-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Tr4aoZa13rf5Lg7h6Hvpip6FwqJ/xMwuKKIbAJTRMaXm+9h10eFlDZUm9xDzAhX2 GOBz8ePKJFFnrzK5hRYeBQ== 0000950129-02-002658.txt : 20020521 0000950129-02-002658.hdr.sgml : 20020521 20020520183703 ACCESSION NUMBER: 0000950129-02-002658 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20020521 GROUP MEMBERS: ALLIANCE MANAGEMENT HOLDINGS, LLC GROUP MEMBERS: ALLIANCE RESOURCE GP, LLC GROUP MEMBERS: ALLIANCE RESOURCE HOLDINGS II, INC. GROUP MEMBERS: ALLIANCE RESOURCE HOLDINGS, INC. GROUP MEMBERS: AMH II, LLC GROUP MEMBERS: JOSEPH W. CRAFT III FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: CRAFT JOSEPH W III CENTRAL INDEX KEY: 0001173893 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: PO BOX 22027 CITY: TULSA STATE: OK ZIP: 74121-2027 MAIL ADDRESS: STREET 1: PO BOX 22027 CITY: TULSA STATE: OK ZIP: 74121-2027 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: ALLIANCE RESOURCE PARTNERS LP CENTRAL INDEX KEY: 0001086600 STANDARD INDUSTRIAL CLASSIFICATION: BITUMINOUS COAL & LIGNITE SURFACE MINING [1221] IRS NUMBER: 731564280 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-56729 FILM NUMBER: 02658373 BUSINESS ADDRESS: STREET 1: 1717 SOUTH BOULDER AVENUE CITY: TULSA STATE: OK ZIP: 74119 BUSINESS PHONE: 9182957600 SC 13D 1 h97179sc13d.txt JOSEPH W. CRAFT III FOR ALLIANCE RESOURCE PARTNERS SCHEDULE 13D - ------------------ ------------ CUSIP NO. 0-26823 PAGE 1 OF 18 - ------------------ ------------ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D UNDER THE SECURITIES EXCHANGE ACT OF 1934 ALLIANCE RESOURCE PARTNERS, L.P. - -------------------------------------------------------------------------------- (NAME OF ISSUER) - -------------------------------------------------------------------------------- Common Units (TITLE OF CLASS OF SECURITIES) 0-26823 -------------- (CUSIP NUMBER) 1717 South Boulder Avenue, Suite 600 Tulsa, Oklahoma 74119 (918) 295-7600 with a copy to: Thomas L. Pearson Senior Vice President - Law and Administration, General Counsel and Secretary Alliance Resource Management GP, LLC 1717 South Boulder Avenue, Suite 600 Tulsa, Oklahoma 74119 (918) 295-7600 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) 5/8/2002 ------------------------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box. Note: Schedules filed in paper format shall include a signed original and five copies of this schedule, including all exhibits. See Rule 13d-7(b) for other parties to whom copies are to be sent. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). SCHEDULE 13D - ------------------ ------------ CUSIP NO. 0-26823 PAGE 2 OF 16 - ------------------ ------------ - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON SS. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Joseph W. Craft III - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X] (b) [ ] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS OO - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION USA - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER 1,470,280 Common Units of Alliance Resource Partners, L.P. ------------------------------------------------------------ 8 SHARED VOTING POWER BENEFICIALLY -0- OWNED BY EACH ------------------------------------------------------------ REPORTING PERSON 9 SOLE DISPOSITIVE POWER WITH 1,470,280 Common Units of Alliance Resource Partners, L.P. ------------------------------------------------------------ 10 SHARED DISPOSITIVE POWER -0- - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,470,280 Common Units of Alliance Resource Partners, L.P. - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 16.4% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* IN - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7 (INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION. SCHEDULE 13D - ------------------ ------------ CUSIP NO. 0-26823 PAGE 3 OF 16 - ------------------ ------------ - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON SS. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Alliance Resource Holdings, Inc. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X] (b) [ ] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS OO - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER 1,232,780 Common Units of Alliance Resource Partners, L.P. ------------------------------------------------------------ 8 SHARED VOTING POWER BENEFICIALLY -0- OWNED BY EACH ------------------------------------------------------------ REPORTING PERSON 9 SOLE DISPOSITIVE POWER WITH 1,232,780 Common Units of Alliance Resource Partners, L.P. ------------------------------------------------------------ 10 SHARED DISPOSITIVE POWER -0- - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,232,780 Common Units of Alliance Resource Partners, L.P. - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 13.7% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* CO - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7 (INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION. SCHEDULE 13D - ------------------ ------------ CUSIP NO. 0-26823 PAGE 4 OF 16 - ------------------ ------------ - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON SS. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Alliance Resource Holdings II, Inc. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X] (b) [ ] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS OO - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER 1,232,780 Common Units of Alliance Resource Partners, L.P. ------------------------------------------------------------ 8 SHARED VOTING POWER BENEFICIALLY -0- OWNED BY EACH ------------------------------------------------------------ REPORTING PERSON 9 SOLE DISPOSITIVE POWER WITH 1,232,780 Common Units of Alliance Resource Partners, L.P. ------------------------------------------------------------ 10 SHARED DISPOSITIVE POWER -0- - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,232,780 Common Units of Alliance Resource Partners, L.P. - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 13.7% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* HC, CO - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7 (INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION. SCHEDULE 13D - ------------------ ------------ CUSIP NO. 0-26823 PAGE 5 OF 16 - ------------------ ------------ - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON SS. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Alliance Resource GP, LLC - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X] (b) [ ] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS OO - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER 1,232,780 Common Units of Alliance Resource Partners, L.P. ------------------------------------------------------------ 8 SHARED VOTING POWER BENEFICIALLY -0- OWNED BY EACH ------------------------------------------------------------ REPORTING PERSON 9 SOLE DISPOSITIVE POWER WITH 1,232,780 Common Units of Alliance Resource Partners, L.P. ------------------------------------------------------------ 10 SHARED DISPOSITIVE POWER -0- - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,232,780 Common Units of Alliance Resource Partners, L.P. - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 13.7% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* OO - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7 (INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION. SCHEDULE 13D - ------------------ ------------ CUSIP NO. 0-26823 PAGE 6 OF 16 - ------------------ ------------ - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON SS. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Alliance Management Holdings, LLC - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X] (b) [ ] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS OO - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER 21,156 Common Units of Alliance Resource Partners, L.P. ------------------------------------------------------------ 8 SHARED VOTING POWER BENEFICIALLY -0- OWNED BY EACH ------------------------------------------------------------ REPORTING PERSON 9 SOLE DISPOSITIVE POWER WITH 21,156 Common Units of Alliance Resource Partners, L.P. ------------------------------------------------------------ 10 SHARED DISPOSITIVE POWER -0- - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 21,156 Common Units of Alliance Resource Partners, L.P. - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 0.2% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* HC, OO - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7 (INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION. SCHEDULE 13D - ------------------ ------------ CUSIP NO. 0-26823 PAGE 7 OF 16 - ------------------ ------------ - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON SS. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON AMH II, LLC - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X] (b) [ ] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS OO - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER 142,844 Common Units of Alliance Resource Partners, L.P. ------------------------------------------------------------ 8 SHARED VOTING POWER BENEFICIALLY -0- OWNED BY EACH ------------------------------------------------------------ REPORTING PERSON 9 SOLE DISPOSITIVE POWER WITH 142,844 Common Units of Alliance Resource Partners, L.P. ------------------------------------------------------------ 10 SHARED DISPOSITIVE POWER -0- - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 142,844 Common Units of Alliance Resource Partners, L.P. - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 1.6% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* HC, OO - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7 (INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION. Page 8 of 16 ITEM 1. SECURITY AND ISSUER. This statement relates to the common limited partnership interests (the "Common Units") of Alliance Resource Partners, L.P. (the "Partnership"), which has its principal executive offices at 1717 South Boulder Avenue, Suite 600, Tulsa, Oklahoma 74119. ITEM 2. IDENTITY AND BACKGROUND. (a) - (b) This statement is filed by Joseph W. Craft III, Alliance Resource Holdings, Inc., Alliance Resource Holdings II, Inc., Alliance Resource GP, LLC, Alliance Management Holdings, LLC and AMH II, LLC (collectively, the "Reporting Persons"), who may be deemed to comprise a group under Rule 13d-5(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The information required to be filed in response to paragraphs (a) and (b) of Item 2 with respect to the Reporting Persons is set forth on Schedule I. (c) The information required to be filed in response to paragraph (c) of Item 2 with respect to the Reporting Persons is as follows: 1. Joseph W. Craft III ("Craft") is currently the President, Chief Executive Officer and Director of Alliance Resource Management GP, LLC (the "MGP"), the managing general partner of the Partnership, which is located at the address listed above. 2. Alliance Resource Holdings, Inc. ("Holdings") is the sole member of Alliance Resource GP, LLC and is principally engaged in producing and marketing coal. The executive officers and directors of Holdings are listed on Appendix A hereto. 3. Alliance Resource Holdings II, Inc. ("ARH-II") is the sole shareholder of Alliance Resource Holdings, Inc. and is a holding company formed to hold the shares of Alliance Resource Holdings, Inc. The executive officers and directors of ARH-II are listed on Appendix A hereto. 4. Alliance Resource GP, LLC (the "SGP") serves as the special general partner of the Partnership and is principally engaged in holding common and subordinated units in the Partnership and certain interests in lands and coal reserves, and serves as the special general partner of the Partnership. The SGP holds 1,232,780 Common Units and 6,433,531 subordinated units of the Partnership. The executive officers and directors of the SGP are listed on Appendix A hereto. 5. Alliance Management Holdings, LLC ("AMH") is a member of the MGP and is principally engaged in holding 183,217 common units of the MGP. The executive officers and directors of AMH are listed on Appendix A hereto. 6. AMH II, LLC ("AMH-II") is the managing member of the MGP and is principally engaged in holding 523,758 common units of the MGP. The executive officers and directors of AMH-II are listed on Appendix A hereto. (d) and (e) During the last five years, none of the Reporting Persons, nor to the best knowledge of such persons, none of the individuals named in Appendix A to this Statement, (i) have been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) nor (ii) have been a party to any civil proceeding of a judicial or administrative body of competent jurisdiction, and is or was, as a result of such proceeding, subject to a judgment, decree or final order enjoining future Page 9 of 16 violations of, or prohibiting or mandating activities subject to, federal or state securities laws, or finding any violation with respect to such laws. (f) The information required to be filed in response to paragraph (f) of Item 2 with respect to the Reporting Persons is set forth on Schedule I. