Document:

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                                                                    Exhibit 10.6

                                ESCROW AGREEMENT

                                      AMONG

                          ALPHA NATURAL RESOURCES, LLC,

                         ALPHA NATURAL RESOURCES, INC.,

                              PREMIUM ENERGY, LLC,

                        CALLAWAY NATURAL RESOURCES, INC.,

                             MATE CREEK ENERGY, LLC,

                          VIRGINIA ENERGY COMPANY, LLC,

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

                      THE UNITHOLDERS OF POWERS SHOP, LLC,

           CERTAIN OF THE UNITHOLDERS OF BUCHANAN ENERGY COMPANY, LLC

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

                                       AND

                   JPMORGAN CHASE BANK, N.A., AS ESCROW AGENT

                                   DATED AS OF
                                OCTOBER 26, 2005

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                                TABLE OF CONTENTS

<TABLE>
<S>                                                                           <C>
Section 1.  Appointment of Escrow Agent....................................    3
Section 2.  Deposit........................................................    3
Section 3.  Investment of the Escrow Amount................................    3
Section 4.  Deposits and Disbursements.....................................    4
            (a) Claims for Indemnification.................................    4
            (b) Amendments.................................................    6
            (c) Notices....................................................    6
            (d) Blank Stock Powers; Transfer Agent.........................    6
            (e) Disbursements to the Nicewonder Partie.....................    6
            (f) Confirmation...............................................    6
            (g) Substitution...............................................    7
Section 5.  Automatic Release..............................................    7
            (a) Scheduled Release..........................................    7
            (b) Pending Disputes...........................................    8
            (c) Termination................................................    8
Section 6.  Termination of Escrow..........................................    8
Section 7.  Account Opening Information/Tax Matters........................    9
            (a) Account Opening............................................    9
            (b) Withholding................................................    9
            (c) Responsibility.............................................    9
            (d) Taxable Distributions......................................   10
Section 8.  Scope of Undertaking...........................................   10
Section 9.  Reliance; Liability............................................   10
Section 10. Indemnification................................................   11
Section 11. Compensation and Reimbursement of Expenses.....................   11
Section 12. Wire Transfers.................................................   12
Section 13. Consultation with Legal Counsel................................   12
Section 14. Resignation; Removal...........................................   12
            (a) Resignation................................................   12
            (b) Removal....................................................   13
Section 15. General........................................................   13
            (a) Entire Agreement...........................................   13
            (b) Succession and Assignment..................................   13
            (c) Counterparts...............................................   14
            (d) Headings...................................................   14
            (e) Notices....................................................   14
            (f) Governing Law..............................................   15
            (g) Arbitration................................................   16
            (h) Amendments and Waivers.....................................   16
            (i) No Third-Party Beneficiaries...............................   16
            (j) Severability...............................................   16
            (k) Expenses...................................................   16
            (l) Construction...............................................   17
            (m) Incorporation of Exhibits and Schedules....................   17
            (n) Compliance with Court Orders...............................   17
</TABLE>

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                                ESCROW AGREEMENT

     This Agreement (as the same may be amended or modified from time to time
and including any and all written instructions given to Escrow Agent (as defined
below) pursuant hereto, this "Agreement") is entered into effective as of
October 26, 2005 by and among (i) Alpha Natural Resources, LLC, a Delaware
limited liability company, Alpha Natural Resources, Inc., a Delaware
corporation, Premium Energy, LLC, a Delaware limited liability company, Callaway
Natural Resources, Inc., a Delaware corporation, Mate Creek Energy, LLC, a
Delaware limited liability company, and Virginia Energy Company, LLC, a Delaware
limited liability company (together, the "Alpha Parties"), (ii) Mate Creek
Energy of W. Va., Inc., a West Virginia corporation ("Mate Creek"), and Virginia
Energy Company, a Virginia corporation ("Virginia Energy"), the unitholders of
Powers Shop, LLC, a Virginia limited liability company ("Powers Shop"), certain
of the unitholders (the "Majority Buchanan Unitholders") of Buchanan Energy
Company, LLC, a Virginia limited liability company, listed on the signature page
of this Agreement and the shareholders of each of Premium Energy, Inc., a West
Virginia corporation ("Premium Energy"), Twin Star Mining, Inc., a West Virginia
corporation ("Twin Star"), Nicewonder Contracting, Inc., a West Virginia
corporation, ("Nicewonder Contracting") and White Flame Energy, Inc., a West
Virginia Corporation ("White Flame") and (iii) JPMorgan Chase Bank, N.A., a
national association ("Escrow Agent"). Collectively, Mate Creek, Virginia
Energy, the unit holders of Powers Shop, the Majority Buchanan Unitholders, and
the shareholders of Premium Energy, Twin Star, Nicewonder Contracting and White
Flame shall be referred to in this Agreement as the "Nicewonder Parties."
Collectively, the Alpha Parties and the Nicewonder Parties shall be referred to
in this Agreement as the "Parties." Capitalized terms used and not otherwise
defined in this Agreement have the meanings given to such terms in the
Indemnification Agreement dated September 23, 2005 by and among the Nicewonder
Parties and the Alpha Parties (the "Indemnification Agreement").

                                    RECITALS

     A. Various of the Alpha Parties and various of the Nicewonder Parties have
entered into the Acquisition Agreements pursuant to which the Alpha Parties will
acquire from the Nicewonder Parties certain of the assets and equity interests
of the Nicewonder Parties.

     B. The Alpha Parties and the Nicewonder Parties have entered into the
Indemnification Agreement, pursuant to which the Parties have provided for the
terms upon which they will indemnify each other with respect to certain matters
relating to the transactions contemplated by the Acquisition Agreements.

     C. Pursuant to Section 2.1 of the Indemnification Agreement, Alpha Natural
Resources, Inc. ("Alpha Inc.") is required to deposit 1,914,082 validly issued,
fully paid and non-assessable shares of Common Stock, $0.01 par value, of Alpha
Inc. ("Alpha Shares") into escrow at the Closing on the terms and subject to the
conditions of this Agreement to satisfy certain indemnification and other
obligations of the Nicewonder Parties arising under the Indemnification
Agreement.

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     D. The Alpha Parties and the Nicewonder Parties have requested Escrow Agent
to act in the capacity of escrow agent under this Agreement, and Escrow Agent,
subject to the terms and conditions of this Agreement, has agreed so to do.

     Now, therefore, in consideration of the premises and the mutual promises
made in this Agreement, and in consideration of the representations, warranties,
and covenants contained in this Agreement, the Parties agree as follows:

SECTION 1. APPOINTMENT OF ESCROW AGENT.

     Each Party hereby appoints Escrow Agent as the escrow agent under this
Agreement and Escrow Agent hereby accepts such appointment, on the terms and
subject to the conditions set forth in this Agreement.

SECTION 2. DEPOSIT.

     Simultaneously with the execution of this Agreement and in accordance with
Section 2.1 of the Indemnification Agreement, at the direction of the Nicewonder
Parties, the Alpha Parties have deposited with Escrow Agent 1,914,082 validly
issued, fully paid and non-assessable shares of Common Stock, $0.01 par value,
of Alpha Inc. (the "Original Share Deposit"). Upon receipt of the Original Share
Deposit, Escrow Agent will acknowledge receipt and agrees to receive, hold in
escrow, invest and reinvest the Escrow Amount, as defined below, in a separate
escrow account (the "Escrow Account") in accordance with the terms of this
Agreement. Escrow Agent will acknowledge receipt, and agrees to receive, hold in
escrow, invest and reinvest any Cash Deposit (as defined below) received by the
Escrow Agent in accordance with the terms of this Agreement and such Cash
Deposit, if any, shall be held in the Escrow Account. All cash and stock
dividends on the Original Share Deposit ("Dividends") and all interest and other
earnings on the Cash Deposit, if any ("Interest") shall become a part of the
Escrow Amount and shall be held by the Escrow Agent on the terms and subject to
the conditions of this Agreement; provided that such Interest (but not the Cash
Deposit) shall be distributed to the Nicewonder Parties, at such time, and from
time to time, as Sellers Representative (as defined below) shall request in
writing. The Original Share Deposit, any Cash Deposit, Dividends and Interest
shall be collectively referred to in this Agreement as the "Escrow Amount".

