Document:

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                                                                     Exhibit 4.2

                         PAYMENT AND GUARANTEE AGREEMENT

     THIS PAYMENT AND GUARANTEE AGREEMENT (the "Guarantee"), dated as of April
12th, 2001, is executed and delivered by each of the entities listed on the
signature pages hereof (collectively, the "Guarantor") for the benefit of the
Holders (as defined below) from time to time of the Class E Preferred Shares (as
defined below) of Anker Coal Group, Inc., a Delaware corporation (the "Issuer").

     WHEREAS, each Guarantor is a direct or indirect wholly-owned subsidiary of
the Issuer;

     WHEREAS, the Issuer is issuing on the date hereof, and has the right to
issue in the future, up to a total of 200,000 shares of its Class E Convertible
Preferred Stock (the "Class E Preferred Shares"), and each Guarantor desires to
issue this Guarantee for the benefit of the Holders, as provided herein; and

     WHEREAS, Guarantor had guaranteed the Notes which are being exchanged on
the date hereof for Class E Preferred Shares and this Guarantee is being issued
at the same time as the Class E Preferred Shares;

     WHEREAS, each Guarantor desires hereby irrevocably and unconditionally to
agree to the extent set forth herein to pay to the Holders the Guarantee
Payments (as defined below) and to make certain other payments on the terms and
conditions set forth herein.

     NOW, THEREFORE, in consideration of the purchase by each Holder of the
Class E Preferred Shares and the Guarantee, which purchase each Guarantor hereby
agrees shall benefit the Guarantor, each Guarantor executes and delivers this
Guarantee for the benefit of the Holders, and hereby covenants and agrees as
follows.

                                   ARTICLE I

     As used in this Guarantee, the following terms shall, unless the context
otherwise requires, have the following meanings. Capitalized terms used but not
otherwise defined herein shall have the meanings assigned to such terms in the
Certificate of Designation of Preferences and Rights of Class E Convertible
Preferred Stock of Anker Coal Group, Inc. adopted as of April 12th, 2001.

     "Guarantee Payments" shall mean the following payments, without
duplication, to the extent not paid by the Issuer: (i) any accumulated arrears
and accruals of unpaid cash dividends which have been theretofore declared on
the Class E Preferred Shares of any series from moneys legally available for the
payment thereof, (ii) the redemption price (including all accumulated arrears
and accruals of unpaid dividends) payable with respect to any Class E Preferred
Shares of any series called for redemption by the Issuer as an optional
redemption and (iii) the lesser of (a) the aggregate of the liquidation
preference and all accumulated arrears and accruals of unpaid dividends (whether
or not declared) to the date of payment and (b) the amount of remaining assets
of the Issuer upon liquidation of the Issuer.

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     "Holder" shall mean any holder from time to time of any Class E Preferred
Shares of the Issuer; provided, however, that in determining whether the Holders
of the requisite percentage of Class E Preferred Shares have given any request,
notice, consent or waiver hereunder, "Holder" shall not include the Issuer,
Guarantor or any other Subsidiary or any entity owned 20% or more by the Issuer,
Guarantor or any other Subsidiary, either directly or indirectly.

                                   ARTICLE II

     SECTION 2.01. (A) The Guarantor irrevocably and unconditionally agrees to
pay in full to the Holders the Guarantee Payments, as and when due (except to
the extent paid by the Issuer), regardless of any defense, right of set-off or
counterclaim which the Issuer may have or assert. This Guarantee is continuing,
irrevocable, unconditional and absolute. The Guarantor's obligation to make a
Guarantee Payment may be satisfied by direct payment of the required amounts by
the Guarantor to the Holders or by causing the Issuer to pay such amounts to the
Holders.

     (B) All Guarantee Payments shall be made without withholding or deduction
for or on account of any present or future taxes, duties, assessments or
governmental charges of whatever nature imposed or levied upon or as a result of
such payment by or on behalf of the United States, any State thereof or any
other jurisdiction through which or from which such payment is made, or any
authority therein or thereof having power to tax, unless the withholding or
deduction of such taxes, duties, assessments or governmental charges is required
by law. In that event, the Guarantor shall pay such additional amounts as may be
necessary in order that the net amounts received by the Holders after such
withholding or deduction will equal the amount which would have been receivable
in respect of the Class E Preferred Shares in the absence of such withholding or
deduction, except that no such additional amounts will be payable to any Holder
(or a third party on his behalf):

          (I)  if such Holder is liable for such taxes, duties, assessments or
               governmental charges in respect of the Class E Preferred Shares
               by reason of such Holder's having some connection with the United
               States, any State thereof or any other jurisdiction through which
               or from which such payment is made, other than being a Holder, or

          (II) if the Issuer or the Guarantor has notified such Holder of the
               obligation to withhold taxes and requested but not received from
               such Holder a declaration of non-residence or other similar claim
               for exemption, and such withholding or deduction would not have
               been required had such declaration or similar claim been
               received.

     SECTION 2.02. The Guarantor hereby waives notice of acceptance of this
Guarantee and of any liability to which it applies or may apply, presentment,
demand for payment, protest, notice of nonpayment, notice of dishonor, notice of
redemption and all other notices and demands.