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. On May 8, 2002, Craft and ARH-II acquired beneficial control of the Partnership's Common Units held by the SGP, which is controlled by its sole member, Holdings, through a reorganization of Holdings. In the reorganization, Craft and twelve other individuals (who are members of the Partnership's management) exchanged all of their shares of Holdings' common stock for shares of ARH-II. The other Holdings shareholders, the Beacon Group Energy Investment Fund, L.P. (the "Beacon Fund"), MPC Partners, LP ("MPC" and together with the Beacon Fund, the "Beacon Investors") (collectively, the "Sellers"), exchanged their shares of Holdings' common stock for $103.3 million, consisting of $46.7 million in cash and $56.6 million in promissory notes from ARH-II (the "Exchange Notes"). The source of the cash was from cash on hand held by Holdings and the SGP. ARH-II expects to pay off the Exchange Notes from cash generated by Holdings' operations and from minimum quarterly distributions by the Partnership on the Common Units and the subordinated units held by the SGP. The payment obligations on the Exchange Notes are secured under a Security and Pledge Agreement (the "Security Agreement") by pledge to the Sellers (i) by ARH-II of all of the outstanding capital stock of Holdings, (ii) by Craft and the other twelve management individuals of all of the outstanding capital stock of ARH-II, (iii) by Craft and the same twelve management individuals of all of the outstanding equity interests in AMH-II, and (iv) by AMH-II of its 74.1% interest in the MGP. The Exchange Notes require two installment payments, the first in the aggregate amount of $30.9 million due on March 1, 2004, and the second in the aggregate amount of $25.7 million due on March 1, 2005, subject to certain acceleration provisions based upon cash availability to Holdings on March 1, 2003 and March 1, 2004. The Exchange Notes carry an annualized interest rate of 10% on the outstanding principal balance. ARH-II was able to fund the acquisition of the Sellers' shares in Holdings without utilizing any of the Partnership's assets or debt capacity. So long as the obligations on the Exchange Notes remain outstanding the Beacon Investors are permitted to designate three members to the Board of Directors of the MGP out of a total of seven directors. Their current directors are Preston R. (Jeff) Miller, John MacWilliams and John P. Neafsey. If a "Material Event" occurs (as defined in the Security Agreement) the Beacon Investors may designate up to five members of the MGP Board and thus assume control of the Partnership's business and affairs until the Exchange Notes are either fully paid, or the Material Event has ceased to exist. Under the Security Agreement, the Beacon Investors are entitled to foreclose on all of the interests in the MGP held by AMH-II if an "Event of Default" occurs as defined in the Security Agreement, and thus take control of the Partnership's business and affairs. An "Event of Default" includes (i) failure to pay the Exchange Notes when due, (ii) failure to pay other obligations that may arise to Sellers as part of the reorganization, (iii) failure of AMH-II, ARH-II, Holdings or the SGP generally to not pay their debts when due, to be subject to a bankruptcy proceeding that is not dismissed within sixty days, or to make a general assignment for the benefit of creditors, (iv) a default occurs under the Partnership's senior credit agreement or senior notes and the amounts borrowed thereunder are accelerated and declared due and owing or, or (v) a change in control of ARH-II, Holdings or the SGP occurs, or if there is any transfer or sale of equity securities of ARH-II, Holdings or the SGP following which Craft no longer is serving as Chairman of the Board, President and CEO of ARH-II, Holdings or the SGP. If the Beacon Investors determine to foreclose on the interests in the MGP, they are required Page 10 of 16 under the terms of the Agreement to foreclose on and take title to all of the equity of AMH-II, ARH-II and Holdings. In a related transaction, Craft and AMH-II acquired beneficial ownership of 142,844 Common Units of the Partnership by the acquisition of the interests held by the Beacon Investors in the MGP for $4.8 million in cash. The sources of the cash were a $0.5 million capital contribution from Craft and the same twelve management members to AMH-II, a distribution of cash on hand at the MGP of $1.4 million to AMH-II, and an unsecured loan of $2.9 million to AMH-II from Holdings. Craft and the twelve management members borrowed their capital contributions to AMH-II from Holdings by a non-recourse loan secured by the pledge of their interests in AMH. Each loan carries a 5% annualized rate of interest and is payable on or before May 7, 2007. Craft and AMH retained beneficial ownership of 21,156 Common Units of the Partnership. Prior to these transactions, the MGP had acquired 164,000 Common Units of the Partnership pursuant to a previously announced Common Unit repurchase program that was funded through a secured loan from Holdings to the MGP. Contemporaneously with these transactions, the MGP distributed 142,844 and 21,156 Common Units of the Partnership to AMH-II and AMH, respectively, and those entities assumed the obligations under the Holdings' loan. The Holdings' loan is payable on demand, carries a 7% annual rate of interest and continues to be secured by a pledge by AMH-II and AMH of the Common Units of the Partnership held by them. Prior to May 8, 2002, Craft acquired (i) 60,000 Common Units of the Partnership through open market purchases using personal funds and (ii) an additional 13,500 Common Units of the Partnership through a private foundation for which he serves as a trustee. Craft expressly disclaims beneficial ownership of the 13,500 Common Units of the Partnership held by the private foundation. ITEM 4. PURPOSE OF TRANSACTION. The Reporting Persons acquired their beneficial ownership of the Common Units of the Partnership to provide liquidity to the Beacon Investors for their investment in Holdings and the MGP, and to permit management to remain in place for continuity purposes. None of the Reporting Persons have any plans or proposals which relate or would result in: (a) The acquisition by any person of additional securities of the Partnership, or the disposition of securities of the Partnership; (b) An extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving the securities of the Partnership; (c) A sale or transfer of a material amount of assets of the Partnership or of any of its subsidiaries; (d) Any change in the present board of directors or management of the Partnership, including any plans or proposals to change the number or term of directors or to fill any existing vacancies on the board; (e) Any material change in the present capitalization or dividend policy of the Partnership; (f) Any other material change in the Partnership's business or corporate structure; Page 11 of 16 (g) Changes in the Partnership's Charter, bylaws or instruments corresponding thereto or other actions which may impede the acquisition of control of the Partnership by any person; (h) Causing a class of securities of the Partnership to be delisted from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association; (i) A class of equity securities of the Partnership becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Act; or (j) Any action similar to those enumerated above. Craft may determine to acquire additional Common Units of the Partnership in open market purchases in the future. The MGP, AMH and/or AMH-II may determine to acquire Common Units of the Partnership in the future pursuant to the previously announced Common Unit repurchase program referenced in Item 3 above. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER. (a) There were 8,982,780 Common Units outstanding as of May 8, 2002. Craft is deemed to be the beneficial owner of 1,470,280 Common Units, which constitute approximately 16.4% of the total issued and outstanding Common Units issued and outstanding as of May 8, 2002. As indicated in Item 3, Craft expressly disclaims beneficial ownership of 13,500 Common Units of the Partnership held by a private foundation for which he serves as trustee. Holdings is deemed to be the beneficial owner of 1,232,780 Common Units, which constitute approximately 13.7% of the total issued and outstanding Common Units issued and outstanding as of May 8, 2002. ARH-II is deemed to be the beneficial owner of 1,232,780 Common Units, which constitute approximately 13.7% of the total issued and outstanding Common Units issued and outstanding as of May 8, 2002. The SGP is deemed to be the beneficial owner of 1,232,780 Common Units, which constitute approximately 13.7% of the total issued and outstanding Common Units issued and outstanding as of May 8, 2002. AMH is deemed to be the beneficial owner of 21,156 Common Units, which constitute approximately 0.2% of the total issued and outstanding Common Units issued and outstanding as of May 8, 2002. AMH-II is deemed to be the beneficial owner of 142,844 Common Units, which constitute approximately 1.6% of the total issued and outstanding Common Units issued and outstanding as of May 8, 2002. The SGP also holds 6,422,531 subordinated limited partnership interests in the Partnership, which may be converted into an equal number of Common Units upon satisfaction of the conditions as described in the Registration Statement on Form S-1 (333-78845), incorporated herein by reference. (b) The number of Common Units as to which there is sole power to vote or to direct the vote, sole power to dispose or direct the disposition, or shared power to dispose or direct the disposition for the Reporting Persons is set forth on the cover pages of this Statement on Schedule 13D, and such information is incorporated herein by reference. (c) The Reporting Persons have not acquired any Common Units of the Partnership during the past sixty days, other than the purchases reported herein. (d) The Reporting Persons have the right to receive distributions from, and the proceeds of sale of, the Common Units reported by such persons on the cover pages of this Statement on Schedule 13D. (e) Not applicable. Page 12 of 16 ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS, OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. Certain transfer restrictions and voting rights in respect of the Common Units beneficially owned by the Reporting Persons are set forth in the First Amended and Restated Agreement of Limited Partnership, a copy of the form of which is included as Appendix A to the Registration Statement on Form S-1 which has been incorporated by reference to this Schedule 13D. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS. Exhibit A: Registration Statement on Form S-1 filed May 20, 1999 for Alliance Resource Partners, L.P. (333-78845) incorporated herein by reference Exhibit B: Security and Pledge Agreement dated as of May 8, 2002 by and among AMH-II, the MGP, ARH-II, Holdings, the Management Investors as identified therein, The Beacon Group Energy Investment Fund, L.P., MPC Partners, LP and three individuals as "Sellers" identified therein, and JPMorgan Chase Bank as collateral agent, incorporated herein by reference to exhibit 99.2 of Alliance Resource Partners, L.P.'s Current Report on Form 8-K dated May 9, 2002. Exhibit C: Form of Promissory Note made by Holdings dated as of May 8, 2002 incorporated herein by reference to exhibit 99.3 of Alliance Resource Partners, L.P.'s Current Report on Form 8-K dated May 9, 2002. Exhibit D: Joint Filing Agreement, dated May 20, 2002. Exhibit E: Promissory Note made by AMH and Security and Pledge Agreement dated May 8, 2002 by and between AMH and Holdings. Exhibit F: Promissory Note made by AMH-II and Security and Pledge Agreement dated May 8, 2002 by and between AMH-II and Holdings. Page 13 of 16 SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, the undersigned certify that the information set forth in this statement is true, complete and correct. Dated: May 20, 2002 By: /s/ Joseph W. Craft III ----------------------------------------- Name: Joseph W. Craft III ALLIANCE RESOURCE HOLDINGS, INC. By: /s/ Thomas L. Pearson ----------------------------------------- Name: Thomas L. Pearson Title: Senior Vice President - Law and Administration, General Counsel and Secretary ALLIANCE RESOURCE HOLDINGS II, INC. By: /s/ Thomas L. Pearson ----------------------------------------- Name: Thomas L. Pearson Title: Secretary ALLIANCE RESOURCE GP, LLC By: /s/ Thomas L. Pearson ----------------------------------------- Name: Thomas L. Pearson Title: Senior Vice President - Law and Administration, General Counsel and Secretary ALLIANCE MANAGEMENT HOLDINGS, LLC By: /s/ Thomas L. Pearson ----------------------------------------- Name: Thomas L. Pearson Title: Secretary Page 14 of 16 AMH II, LLC By: /s/ Thomas L. Pearson ----------------------------------------- Name: Thomas L. Pearson Title: Secretary Page 15 of 16 SCHEDULE I