SECTION 3. INVESTMENT OF THE ESCROW AMOUNT.

     During the term of this Agreement, that portion of the Escrow Amount
represented by Alpha Shares shall be held in the Escrow Account with JPMorgan
Chase Bank, N.A., and such Alpha Shares shall not be sold, transferred, pledged
or otherwise disposed of unless Escrow Agent is otherwise instructed in writing
by the Alpha Parties and Nicewonder Parties; provided, however, that any Cash
Deposit or other cash held in the Escrow Amount shall be held in an interest
bearing account with JPMorgan Chase Bank, N.A. ("JPMorgan Money Market
Account"), unless otherwise instructed in writing by the Alpha Parties and
Nicewonder Parties. Such written instructions, if any, referred to in the
foregoing sentence shall specify the type and identity of the investments to be

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purchased and/or sold, any particular settlement procedures required, if any
(which settlement procedures shall be consistent with industry standards and
practices), and such other information as Escrow Agent may require. Escrow Agent
shall not be liable for failure to invest or reinvest funds absent sufficient
written direction. Escrow Agent may use a broker-dealer of its own selection,
including a broker-dealer owned by or affiliated with Escrow Agent or any of its
affiliates. Escrow Agent or any of its affiliates may receive compensation with
respect to any investment directed under this Agreement. It is expressly agreed
and understood by the Parties that Escrow Agent shall not in any way whatsoever
be liable (except, subject to Section 9 of this Agreement, for its own gross
negligence, willful misconduct or bad faith) for any diminution or losses on any
investments or reinvestments, including losses from market risks due to
premature liquidation or resulting from other actions taken pursuant to this
Agreement.

SECTION 4. DEPOSITS AND DISBURSEMENTS.

     (a) Claims for Indemnification.

          (i) Written Claim. At any time and from time to time prior to 5:00
p.m. Eastern Time on October 26, 2007, the Alpha Parties may in good faith give
a written Claim for Indemnification to the Nicewonder Parties and to Escrow
Agent. The Claim for Indemnification means a written notice asserting a claim
under Section 5.2(a) or Section 5.2(b) of the Indemnification Agreement and
providing a general description of the Adverse Consequences that the Indemnified
Party may suffer, with an estimate of the extent of the dollar amount of Adverse
Consequences, but only if such information can reasonably be determined at the
time notice is given.

          (ii) Counternotice; Notice Certification. If, prior to 5:00 p.m.,
Eastern Time, 15 Business Days following receipt by the Nicewonder Parties and
Escrow Agent of the Claim for Indemnification (such 15 Business Day period, the
"Claim Period"), the Nicewonder Parties give written notice to the Alpha Parties
and Escrow Agent disputing such Claim for Indemnification (a "Counternotice"),
the Escrow Amount shall be distributed as provided in Section 4(a)(iii) and
Section 4(a)(iv) of this Agreement. If no such Counternotice is given to the
Alpha Parties and Escrow Agent within the Claim Period and Alpha Inc. has given
Escrow Agent a certification in the form of Exhibit A attached to this
Agreement, signed by Alpha Inc., and certifying that the Claim for
Indemnification was timely and properly given to the Nicewonder Parties ("Notice
Certification"), then, within ten Business Days after the expiration of the
Claim Period, Escrow Agent shall pay to Alpha Inc. the amount set forth in such
Claim for Indemnification by returning to Alpha Inc. a whole number of Alpha
Shares, as determined by Alpha Parties in writing to Escrow Agent, (rounded up
or down to the nearest whole Alpha Share) out of the Escrow Amount, which when
multiplied by the Closing Price (as defined below) as of the final day of such
Claim Period, equals the amount of such Claim for Indemnification. Escrow Agent
will not be responsible for determining the Closing Price or the number of Alpha
Shares to be released.

          For purposes of this Agreement:

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               (A) "Closing Price" means the Weighted Average Daily Trading
     Price of Alpha Shares on the principal exchange or automated quotation
     system on which Alpha Shares are listed during the 20 days on which Alpha
     Shares are traded prior to the date of the determination in question; and

               (B) "Weighted Average Daily Trading Price" for a stated number of
     trading days shall mean the product of (x) the average of the high and low
     sales prices for each of such days times (y) the number of shares traded on
     each such day, all as would be reported in the official compilation of
     trading information on the principal exchange or automated quotation system
     on which Alpha Shares are listed, divided by (z) the total number of shares
     traded during all such days, as reported in the official compilation of
     trading information on the principal exchange or automated quotation system
     on which Alpha Shares are listed.

          (iii) Payment of Undisputed Portions. If within the Claim Period, the
Nicewonder Parties give a Counternotice that also provides that portions of the
Claim for Indemnification are not disputed ("Undisputed Portions"), then, within
ten Business Days after the date of such Counternotice, Escrow Agent shall pay
to Alpha Inc. the Undisputed Portions by returning to Alpha Inc. a whole number
of Alpha Shares, as determined by Alpha Parties and the Sellers Representative
in writing to Escrow Agent, (rounded up or down to the nearest whole Alpha
Share) out of the Escrow Amount, which when multiplied by the Closing Price as
of the date of such Counternotice, equals the amount of such Undisputed
Portions. Escrow Agent will not be responsible for determining the Closing Price
or the number of Alpha Shares to be released.

          (iv) Disputes. If a Counternotice is properly given with respect to a
Claim for Indemnification within the Claim Period, subject to Section 4(a)(iii)
of this Agreement with respect to Undisputed Portions, Escrow Agent shall refuse
to comply with any demands made upon it with respect to the underlying Claim for
Indemnification until it receives joint written instructions of the Alpha
Parties and the Nicewonder Parties pursuant to Section 5.8 of the
Indemnification Agreement in the form of Exhibit B attached to this Agreement,
signed by Alpha Inc. on behalf of the Alpha Parties and the Sellers
Representative on behalf of the Nicewonder Parties, instructing Escrow Agent to
pay Alpha Inc. the amount of such Claim for Indemnification as determined by a
Final Determination by returning to Alpha Inc. a whole number of Alpha Shares,
as determined by Alpha Parties and the Sellers Representative in writing to
Escrow Agent, (rounded up or down to the nearest whole Alpha Share) out of the
Escrow Amount, which when multiplied by the Closing Price as of the date of such
Final Determination, equals the amount of such Claim for Indemnification as
determined by such Final Determination. In making such payment, Escrow Agent
shall not incur any liability to any Party. Escrow Agent may rely and continue
to rely conclusively upon such written instructions. Escrow Agent will not be
responsible for determining the Closing Price or the number of Alpha Shares to
be released.

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     (b) Amendments. Within the Claim Period, the Alpha Parties may amend any
Claim for Indemnification and the Nicewonder Parties may amend any
Counternotice, in each case by giving written notice to the other Party and
Escrow Agent.

     (c) Notices.

          (i) Authorized Signers. All notices by either the Alpha Parties or the
Nicewonder Parties will be signed by an authorized signer, as shown on Exhibit C
to this Agreement.