     SECTION 2.03. The obligations, covenants, agreements and duties of the
Guarantor under this Guarantee shall in no way be affected or impaired by reason
of the happening from time to time of any of the following:

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          (A)  the release or waiver, by operation of law or otherwise, of the
               performance or observance by the Issuer of any express or implied
               agreement, covenant, term or condition relating to the Class E
               Preferred Shares to be performed or observed by the Issuer;

          (B)  the extension of time for the payment by the Issuer of all or any
               portion of the dividends, redemption price, liquidation
               distributions or any other sums payable under the terms of the
               Class E Preferred Shares or the extension of time for the
               performance of any other obligation under, arising out of, or in
               connection with, the Class E Preferred Shares;

          (C)  any failure, omission, delay or lack of diligence on the part of
               the Holders to enforce, assert or exercise any right, privilege,
               power or remedy conferred on the Holders pursuant to the term of
               the Class E Preferred Shares, or any action on the part of the
               Issuer granting indulgence or extension of any kind;

          (D)  the voluntary or involuntary liquidation, dissolution, sale of
               any collateral, receivership, insolvency, bankruptcy, assignment
               for the benefit of creditors, reorganization, arrangement,
               composition or readjustment of debt of, or other similar
               proceedings affecting, the Issuer or any of the assets of the
               Issuer;

          (E)  any invalidity of, or defect or deficiency in, any of the Class E
               Preferred Shares; or

          (F)  the settlement or compromise of any obligation guaranteed hereby
               or hereby incurred.

There shall be no obligation of the Holders to give notice to, or obtain consent
of, the Guarantor with respect to the happening of any of the foregoing.

     SECTION 2.04. This is a guarantee of payment and not of collection. A
Holder may enforce this Guarantee directly against the Guarantor, and the
Guarantor waives any right or remedy to require that any action be brought
against the Issuer or any other person or entity before proceeding against the
Guarantor. Subject to Section 2.05, all waivers herein contained shall be
without prejudice to the Holders' right at the Holders' option to proceed
against the Issuer or Guarantor, whether by separate action or by joinder. The
Guarantor agrees that this Guarantee shall not be discharged except by payment
of the Guarantee Payments in full and by complete performance of all obligations
of the Guarantor contained in this Guarantee.

     SECTION 2.05. The Guarantor shall be subrogated to all (if any) rights of
the Holders against the Issuer in respect of any amounts paid to the Holders by
the Guarantor under this Guarantee and shall have the right to waive payment of
any amount of dividends in respect of which payment has been made to the Holders
by the Guarantor pursuant to Section 2.01; provided, however, that the Guarantor
shall not (except to the extent required by mandatory provisions of law)
exercise any rights which it may acquire by way of subrogation or any indemnity,
reimbursement or other agreement, in all cases as a result of a payment under
this Guarantee, if, at the time of any such payment, any amounts are due and
unpaid

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under this Guarantee. If any amount shall be paid to the Guarantor in violation
of the preceding sentence, the Guarantor agrees to pay over such amount to the
Holders.

     SECTION 2.06. The Guarantor acknowledges that its obligations hereunder are
several and independent of the obligations of the Issuer with respect to its
Class E Preferred Shares and that the Guarantor shall be liable as principal and
debtor hereunder to make Guarantee Payments pursuant to the terms of this
Guarantee notwithstanding the occurrence of any event referred to in subsections
(a) through (f), inclusive, of Section 2.03 hereof. Each Guarantor shall be
jointly and severably liable for obligations under this Guarantee.

     SECTION 2.07. The Guarantor represents and warrants that its obligations
hereunder rank, and covenants that such obligations will at all times rank, (a)
junior to all liabilities of the Guarantor, (b) senior to the most senior
preferred or preference stock issued by the Guarantor, if any, and with any
guarantee entered into by the Guarantor in respect of any preferred or
preference stock of any affiliate of the Guarantor and (c) senior to the common
shares of the Guarantor.

                                  ARTICLE III

     SECTION 3.01. The Guarantor shall not issue any preferred or preference
stock ranking senior to its obligations under this Guarantee or enter into any
guarantee in respect of any preferred or preference stock of any affiliate of
the Guarantor, which guarantee would rank senior to this Guarantee in any
respect, without the prior written approval of Holders of a majority of the
outstanding Class E Preferred Shares, voting as a single class.

     SECTION 3.02. If, in compliance with Section 3.01, the Guarantor issues,
following the date of the issuance of the Class E Preferred Shares, any
preferred or preference stock ranking senior to its obligations under this
Guarantee or enters into any guarantee in respect of any preferred or preference
stock of any affiliate of the Guarantor, which guarantee would rank junior to
all liabilities of the Guarantor but senior to this Guarantee as regards rights
in respect of dividends, liquidation preference and distributions, and rights
upon redemption, then this Guarantee will be deemed to give the Holders such
rights and entitlements as are contained in or attached to such other preferred
or preference stock or guarantee such that this Guarantee ranks pari passu as to
such rights and entitlements with any such preferred or preference stock or
other guarantee.

     SECTION 3.03. The Guarantor shall not, and the Guarantor shall not permit
or cause any subsidiary of the Guarantor to; (a) declare or pay any cash
dividends on any shares of the Guarantor ranking junior to the Guarantor's
obligations under this Guarantee (except for cash dividends to the Issuer or
another Guarantor); (b) redeem, or purchase or otherwise acquire any shares of
the Guarantor ranking junior to the Guarantor's obligations under this Guarantee
(except for redemptions, purchases or other acquisitions of shares owned by the
Issuer or another Guarantor), or (c) make any payment on any shares of the
Guarantor ranking junior to the Guarantor's obligations under this Guarantee
(except payments with respect to shares owned by the Issuer or another
Guarantor).