CITIZENSHIP OR STATE OF INCORPORATION AS NAME APPLICABLE BUSINESS ADDRESS ---- ----------------------- ---------------- Joseph W. Craft III U.S.A. 1717 South Boulder Avenue Tulsa, Oklahoma 74119 Alliance Resource Holdings, Inc. Delaware 1717 South Boulder Avenue Tulsa, Oklahoma 74119 Alliance Resource Holdings II, Inc. Delaware 1717 South Boulder Avenue Tulsa, Oklahoma 74119 Alliance Resource GP, LLC Delaware 1717 South Boulder Avenue Tulsa, Oklahoma 74119 Alliance Management Holdings, LLC Delaware 1717 South Boulder Avenue Tulsa, Oklahoma 74119 AMH II, LLC Delaware 1717 South Boulder Avenue Tulsa, Oklahoma 74119
Page 16 of 16 APPENDIX A EXECUTIVE OFFICERS AND DIRECTORS OF ALLIANCE RESOURCE HOLDINGS, INC. Joseph W. Craft III President, Chief Executive Officer and Director Thomas L. Pearson Senior Vice President - Law and Administration, General Counsel and Secretary Charles R. Wesley Senior Vice President - Operations Gary J. Rathburn Senior Vice President - Marketing EXECUTIVE OFFICERS AND DIRECTORS OF ALLIANCE RESOURCE HOLDINGS II, INC. Joseph W. Craft III President and Director Thomas L. Pearson Secretary Cary P. Marshall Treasurer EXECUTIVE OFFICERS AND DIRECTORS OF ALLIANCE RESOURCE GP, LLC Joseph W. Craft III President, Chief Executive Officer and Director Thomas L. Pearson Senior Vice President - Law and Administration, General Counsel and Secretary Charles R. Wesley Senior Vice President - Operations Gary J. Rathburn Senior Vice President - Marketing EXECUTIVE OFFICERS AND DIRECTORS OF ALLIANCE MANAGEMENT HOLDINGS, LLC Joseph W. Craft III President and Director Thomas L. Pearson Secretary Cary P. Marshall Treasurer EXECUTIVE OFFICERS AND DIRECTORS OF AMH II, LLC Joseph W. Craft III President and Director Thomas L. Pearson Secretary Cary P. Marshall Treasurer Each of the foregoing persons is a United States citizen. The principal business address for each person is 1717 South Boulder Avenue, Tulsa, Oklahoma 74119. EXHIBIT INDEX Exhibit A: Registration Statement on Form S-1 for Alliance Resource Partners, L.P. (333-78845) incorporated herein by reference Exhibit B: Security and Pledge Agreement dated as of May 8, 2002 by and among AMH-II, the MGP, ARH-II, Holdings, the Management Investors as identified therein, The Beacon Group Energy Investment Fund, L.P., MPC Partners, LP and three individuals as "Sellers" identified therein, and JPMorgan Chase Bank as collateral agent, incorporated herein by reference to exhibit 99.2 of Alliance Resource Partners, L.P.'s Current Report on Form 8-K dated May 9, 2002. Exhibit C: Form of Promissory Note made by Holdings dated as of May 8, 2002 incorporated herein by reference to exhibit 99.3 of Alliance Resource Partners, L.P.'s Current Report on Form 8-K dated May 9, 2002. Exhibit D: Joint Filing Agreement, dated May 20, 2002. Exhibit E: Promissory Note made by AMH and Security and Pledge Agreement dated May 8, 2002 by and between AMH and Holdings. Exhibit F: Promissory Note made by AMH-II and Security and Pledge Agreement dated May 8, 2002 by and between AMH-II and Holdings. EX-99.D 3 h97179exv99wd.txt JOINT FILING AGREEMENT DATED 5/20/2002 EXHIBIT D JOINT FILING AGREEMENT In accordance with Rule 13d-1(f) promulgated under the Securities Exchange Act of 1934, as amended, the undersigned hereby agree to the joint filing with all other Reporting Persons (as such term is defined in the Schedule 13D referred to below) on behalf of each of them of a statement on Schedule 13D (including amendments thereto) with respect to the Common Units of beneficial interest of Alliance Resource Partners, L.P., a Delaware limited partnership, and that this Agreement may be included as an Exhibit to such joint filing. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument. IN WITNESS WHEREOF, the undersigned hereby execute this Agreement as of the 20th day of May, 2002. By: /s/ Joseph W. Craft III ------------------------------------------------ Name: Joseph W. Craft III ALLIANCE RESOURCE HOLDINGS, INC. By: /s/ Thomas L. Pearson ------------------------------------------------ Name: Thomas L. Pearson Title: Senior Vice President - Law and Administration, General Counsel and Secretary ALLIANCE RESOURCE HOLDINGS II, INC. By: /s/ Thomas L. Pearson ------------------------------------------------ Name: Thomas L. Pearson Title: Secretary ALLIANCE RESOURCE GP, LLC By: /s/ Thomas L. Pearson ------------------------------------------------ Name: Thomas L. Pearson Title: Senior Vice President - Law and Administration, General Counsel and Secretary ALLIANCE MANAGEMENT HOLDINGS, LLC By: /s/ Thomas L. Pearson ------------------------------------------------ Name: Thomas L. Pearson Title: Secretary AMH II, LLC By: /s/ Thomas L. Pearson ------------------------------------------------ Name: Thomas L. Pearson Title: Secretary EX-99.E 4 h97179exv99we.txt PROMISSORY NOTE MADE BY AMH. EXHIBIT E ALLIANCE MANAGEMENT HOLDINGS, LLC PROMISSORY NOTE No. 1 Alliance Management Holdings, LLC, a Delaware limited liability company (the "Company"), for value received, promises to pay to the order of Alliance Resource Holdings, Inc., a Delaware corporation (hereinafter referred to as "Lender"), TWO HUNDRED SEVENTY-SIX THOUSAND SEVEN HUNDRED NINETEEN AND 3/100 DOLLARS ($276,719.03) and to pay interest on the principal outstanding quarterly in arrears on February 15, May 15, August 15, and November 15, of each year, commencing May 15, 2002, which such interest to accrue from February 15, 2002 until maturity hereof at an interest rate of seven (7.0%) per annum. Reference is hereby made to the further provisions of this Note to be duly executed and delivered by their respective duly authorized officers. Dated: May 8, 2002 ALLIANCE RESOURCE HOLDINGS, INC. By: /s/ Thomas L. Pearson ------------------------------------- Thomas L. Pearson Senior Vice President-Law and Administration and General Counsel ALLIANCE MANAGEMENT HOLDINGS, LLC By: /s/ Thomas L. Pearson ------------------------------------- Thomas L. Pearson Secretary EXHIBIT E THIS NOTE WAS ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNTIED STATES SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN APPLICABLE EXEMPTION THEREFROM. PROMISSORY NOTE This Note is duly authorized by Alliance Management Holdings, LLC, a Delaware limited liability company (the "Company"). 1. Loan. The principal amount outstanding of this Note is $276,719.03. This Note shall not be deemed terminated or cancelled prior to the receipt of ninety (90) days notice from lender (the "Maturity Date"), although the entire principal balance hereof may from time to time be paid in full. Unless otherwise agreed to in writing, or otherwise required by applicable law, payments will be applied first to unpaid accrued interest, then to principal, and any remaining amount to any unpaid collection costs and other charges. The outstanding principal balance of this Note, together will all accrued but unpaid interest, shall be due and payable on the Maturity Date. 2. Use of Funds. All borrowings hereunder have been used exclusively for the purchase of common units representing limited partner Interest ("Common Units") in Alliance Resource Partners, L.P., a Delaware limited partnership, which are currently publicly-traded on the Nasdaq National Market. 3. Interest. The Company promises to pay interest on the principal amount of this Note at a rate equal to the seven percent (7.0%) per annum from February 15, 2002 until maturity. The Company will pay interest quarterly on February 15, May 15, August 15, and November 15 of each year (each an "Interest Payment Date"), or if any such day is not a Business Day (as hereinafter defined), on the next succeeding Business Day. Any installment of interest which is overdue shall bear interest at the rate of nine percent (9%) per annum. The first Interest Payment Date shall be May 15, 2002. Interest will be computed on the basis of a 360-day year of twelve 30-day months. As used herein, the term "Business Day" shall mean any day other than a Saturday, Sunday or any other day on which national banking associations are authorized to be closed. The books and records of Lender shall be prima facie evidence of all outstanding principal of and accrued and unpaid interest on this Note. 4. Method of Payment. The Company will pay interest on this Note to Alliance Resource Holdings, Inc., a Delaware corporation (hereinafter referred to as hereinafter referred to, along with any subsequent holder of this Note, as the "Lender"). The Company will pay the principal and interest on this Note in money of the United States of America that at the time of payment is legal tender for payment of public and private debts. At the Lender's direction, the Company will make payments in respect of this Note by (i) mailing a Company check to the address provided to the Company by the Lender in writing (ii) making a wire transfer of funds to an account designated by the Lender in writing, or (iii) any other method of payment mutually accepted to Lender and Company. 5. Security. All indebtedness, obligations and liabilities of any kind of the Company from time to time owing under this Note, including without limitation, principal and interest thereon, are secured pursuant to the terms and provisions of that certain Security Agreement, dated the date hereof, between the Company and the Lender. 6. Subordination. All indebtedness, obligations and liabilities of any kind of the Company from time to time owing under this Note, including without limitation, principal and interest thereon, are subordinate and junior in right of payment and collection in full of all amounts owing (including without 1 limitation, interest accruing after the filing of a petition initiating any proceeding pursuant to any bankruptcy law with respect to the Company as debtor) under any other indebtedness of the Company now or hereafter outstanding in favor of Lender, unless, in the case of any particular indebtedness, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such indebtedness shall not be senior in right of payment hereunder. 7. Assignment by Lender. The Lender may not sell, assign, transfer or otherwise dispose of its rights under this Note without the prior written consent of the Company. 8. Amendments and Waivers. The terms of this Note may be amended or supplemented with the prior written consent of the Company and the Lender and any existing default hereunder, or compliance with any provision hereof, may be waived by the Lender. 9. Defaults and Remedies. The Company agrees that upon the occurrence of any one or more of the following events of default: (a) default in payment of interest or principal on this Note for a period of 30 days or (b) the bankruptcy or insolvency of, the assignment for the benefit of creditors by, or the appointment of a receiver for any property of the Company, the Lender may, at its option, without further notice or demand, (i) declare the outstanding principal balance of and accrued but unpaid interest on this Note at once due and payable, (ii) refuse to advance any additional amounts under this Note, (iii) pursue any and all other rights, remedies and recourse available, at law or in equity, or (iv) pursue any combination of the foregoing. The amount due and payable upon the acceleration of this Note is equal to 100% of the principal amount thereof plus accrued and unpaid interest to the day of payment. The Lender may not enforce this Note except as provided herein. The failure by the Lender to exercise the option to accelerate the maturity of this Note or any other right, remedy or recourse available to the Lender upon the occurrence of an event of default hereunder shall not constitute a waiver of the right of the Lender to exercise the same at that time or at any subsequent time with respect to such event of default or any other event of default. The acceptance by the Lender of any payment under this Note which is less than the payment in full of all amounts due and payable at the time of such payment shall not constitute a waiver of or impair, reduce, release or extinguish any right, remedy or recourse of the Lender, or nullify any prior reduce, release or extinguish any right, remedy or recourse of the Lender, or nullify any prior exercise of any such right, remedy or recourse, or impair, reduce, release or extinguish the obligations of the Company hereunder. If this Note is placed in the hands of an attorney for collection, or is collected in whole or in part by suit or through probate, bankruptcy or other legal proceedings of any kind, the Company will be obligated to pay, in addition to all other sums payable hereunder, all costs and expenses of collection, including but not limited to reasonable attorneys' fees. 10. Recourse Against Others. A director, officer, employee or member, as such, of the Company or any of its subsidiaries or affiliates shall not have any liability for any obligations of the Company under this Notice or for any claim based on, in respect of or by reason of such obligations or their creation. The Lender by accepting this Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of this Note. 11. Waiver or Notice. The Company and all other parties hereafter assuming or otherwise becoming liable for the payment of any sum of money payable under this Note, jointly and severally, waive notice of acceleration and notice of intent to accelerate, grace, presentment and demand for payment, protect, notice of protest and/or dishonor, notice of nonpayment, and all other notice, filing of suit and diligence in collecting this Note or enforcing any of the security herefor. 