under this Agreement. If the last day for the
giving of any notice or the performance of any act required or permitted under this Agreement is a
day that is not a Business Day, the time for the giving of such notice or the performance of such
act shall be extended to the next succeeding Business Day.

     13.21 Reserved Rights. For avoidance of doubt, none of Buyer’s rights and remedies
herein shall be interpreted or construed to apply to the Reserved Rights.

     13.22 Rule Against Perpetuities. If a court of competent jurisdiction shall hold that
the Rule Against Perpetuities or any similar Legal Requirement applies to any transfer of an
interest contemplated herein, any right to receive, and obligation to make, such transfer shall
terminate on the last day of the period allowed for vesting under such Rule or other Legal
Requirement, such that the transfer shall thereby be deemed valid under the Rule or Legal
Requirement.

Signatures appear on the following page.

47

 

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

	 	 	 	 	 	 	 
	 	 	BUYER:	 	 
	 
	 	 	 	 	 	 
	 	 	CNX GAS COMPANY LLC:	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	SELLER:	 	 
	 
	 	 	 	 	 	 
	 	 	AMERICAN LAND HOLDINGS OF INDIANA, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	BEAVER DAM COAL COMPANY	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	BLACK BEAUTY COAL COMPANY, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	CABALLO COAL COMPANY	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	CENTRAL STATES COAL RESERVES OF INDIANA, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	COAL RESERVE HOLDING LIMITED LIABILITY COMPANY #1	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 

48

 

	 	 	 	 	 	 	 
	 	 	HAYDEN GULCH TERMINAL, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	MIDWEST COAL RESERVES OF INDIANA, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	PEABODY COAL COMPANY, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	PEABODY DEVELOPMENT COMPANY, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	PEABODY NATURAL GAS, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	PEABODY NATURAL RESOURCES COMPANY	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 

49

 

List of Exhibits and Schedules

EXHIBITS

	 	 	 
	No.	 	DESCRIPTION
	A

	 	List of Oil and Gas Interests
	A-1 to A-19

	 	Description of Oil and Gas Interests
	B

	 	Wells and Equipment
	C

	 	Partial Assignment Leases
	D

	 	Form Deed
	E

	 	Form of Peabody Guaranty

50

 

SCHEDULES

	 	 	 
	No.	 	DESCRIPTION
	1.1a

	 	“Knowledge” Persons
	1.1b

	 	Burdens on Production
	1.1c

	 	Third Party Consents
	1.1d

	 	Transfer Approvals
	2.1(c)(iii)

	 	Material Contracts
	3.3(a)

	 	Allocated Values
	5.2(d)

	 	Right of First Refusal Lands
	8.10(b)

	 	Permits and Bonds for Assets
	8.12

	 	Taxes Due on Assets
	8.16

	 	Labor Agreements and Disputes
	8.18

	 	Material Liabilities

51

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