     SECTION 3.04. The Guarantor shall not, and the Guarantor shall not permit
or cause any subsidiary of the Guarantor to redeem, purchase or otherwise
acquire, or pay a liquidation preference with respect to, any preferred or
preference stock of the Guarantor ranking pari passu with this Guarantee, any
preferred or preference stock of affiliates of the Guarantor (including the
Issuer) entitled to the benefits of a guarantee ranking pari passu with

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this Guarantee or any preferred or preference stock of affiliates of the
Guarantor (including the Issuer) entitled to the benefits of a guarantee ranking
junior to this Guarantee as to participation in assets of the Guarantor upon
liquidation if at such time the Guarantor shall be in default with respect to
its obligations under this Guarantee.

     SECTION 3.05. The Guarantor shall not, and the Guarantor shall not permit
or cause any subsidiary of the Guarantor to pay cash dividends, or make
guarantee payments with respect to dividends, on any preferred or preference
stock of any affiliates of the Guarantor entitled to the benefits of a guarantee
ranking junior to this Guarantee (except for cash dividends or guarantee
payments to the Issuer or other Guarantor).

     SECTION 3.06. If as a result of a sale of stock, merger, consolidation or
other business combination transaction, a Guarantor (whether or not the
surviving or successor entity) is no longer a direct or indirect subsidiary of
the Issuer or any other Guarantor, then such Guarantor (and only such Guarantor)
shall be released from its obligations under this Guarantee; provided that all
of the consideration from such transaction is in cash or marketable securities
and has been paid to the Issuer or another Guarantor. In addition, a Guarantor
shall not sell its stock, merge or consolidate or otherwise enter into a
business combination transaction (whether or not the Guarantor is the surviving
or successor entity), unless immediately following such transaction, the
consolidated net worth of the surviving or successor entity is at least $1
greater than the net worth of such Guarantor immediately prior to such
transaction.

     SECTION 3.07. The Guarantor shall take all actions necessary to ensure the
compliance of its subsidiaries with this Article III, which may include causing
such subsidiaries to incorporate appropriate restrictions in their respective
Certificates of Incorporation or similar constitutional documents.

                                   ARTICLE IV

     This Guarantee shall terminate and be of no further force and effect upon
(i) conversion of all Class E Preferred Shares into Conversion Shares, (ii) full
payment of the redemption price (including all accumulated arrears and accruals
of unpaid dividends) of all Class E Preferred Shares, or (iii) full payment of
the amounts payable to the Holders upon liquidation of the Issuer; provided,
however, that this Guarantee shall continue to be effective or shall be
reinstated, as the case may be, if at any time payment of any sums payable under
the Class E Preferred Shares or this Guarantee must be restored by a Holder for
any reason whatsoever. The Guarantor agrees to indemnify each Holder and hold it
harmless against any loss it may suffer in such circumstances.

                                   ARTICLE V

     SECTION 5.01. All guarantees and agreements contained in this Guarantee
shall bind the successors, assigns, receivers, trustees and representatives of
the Guarantor and shall inure to the benefit of the Holders. The Guarantor shall
not assign its obligations hereunder without the prior approval of the Holders
of a majority of all outstanding Class E Preferred Shares voting as a single
class, which consent shall be obtained in writing or by a vote at a separate
general meeting at which such Holders shall be present in person or by proxy.

     SECTION 5.02. Except for those changes required by Section 3.02 hereof or
which do not adversely affect the rights of Holders (in any of which cases no
agreement will be

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required), this Guarantee shall be changed only by agreement in writing signed
by the Guarantor with the prior approval of the Holders of a majority of all
outstanding Class E Preferred Shares voting as a single class, which approval
shall be obtained in writing or by a vote at a separate general meeting at which
such Holders shall be present in person or by proxy.

     SECTION 5.03. All notices, communications and distributions hereunder shall
be given or made to the intended recipient at the address specified for each
Guarantor on the signature pages hereof, or at such other address as the
addressee may hereafter specify for the purpose by written notice to the
Holders. Such notices and other communications (including, without limitation,
any modifications of, or waivers or consents under, this Agreement) shall be
given or made in writing and may be delivered by hand, by overnight courier, by
facsimile, or by first-class mail (return receipt requested). All such notices
and other communications shall be deemed to have been duly given (a) if
delivered by hand, overnight courier or first-class mail (return receipt
requested), on the date of delivery; and (b) if transmitted by facsimile (with
receipt confirmed by machine), on the date of transmission if the same is a
business day or, if not a business day, on the first business day after the date
of transmission. The address of the Guarantor may be changed at any time and
from time to time and shall be the most recent such address furnished in writing
by the Guarantor to the Holders. Any notice, request or other communication
required or permitted to be given hereunder to the Holders shall be given by the
Guarantor in the same manner as notices sent by the Issuer to the Holders.

     SECTION 5.04. The masculine and neuter genders used herein shall include
the masculine, feminine and neuter genders.

     SECTION 5.05. This Guarantee is solely for the benefit of the Holders and
is not separately transferable from the Class E Preferred Shares.

     SECTION 5.06. This Guarantee shall be governed by and construed and
interpreted in accordance with the laws of the State of New York.

                     [Signatures appear on following pages]

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     THIS GUARANTEE is executed as of the day and year first above written.