2 12. Governing Law. This note has been executed under, and shall be construed and enforced in accordance with, the laws of the State of Delaware, except as such laws are pre-empted by applicable federal laws. 3 EXHIBIT E ALLIANCE MANAGEMENT HOLDINGS, LLC SECURITY AGREEMENT THIS SECURITY AGREEMENT (this "Agreement") dated May 8, 2002 is made by Alliance Management Holdings, LLC, a Delaware limited liability company (the "Debtor") with an address at 1717 South Boulder Avenue, Tulsa, Oklahoma 74119, to Alliance Resource Holdings, Inc., a Delaware corporation (the "Secured Party") with an address at 1717 South Boulder Avenue, Tulsa, Oklahoma 74119. PRELIMINARY STATEMENTS 1. Alliance Resource Management GP, LLC ("MGP"), was authorized by its Board of Directors to repurchase from time to time (the "Repurchase Program") up to one million (1,000,000) common units ("Common Units") representing limited partner interests in Alliance Resource Partners, L.P. a Delaware limited partnership and an affiliate of the MGP and the Secured Party (the "Partnership"). 2. The MGP and the Secured Party entered into that certain Revolving Credit Promissory Note dated November 30, 1999 (the "1999 Note") and that certain Security Agreement dated November 30, 1999 (the "1999 Security Agreement"), pursuant to which the Secured Party made advances to the MGP from time to time, upon the MGP's request, to fund the purchase of Common Units under the Repurchase Program. 3. In accordance with the 1999 Note and the 1999 Security Agreement, the MGP purchased 164,000 Common Units of the Partnership (the "Repurchased Units"), which were pledged to the Secured Party as security for the 1999 Note. 4. The MGP has determined to distribute the Repurchased Units in a special allocation to the Debtor and Alliance Management Holdings II, LLC ("AMH-II"), whereby 21,156 of the Repurchased Units will be distributed to the Debtor and 142,844 of the Repurchased Units will be distributed to AMH-II. 5. The loan to the MGP by the Secured Party, which has an outstanding balance of $2,145,108.75 as of the date hereof, will be assumed by the Debtor and AMH-II in proportion to their pro rata share of the Repurchased Units immediately upon receipt of the Repurchased Units. 6. In connection with the distribution of the Repurchased Units and the assumption of the loan, the Secured Party and the Debtor have executed a Promissory Note for $276,719.03 dated as of the date hereof, the Secured Party has returned the 1999 Note to the MGP marked "cancelled," and the MGP and the Secured Party have cancelled the 1999 Security Agreement. 7. The Debtor and the Secured Party intend that the Secured Party should have a security interest in all of the Repurchased Units distributed to the Debtor by the MGP. NOW THEREFORE, in consideration of the premises and in order to induce the Secured Party to make advances under the Note, the Debtor hereby agrees as follows: Section 1 Defined Terms and Related Matters. 4 (a) Each capitalized term used herein and not otherwise defined shall have the meaning for such term as defined in the Note. (b) The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. Section 2 Grant of Security. The Debtor hereby grants to the Secured Party a security interest in all of the Debtor's right, title and interest in and to the following (the "Collateral"): (i) all of the Repurchased Units distributed from the MGP to the Debtor, and the certificates representing such Repurchased Units (if the Repurchased Units are in certificated form), and all distributions, dividends, interest and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such Repurchased Units; provided, however, any quarterly cash distributions on the Repurchased Units received by the Debtor pursuant to Section 7(a)(ii) hereunder shall not be included in the Collateral; and (ii) all proceeds of any of the foregoing. The inclusion of proceeds in this Agreement does not authorize the Debtor to sell, dispose of or otherwise use the Collateral in any manner not specifically authorized hereunder. Section 3 Security for Secured Obligations. This Agreement secures the prompt and complete (a) payment of all obligations of the Debtor to the Secured Party under the Note, now or hereafter existing, and (b) performance and observance by the Debtor of all covenants and conditions contained in the Note or this Agreement, whether for principal, interest, fees, expenses or otherwise (all such obligations, covenants and conditions described in the foregoing clauses(a) and (b) being hereinafter referred to as the "Secured Obligation"). Section 4 Delivery of Collateral. In the event any of the Repurchased Units constituting the Collateral are in certificated form, such certificates or other instruments representing or evidencing the Collateral shall be delivered to and held by the Secured Party and shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance satisfactory to the Secured Party. The Secured Party shall have the right, at any time in its sole discretion and without notice to the Debtor, to transfer to or to register in the name of the Debtor or any of its nominees any or all of the Collateral, subject only to the revocable rights specified in Section 7(a) hereof. In addition, the Secured Party shall have the right at any time to exchange certificates or instruments representing or evidencing Collateral for certificates or instruments of smaller or larger denominations. Section 5 Representations and Warranties: Covenant. The Debtor represents and warrants as follows: (a) The Debtor is a limited liability company duly organized, validly existing and in good standing under the laws of Delaware. The principal place of business and chief executive office of the Debtor and the office where the Debtor keeps its records, are located at the address 5 specified in the introductory paragraph to this Agreement or at such other locations disclosed in writing to the Secured Party after the date hereof; (b) The Debtor has all requisite power and authority, corporate or otherwise, to execute and deliver this Agreement and perform all of its obligations hereunder. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary action of Debtor's Board of Directors and members. This Agreement has been duly executed and delivered by Debtor, is in full force and effect and constitutes the legal, valid and binding obligation of such entity, enforceable against it in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditor's rights generally and general principles of equity. Upon the filing of financing statements in the locations requested by the Secured Party, this Agreement creates valid liens and security interests in the Collateral, securing the Secured Obligations. (c) The execution, delivery and performance by Debtor of this Agreement and the consummation of each of the transactions contemplated hereby do not and shall not, by the lapse of time, the giving of notice or otherwise: (i) constitute a violation of any of the terms and provision of any statute, rule, regulation or order of any governmental agency or body or any court, domestic or foreign, having jurisdiction over the Debtor or a breach of any provision contained in the operating agreement of the Debtor, or contained in any material agreement, instrument or documents to which the Debtor is a party, except for such violations or breaches that will not have a material adverse effect on it; or (ii) result in or require the creation or imposition of any lien, security interest, option or other charge or encumbrance upon any of the properties or assets of the Debtor (collectively, "Liens"), other than those Liens permitted or created by this Agreement. (d) No authorization, approval, or other action by, and no notice to or filing with, any governmental authority, or regulatory body is required either (i) for the pledge by the Debtor of the Collateral pursuant to this Agreement or for the execution, delivery or performance of this Agreement by the Debtor or (ii) for the exercise by the Secured Party of the voting or other rights provided for in this Agreement or the remedies in respect of the Collateral pursuant to this Agreement (except as may be required in connection with such disposition by laws affecting the offering and sale of securities generally); and (e) The Debtor covenants and agrees that no Liens will exist to any and all Collateral, other than the security interest in the Collateral created by this Agreement. Section 6 Further Assurances. The Debtor agrees that from time to time, at its own expense, it will promptly execute and deliver all further instruments and documents, and take all further section that may be necessary or desirable, or that the Secured Party may request, in order to perfect and protect any security interest granted or purported to be granted hereby or not enable the Security Party to exercise and enforce its rights and remedies hereunder with respect to the Collateral, including without limitation, (i) executing and filing of such financing or continuation statements, or amendments thereto, and such other instruments or notices as the Secured Party may reasonably request as being necessary or desirable in order to perfect and preserve the security interests granted or purported to be granted hereby and (ii) furnishing to the Secured Party from time to time such statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Secured Party may reasonably request, all in reasonable detail. 6 Section 7 Voting Rights and Distributions. (a) So long as no Event of Default (as defined herein) or event which, with the giving of notice or the lapse of time, or both, would become an Event of Default shall have occurred and be continuing: (i) The Borrower shall be entitled to exercise any and all voting and other consensual rights pertaining to the Collateral or any part thereof for any purpose not inconsistent with the terms of this Agreement or the Note; (ii) The Borrower shall be entitled to receive and retain any and all distributions, dividends and interest paid in respect of the Collateral; provided, however, that any and all (A) distributions or dividends paid or payable other than in cash in respect of, and instruments and other property received, receivable or otherwise distributed in respect of, or in exchange for, any Collateral, (B) distributions or dividends paid or payable in cash in respect of any Collateral in connection with a partial or total liquidation or dissolution of the Debtor, and (C) cash paid, payable or otherwise distributed in redemption of, or in exchange for, any Collateral, shall be, and shall be forthwith delivered to the Secured Party to hold as Collateral and shall, if received by the Debtor, be received in trust for the benefit of the Secured Party, and be forthwith delivered to the Secured Party as Collateral in the same form as so received (with any necessary endorsement); and (iii) The Secured Party shall execute and deliver (or cause to be executed and delivered) to the Debtor all such proxies and other instruments as the Debtor may reasonably request for the purpose of enabling the Debtor to exercise the voting and other rights which it is entitled to exercise pursuant to paragraph (i) above and to receive the distributions which it is authorized to receive and retain pursuant to paragraph (ii) above. (b) Upon the occurrence and during the continuance of an Event of Default: (i) All rights of the Debtor to exercise the voting and other