          (ii) Sellers Representative. Each Nicewonder Party has constituted and
appointed David Lester ("Sellers Representative") as its authorized signer and
true and lawful attorney-in-fact to act for and on behalf of such Nicewonder
Party in all matters relating to or arising out of the Indemnification Agreement
and this Agreement, including specifically, but without limitation, receiving
all demands and notices on or with respect to the Nicewonder Parties under this
Agreement, taking any action or refraining from taking any action as he may deem
appropriate and executing and delivering all instruments and documents of every
kind incident to or otherwise relating to this Agreement, such Nicewonder Party
agreeing to be fully bound by the acts, decisions and agreements of Sellers
Representative taken and done pursuant to the authority granted in this
Agreement and the Nicewonder Parties hereby confirm all that Sellers
Representative shall do or cause to be done by virtue of his appointment as
Sellers Representative. The Nicewonder Parties may designate a successor Sellers
Representative to discharge the duties outlined above by delivery to the Alpha
Parties and the Escrow Agent of written notice in the manner set forth in
Section 15(e) of this Agreement (either signed by the then acting Sellers
Representative or Don Nicewonder) naming such successor Sellers Representative.
Each such successor Sellers Representative will have all the power, authority,
rights and privileges hereby conferred upon the original Sellers Representative,
and the term "Sellers Representative" as used in this Agreement shall be deemed
to include such successor Sellers Representative.

     (d) Blank Stock Powers; Transfer Agent. Escrow Agent acknowledges receipt
of five stock powers duly executed in blank and signature guaranteed from each
record holder of the Alpha Shares deposited into the Escrow Account. Escrow
Agent is authorized to use such blank stock powers to facilitate all
disbursements of the Escrow Amount pursuant to the terms of this Agreement.
Alpha Inc. shall provide all reasonable assistance to the Escrow Agent to
complete such disbursements, including furnishing Alpha Inc.'s transfer agent
with all transfer opinions and other documents necessary to effect such
disbursements.

     (e) Disbursements to the Nicewonder Parties. Any disbursement made to the
Nicewonder Parties from the Escrow Account pursuant to this Agreement shall be
paid to each Nicewonder Party in accordance with the written instructions
provided by Sellers Representative to the Escrow Agent.

     (f) Confirmation. Receipt, investment and reinvestment of the Escrow
Account shall be confirmed by Escrow Agent as soon as practicable by account
statement, and any

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discrepancies in any such account statement shall be noted by the Parties to
Escrow Agent within 30 calendar days after receipt thereof. Failure to inform
Escrow Agent in writing of any discrepancies in any such account statement
within said 30-day period shall conclusively be deemed confirmation of such
account statement in its entirety.

     (g) Substitution.

          (i) Cash Deposit. Pursuant to the terms of this Section 4(g), the
Nicewonder Parties may substitute cash (the "Cash Deposit") for Alpha Shares
held in the Escrow Account. The Nicewonder Parties shall deliver such Cash
Deposit by wire transfer to an account designated by Escrow Agent. Escrow Agent
will hold the Cash Deposit in the Escrow Account upon receipt by Escrow Agent of
joint written instructions from the Alpha Parties and the Nicewonder Parties
(signed by Alpha Inc. on behalf of the Alpha Parties and the Sellers
Representative on behalf of the Nicewonder Parties) directing Escrow Agent to
(A) hold the Cash Deposit in the Escrow Account pursuant to the terms of this
Agreement and (B) disburse a specified portion of the Alpha Shares from the
Escrow Account to the Nicewonder Parties. The number of Alpha Shares to be
disbursed by Escrow Agent upon such Cash Deposit shall equal that whole number
of Alpha Shares, as determined by Alpha Parties and the Sellers Representative
in writing to Escrow Agent, (rounded up or down to the nearest whole Alpha
Share), which when multiplied by the Closing Price as of the date of receipt of
such joint written instructions, equals the amount of such Cash Deposit. Escrow
Agent will not be responsible for determining the Closing Price or the number of
Alpha Shares to be released.

          (ii) Form of Disbursement. Except as provided in Section 5(a) of this
Agreement, if cash is held in the Escrow Account, a Party entitled to a
disbursement may elect to receive the disbursement either in the form of (x)
Alpha Shares (valued in the manner set forth in the applicable section of this
Agreement) or (y) cash equal to the number of Alpha Shares required to be
disbursed multiplied by the Closing Price as of the applicable date of
determination, assuming in either case that there are sufficient Alpha Shares or
cash in the Escrow Account to facilitate such request. If cash is disbursed from
the Escrow Account with respect to a Claim for Indemnification of an Alpha
Party, such cash shall be disbursed to the Alpha Party suffering such Adverse
Consequences as may be specified by the Alpha Parties in writing to the Escrow
Agent.

SECTION 5. AUTOMATIC RELEASE.

     (a) Scheduled Release. Subject to the provisions of this Section 5:

          (i) on January 26, 2007, Escrow Agent shall disburse to the Nicewonder
     Parties out of the Escrow Amount (A) 1/3 of the difference between the
     Original Share Deposit and any Alpha Shares disbursed pursuant to Section
     4(g) plus (B) 1/3 of the total Cash Deposits, if any; and

          (ii) on April 26, 2007, Escrow Agent shall disburse to the Nicewonder
     Parties out of the Escrow Amount an additional (A) 1/3 of the difference
     between the Original Share Deposit and any Alpha Shares disbursed pursuant
     to Section 4(g) plus (B) 1/3 of the total Cash Deposits, if any (each of
     clause (i) and (ii), a "Scheduled Release Date");

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     provided, however, that in no event shall Escrow Agent disburse any Alpha
Shares or Cash Deposit out of the Escrow Amount on a Scheduled Release Date
unless Escrow Agent has, prior to the Scheduled Release Date, received joint
written instructions of the Alpha Parties and the Nicewonder Parties in the form
of Exhibit D attached to this Agreement (signed by Alpha Inc. and the Sellers
Representative on behalf of the Nicewonder Parties), certifying that each of the
matters described in Section 5.2(b)(vi), (vii) and (viii) of the Indemnification
Agreement has been resolved to the satisfaction of the Alpha Parties (the
"Release Instructions"). The Release Instructions will also detail the number of
Alpha Shares or amount of Cash Deposit that will be released. If the Escrow
Agent does not receive the Release Instructions until after a Scheduled Release
Date has occurred, the Escrow Agent shall disburse from the Escrow Amount
(within 3 Business Days after receipt of the Release Instructions) that number
of Alpha Shares and Cash Deposit, if any, that would have been released on any
prior Scheduled Release Date.

     (b) Pending Disputes. Notwithstanding anything in Section 5(a) to the
contrary, if the Escrow Agent has received the Release Instructions and any
Claims for Indemnification are pending as of any Scheduled Release Date, then
(i) the number of Alpha Shares and Cash Deposit, if any, scheduled to be
disbursed to the Nicewonder Parties under Section 5(a) shall be reduced (in the
proportion that each bears to the total Escrow Amount) by an amount necessary to
retain in the Escrow Account a whole number of Alpha Shares, as determined by
Alpha Parties and the Sellers Representative in writing to Escrow Agent,
(rounded up or down to the nearest whole Alpha Share), which when multiplied by
the Closing Price as of the Scheduled Release Date, and added to the remaining
Cash Deposit, if any, equals the amount of such pending Claims for
Indemnification; (ii) the remaining balance of the Alpha Shares and Cash
Deposit, if any, scheduled to be disbursed to the Nicewonder Parties after such
retention, if any, will be so disbursed by Escrow Agent (pursuant to joint
written instructions in the form of Exhibit B attached to this Agreement); and
(iii) as each such Claim for Indemnification is resolved by a Final
Determination, any amount of Alpha Shares and Cash Deposit, if any, scheduled to
be disbursed that was retained in the Escrow Account with respect to such Claim
for Indemnification shall, after such resolution, be disbursed by Escrow Agent
to the Nicewonder Parties, after any disbursement to the Alpha Parties resulting
from the Final Determination (pursuant to joint written instructions in the form
of Exhibit B attached to this Agreement). The Alpha Parties and the Nicewonder
Parties shall furnish to Escrow Agent the joint written instructions required by
this Section 5 within five Business Days of the date of such Final Determination
and Escrow Agent shall disburse any amounts required under this Section 5 within
five Business Days of receipt of such joint written instructions.