         Anker Group, Inc., a Delaware corporation
         Anker Energy Corporation, a Delaware corporation
         Bronco Mining Company, Inc., a West Virginia corporation
         Anker Power Services, Inc., a West Virginia corporation
         Anker West Virginia Mining Company, Inc., a West Virginia corporation
         Juliana Mining Company, Inc., a West Virginia corporation
         King Knob Coal Co., Inc., a West Virginia corporation
         Vantrans, Inc., Inc., a Delaware corporation
         Melrose Coal Company, Inc., a West Virginia corporation
         Marine Coal Sales Company, a Delaware corporation
         Hawthorne Coal Company, Inc., a West Virginia corporation
         Upshur Property, Inc., a Delaware corporation
         Heather Glen Resources, Inc., a West Virginia corporation
         New Allegheny Land Holding Company, Inc., a West Virginia corporation
         Patriot Mining Company, Inc., a West Virginia corporation
         Vindex Energy Corporation, a West Virginia corporation
         Anker Virginia Mining Company, Inc., a Virginia corporation
         Simba Group, Inc., a Delaware corporation

             By: /s/ David D. Struth
                --------------------------------------------

             Name: David D. Struth
                  ------------------------------------------

             Title: Treasurer
                   -----------------------------------------

            Address for Notices to each of the Guarantors:

            c/o Anker Coal Group, Inc.
            2708 Cranberry Square
            Morgantown, WV  26508
            Attn:  General Counsel<PAGE>   1
                                                                   Exhibit 10.14

                  AMENDMENT NO. 4 TO LOAN DOCUMENTS AND WAIVER

                                    September 26, 2000

FOOTHILL CAPITAL CORPORATION
2450 Colorado Avenue
Suite 3000 West
Santa Monica, California 90404

Gentlemen:

         Foothill Capital Corporation, as agent ("Agent"), the financial
institutions party to the Loan Agreement referred to herein (each, individually
a "Lender" and collectively, "Lenders") and certain Subsidiaries of Anker Coal
Group, Inc. (each, individually, a "Borrower" and collectively "Borrowers") have
entered into certain financing arrangements as set forth in the Loan and
Security Agreement, dated as of November 21, 1998, by and among Borrowers, Anker
Coal Group, Inc., Lenders and Agent, as amended by Amendment No. 1 to Loan
Documents, dated August 4, 1999, by and among Borrowers, Borrowers' Agent,
Guarantors, Lenders and Agent and Amendment No. 2 to Loan Documents, dated
August 27, 1999, by and among Borrowers, Borrowers' Agent, Guarantors, Lenders
and Agent, and Amendment No. 3 to Loan Documents, dated as of October 1, 1999,
by and among Borrowers, Borrowers' Agent, Guarantors, Lenders and Agent (as the
same may hereafter be further amended, modified, supplemented, extended,
renewed, restated or replaced, the "Loan Agreement"), and all other Loan
Documents referred to therein or at any time executed and/or delivered in
connection therewith or related thereto. All capitalized terms used herein shall
have the meanings assigned thereto in the Loan Agreement, unless other defined
herein.

         Borrowers have requested that Lenders agree to (a) make to Borrowers,
within the limits of the Maximum Revolving Amount, an Advance in the amount of
$6,300,000 for the purpose and to be repaid on the terms and conditions set
forth herein, extend the Termination Date and make various other amendments to
the Loan Agreement, and waive certain Events of Default that have occurred and
are continuing as of the date hereof, and Lenders are willing to agree to the
foregoing on and subject to the terms and conditions contained in this Amendment
No. 4 to Loan Documents (this "Amendment").

<PAGE>   2

         In consideration of the foregoing and the respective agreements and
covenants herein, the parties hereto agree as follows:

         1. Existing Definitions. All capitalized terms used herein shall have
the meanings given to them in the Loan Agreement, unless otherwise defined
herein.

         2. Additional Definitions. As used herein, the following terms shall
have the respective meanings given to them below and Section 1 of the Loan
Agreement shall be deemed and is hereby amended to include, in addition and not
in limitation, each of the following definitions:

                           "(a) "Supplemental Term Loan" means the Advance made,
                  or to be made, by Lenders to Borrowers in the principal amount
                  of $6,300,000 pursuant to, and payable by Borrowers in
                  accordance with, Section 2.1(a) of the Loan Agreement."

                           "'Amendment No. 4' means Amendment No. 4 to Loan
                  Documents, dated as of September 26, 2000, executed by and
                  among Borrowers, Borrowers' Agent, Guarantors, Agent and
                  Lenders."

                           "'Amendment No. 4 Closing Date' means the date that
                  each of the conditions set forth in Section 17 of Amendment
                  No. 4 have been satisfied in full in a manner satisfactory to
                  Agent."

                           "'Supplemental Term Loan Repayment Date' means
                  January 1, 2004."

         3. Amendments to Definitions. A. The definition of "Availability" set
forth in Section 1.1 of the Loan Agreement is hereby amended and restated in its
entirety to read as follows:

                  ""Availability" means, as to each Borrower, at any time, the
                  amount that such Borrower is entitled to borrow as Advances
                  under Section 2.1, such amount being the difference derived
                  when (a) the sum of the principal amount of Advances
                  (including Agent Advances and Foothill Loans, but expressly
                  excluding the Supplemental Term Loan) then outstanding to such
                  Borrower (including any amounts that the Lender Group may have
                  paid for the account of such Borrower pursuant to any of the
                  Loan Documents and that have not been reimbursed by such
                  Borrower) is subtracted from (b) the lesser of (i) the Maximum
                  Revolving Amount, less the aggregate principal amount of
                  Advances (including Agent Advances and Foothill Loans, but
                  expressly excluding the Supplemental Term Loan) then
                  outstanding to all other Borrowers, less the then outstanding
                  Letter of

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                  Credit Usage of all Borrowers, or (ii) the Borrowing Base for
                  such Borrower less the Letter of Credit Usage for such
                  Borrower."