consensual rights which it would otherwise be entitled to exercise pursuant to Section 7(a)(i) shall cease, and the Secured Party shall thereupon have the sole right to exercise such voting and other consensual rights; (ii) All rights of the Debtor to receive the distributions, dividends and interests which it would otherwise be entitled to receive and retain pursuant to Section 7(a)(ii) shall cease, and the Secured Party shall thereupon have the sole right to receive and hold as Collateral such distributions, dividends and interest; and (iii) All distributions, dividends and interest which are received by the Debtor contrary to the provisions of paragraph (ii) of this Section 7(b) shall be received in trust for the benefit of the Secured Party and shall be forthwith paid over to the Secured Party as Collateral in the same form as so received (with any necessary endorsement). Section 8 Sale of Repurchased Units by Debtor. (a) Notwithstanding Section 7(a)(ii)(C) or any other provision of this Agreement, the Debtor may sell Repurchased Units from the Collateral on the open market or directly to investors at prevailing market prices; provided, however, the proceeds of such sale shall immediately be 7 applied against the Secured Obligations. Any surplus of such cash or cash proceeds remaining after payment in full of all the Secured Obligations may be retained by the Debtor or to whomsoever may be lawfully entitled to receive such surplus. In the event of any such sales by the Debtor, the Secured Party will provide the Debtor with such certificates or other instruments representing or evidencing the Repurchased Units to be sold, in suitable form for transfer, as may be necessary to consummate such sales. (b) Other than pursuant to Section 8(a), the Debtor shall not: (i) sell, assign (by agreement, operation of law or otherwise) or otherwise dispose of, or grant any option with respect to, any of the Collateral, or (ii) create or permit to exist any Lien upon or with respect to any of the Collateral, except for the security interest created by this Agreement. Section 9 Continuation of this Agreement. (a) The Debtor agrees this Security Agreement will not terminate prior to the satisfaction of the conditions set forth in paragraph (b) of this Section 9, although from time to time, because of sales pursuant to Section 8(a) and the application of the proceeds therefrom or otherwise, the Debtor may make payment in full of all of the Secured Obligations. (b) The Debtor agrees that this Security Agreement and the security interest granted hereunder shall terminate automatically upon the maturity of the Note when, but only when, all Secured Obligations have been fully paid and performed. At any time thereafter upon the Debtor's request the Secured Party shall promptly reassign and redeliver, including the termination of any financing statements (or cause to be reassigned and redelivered) to the Debtor, or to such other persons as the Debtor shall designate in writing, against receipt, such of the Collateral (if any) as shall not have been sold or otherwise applied by the Secured Party pursuant to the terms hereof and shall still be held by it hereunder. Section 10 Secured Party Appointed Attorney-in-Fact. The Debtor hereby irrevocably appoints the Secured Party as the Debtor's attorney-in-fact, with full authority in the place and stead of the Debtor and in the name of Debtor, the Secured Party, from time to time in the Secured Party's sole discretion, to take any action and to execute any instrument which the Secured Party may deem necessary or advisable to accomplish the purposes of this Agreement, including, without limitation, to receive, endorse and collect all certificates or instruments made payable to the Debtor representing any distribution or other payment in respect of the Collateral or any part thereof and to give full discharge for the same. Section 11 Secured Party May Perform. If the Debtor fails to perform any agreement contained herein, the Secured Party may itself perform, or cause performance of, such agreement, and the expenses of the Secured Party incurred in connection therewith shall be payable by the Debtor under Section 14 of this Agreement. Section 12 The Secured Party's Duties. The powers conferred on the Secured Party hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers. Except for reasonable care in the custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, the Secured Party shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral. The Secured Party shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which the Secured Party accords its own property, it being 8 understood that the Secured Party shall not have any responsibility for (i) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any Collateral, whether or not the Secured Party has or is deemed to have knowledge of such matters, or (ii) taking any necessary steps to preserve rights against any parties with respect to any Collateral. Section 13 Remedies upon Default. If any Event of Default (as defined in the Note) shall have occurred and be continuing: (a) The Secured Party may exercise in respect of the Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party on default under the Uniform Commercial Code in effect in the State of Delaware at that time (the "Code") (whether or not the Code applies to the affected Collateral), and the Secured Party may also, without notice except as specified below, sell the Collateral), and the Secured Party may also, without notice except as specified below, sell the Collateral or any part thereof in one or more lots, for cash, on credit or for future delivery, and upon such other terms as the Secured Party may deem commercially reasonable. The Debtor agrees that, to the extent notice of any such sale shall be required by law, at least ten (10) days' notice to the Debtor shall constitute reasonable notification. The Secured Party shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Secured Party may adjourn any sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned: (b) Any cash held by the Secured Party as Pledged Collateral and all cash proceeds received by the Secured Party in respect of any sale of, collection from, or other realization upon all or any part of the Collateral may, in the sole discretion of the Secured Party, be held by the Secured Party as collateral for, and/or then or at any time thereafter applied (after payment of any amounts payable to the Secured Party pursuant to Section 14 hereof) in whole or in part by the Secured Party against, all or any part o the Secured Obligations in such order as the Secured Party shall elect. Any surplus of such cash or cash proceeds held by the Secured Party and remaining after payment in full of all the Secured Obligations shall be paid over to the Debtor or to whomsoever may be lawfully entitled to receive such surplus; (c) In connection with the sale of any Collateral, the Secured Party is authorized, but not obligated, to limit prospective purchasers to the extent deemed necessary or desirable by the Secured Party to render such sale exempt from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), and any applicable state securities laws and regulations, and no sale so make in good faith by the Secured Party shall be deemed not to be "commercially reasonable" because so made; and (d) all rights and remedies of the Secured Party expressed herein are in addition to all other rights and remedies possessed by the Secured Party under the Note and any other agreement or instrument relating to the Secured Obligations. Section 14 Indemnity and Expenses. (a) The Debtor hereby indemnifies the Secured Party from and against any and all claims, losses and liabilities growing out of or resulting from this Agreement (including, without limitation, enforcement of this Agreement), except claims, losses or liabilities resulting from the Secured Party's gross negligence or willful misconduct. It is the express intention of the Debtor that the Secured Party shall be indemnified and held harmless against any and all losses, liabilities, claims, efficiencies, 9 judgments or expenses arising out of or resulting from the ordinary negligence (whether sole or contributory) of the Secured Party. (b) The Debtor will upon demand pay to the Secured Party the amount of any and all expenses, including the fees and expenses of its counsel and of any experts and agents, that the Secured Party may incur in connection with (i) the administration of this Agreement, (ii) the evaluation, appraisal, custody or preservation of, or the sale of, collection from, or other realization upon, any of the Collateral, (iii) the exercise or enforcement of any of the rights of the Secured Party hereunder or (iv) the failure by the Debtor to perform or observe any of the provisions hereof. The Debtor agrees to pay interest on any sums payable to the Secured Party hereunder that are not paid when due at a rate per annum equal to nine percent (9%). Section 15 Amendments. No amendment or waiver of any provisions of this Agreement, nor consent to any departure by the Debtor herefrom, shall in any event be effective unless the same shall be in writing and signed by the Secured Party, and then such waiver or consent shall be effective only in the specific instance and for the specific instance and for the specific purpose for which given. Section 16 Addresses for Notices. All notices and other communications provided for hereunder shall be in writing (including telegraphic communication) and, if to the Debtor, mailed or telegraphed or delivered to it at the address of the Debtor specified in the introductory paragraph of this Agreement, if to the Secured Party, mailed or delivered to it at the address of the Secured Party specified in the introductory paragraph of this Agreement, or as to either party at such other address as shall be designated by such party in a written notice to each other party. All such notices and other communications shall, when mailed or telegraphed, respectively, be effective when deposited in the mails or delivered to the telegraph company, respectively, addressed as aforesaid. Section 17 Waiver of Marshalling. All rights of marshalling of assets of the Debtor, including any such right with respect to the Collateral, are hereby waived by the Debtor. Section 18 Limitation by Law. All rights, remedies and powers provided in this Agreement may be exercised only to the extent that the exercise thereof does not violate any applicable provision of law, and all the provisions of this Agreement are intended to be subject to all applicable mandatory provisions of law which may be controlling and to be limited to the extent necessary so that they will not render this Agreement invalid, unenforceable, in whole or in part, or not entitled to be recorded, registered or filed under the provisions of any applicable laws. Section 19 Severability. Should any clause, sentence, paragraph, subsection or Section of this Agreement be judicially declared to be invalid, unenforceable or void, such decision will not have the effect of invalidating or voiding the remainder of this Agreement, and the parties hereto agree that parts of this Agreement so held to invalid, unenforceable or void will be deemed to have been stricken herefrom by the parties hereto, and the remainder of this Agreement will have the same force and effectiveness as if such stricken part or parts had never been included herein. Section 20 Captions. The captions in this Agreement have been inserted for convenience only and shall be given no substantive meaning or significance whatever in construing the terms and provisions of this Agreement. Section 21 No Waiver Remedies. No failure on the part of the Secured Party to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. 