     (c) Termination. Notwithstanding anything in this Section 5 to the
contrary, on the Termination Date (as defined below), all further disbursements
out of the Escrow Amount shall be determined in accordance with Section 6 below.

SECTION 6. TERMINATION OF ESCROW.

     On October 26, 2007 (the "Termination Date"), Escrow Agent shall distribute
all of the remaining Escrow Amount to the Nicewonder Parties, unless any Claims
for Indemnification are

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then pending, in which case (i) there shall be retained in the Escrow Account
(in the proportion that each form of Escrow Amount bears to the total Escrow
Amount) a whole number of Alpha Shares, as determined by Alpha Parties and the
Sellers Representative in writing to Escrow Agent, (rounded up or down to the
nearest whole Alpha Share), which when multiplied by the Closing Price as of the
Termination Date, and added to the remaining Cash Deposit, if any, equals the
amount of such pending Claims for Indemnification; (ii) the remaining balance of
the Escrow Amount after such retention will be so disbursed by Escrow Agent to
the Nicewonder Parties (pursuant to joint written instructions in the form of
Exhibit B attached to this Agreement, signed by Alpha Inc. and the Sellers
Representative on behalf of the Nicewonder Parties); and (iii) as each such
Claim for Indemnification is resolved by a Final Determination, any amount
retained with respect thereto that remains in the Escrow Account after such
resolution will be disbursed by Escrow Agent to the Nicewonder Parties, after
any disbursement to the Alpha Parties resulting from the Final Determination
(pursuant to joint written instructions in the form of Exhibit B attached to
this Agreement, signed by Alpha Inc. and the Sellers Representative on behalf of
the Nicewonder Parties). The Alpha Parties and the Nicewonder Parties shall
furnish to Escrow Agent the joint written instructions required by this Section
6 within five Business Days of the date of such Final Determination and Escrow
Agent shall disburse any amounts required under this Section 6 within five
Business Days of receipt of such joint written instructions. This Agreement
shall in any event terminate on the complete disbursement of the Escrow Amount,
provided that the provisions of Section 7, Section 10 and Section 11 shall
survive the termination of this Agreement.

SECTION 7. ACCOUNT OPENING INFORMATION/TAX MATTERS.

     (a) Account Opening.

IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT

For accounts opened in the US:

To help the government fight the funding of terrorism and money laundering
activities, Federal law requires all financial institutions to obtain, verify,
and record information that identifies each person who opens an account. When an
account is opened, the Escrow Agent will ask for information that will allow us
to identify relevant parties.

     (b) Withholding. Any payments of income from the Escrow Amount shall be
subject to withholding regulations then in force with respect to United States
taxes. The Parties each represent that it has provided Escrow Agent with its
correct Taxpayer Identification Number ("TIN") assigned by the Internal Revenue
Service ("IRS") or any other taxing authority.

     (c) Responsibility. In addition, Escrow Agent shall withhold any taxes it
deems appropriate and shall remit such taxes to the appropriate authorities. Any
tax returns or reports required to be prepared and filed on behalf of or by the
Escrow Amount will be prepared and filed by the Alpha Parties or the Nicewonder
Parties, as applicable, and the Escrow Agent shall have no responsibility for
the preparation and/or filing of any tax return with respect to income earned by
the Escrow Amount, if any. In addition, any tax or other payments required to be
made pursuant to

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such tax return or filing will be paid by the Alpha Parties or the Nicewonder
Parties, as appropriate. Escrow Agent shall have no responsibility for such
payment unless directed to do so by the appropriate authorized Party.

     (d) Taxable Distributions. The Nicewonder Parties and the Alpha Parties
agrees that, for purposes of federal and other taxes based on income, the
Nicewonder Parties will be treated as the owners of the Escrow Amount, and that
the Nicewonder Parties will be responsible for reporting all income, if any,
that is earned on, or derived from, its portion of such Escrow Amount, in the
taxable year or years in which such income is properly includible and shall pay
any taxes attributable thereto (with such tax liability allocated to each
Nicewonder Party as the Nicewonder Parties may determine). The Alpha Parties and
the Nicewonder Parties agree not to take any position for tax purposes that is
inconsistent with the provisions of this Section 7(d).

SECTION 8. SCOPE OF UNDERTAKING.

     Escrow Agent's duties and responsibilities in connection with this
Agreement shall be purely ministerial and shall be limited to those expressly
set forth in this Agreement. Escrow Agent is not a principal, participant or
beneficiary in any transaction underlying this Agreement and shall have no duty
to inquire beyond the terms and provisions of this Agreement. Escrow Agent is
not required to be familiar with the provisions of any other instrument or
agreement, including the Indemnification Agreement and the Acquisition
Agreements, and shall not be charged with any responsibility or liability in
connection with the observance or non-observance, by any person, of the
provisions of any other such instrument or agreement, including the
Indemnification Agreement and the Acquisition Agreements. Escrow Agent shall
have no responsibility or obligation of any kind in connection with this
Agreement or the Escrow Amount other than as provided in this Agreement. Without
limiting the generality of the foregoing, it is hereby expressly agreed and
stipulated by the Parties that Escrow Agent shall not be required to exercise
any discretion under this Agreement and, other than pursuant to Section 3, shall
have no investment or management responsibility and, accordingly, shall have no
duty to, or liability for its failure to, provide investment recommendations or
investment advice to any Party. Escrow Agent shall not be liable for any error
in judgment, any act or omission, any mistake of law or fact, or for anything it
may do or refrain from doing in connection with this Agreement (except for,
subject to Section 9, its own willful misconduct, gross negligence or bad
faith). It is the intention of the Parties that Escrow Agent shall never be
required to use, advance or risk its own funds or otherwise incur financial
liability in the performance of any of its duties or the exercise of any of its
rights and powers under this Agreement.

SECTION 9. RELIANCE; LIABILITY.

     Escrow Agent may rely on, and shall not be liable for acting or refraining
from acting in accordance with, any written notice, instruction or request or
other paper furnished to it in the form required by this Agreement and believed
by it to have been signed or presented by the proper Party or Parties. Escrow
Agent shall be responsible for holding, investing, reinvesting and disbursing
the Escrow Amount pursuant to this Agreement; provided, however, anything in
this Agreement to the contrary notwithstanding, in no event shall the Escrow
Agent be liable for special, indirect or

                                       10

<PAGE>

consequential loss or damage of any kind whatsoever (including but not limited
to lost profits), even if the Escrow Agent has been advised of the likelihood of
such loss or damage and regardless of the form of action and provided, further,
that Escrow Agent shall have no liability for any loss arising from any cause
beyond its control, including the following: (a) acts of God, force majeure,
including war (whether or not declared or existing), revolution, insurrection,
riot, civil commotion, accident, fire, explosion, stoppage of labor, strikes and
other differences with employees; (b) the act, failure or neglect of any Party
(other than Escrow Agent); (c) any delay, error, omission or default of any
mail, courier, telegraph, cable or wireless agency or operator; or (d) the acts
or edicts of any Governmental Authorities. Escrow Agent is not responsible or
liable in any manner whatsoever for the sufficiency, correctness, genuineness or
validity of the subject matter of this Agreement or any part of this Agreement
or for the transaction or transactions requiring or underlying the execution of
this Agreement, the form or execution of this Agreement or for the identity or
authority of any person executing this Agreement or any part of this Agreement
or depositing the Escrow Amount. Escrow Agent shall have a lien, which shall be
paramount and prior in right of all other persons, upon all monies and other
property that shall have been received by it under this Agreement, to secure the
payment to it of fees and expenses due to Escrow Agent pursuant to this
Agreement.