                  (a) Subsection (i) of the definition of "Eligible Accounts"
set forth in Section 1.1 of the Loan Agreement is hereby amended and restated in
its entirety to read as follows:

                           "(i) Accounts (i) owing by an Affiliate of AES
                  Corporation evidencing total obligations collectively owing to
                  Borrowers by such Account Debtors in excess of 25% of all
                  Eligible Accounts, (ii) owing by AK Steel Corporation
                  evidencing total obligations collectively owing to Borrowers
                  by such Account Debtors in excess of 25% of all Eligible
                  Accounts, (iii) owing by Potomac Electric Power Company
                  evidencing total obligations collectively owing to Borrowers
                  by such Account Debtor in excess of 45% of all Eligible
                  Accounts, and (iv) with respect to all other Account Debtors,
                  Accounts owing by such Account Debtors evidencing total
                  obligations owing to Borrowers in excess of 10% of all
                  Eligible Accounts, in all cases to the extent of the
                  obligations owing by such Account Debtors in excess of such
                  applicable percentages;

                  (b) The definition of "Permitted Disposition" set forth in
Section 1.1 of the Loan Agreement is hereby amended by deleting clause (b)(ii)
in its entirety and substituting the following therefor:

                           "(b)(ii) $1,800,000 in the aggregate from and after
                  the first anniversary of the Closing Date through and
                  including December 31, 2000, (iii) $750,000 in the aggregate
                  from and after January 1, 2001 through and including December
                  31, 2001, and (iv) $500,000 in the aggregate for each calendar
                  year thereafter during the term of this Agreement," ; and

                  (c) Schedule R-2 presently attached to the Loan Agreement is
hereby deleted in its entirety and Schedule R-2 attached to this Amendment is
hereby substituted therefor.

         4. Supplemental Term Loan. Section 2.1(a) of the Loan Agreement is
hereby amended as follows:

                  (a) The following sentences are hereby inserted in Section
2.1(a) immediately after clause (z) of the definition of Borrowing Base:

                                       3
<PAGE>   4
                           "In addition to Advances requested by Borrowers
                  pursuant to Section 2.1(c), each Lender agrees to make to
                  Borrowers' Agent, on behalf of Borrowers, on the Amendment No.
                  4 Closing Date, such Lender's Pro Rata Share of the
                  Supplemental Term Loan. Notwithstanding anything to the
                  contrary contained in the Loan Agreement or in any of the
                  other Loan Documents, the Supplemental Term Loan shall be paid
                  to Agent, in accordance with Section 2.4, in thirty-six (36)
                  consecutive monthly installments (or earlier, as otherwise
                  provided in this Agreement), commencing on January 1, 2001 and
                  on the first day of each month thereafter, of which (a) the
                  first eighteen (18) installments shall each be in the amount
                  of $140,000, (b) the nineteenth (19th) through thirty-fifth
                  (35th) installments shall each be in the amount of $210,000,
                  and (c) the last and thirty-sixth (36th) installment shall be
                  paid on the Supplemental Term Loan Repayment Date and shall be
                  in the amount of the entire unpaid balance of the Supplemental
                  Term Loan outstanding on the Supplemental Term Loan Repayment
                  Date. Each such principal installment shall be accompanied by
                  a payment of interest in accordance with Section 2.6(a)(i).
                  The Supplemental Term Loan is, and shall be deemed for all
                  purposes to, constitute an Advance and, as such, is being made
                  within the limits of the Maximum Revolving Amount and shall be
                  secured (together with all other Advances) by all of the
                  Collateral and Guarantor Collateral. Notwithstanding the
                  foregoing, solely for the purposes of determining Availability
                  and the amount of Advances that may by borrowed by Borrowers
                  pursuant to this Section 2.1(a), the principal amount of the
                  Supplemental Term Loan at any time outstanding shall be
                  excluded from then outstanding Advances for purposes of
                  determining the amount of Advances that may be made against
                  the Borrowing Base limitation set forth in clause (ii) of this
                  Section 2.1(a)."

                  (b) The last sentence of Section 2.1(a) is hereby amended and
         restated in its entirety to read as follows:

                           "Amounts borrowed pursuant to this Section 2.1 may be
                  (i) repaid and, subject to the terms and conditions of this
                  Agreement, reborrowed at any time during the term of this
                  Agreement, except that, any amounts repaid in respect of the
                  Supplemental Term Loan cannot be reborrowed as part of the
                  Supplemental Term Loan, and will not be re-advanced by Lenders
                  as part of the Supplemental Term Loan, and (ii) re-advanced by
                  Anker Energy or Marine to other Borrowers and/or to Guarantors
                  if and to the extent permitted by Section 7.13."

         5. Interest.

                                       4
<PAGE>   5

         (a) Section 2.6(a)(i) of the Loan Agreement is hereby amended and
restated in its entirety to read as follows:

                           "(i) Except as provided in clause (ii) and (vii)
                           below for Loans other than the Term Loan and the
                           Supplemental Term Loan, (A) all Loans (except for the
                           Term Loan and the Supplemental Term Loan) shall bear
                           interest at a per annum rate of one percentage point
                           (1%) above the Reference Rate and (B) the Term Loan
                           and the Supplemental Term Loan shall each bear
                           interest at a per annum rate of two and one-half
                           percentage points (2 1/2%) above the Reference Rate."