10 Section 22 Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement. Section 23 Continuing Security Interest; Substitution of Agent. This Agreement shall create a continuing security interest in the Collateral and shall (i) remain in full force and effect until payment in full of the Secured Obligations, (ii) be binding upon the Debtor, its successors and assigns, and (iii) inure to the benefit of the Secured Party and its successor, transferees and assigns. Without limiting the generality of the foregoing clause (iii), upon written notice to the Debtor, the Secured Party may substitute another entity to take its place as the Secured Party, and such other entity shall thereupon become vested with all the benefits in respect thereof granted to the Secured Party herein or otherwise. Upon the payment in full of the Secured Obligations, the Debtor shall be entitled to the return, upon its request and at its expense, of such of the Collateral as shall not have been sold or otherwise applied against the Secured Obligations pursuant to the terms hereof. Section 24 Appraisals. The Debtor agrees that at any time and from time to time, at the expense of the Debtor, the Debtor, as the request of the Secured Party, shall deliver to the Secured Party an appraisal of the Collateral, in form and substance satisfactory to the Secured Party. Section 25 Survival of Representations and Warranties. All representations and warranties contained in this Agreement or made in writing by or on behalf of the Debtor in connection herewith shall survive the execution and delivery of this Agreement and repayment of the Secured Obligations. Any investigation by the Secured Party shall not diminish in any respect whatsoever its rights to rely on such representations and warranties. Section 26 Security Interest Absolute. All rights of the Secured Party and security interests hereunder, and all obligations of the Debtor hereunder shall be absolute and unconditional irrespective of: (i) any lack of validity or enforceability of the Note or any other agreement or instrument relating thereto: (ii) any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations, or any other amendment or waiver of or any consent to any departure from the Note; (iii) any exchange, release or non-perfection of any collateral, or any release or amendment or waiver of or consent to departure from any guaranty, for all or any of the Secured Obligations; or (iv) any other circumstance which might otherwise constitute a defense available to, or discharge of, the Debtor or a third party pledgor. Section 27 Waiver of Jury Trial. The Debtor and Secured Party hereby waive, to the extent permitted by applicable law, any right to a trial by jury in any action or proceeding to enforce or defend any rights under this Agreement or under any amendment, instrument, document or agreement delivered or which may in the future be delivered in connection herewith or arising from or relating to any 11 relationship existing in connection with this Agreement, and agrees, to the extent permitted by applicable law, that any such action or proceeding shall be tried before a court and not before a jury. Section 28 Governing Law; Terms. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware. [This space left blank intentionally] 12 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective representatives to be effective as of the date first above written above. ALLIANCE MANAGEMENT HOLDINGS, LLC By: /s/ Thomas L. Pearson ------------------------------------------------ Thomas L. Pearson Secretary ALLIANCE RESOURCE HOLDINGS, INC. By: /s/ Thomas L. Pearson ------------------------------------------------ Thomas L. Pearson Senior Vice President - Law and Administration and General Counsel 13 EX-99.F 5 h97179exv99wf.txt PROMISSORY NOTE MADE BY AHM-II. EXHIBIT F AMH-II, LLC PROMISSORY NOTE No. 1 AMH-II, LLC, a Delaware limited liability company (the "Company"), for value received, promises to pay to the order of Alliance Resource Holdings, Inc., a Delaware corporation (hereinafter referred to as "Lender"), ONE MILLION EIGHT HUNDRED SIXTY-EIGHT THREE HUNDRED EIGHTY-NINE AND 72/100 DOLLARS ($1,868,389.72) and to pay interest on the principal outstanding quarterly in arrears on February 15, May 15, August 15, and November 15, of each year, commencing May 15, 2002, which such interest to accrue from February 15, 2002 until maturity hereof at an interest rate of seven (7.0%) per annum. Reference is hereby made to the further provisions of this Note to be duly executed and delivered by their respective duly authorized officers. Dated: May 8, 2002 ALLIANCE RESOURCE HOLDINGS, INC. By: /s/ Thomas L. Pearson ---------------------------------------------- Thomas L. Pearson Senior Vice President-Law and Administration and General Counsel AHM-II, LLC By: /s/ Thomas L. Pearson ---------------------------------------------- Thomas L. Pearson Secretary EXHIBIT F THIS NOTE WAS ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNTIED STATES SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN APPLICABLE EXEMPTION THEREFROM. PROMISSORY NOTE This Note is duly authorized by AMH-II, LLC, a Delaware limited liability company (the "Company"). 1. Loan. The principal amount outstanding of this Note is $1,868,389.72. This Note shall not be deemed terminated or cancelled prior to the receipt of ninety (90) days notice from lender (the "Maturity Date"), although the entire principal balance hereof may from time to time be paid in full. Unless otherwise agreed to in writing, or otherwise required by applicable law, payments will be applied first to unpaid accrued interest, then to principal, and any remaining amount to any unpaid collection costs and other charges. The outstanding principal balance of this Note, together will all accrued but unpaid interest, shall be due and payable on the Maturity Date. 2. Use of Funds. All borrowings hereunder have been used exclusively for the purchase of common units representing limited partner Interest ("Common Units") in Alliance Resource Partners, L.P., a Delaware limited partnership, which are currently publicly-traded on the Nasdaq National Market. 3. Interest. The Company promises to pay interest on the principal amount of this Note at a rate equal to the seven percent (7.0%) per annum from February 15, 2002 until maturity. The Company will pay interest quarterly on February 15, May 15, August 15, and November 15 of each year (each an "Interest Payment Date"), or if any such day is not a Business Day (as hereinafter defined), on the next succeeding Business Day. Any installment of interest which is overdue shall bear interest at the rate of nine percent (9%) per annum. The first Interest Payment Date shall be May 15, 2002. Interest will be computed on the basis of a 360-day year of twelve 30-day months. As used herein, the term "Business Day" shall mean any day other than a Saturday, Sunday or any other day on which national banking associations are authorized to be closed. The books and records of Lender shall be prima facie evidence of all outstanding principal of and accrued and unpaid interest on this Note. 4. Method of Payment. The Company will pay interest on this Note to Alliance Resource Holdings, Inc., a Delaware corporation (hereinafter referred to as hereinafter referred to, along with any subsequent holder of this Note, as the "Lender"). The Company will pay the principal and interest on this Note in money of the United States of America that at the time of payment is legal tender for payment of public and private debts. At the Lender's direction, the Company will make payments in respect of this Note by (i) mailing a Company check to the address provided to the Company by the Lender in writing (ii) making a wire transfer of funds to an account designated by the Lender in writing, or (iii) any other method of payment mutually accepted to Lender and Company. 5. Security. All indebtedness, obligations and liabilities of any kind of the Company from time to time owing under this Note, including without limitation, principal and interest thereon, are secured pursuant to the terms and provisions of that certain Security Agreement, dated the date hereof, between the Company and the Lender. 6. Subordination. All indebtedness, obligations and liabilities of any kind of the Company from time to time owing under this Note, including without limitation, principal and interest thereon, are subordinate and junior in right of payment and collection in full of all amounts owing (including without 1 limitation, interest accruing after the filing of a petition initiating any proceeding pursuant to any bankruptcy law with respect to the Company as debtor) under any other indebtedness of the Company now or hereafter outstanding in favor of Lender, unless, in the case of any particular indebtedness, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such indebtedness shall not be senior in right of payment hereunder. 7. Assignment by Lender. The Lender may not sell, assign, transfer or otherwise dispose of its rights under this Note without the prior written consent of the Company. 8. Amendments and Waivers. The terms of this Note may be amended or supplemented with the prior written consent of the Company and the Lender and any existing default hereunder, or compliance with any provision hereof, may be waived by the Lender. 9. Defaults and Remedies. The Company agrees that upon the occurrence of any one or more of the following events of default: (a) default in payment of interest or principal on this Note for a period of 30 days or (b) the bankruptcy or insolvency of, the assignment for the benefit of creditors by, or the appointment of a receiver for any property of the Company, the Lender may, at its option, without further notice or demand, (i) declare the outstanding principal balance of and accrued but unpaid interest on this Note at once due and payable, (ii) refuse to advance any additional amounts under this Note, (iii) pursue any and all other rights, remedies and recourse available, at law or in equity, or (iv) pursue any combination of the foregoing. The amount due and payable upon the acceleration of this Note is equal to 100% of the principal amount thereof plus accrued and unpaid interest to the day of payment. The Lender may not enforce this Note except as provided herein. The failure by the Lender to exercise the option to accelerate the maturity of this Note or any other right, remedy or recourse available to the Lender upon the occurrence of an event of default hereunder shall not constitute a waiver of the right of the Lender to exercise the same at that time or at any subsequent time with respect to such event of default or any other event of default. The acceptance by the Lender of any payment under this Note which is less than the payment in full of all amounts due and payable at the time of such payment shall not constitute a waiver of or impair, reduce, release or extinguish any right, remedy or recourse of the Lender, or nullify any prior reduce, release or extinguish any right, remedy or recourse of the Lender, or nullify any prior exercise of any such right, remedy or recourse, or impair, reduce, release or extinguish the obligations of the Company hereunder. If this Note is placed in the hands of an attorney for collection, or is collected in whole or in part by suit or through probate, bankruptcy or other legal proceedings of any kind, the Company will be obligated to pay, in addition to all other sums payable hereunder, all costs and expenses of collection, including but not limited to reasonable attorneys' fees. 10. Recourse Against Others. A director, officer, employee or member, as such, of the Company or any of its subsidiaries or affiliates shall not have any liability for any obligations of the Company under this Notice or for any claim based on, in respect of or by reason of such obligations or their creation. The Lender by accepting this Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of this Note. 11. Waiver or Notice. The Company and all other parties hereafter assuming or otherwise becoming liable for the payment of any sum of money payable under this Note, jointly and severally, waive notice of acceleration and notice of intent to accelerate, grace, presentment and demand for payment, protect, notice of protest and/or dishonor, notice of nonpayment, and all other notice, filing of suit and diligence in collecting this Note or enforcing any of the security herefor. 2 12. Governing Law. This note has been executed under, and shall be construed and enforced in accordance with, the laws of the State of Delaware, except as such laws are pre-empted by applicable federal laws. 3 EXHIBIT F AMH-II, LLC SECURITY AGREEMENT THIS SECURITY AGREEMENT (this "Agreement") dated May 8, 2002 is made by AMH-II, LLC, a Delaware limited liability company (the "Debtor") with an address at 1717 South Boulder Avenue, Tulsa, Oklahoma 74119, to Alliance Resource Holdings, Inc., a Delaware corporation (the "Secured Party") with an address at 1717 South Boulder Avenue, Tulsa, Oklahoma 74119. PRELIMINARY STATEMENTS 1. Alliance Resource Management GP, LLC ("MGP"), was authorized by its Board of Directors to repurchase from time to time (the "Repurchase Program") up to one million (1,000,000) common units ("Common Units") representing limited partner interests in Alliance Resource Partners, L.P. a Delaware limited partnership and an affiliate of the MGP and the Secured Party (the "Partnership"). 2. The MGP and the Secured Party entered into that certain Revolving Credit Promissory Note dated November 30, 1999 (the "1999 Note") and that certain Security Agreement dated November 30, 1999 (the "1999 Security Agreement"), pursuant to which the Secured Party made advances to the MGP from time to time, upon the MGP's request, to fund the purchase of Common Units under the Repurchase Program. 