SECTION 10. INDEMNIFICATION.

     The Nicewonder Parties collectively, on the one hand, and the Alpha Parties
collectively, on the other hand, hereby indemnify Escrow Agent, its officers,
directors, partners, employees and agents (each herein called an "Indemnified
Party") against, and hold each Indemnified Party harmless from 50% of any and
all expenses, including reasonable attorneys' fees and court costs, losses,
costs, damages and claims, including costs of investigation, litigation and
arbitration, tax liability and loss on investments suffered or incurred by any
Indemnified Party in connection with or arising from or out of this Agreement
(except, subject to Section 9, such acts or omissions as may result from the
willful misconduct, gross negligence or bad faith of an Indemnified Party), and
such indemnification shall survive the termination of this Agreement.

SECTION 11. COMPENSATION AND REIMBURSEMENT OF EXPENSES.

     The Alpha Parties and the Nicewonder Parties hereby agree to pay Escrow
Agent for its services under this Agreement in accordance with Escrow Agent's
fee schedule attached as Schedule I as in effect from time to time and to pay
all reasonable expenses incurred by Escrow Agent in connection with the
performance of its duties and enforcement of its rights under this Agreement and
otherwise in connection with the preparation, operation, administration and
enforcement of this Agreement, including reasonable attorneys' fees, brokerage
costs and related expenses incurred by Escrow Agent. Any such compensation and
reimbursement to which Escrow Agent is entitled shall be borne 50% by the Alpha
Parties and 50% by the Nicewonder Parties (allocated to each Nicewonder Party as
the Nicewonder Parties may determine). In the event such Parties for any reason
fail to pay any such fees and expenses as and when the same are due, such unpaid
fees and expenses shall be charged to and set-off and paid from the Escrow
Amount by Escrow Agent without any further notice; provided that the Alpha
Parties or the Nicewonder Parties, as the case may be, shall be entitled to
immediate reimbursement from the other Parties for

                                       11

<PAGE>

such fees and expenses as are not paid by such other Parties and are set-off and
paid from the Escrow Amount.

SECTION 12. WIRE TRANSFERS.

     In the event funds transfer instructions are given (other than in writing
at the time of execution of this Agreement), whether in writing, by telecopier
or otherwise, the Escrow Agent is authorized to seek confirmation of such
instructions by telephone call-back to the person or persons designated on
Schedule II to this Agreement, and the Escrow Agent may rely upon the
confirmation of anyone purporting to be the person or persons so designated. The
persons and telephone numbers for call-backs may be changed only in a writing
actually received and acknowledged by the Escrow Agent. If the Escrow Agent is
unable to contact any of the authorized representatives identified in Schedule
II, the Escrow Agent is hereby authorized to seek confirmation of such
instructions by telephone call-back to any one or more of the Parties' executive
officers, ("Executive Officers"), which shall include the titles of President,
Executive Vice President and Vice President, as the Escrow Agent may select.
Such "Executive Officer" shall deliver to the Escrow Agent a fully executed
incumbency certificate, and the Escrow Agent may rely upon the confirmation of
anyone purporting to be any such Executive Officer. The Escrow Agent and the
beneficiary's bank in any funds transfer may rely solely upon any account
numbers or similar identifying numbers provided by the Alpha Parties or the
Nicewonder Parties to identify (i) the beneficiary, (ii) the beneficiary's bank,
or (iii) an intermediary bank. The Escrow Agent may apply any of the Escrow
Amount for any payment order it executes using any such identifying number, even
when its use may result in a person other than the beneficiary being paid, or
the transfer of funds to a bank other than the beneficiary's bank or an
intermediary bank designated. The parties to this Agreement acknowledge that
these security procedures are commercially reasonable.

SECTION 13. CONSULTATION WITH LEGAL COUNSEL.

     Escrow Agent may consult with its counsel or other counsel satisfactory to
it concerning any question relating to its duties or responsibilities under or
otherwise in connection with this Agreement and shall not be liable for any
action taken, suffered or omitted by it in good faith upon the advice of such
counsel (except, subject to Section 9, for its own gross negligence, willful
misconduct or bad faith).

SECTION 14. RESIGNATION; REMOVAL.

          (a) Resignation. Escrow Agent (and any successor escrow agent) may at
any time resign as such by delivering the Escrow Amount to any successor escrow
agent jointly designated in writing by the Parties other than the Escrow Agent,
or to any court of competent jurisdiction, whereupon Escrow Agent shall be
discharged of and from any and all further obligations arising in connection
with this Agreement. The resignation of Escrow Agent will take effect on the
earlier of the appointment of a successor (including a court of competent
jurisdiction) or the day which is 30 days after the date of delivery of its
written notice of resignation to the other Parties. If at that time Escrow Agent
has not received a designation of a successor escrow agent, Escrow Agent's sole
responsibility after that time shall be to retain and safeguard the Escrow
Amount until receipt of a

                                       12

<PAGE>

designation of successor escrow agent, a joint written disposition instruction
by the Alpha Parties and the Nicewonder Parties, or termination of this
Agreement as provided.

     (b) Removal. The Nicewonder Parties and the Alpha Parties may jointly
remove the Escrow Agent and terminate this Agreement upon ten days prior notice.
Upon such removal and termination, the Escrow Amount (including any interest or
other earnings thereon) shall be transferred in accordance with the joint
written instructions of the Nicewonder Parties and the Alpha Parties.

SECTION 15. GENERAL.

     (a) Entire Agreement. This Agreement constitutes the entire agreement among
the Parties and Escrow Agent and supersedes any prior understandings,
agreements, or representations by or among the Parties and Escrow Agent, written
or oral, to the extent they relate in any way to the subject matter of this
Agreement.

     (b) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties and Escrow Agent named in this Agreement and
their respective successors and permitted assigns. Neither Party nor Escrow
Agent may assign either this Agreement or any of its rights, interests, or
obligations under this Agreement without the prior written approval of the other
Parties and Escrow Agent; provided, however, that the Alpha Parties may (i)
assign any or all of its rights and interests under this Agreement to one or
more of their Affiliates, (ii) assign, pledge or mortgage all of its rights and
interests under this Agreement to any provider of financing, and any trustee or
agent acting on their behalf, as security for the Alpha Parties' or their
Affiliates' obligations under all documents and instruments evidencing,
guaranteeing or executed by them in connection with any such financing and (iii)
designate one or more of their Affiliates to perform their obligations under
this Agreement (in any or all of which cases the Alpha Parties nonetheless shall
remain responsible for the performance of all of its obligations under this
Agreement). At the time of any assignment or designation, the Alpha Parties
shall inform Escrow Agent and the Nicewonder Parties of such assignee or
designee pursuant to this Section 15(b) by delivery to Escrow Agent and the
Nicewonder Parties of written notice in the manner set forth in Section 15(e) of
this Agreement (signed by Alpha Inc.) and such notice shall specify (w) such
assignees or designees, (x) those rights and interests assigned, (y) the
authorized signers of such assignee or designee to be shown on Exhibit C to this
Agreement and the authority that such authorized signers will have pursuant to
this Agreement, and (z) the persons designated by such assignee or designee for
telephone call-back confirmations to be shown on Schedule II and the authority
that such persons will have pursuant to this Agreement. A material change in the
ownership of (a) Alpha Natural Resources, Inc. (other than as the result of
trading of its common stock on the New York Stock Exchange, Inc. or an
underwritten offering of its common stock) or (b) an Affiliate of the Alpha
Parties designated to perform the Alpha Parties' obligations under this
Agreement or hold any portion of the Business (other than the transfer to a
direct or indirect wholly owned Subsidiary of Alpha Natural Resources, LLC)
shall be deemed an assignment for purposes of this Agreement. A reference to any
Party to this Agreement or another agreement or document or the Escrow Agent
includes the Party's (or the Escrow Agent's) successors and assigns.