         (b) Section 2.6(c) of the Loan Agreement is hereby amended and restated
in its entirety to read as follows:

                                    "(c) Default Rate. Upon the occurrence and
                           during the continuation of an Event of Default, (i)
                           all Loans (except for the Term Loan and the
                           Supplemental Term Loan) shall each bear interest at a
                           per annum rate equal to three (3) percentage points
                           above the Reference Rate, (ii) the Term Loan and the
                           Supplemental Term Loan shall each bear interest at a
                           rate equal to four and one-half (4 1/2) percentage
                           points above the Reference Rate, and (iii) the Letter
                           of Credit fee provided in Section 2.6(b) shall be
                           increased to four (4%) per annum times the amount of
                           the undrawn Letters of Credit from and after the
                           occurrence of an Event of Default."

         (c) Section 2.6(d) of the Loan Agreement is hereby amended and restated
in its entirety to read as follows:

                                    "(d) Minimum Interest. In no event shall the
                           rate of interest chargeable under Section 2.6(a)(i)
                           for any day be less than (i) seven (7%) percent per
                           annum for all Loans other than the Supplemental Term
                           Loan and (ii) eight (8%) percent per annum for the
                           Supplemental Term Loan. To the extent that interest
                           accrued hereunder at the rate set forth in such
                           section would be less than the foregoing minimum
                           daily rate, the interest rate chargeable hereunder
                           for such day automatically shall be deemed increased
                           to the minimum rate."

                                       5
<PAGE>   6

         6. Term Extension. Section 3.4(a) of the Loan Agreement is hereby
amended and restated in its entirety to read as follows:

                                    "(a) This Agreement shall become effective
                           upon the execution and delivery hereof by Borrowers,
                           Borrowers' Agent and the Lender Group and shall
                           continue in full force and effect for a term ending
                           on November 21, 2005 (the "Termination Date"), unless
                           sooner terminated pursuant to the terms hereof."

         7. Early Termination Premium. Section 3.6 of the Loan Agreement is
hereby amended and restated in its entirety to read as follows:

                                    "3.6 Early Termination by Borrowers. The
                           provisions of Section 3.4 that provides for
                           termination of this Agreement by Borrowers only on
                           the Termination Date thereof notwithstanding,
                           Borrowers have the option, at any time upon 45 days
                           prior written notice to Agent, to terminate this
                           Agreement by paying to Agent, for the ratable benefit
                           of the Lender Group, in cash, the Obligations
                           (including an amount equal to 105% of the undrawn
                           amount of the Letters of Credit), in full, together
                           with a premium (the "Early Termination Premium")
                           equal to (a) three and one-half (3 1/2%) percent of
                           the Maximum Amount, as then in effect, if such
                           termination occurs at any time on or prior to
                           November 20, 2001, (b) two and one-half (2 1/2%)
                           percent of the Maximum Amount, as then in effect, if
                           such termination occurs at any time from and after
                           November 21, 2001 through and including November 20,
                           2002, (c) one and one half (1 1/2%) percent of the
                           Maximum Amount, as then in effect, if such
                           termination occurs at any time from and after
                           November 21, 2002 through and including November 20,
                           2003, and (d) one half (1/2%) percent of the Maximum
                           Amount, as then in effect, if such termination occurs
                           at any time from and after November 21, 2003 through
                           and including the day immediately prior to the
                           Termination Date; provided, however, that no Early
                           Termination Premium shall be due and payable if this
                           Agreement is terminated solely by reason of
                           replacement of the financing arrangements provided to
                           Borrowers hereunder pursuant to new financing
                           arrangements entered into between Borrowers and Wells
                           Fargo Bank, or its successors."

                                       6
<PAGE>   7

         8. Schedule of Litigation. Schedule 5.10 of the Loan Agreement is
hereby deleted in its entirety and Schedule 5.10 attached to this Amendment is
hereby substituted therefor.

         9. Automated Collateral Monitoring Project. Section 6.2 of the Loan
Agreement is hereby amended by adding the following new sentence at the end of
such Section:

                                    "In addition to, and not in limitation of
                           the foregoing, Borrowers will promptly implement and
                           thereafter at all times comply with the requirements
                           of Agent's Automated Collateral Monitoring Project in
                           order to automate Borrowers' submission of its
                           Borrowing Base Certificate to Agent through
                           electronic data files."

         10. Intercompany Loans. Section 7.13(c)(ix) of the Loan Agreement is
hereby amended by amending and restating in their entirety clauses (1) and (10)
to read as follows:

                           "(1)  Parent  $18,100,000,   plus  the  aggregate
                                         amount   of  costs   and   expenses
                                         (including,   without   limitation,
                                         federal,  state  and  local  taxes)
                                         paid by Parent for its own  account
                                         and   for   the   account   of  its
                                         Subsidiaries as consolidated  group
                                         expenses and the  aggregate  amount
                                         of  distributions  permitted  to be
                                         made by Parent pursuant to Section
                                         7.11

                           "(10)  Juliana Mining
                                  Company, Inc.        $5,800,000 for fiscal
                                                       year 1999,
                                                       $3,000,000 for
                                                       fiscal  year 2000
                                                       and  $500,000 for
                                                       each  fiscal year
                                                       thereafter"

         11. Parent's Use of Proceeds of Supplemental Term Loan. By its
signature hereinbelow, Parent covenants and agrees that it will use the proceeds
of the Supplemental Term

                                       7
<PAGE>   8

Loan (loaned to Parent by Anker Energy and/or by Marine as an Intercompany Loan
pursuant to Section 7.13(c)(ix)), solely for the purpose of paying interest
owing by Parent on the Senior Notes and the 1999 Notes on October 1, 2000.