3. In accordance with the 1999 Note and the 1999 Security Agreement, the MGP purchased 164,000 Common Units of the Partnership (the "Repurchased Units"), which were pledged to the Secured Party as security for the 1999 Note. 4. The MGP has determined to distribute the Repurchased Units in a special allocation to the Debtor and Alliance Management Holdings II, LLC ("AMH-II"), whereby 21,156 of the Repurchased Units will be distributed to the Debtor and 142,844 of the Repurchased Units will be distributed to AMH-II. 5. The loan to the MGP by the Secured Party, which has an outstanding balance of $2,145,108.75 as of the date hereof, will be assumed by the Debtor and AMH-II in proportion to their pro rata share of the Repurchased Units immediately upon receipt of the Repurchased Units. 6. In connection with the distribution of the Repurchased Units and the assumption of the loan, the Secured Party and the Debtor have executed a Promissory Note for $1,868,389.72 dated as of the date hereof, the Secured Party has returned the 1999 Note to the MGP marked "cancelled," and the MGP and the Secured Party have cancelled the 1999 Security Agreement. 7. The Debtor and the Secured Party intend that the Secured Party should have a security interest in all of the Repurchased Units distributed to the Debtor by the MGP. NOW THEREFORE, in consideration of the premises and in order to induce the Secured Party to make advances under the Note, the Debtor hereby agrees as follows: Section 1 Defined Terms and Related Matters. (a) Each capitalized term used herein and not otherwise defined shall have the meaning for such term as defined in the Note. 4 (b) The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. Section 2 Grant of Security. The Debtor hereby grants to the Secured Party a security interest in all of the Debtor's right, title and interest in and to the following (the "Collateral"): (i) all of the Repurchased Units distributed from the MGP to the Debtor, and the certificates representing such Repurchased Units (if the Repurchased Units are in certificated form), and all distributions, dividends, interest and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such Repurchased Units; provided, however, any quarterly cash distributions on the Repurchased Units received by the Debtor pursuant to Section 7(a)(ii) hereunder shall not be included in the Collateral; and (ii) all proceeds of any of the foregoing. The inclusion of proceeds in this Agreement does not authorize the Debtor to sell, dispose of or otherwise use the Collateral in any manner not specifically authorized hereunder. Section 3 Security for Secured Obligations. This Agreement secures the prompt and complete (a) payment of all obligations of the Debtor to the Secured Party under the Note, now or hereafter existing, and (b) performance and observance by the Debtor of all covenants and conditions contained in the Note or this Agreement, whether for principal, interest, fees, expenses or otherwise (all such obligations, covenants and conditions described in the foregoing clauses(a) and (b) being hereinafter referred to as the "Secured Obligation"). Section 4 Delivery of Collateral. In the event any of the Repurchased Units constituting the Collateral are in certificated form, such certificates or other instruments representing or evidencing the Collateral shall be delivered to and held by the Secured Party and shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance satisfactory to the Secured Party. The Secured Party shall have the right, at any time in its sole discretion and without notice to the Debtor, to transfer to or to register in the name of the Debtor or any of its nominees any or all of the Collateral, subject only to the revocable rights specified in Section 7(a) hereof. In addition, the Secured Party shall have the right at any time to exchange certificates or instruments representing or evidencing Collateral for certificates or instruments of smaller or larger denominations. Section 5 Representations and Warranties: Covenant. The Debtor represents and warrants as follows: (a) The Debtor is a limited liability company duly organized, validly existing and in good standing under the laws of Delaware. The principal place of business and chief executive office of the Debtor and the office where the Debtor keeps its records, are located at the address specified in the introductory paragraph to this Agreement or at such other locations disclosed in writing to the Secured Party after the date hereof; 5 (b) The Debtor has all requisite power and authority, corporate or otherwise, to execute and deliver this Agreement and perform all of its obligations hereunder. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary action of Debtor's Board of Directors and members. This Agreement has been duly executed and delivered by Debtor, is in full force and effect and constitutes the legal, valid and binding obligation of such entity, enforceable against it in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditor's rights generally and general principles of equity. Upon the filing of financing statements in the locations requested by the Secured Party, this Agreement creates valid liens and security interests in the Collateral, securing the Secured Obligations. (c) The execution, delivery and performance by Debtor of this Agreement and the consummation of each of the transactions contemplated hereby do not and shall not, by the lapse of time, the giving of notice or otherwise: (i) constitute a violation of any of the terms and provision of any statute, rule, regulation or order of any governmental agency or body or any court, domestic or foreign, having jurisdiction over the Debtor or a breach of any provision contained in the operating agreement of the Debtor, or contained in any material agreement, instrument or documents to which the Debtor is a party, except for such violations or breaches that will not have a material adverse effect on it; or (ii) result in or require the creation or imposition of any lien, security interest, option or other charge or encumbrance upon any of the properties or assets of the Debtor (collectively, "Liens"), other than those Liens permitted or created by this Agreement. (d) No authorization, approval, or other action by, and no notice to or filing with, any governmental authority, or regulatory body is required either (i) for the pledge by the Debtor of the Collateral pursuant to this Agreement or for the execution, delivery or performance of this Agreement by the Debtor or (ii) for the exercise by the Secured Party of the voting or other rights provided for in this Agreement or the remedies in respect of the Collateral pursuant to this Agreement (except as may be required in connection with such disposition by laws affecting the offering and sale of securities generally); and (e) The Debtor covenants and agrees that no Liens will exist to any and all Collateral, other than the security interest in the Collateral created by this Agreement. Section 6 Further Assurances. The Debtor agrees that from time to time, at its own expense, it will promptly execute and deliver all further instruments and documents, and take all further section that may be necessary or desirable, or that the Secured Party may request, in order to perfect and protect any security interest granted or purported to be granted hereby or not enable the Security Party to exercise and enforce its rights and remedies hereunder with respect to the Collateral, including without limitation, (i) executing and filing of such financing or continuation statements, or amendments thereto, and such other instruments or notices as the Secured Party may reasonably request as being necessary or desirable in order to perfect and preserve the security interests granted or purported to be granted hereby and (ii) furnishing to the Secured Party from time to time such statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Secured Party may reasonably request, all in reasonable detail. Section 7 Voting Rights and Distributions. (a) So long as no Event of Default (as defined herein) or event which, with the giving of notice or the lapse of time, or both, would become an Event of Default shall have occurred and be continuing: 6 (i) The Borrower shall be entitled to exercise any and all voting and other consensual rights pertaining to the Collateral or any part thereof for any purpose not inconsistent with the terms of this Agreement or the Note; (ii) The Borrower shall be entitled to receive and retain any and all distributions, dividends and interest paid in respect of the Collateral; provided, however, that any and all (A) distributions or dividends paid or payable other than in cash in respect of, and instruments and other property received, receivable or otherwise distributed in respect of, or in exchange for, any Collateral, (B) distributions or dividends paid or payable in cash in respect of any Collateral in connection with a partial or total liquidation or dissolution of the Debtor, and (C) cash paid, payable or otherwise distributed in redemption of, or in exchange for, any Collateral, shall be, and shall be forthwith delivered to the Secured Party to hold as Collateral and shall, if received by the Debtor, be received in trust for the benefit of the Secured Party, and be forthwith delivered to the Secured Party as Collateral in the same form as so received (with any necessary endorsement); and (iii) The Secured Party shall execute and deliver (or cause to be executed and delivered) to the Debtor all such proxies and other instruments as the Debtor may reasonably request for the purpose of enabling the Debtor to exercise the voting and other rights which it is entitled to exercise pursuant to paragraph (i) above and to receive the distributions which it is authorized to receive and retain pursuant to paragraph (ii) above. (b) Upon the occurrence and during the continuance of an Event of Default: (i) All rights of the Debtor to exercise the voting and other consensual rights which it would otherwise be entitled to exercise pursuant to Section 7(a)(i) shall cease, and the Secured Party shall thereupon have the sole right to exercise such voting and other consensual rights; (ii) All rights of the Debtor to receive the distributions, dividends and interests which it would otherwise be entitled to receive and retain pursuant to Section 7(a)(ii) shall cease, and the Secured Party shall thereupon have the sole right to receive and hold as Collateral such distributions, dividends and interest; and (iii) All distributions, dividends and interest which are received by the Debtor contrary to the provisions of paragraph (ii) of this Section 7(b) shall be received in trust for the benefit of the Secured Party and shall be forthwith paid over to the Secured Party as Collateral in the same form as so received (with any necessary endorsement). Section 8 Sale of Repurchased Units by Debtor. (a) Notwithstanding Section 7(a)(ii)(C) or any other provision of this Agreement, the Debtor may sell Repurchased Units from the Collateral on the open market or directly to investors at prevailing market prices; provided, however, the proceeds of such sale shall immediately be applied against the Secured Obligations. Any surplus of such cash or cash proceeds remaining after payment in full of all the Secured Obligations may be retained by the Debtor or to whomsoever may be lawfully entitled to receive such surplus. In the event of any such sales by the Debtor, the Secured Party 7 will provide the Debtor with such certificates or other instruments representing or evidencing the Repurchased Units to be sold, in suitable form for transfer, as may be necessary to consummate such sales. (b) Other than pursuant to Section 8(a), the Debtor shall not: (i) sell, assign (by agreement, operation of law or otherwise) or otherwise dispose of, or grant any option with respect to, any of the Collateral, or (ii) create or permit to exist any Lien upon or with respect to any of the Collateral, except for the security interest created by this Agreement. Section 9 Continuation of this Agreement. (a) The Debtor agrees this Security Agreement will not terminate prior to the satisfaction of the conditions set forth in paragraph (b) of this Section 9, although from time to time, because of sales pursuant to Section 8(a) and the application of the proceeds therefrom or otherwise, the Debtor may make payment in full of all of the Secured Obligations. (b) The Debtor agrees that this Security Agreement and the security interest granted hereunder shall terminate automatically upon the maturity of the Note when, but only when, all Secured Obligations have been fully paid and performed. At any time thereafter upon the Debtor's request