                                       13

<PAGE>

     (c) Counterparts. This Agreement and any certificate, instructions,
instrument, agreement or other document required to be provided under this
Agreement may be executed in one or more counterparts (including by means of
facsimile), each of which shall be deemed an original but all of which together
will constitute one and the same instrument. All signatures of the parties to
this Agreement may be transmitted by facsimile, and such facsimile will, for all
purposes, be deemed to be the original signature of such party whose signature
it reproduces, and will be binding upon such party.

     (d) Headings. The section headings contained in this Agreement are inserted
for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.

     (e) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given when (i) delivered
by hand (with written confirmation of receipt) or by facsimile transmission
(with confirmation received by the sender), (ii) two Business Days (as defined
below) after sent by registered or certified mail, return receipt requested,
postage prepaid, or (iii) when received by the addressee, if sent by a
nationally recognized overnight delivery service (receipt requested), in each
case to the appropriate addresses set forth below:

     If to Nicewonder Parties:

     Don Nicewonder
     148 Bristol East Road
     Bristol, VA 24201
     Attention: Don Nicewonder
     Facsimile: (276) 466-6139

     With a copy to:

     David Lester
     148 Bristol East Road
     Bristol, VA 24201
     Attention: David Lester
     Facsimile: (276) 466-6139

     With a copy to:

     Jones & Associates
     P.O. Box 1989
     Charleston, West Virginia 25327
     Attention: E. Forrest Jones, Jr., Esq.
     Facsimile No.: (304) 345-2456

     If to the Alpha Parties:

                                       14

<PAGE>

     Alpha Natural Resources, LLC
     406 West Main Street
     Abingdon, Virginia 24210
     Attention: Kevin S. Crutchfield
     Facsimile: (276) 628-2951

     With copies to:

     Alpha Natural Resources, LLC
     406 West Main Street
     Abingdon, Virginia 24210
     Attention: Vaughn R. Groves, Esq.
     Facsimile: (276) 628-2951

     Bartlit Beck Herman Palenchar & Scott LLP
     1899 Wynkoop Street, Suite 800
     Denver, Colorado 80202
     Attention: James L. Palenchar, Esq.
     Facsimile: (303) 592-3140

     If to Escrow Agent:

     JPMorgan Chase Bank, N.A.
     600 Travis Street, 53rd Floor
     Houston, Texas 77002
     Attention: Ruth Chipongian
     Facsimile: (713) 216-6927

Any Party or the Escrow Agent may send any notice, request, demand, claim, or
other communication hereunder to the intended recipient at the address set forth
above using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other communication shall be deemed to
have been duly given unless and until it actually is received by the intended
recipient. Any Party or the Escrow Agent may change the address to which
notices, requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Parties and Escrow Agent notice in the manner set
forth in this Agreement. "Business Day" shall mean any day other than a
Saturday, Sunday or any other day on which the Escrow Agent located at the
notice address set forth above is authorized or required by law or executive
order to remain closed.

     (f) Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the Commonwealth of Virginia without giving
effect to any choice or conflict of law provision or rule (whether of the State
of Delaware or any other

                                       15

<PAGE>

jurisdiction) that would cause the application of the laws of any jurisdiction
other than the Commonwealth of Virginia.

     (g) Arbitration. Any dispute, controversy or claim arising out of or
relating to this Agreement (a "Dispute") shall be settled by binding arbitration
in accordance with the commercial arbitration rules of the American Arbitration
Association ("AAA") except as otherwise provided in this Section 15(g). Any such
Dispute shall be arbitrated on an individual basis, and shall not be
consolidated in any arbitration with any dispute, claim or controversy of any
other party. The arbitration shall be conducted in Abingdon, Virginia, and any
court having jurisdiction thereof may immediately issue judgment on the
arbitration award. All costs of the Dispute resolution process contemplated by
this Section 15(g) (including, without limitation, the fees arbitrator, but
exclusive of attorneys' fees) shall be borne by the Person who is the least
successful in such process, which shall be determined by comparing (x) the
position asserted by each Person on all disputed matters taken together to (y)
the final decision of the arbitrator on all disputed matters taken together. The
Parties and Escrow Agent agree that the arbitration provided for in this Section
15(g) shall be the exclusive means to resolve all Disputes. If a Dispute arises
between Alpha Parties and Nicewonder Parties, Escrow Agent will not be
responsible for choosing an Arbitrator.

     (h) Amendments and Waivers. Any provision of this Agreement may be amended
and the observance thereof may be waived (either generally or in a particular
instance and either retroactively or prospectively) with the written consent of
Escrow Agent, the Alpha Parties and the Sellers Representative. No waiver by any
Party or Escrow Agent of any provision of this Agreement of any default,
misrepresentation, or breach of warranty or covenant under this Agreement,
whether intentional or not, shall be valid unless the same shall be in writing
and signed by the Party or Escrow Agent making such waiver, nor shall such
waiver be deemed to extend to any prior or subsequent default,
misrepresentation, or breach of warranty or covenant under this Agreement or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.

     (i) No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties, Escrow Agent and
their respective successors and permitted assigns. This Agreement shall be
binding upon and inure to the benefit of the Parties and Escrow Agent, their
respective successors in interest and assignees and no third party shall have
any interest in the Escrow Amount.

     (j) Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions of this
Agreement or the validity or enforceability of the offending term or provision
in any other situation or in any other jurisdiction.

     (k) Expenses. Except as otherwise provided in this Agreement including
paragraph 10, each Party will bear its own costs and expenses (including legal
fees and expenses) incurred in connection with this Agreement and the
transactions contemplated by this Agreement.

                                       16

<PAGE>

     (l) Construction. The Parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the Parties and Escrow Agent and no presumption or burden of proof
shall arise favoring or disfavoring any Party and Escrow Agent by virtue of the
authorship of any of the provisions of this Agreement. All references in this
Agreement to articles, sections or subdivisions thereof shall refer to the
corresponding article, section or subdivision thereof of this Agreement unless
specific reference is made to such articles, sections, or subdivisions of
another document or instrument. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" means including without limitation.

     (m) Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated in this Agreement by reference and
made a part of this Agreement.

     (n) Compliance with Court Orders. In the event that any portion of the
Escrow Amount shall be attached, garnished or levied upon by any court order, or
the delivery thereof shall be stayed or enjoined by an order of a court, or any
order, judgment or decree shall be made or entered by any court order affecting
the property deposited under this Agreement, the Escrow Agent is hereby
expressly authorized, in its sole discretion, to obey and comply with all writs,
orders or decrees so entered or issued, which it is advised by legal counsel of
its own choosing is binding upon it, whether with or without jurisdiction, and
in the event that the Escrow Agent obeys or complies with any such writ, order
or decree it shall not be liable to any of the parties hereto or to any other
person, firm or corporation, by reason of such compliance notwithstanding such
writ, order or decree be subsequently reversed, modified, annulled, set aside or
vacated.

                            [SIGNATURE PAGE FOLLOWS]

                                       17

<PAGE>

     IN WITNESS WHEREOF, the Parties have executed this Agreement to be
effective as of the date first above written.