         12. Use of Proceeds. Section 7.17 of the Loan Agreement is hereby
amended and restated in its entirety to read as follows:

                                    "7.17 Use of Proceeds. Use the proceeds of
                           the Advances and the Term Loan made hereunder for any
                           purpose other than (a) on the Closing Date, (i) to
                           repay in full the outstanding Indebtedness owing to
                           the Existing Lenders, and (ii) to pay transactional
                           costs and expenses incurred in connection with this
                           Agreement, (b) subsequent to the Closing Date, for
                           all Loans other than the Supplemental Term Loan,
                           consistent with the terms and conditions hereof, for
                           their working capital and their lawful general
                           corporate purposes in the ordinary course of their
                           respective businesses, and (c) in the case of Anker
                           Energy and Marine, to make Intercompany Loans
                           permitted by Section 7.13, including, without
                           limitation, the loan to Parent of the proceeds of the
                           Supplemental Term Loan for the sole purpose of
                           enabling Parent to fund in part the interest payment
                           owing by Parent on the Senior Notes and the 1999
                           Notes on October 1, 2000."

         13. Acknowledgment and Waiver of Existing Defaults.

                  (a) Acknowledgment of Events of Default. Borrowers and
Guarantors hereby acknowledge and agree that (a) the aggregate value of
obsolete, worn-out and/or non-productive Equipment sold and transferred by
Borrowers during the current fiscal year has exceeded the amount permitted by
Section 7.4(b) of the Loan Agreement and (b) Anker Energy and/or Marine have
made Intercompany Loans to Juliana during the current fiscal year in excess of
the amount permitted by Section 7.13(c)(ix) of the Loan Agreement, in each case
prior to giving effect to the amendments to such Sections contained in this
Amendment. As a result of the foregoing, Events of Default (the "Existing
Defaults") have occurred and are continuing under the Loan Agreement.

                  (b) Waiver of Existing Defaults. At the request of Borrowers
and Guarantors, the Required Lenders hereby waive the Existing Defaults,
provided, however, that nothing contained herein shall constitute a waiver of
any other Default or Event of Default that may presently exist or any other
Default or Event of Default that may hereafter occur under the Loan Agreement or
any other Loan Document, including, without limitation, any Default or Event of
Default occurring under Sections 7.4 and/or 7.13(c)(ix) of the Loan Agreement.

                                       8
<PAGE>   9

         14. Consents. At the request of Borrowers and Guarantors, A. the
Required Lenders hereby consent to the liquidation by Anker West Virginia of its
ownership interest in Summit Energy Group, LLC ("Summit"), and the purchase by
Anker West Virginia of the real property in Harrison County, West Virginia
previously subleased by Summit from Energysystems, Inc., a West Virginia
corporation (the "Harrison County Property"), provided that, Anker West Virginia
covenants and agrees that it shall, promptly upon Agent's request, execute and
deliver to Agent a Mortgage covering the Harrison County Property, or at Agent's
election, an amendment to the existing Mortgage previously granted by Anker West
Virginia to the Agent, for the purpose of granting a Lien thereon to Agent, in
form and substance satisfactory to Agent, and B. Agent hereby consents to the
retention of KPMG by Borrowers and Guarantors as their independent certified
public accountants.

         15. Representations, Warranties and Covenants. In addition to the
continuing representations, warranties and covenants heretofore or hereafter
made by Borrowers and Guarantors to Lender Group pursuant to the Loan Documents,
each Borrower and Guarantor hereby jointly and severally represents, warrants
and covenants with and to Lender Group as follows (which representation,
warranties and covenants are continuing and shall survive the execution and
delivery hereof and shall be incorporated into and made a part of the Loan
Documents):

                  (a) No Default or Event of Default exists as of the date of
this Amendment after giving effect to the amendments set forth herein.

                  (b) This Amendment has been duly executed and delivered by
each Borrower and each Guarantor, and the agreements and obligations of each
Borrower and each Guarantor contained herein constitute legal, valid and binding
obligations of Borrowers and Guarantors enforceable against each Borrower and
each Guarantor in accordance with their respective terms.

                  (c) All of the representations and warranties set forth in the
Loan Agreement and the other Loan Documents are true and correct in all material
respects on and as of the date hereof as if made on the date hereof, except to
the extent any such representation or warranty is made as of a specified date,
in which case such representation or warranty shall have been true and correct
as of such date.

         16. Fees. In consideration of the Supplemental Term Loan, Borrowers
shall pay on the Amendment No. 4 Closing Date A. to Agent, for its own account,
an agency fee in the amount of $50,000 and B. to Agent, for the ratable benefit
of Lenders, a commitment fee in the amount of $250,000; which fees were earned
in full upon execution and delivery by Parent to Agent of the Agent's commitment
letter for the Supplemental Term Loan, dated August 23, 2000, and which fees may
be charged by Agent, at its option, to any accounts of Borrowers maintained by
Agent.