the Secured Party shall promptly reassign and redeliver, including the termination of any financing statements (or cause to be reassigned and redelivered) to the Debtor, or to such other persons as the Debtor shall designate in writing, against receipt, such of the Collateral (if any) as shall not have been sold or otherwise applied by the Secured Party pursuant to the terms hereof and shall still be held by it hereunder. Section 10 Secured Party Appointed Attorney-in-Fact. The Debtor hereby irrevocably appoints the Secured Party as the Debtor's attorney-in-fact, with full authority in the place and stead of the Debtor and in the name of Debtor, the Secured Party, from time to time in the Secured Party's sole discretion, to take any action and to execute any instrument which the Secured Party may deem necessary or advisable to accomplish the purposes of this Agreement, including, without limitation, to receive, endorse and collect all certificates or instruments made payable to the Debtor representing any distribution or other payment in respect of the Collateral or any part thereof and to give full discharge for the same. Section 11 Secured Party May Perform. If the Debtor fails to perform any agreement contained herein, the Secured Party may itself perform, or cause performance of, such agreement, and the expenses of the Secured Party incurred in connection therewith shall be payable by the Debtor under Section 14 of this Agreement. Section 12 The Secured Party's Duties. The powers conferred on the Secured Party hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers. Except for reasonable care in the custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, the Secured Party shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral. The Secured Party shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which the Secured Party accords its own property, it being understood that the Secured Party shall not have any responsibility for (i) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any 8 Collateral, whether or not the Secured Party has or is deemed to have knowledge of such matters, or (ii) taking any necessary steps to preserve rights against any parties with respect to any Collateral. Section 13 Remedies upon Default. If any Event of Default (as defined in the Note) shall have occurred and be continuing: (a) The Secured Party may exercise in respect of the Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party on default under the Uniform Commercial Code in effect in the State of Delaware at that time (the "Code") (whether or not the Code applies to the affected Collateral), and the Secured Party may also, without notice except as specified below, sell the Collateral), and the Secured Party may also, without notice except as specified below, sell the Collateral or any part thereof in one or more lots, for cash, on credit or for future delivery, and upon such other terms as the Secured Party may deem commercially reasonable. The Debtor agrees that, to the extent notice of any such sale shall be required by law, at least ten (10) days' notice to the Debtor shall constitute reasonable notification. The Secured Party shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Secured Party may adjourn any sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned: (b) Any cash held by the Secured Party as Pledged Collateral and all cash proceeds received by the Secured Party in respect of any sale of, collection from, or other realization upon all or any part of the Collateral may, in the sole discretion of the Secured Party, be held by the Secured Party as collateral for, and/or then or at any time thereafter applied (after payment of any amounts payable to the Secured Party pursuant to Section 14 hereof) in whole or in part by the Secured Party against, all or any part o the Secured Obligations in such order as the Secured Party shall elect. Any surplus of such cash or cash proceeds held by the Secured Party and remaining after payment in full of all the Secured Obligations shall be paid over to the Debtor or to whomsoever may be lawfully entitled to receive such surplus; (c) In connection with the sale of any Collateral, the Secured Party is authorized, but not obligated, to limit prospective purchasers to the extent deemed necessary or desirable by the Secured Party to render such sale exempt from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), and any applicable state securities laws and regulations, and no sale so make in good faith by the Secured Party shall be deemed not to be "commercially reasonable" because so made; and (d) all rights and remedies of the Secured Party expressed herein are in addition to all other rights and remedies possessed by the Secured Party under the Note and any other agreement or instrument relating to the Secured Obligations. Section 14 Indemnity and Expenses. (a) The Debtor hereby indemnifies the Secured Party from and against any and all claims, losses and liabilities growing out of or resulting from this Agreement (including, without limitation, enforcement of this Agreement), except claims, losses or liabilities resulting from the Secured Party's gross negligence or willful misconduct. It is the express intention of the Debtor that the Secured Party shall be indemnified and held harmless against any and all losses, liabilities, claims, efficiencies, judgments or expenses arising out of or resulting from the ordinary negligence (whether sole or contributory) of the Secured Party. 9 (b) The Debtor will upon demand pay to the Secured Party the amount of any and all expenses, including the fees and expenses of its counsel and of any experts and agents, that the Secured Party may incur in connection with (i) the administration of this Agreement, (ii) the evaluation, appraisal, custody or preservation of, or the sale of, collection from, or other realization upon, any of the Collateral, (iii) the exercise or enforcement of any of the rights of the Secured Party hereunder or (iv) the failure by the Debtor to perform or observe any of the provisions hereof. The Debtor agrees to pay interest on any sums payable to the Secured Party hereunder that are not paid when due at a rate per annum equal to nine percent (9%). Section 15 Amendments. No amendment or waiver of any provisions of this Agreement, nor consent to any departure by the Debtor herefrom, shall in any event be effective unless the same shall be in writing and signed by the Secured Party, and then such waiver or consent shall be effective only in the specific instance and for the specific instance and for the specific purpose for which given. Section 16 Addresses for Notices. All notices and other communications provided for hereunder shall be in writing (including telegraphic communication) and, if to the Debtor, mailed or telegraphed or delivered to it at the address of the Debtor specified in the introductory paragraph of this Agreement, if to the Secured Party, mailed or delivered to it at the address of the Secured Party specified in the introductory paragraph of this Agreement, or as to either party at such other address as shall be designated by such party in a written notice to each other party. All such notices and other communications shall, when mailed or telegraphed, respectively, be effective when deposited in the mails or delivered to the telegraph company, respectively, addressed as aforesaid. Section 17 Waiver of Marshalling. All rights of marshalling of assets of the Debtor, including any such right with respect to the Collateral, are hereby waived by the Debtor. Section 18 Limitation by Law. All rights, remedies and powers provided in this Agreement may be exercised only to the extent that the exercise thereof does not violate any applicable provision of law, and all the provisions of this Agreement are intended to be subject to all applicable mandatory provisions of law which may be controlling and to be limited to the extent necessary so that they will not render this Agreement invalid, unenforceable, in whole or in part, or not entitled to be recorded, registered or filed under the provisions of any applicable laws. Section 19 Severability. Should any clause, sentence, paragraph, subsection or Section of this Agreement be judicially declared to be invalid, unenforceable or void, such decision will not have the effect of invalidating or voiding the remainder of this Agreement, and the parties hereto agree that parts of this Agreement so held to invalid, unenforceable or void will be deemed to have been stricken herefrom by the parties hereto, and the remainder of this Agreement will have the same force and effectiveness as if such stricken part or parts had never been included herein. Section 20 Captions. The captions in this Agreement have been inserted for convenience only and shall be given no substantive meaning or significance whatever in construing the terms and provisions of this Agreement. Section 21 No Waiver Remedies. No failure on the part of the Secured Party to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. 10 Section 22 Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement. Section 23 Continuing Security Interest; Substitution of Agent. This Agreement shall create a continuing security interest in the Collateral and shall (i) remain in full force and effect until payment in full of the Secured Obligations, (ii) be binding upon the Debtor, its successors and assigns, and (iii) inure to the benefit of the Secured Party and its successor, transferees and assigns. Without limiting the generality of the foregoing clause (iii), upon written notice to the Debtor, the Secured Party may substitute another entity to take its place as the Secured Party, and such other entity shall thereupon become vested with all the benefits in respect thereof granted to the Secured Party herein or otherwise. Upon the payment in full of the Secured Obligations, the Debtor shall be entitled to the return, upon its request and at its expense, of such of the Collateral as shall not have been sold or otherwise applied against the Secured Obligations pursuant to the terms hereof. Section 24 Appraisals. The Debtor agrees that at any time and from time to time, at the expense of the Debtor, the Debtor, as the request of the Secured Party, shall deliver to the Secured Party an appraisal of the Collateral, in form and substance satisfactory to the Secured Party. Section 25 Survival of Representations and Warranties. All representations and warranties contained in this Agreement or made in writing by or on behalf of the Debtor in connection herewith shall survive the execution and delivery of this Agreement and repayment of the Secured Obligations. Any investigation by the Secured Party shall not diminish in any respect whatsoever its rights to rely on such representations and warranties. Section 26 Security Interest Absolute. All rights of the Secured Party and security interests hereunder, and all obligations of the Debtor hereunder shall be absolute and unconditional irrespective of: (i) any lack of validity or enforceability of the Note or any other agreement or instrument relating thereto: (ii) any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations, or any other amendment or waiver of or any consent to any departure from the Note; (iii) any exchange, release or non-perfection of any collateral, or any release or amendment or waiver of or consent to departure from any guaranty, for all or any of the Secured Obligations; or (iv) any other circumstance which might otherwise constitute a defense available to, or discharge of, the Debtor or a third party pledgor. Section 27 Waiver of Jury Trial. The Debtor and Secured Party hereby waive, to the extent permitted by applicable law, any right to a trial by jury in any action or proceeding to enforce or defend any rights under this Agreement or under any amendment, instrument, document or agreement delivered or which may in the future be delivered in connection herewith or arising from or relating to any relationship existing in connection with this Agreement, and agrees, to the extent permitted by applicable law, that any such action or proceeding shall be tried before a court and not before a jury. 11 Section 28 Governing Law; Terms. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware. [This space left blank intentionally] 12 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective representatives to be effective as of the date first above written above. AMH-II, LLC By: /s/ Thomas L. Pearson ---------------------------------------------- Thomas L. Pearson Secretary ALLIANCE RESOURCE HOLDINGS, INC. By: /s/ Thomas L. Pearson ---------------------------------------------- Thomas L. Pearson Senior Vice President - Law and Administration and General Counsel 13 -----END PRIVACY-ENHANCED MESSAGE-----