                                        NICEWONDER PARTIES:

                                        MATE CREEK ENERGY OF W. VA., INC.

                                        By: Kenneth Donald "Don" Nicewonder
                                            ------------------------------------
                                        Title: President

                                       18

<PAGE>

                                        VIRGINIA ENERGY COMPANY

                                        By: Kenneth Donald "Don" Nicewonder
                                            ------------------------------------
                                        Title: President

                                       19

<PAGE>

                                        /s/ Kenneth Donald "Don" Nicewonder
                                        ----------------------------------------
                                        KENNETH DONALD "DON" NICEWONDER

                                       20

<PAGE>

                                        /s/ Kenneth R. Nicewonder
                                        ----------------------------------------
                                        KENNETH R. NICEWONDER

                                       21

<PAGE>

                                        /s/ John Kevin Nicewonder
                                        ----------------------------------------
                                        JOHN KEVIN NICEWONDER

                                       22

<PAGE>

                                        /s/ Kim Nicewonder Johnson
                                        ----------------------------------------
                                        KIM NICEWONDER JOHNSON

                                       23

<PAGE>

                                        /s/ David Lester
                                        ----------------------------------------
                                        DAVID LESTER

                                       24

<PAGE>

                                        MAJORITY BUCHANAN UNITHOLDERS:

                                        /s/ J.D. Nicewonder
                                        ----------------------------------------
                                        J.D. Nicewonder

                                       25

<PAGE>

                                        /s/ Paul Chaney
                                        ----------------------------------------
                                        Paul Chaney

                                       26

<PAGE>

                                        /s/ E. H. Lester
                                        ----------------------------------------
                                        E. H. Lester

                                       27

<PAGE>

                                        E. H. LESTER CHARITABLE INCOME TRUST II

                                        By: Edsel H. Lester
                                            ------------------------------------
                                        Title: Attorney-in-Fact under Power of
                                               Attorney dated February 4, 1998,
                                               for Paige G. Lester, Trustee

                                       28

<PAGE>

                                        TRI-CITIES INVESTMENTS, A VIRGINIA
                                        GENERAL PARTNERSHIP

                                        By: Tri-Cities Investments, Inc.,
                                            its general partner

                                        By: /s/ David Lester
                                            ------------------------------------
                                        Title: President

                                       29

<PAGE>

                                        /s/ F.D. Robertson
                                        ----------------------------------------
                                        F.D. Robertson

                                       30

<PAGE>

                                        ALPHA PARTIES:

                                        ALPHA NATURAL RESOURCES, LLC

                                        By: /s/ Vaughn R. Groves
                                            ------------------------------------
                                        Title: Vice President

                                       31

<PAGE>

                                        ALPHA NATURAL RESOURCES, INC.

                                        By: /s/ Vaughn R. Groves
                                            ------------------------------------
                                        Title: Vice President

                                       32

<PAGE>

                                        PREMIUM ENERGY, LLC

                                        By: /s/ Vaughn R. Groves
                                            ------------------------------------
                                        Title: Vice President

                                       33

<PAGE>

                                        CALLAWAY NATURAL RESOURCES, INC.

                                        By: /s/ Vaughn R. Groves
                                            ------------------------------------
                                        Title: Vice President

                                       34

<PAGE>

                                        MATE CREEK ENERGY, LLC

                                        By: /s/ Vaughn R. Groves
                                            ------------------------------------
                                        Title: Vice President

                                       35

<PAGE>

                                        VIRGINIA ENERGY COMPANY, LLC

                                        By: /s/ Vaughn R. Groves
                                            ------------------------------------
                                        Title: Vice President

                                       36

<PAGE>

                                        ESCROW AGENT:

                                        JPMORGAN CHASE BANK, N.A.

                                        By: /s/ Greg Campbell
                                            ------------------------------------
                                        Title: Vice President

                                       37exv10w1

 

Exhibit 10.1

2002
Form

1999 AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.

STOCK INCENTIVE PLAN

FORM OF

NON QUALIFIED STOCK OPTION AGREEMENT

THIS AGREEMENT (the “Agreement”), is made effective as of {INSERT DATE}, 2002 (hereinafter called the
“Date of Grant”) between American Axle & Manufacturing Holdings, Inc., a Delaware corporation
(hereinafter called the “Company”), and {INSERT NAME} hereinafter called the “Participant”):

R E C I T A L S:

          WHEREAS, the Company has adopted the 1999 American Axle & Manufacturing of Michigan, Inc.
Stock Incentive Plan (the “Plan”), which Plan is incorporated herein by reference and made a part
of this Agreement. Capitalized terms not otherwise defined herein shall have the same meanings as
in the Plan; and

          WHEREAS, the Compensation Committee of the Board of Directors has determined that it would be
in the best interests of the Company and its stockholders to grant the option provided for herein
to the Participant pursuant to the Plan and the terms set forth herein.

          NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties
agree as follows:

          1. Grant of the Option. The Company hereby grants to the Participant the right and
option (the “Option”) to purchase, on the terms and conditions hereinafter set forth, all or any
part of an aggregate of {Insert # of Options Granted} Shares, subject to adjustment as set forth in
the Plan. The purchase price of the Shares subject to the Option (the “Option Price”) shall be
${Insert Price} per share, the closing price of AAM stock on the Date of Grant. This one time Option is
intended to be a non-qualified stock option, and is not intended to be treated as an option that
complies with Section 422 of the Internal Revenue Code of 1986, as amended.

          2. Vesting. At any time, the portion of the Option that has become vested and
exercisable as described in this Section 2 is hereinafter referred to as the “Vested Portion.”

 

 

2

               (a) Vesting Schedule.

                    (i) Subject to (a)(ii) and (b), the Option shall vest and become exercisable in accordance
with following schedule:

	 	 	 	 	 
	 	 	Exercisable Shares*
	Prior to the first anniversary of the Date of Grant
	 	 	0	%
	 
	 	 	 	 
	On or after the first anniversary of the Date of Grant
	 	 	33	%
	 
	 	 	 	 
	On or after the second anniversary of the Date of Grant
	 	 	67	%
	 
	 	 	 	 
	On or after the third anniversary of the Date of Grant
	 	 	100	%

 

			
	*	 	 whole shares only; fractional shares, if any, are added to the subsequent anniversary date.

                    (ii) Notwithstanding the foregoing, the Options shall become immediately vested and
exercisable (by the Participant or the Participant’s beneficiary as applicable) upon the
Participant’s death, Disability, or retirement at or after age 65 under the Company’s Retirement
Program for Salaried Employees, Restatement dated January 1, 2001 (the “Program”), or Limited Early
Retirement under Section 7.11 of the Program; or upon retirement under the Program upon expiration
of any employment agreement between the Company and the Participant; or upon any other retirement
under the Program with the advance written approval of the Company’s Chief Executive Officer; or
termination of Participant’s employment by the Company because of a reorganization of the Company
in which the Participant’s position is eliminated; or in the event of a Change in Control.

               (b) Termination of Employment

               Except as otherwise expressly stated in Section 2(a)(ii), if the Participant’s employment with
the Company is terminated for any reason, the Option shall, to the extent not then vested, be
canceled by the Company without consideration and the Vested Portion of the Option shall remain
exercisable for the period set forth in Section 3(a).