                                       9
<PAGE>   10

         17. Conditions Precedent. The consent, waiver and amendments herein
shall be effective upon the satisfaction of each of the following conditions
precedent in a manner satisfactory to Agent (the date of satisfaction of such
conditions, the "Amendment No. 4 Closing Date"):

                  (a) Agent shall have received an original of this Amendment,
duly authorized, executed and delivered by each Borrower, each Guarantor and
each Lender;

                  (b) No Default or Event of Default shall have occurred or be
continuing;

                  (c) Agent's receipt of an opinion letter of counsel to
Borrowers and Guarantors, in form and substance satisfactory to Agent in its
sole discretion, including, without limitation, an opinion that the consummation
of the transactions contemplated by this Amendment do not violate the terms and
conditions of the 1999 Notes, the 1999 Note Indenture or the Intercreditor
Agreement executed between the Agent and the 1999 Note Trustee under the 1999
Note Indenture; and

                  (d) The transactions contemplated by this Amendment shall have
been consummated on or before October 2, 2000.

         18.      Miscellaneous.

                  (a) Headings. The headings listed herein are for convenience
only and do not constitute matters to be considered in interpreting this
Amendment.

                  (b) Effect of this Amendment. Except as modified pursuant
hereto, the Loan Documents are hereby specifically ratified, restated and
confirmed by all parties hereto as of the effective date hereof. To the extent
of a conflict between the terms of this Amendment and the other Loan Documents,
the terms of this Amendment shall control.

                  (c) Governing Law. The validity, interpretation and
enforcement of this Amendment shall be governed by the laws of the State of New
York.

                  (d) Further Assurances. Borrowers and Guarantors shall execute
and deliver such additional documents and take such additional action as may be
necessary or desirable, as determined by Agent, to effectuate the provisions and
purposes of this Amendment.

                                       10
<PAGE>   11

                  (e) Counterparts. This Amendment may be executed in any number
of counterparts, but all of such counterparts shall together constitute but one
and the same agreement.

                            [SIGNATURE PAGES FOLLOW]

                                       11
<PAGE>   12

                                            Very truly yours,

ANKER ENERGY CORPORATION                    ANKER POWER SERVICES, INC.

By: /s/ Bruce Sparks                        By: /s/ B. Judd Hartman
   ----------------------------------------    ---------------------------------

Title: President                            Title: Secretary
      -------------------------------------       ------------------------------

MARINE COAL SALES COMPANY                   BRONCO MINING COMPANY, INC.

By: /s/ B. Judd Hartman                     By: /s/ Bruce Sparks
   ----------------------------------------    ---------------------------------

Title: Secretary                            Title: President
      -------------------------------------       ------------------------------

ANKER WEST VIRGINIA MINING                  VANTRANS, INC.
COMPANY, INC.

By: /s/ B. Judd Hartman                     By: /s/ B. Judd Hartman
   ----------------------------------------    ---------------------------------

Title: Secretary                            Title: Secretary
      -------------------------------------       ------------------------------

PATRIOT MINING COMPANY, INC.                KING KNOB COAL CO., INC.

By: /s/ B. Judd Hartman                     By: /s/ B. Judd Hartman
   ----------------------------------------    ---------------------------------

Title: Secretary                            Title: Secretary
      -------------------------------------       ------------------------------

VINDEX ENERGY CORPORATION                   HEATHER GLEN RESOURCES, INC.

By: /s/ B. Judd Hartman                     By: /s/ B. Judd Hartman
   ----------------------------------------    ---------------------------------

Title: Secretary                            Title: Secretary
      -------------------------------------       ------------------------------

ANKER VIRGINIA MINING COMPANY, INC.         HAWTHORNE COAL COMPANY, INC.

By: /s/ B. Judd Hartman                     By: /s/ B. Judd Hartman
   ----------------------------------------    ---------------------------------

Title: Secretary                            Title: Secretary
      -------------------------------------       ------------------------------

                       [SIGNATURES CONTINUED ON NEXT PAGE]

                                       12
<PAGE>   13

                    [SIGNATURES CONTINUED FROM PREVIOUS PAGE]

JULIANA MINING COMPANY, INC.                UPSHUR PROPERTY, INC.

By: /s/ B. Judd Hartman                     By: /s/ B. Judd Hartman
   --------------------------------------      ---------------------------------

Title: Secretary                            Title: Secretary
      -----------------------------------         ------------------------------

ANKER COAL GROUP, INC.,  as Guarantor       MELROSE COAL COMPANY, INC.
and Borrowers' Agent

By: /s/ Bruce Sparks                        By: /s/ B. Judd Hartman
   --------------------------------------      ---------------------------------

Title: President                            Title: Secretary
      -----------------------------------         ------------------------------

ANKER GROUP, INC.                           NEW ALLEGHENY LAND HOLDING
                                            COMPANY, INC.

By: /s/ Bruce Sparks                        By: /s/ B. Judd Hartman
   --------------------------------------      ---------------------------------

Title: President                            Title: Secretary
      -----------------------------------         ------------------------------

SIMBA GROUP, INC.

By: /s/ Bruce Sparks
   --------------------------------------
Title: President
      -----------------------------------

                       [SIGNATURES CONTINUED ON NEXT PAGE]

                                       13
<PAGE>   14

                    [SIGNATURES CONTINUED FROM PREVIOUS PAGE]

AGREED AND ACKNOWLEDGED:

FOOTHILL CAPITAL CORPORATION  as
Agent and as a Lender

By: /s/ Peter Drooff
   --------------------------------------

Title: Vice President
      -----------------------------------

CONGRESS FINANCIAL CORPORATION

By: /s/ Cindy B. Denbaum
   --------------------------------------
Title: Vice President
      -----------------------------------

SUNROCK CAPITAL CORP.

By: Signature illegible
   --------------------------------------
Title: Vice President
      -----------------------------------

                                       14

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