          3. Exercise of Option.

               (a) Period of Exercise. Subject to the provisions of the Plan and this Agreement,
the Participant may exercise all or any part of the Vested Portion of the Option at any time prior
to the earliest to occur of:

                    (i) the tenth anniversary of the Date of Grant;

 

 

3

                    (ii) one year following the date of the Participant’s termination of employment as a result
of the Participant’s death, Disability, or retirement at or after age 65 under the Program, or
Limited Early Retirement under Section 7.11 of the Program; or retirement under the Program upon
expiration of any employment agreement between the Company and the Participant; or any other
retirement under the Program with the advance written approval of the Company’s Chief Executive
Officer; or termination of Participant’s employment by the Company because of a reorganization of
the Company in which the Participant’s position is eliminated; or in the event of a Change in
Control (each of the foregoing hereinafter referred to as a “Termination Date”); except that if
Participant is a member of the Company’s Board of Directors on any such Termination Date, then one
year following the last date of Participant’s service as a member of the Company’s Board of
Directors.

                    (iii) ninety days following the date of the Participant’s termination of employment by the
Company without Cause; or, except as stated in Section 2(a)(ii), the Participant’s resignation;
and 

                    (iv) the date of the Participant’s termination of employment by the Company for Cause.

                    For purposes of this Agreement:

                    “Cause” shall mean “cause” as defined in any employment agreement entered into by and between
the Participant and the Company or any of its Subsidiaries which is in effect as of or after the
Date of Grant (as the same may be amended in accordance with the terms thereof); or if not defined
therein or if there shall be no such agreement, “Cause” shall mean

                    (i) neglect of or willful and continuing refusal to perform one’s duties (other than due to
Disability),

                    (ii) a breach of any non-competition/no raid covenants the Participant is subject to,

                    (iii) engaging in conduct which is demonstrably injurious to the Company, the Company’s
Subsidiaries or Affiliates, as such terms are used in the Plan (including, without limitation, a
breach of any confidentiality covenant the Participant is subject to), or

                    (iv) a conviction or plea of guilty or nolo contendere to a felony or a misdemeanor involving
moral turpitude, dishonesty or theft, in each case as determined in the sole discretion of the
Committee.

                    “Disability” shall mean the inability of a Participant to perform in all material respects his
duties and responsibilities to the Company, or any Subsidiary of the Company, by reason of a
physical or mental disability or infirmity which inability is reasonably expected to be permanent
and has continued (i) for a period of six consecutive months or (ii) such shorter period as the
Committee may reasonably determine in good faith. The Disability

 

 

4

determination shall be in the
sole discretion of the Committee and a Participant (or his representative) shall furnish the Committee with medical evidence documenting the
Participant’s disability or infirmity that is satisfactory to the Committee.

               (b) Method of Exercise.

                    (i) Subject to Section 3(a), the Vested Portion of the Option may be exercised by delivering
to the Company at its principal office, or its designee, written notice of intent to so exercise;
provided that, the Option may be exercised with respect to whole Shares only. Such notice shall
specify the number of Shares for which the Option is being exercised and shall be accompanied by
payment in full of the Exercise Price. The payment of the Exercise Price shall be made (i) in cash
or its equivalent (e.g., by check), (ii) in Shares having a Fair Market Value equal to the
aggregate Option Price for the Shares being purchased and satisfying such other requirements as may
be imposed by the Committee; provided, that such Shares have been held by the Participant for no
less than six months, (iii) partly in cash and partly in such Shares or (iv) through the delivery
of irrevocable instructions to a broker to deliver promptly to the Company an amount equal to the
aggregate option price for the shares being purchased. The Participant shall also be required to
pay all withholding taxes relating to the exercise.

                    (ii) Notwithstanding any other provision of the Plan or this Agreement to the contrary, the
Option may not be exercised prior to the completion of any registration or qualification of the
Option or the Shares that is required to comply with applicable state and federal securities laws
or any ruling or regulation of any governmental body or national securities exchange that the
Committee shall in its sole discretion determine in good faith to be necessary or advisable.

                    (iii) Upon the Company’s determination that the Option has been validly exercised as to any
of the Shares, the Company, upon request by the Participant, shall issue certificates in the
Participant’s name for such Shares. However, the Company shall not be liable to the Participant
for damages relating to any delays in issuing the certificates to him, any loss of the
certificates, or any mistakes or errors in the issuance of the certificates or in the certificates
themselves.

                    (iv) In the event of the Participant’s death, the Vested Portion of the Option shall remain
exercisable by the Participant’s executor or administrator, or the person or persons to whom the
Participant’s rights under this Agreement shall pass by will or by the laws of descent and
distribution as the case may be, to the extent set forth in Section 3(a). Any heir or legatee of
the Participant shall take rights herein granted subject to the terms and conditions hereof.

          4. No Right to Continued Employment. Neither the Plan nor this Agreement shall be
construed as giving the Participant the right to be retained in the employ of , or in any
consulting relationship to, the Company or any Affiliate. Further, the Company or any Affiliate
may at any time dismiss the Participant or discontinue any consulting relationship, free from any
liability or any claim under the Plan or this Agreement, except as otherwise expressly provided
herein.

 

 

5

          5. Legend on Certificates. The Committee may cause a legend or legends to be put on
certificates representing the Shares purchased by exercise of the Option to make appropriate
reference to such restrictions as the Committee may deem advisable under the Plan or as may be
required by the rules, regulations, and other requirements of the Securities and Exchange
Commission, any stock exchange upon which such Shares are listed, and any applicable Federal or
state laws.

          6. Transferability. Except as otherwise provided in the Plan, the Option may not be
assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by the
Participant otherwise than by will or by the laws of descent and distribution, and any such
purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void
and unenforceable against the Company or any Affiliate; provided that the designation of a
beneficiary shall not constitute an assignment, alienation, pledge, attachment, sale, transfer or
encumbrance.

No such permitted transfer of the Option to heirs or legatees of the Participant shall be effective
to bind the Company unless the Committee shall have been furnished with written notice thereof and
a copy of such evidence as the Committee may deem necessary to establish the validity of the
transfer and the acceptance by the transferee or transferees of the
terms and conditions hereof. Except as otherwise provided in the Plan, during the Participant’s lifetime, the Option is
exercisable only by the Participant.

          7. Withholding. A Participant shall be required to pay to the Company or any
Affiliate, and the Company shall have the right and is hereby authorized to withhold, any
applicable withholding taxes in respect of an Option, its exercise or any payment or transfer under
an Option or under the Plan and to take such other action as may be necessary in the opinion of the
Company to satisfy all obligations for the payment of such withholding taxes.

          8. Securities Laws. Upon the acquisition of any Shares pursuant to the exercise of
the Option, the Participant will make or enter into such written representations, warranties and
agreements as the Committee may reasonably request in order to comply with applicable securities
laws or with this Agreement.

          9. Notices. Any notice necessary under this Agreement shall be addressed to the
Company in care of its Secretary at the principal executive office of the Company and to the
Participant at the address appearing in the records of the Company for the Participant or to either
party at such other address as either party hereto may hereafter designate in writing to the other.
Any such notice shall be deemed effective upon receipt thereof by the addressee.

          10. Choice of Law. The interpretation, performance and enforcement of this agreement
shall be governed by the laws of the State of New York without regard to principles of conflicts of
law.

 

 

6

          11. Option Subject to Plan. By entering into this Agreement the Participant agrees
and acknowledges that the Participant has received a copy of the Plan. The Option is subject to
the Plan, the terms and provisions of which, as may be amended from time to time, are hereby
incorporated herein by reference. In the event of a conflict between any term or provision
contained herein and a term or provision of the Plan, the applicable terms and provisions of the
Plan will govern and prevail.

          12. Signature in Counterparts. This Agreement may be signed in counterparts, each of
which shall be an original, with the same effect as if the signatures thereto and hereto were upon
the same instrument.

          IN WITNESS WHEREOF, the parties hereto have executed this Agreement.

	 	 	 	 	 
	 	AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	John C. McKinley
	 

	 	 	 	Executive Director Human Resources

Agreed and acknowledged as

of the date first above written:

                                        

{Insert Participant Name}

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