Exhibit 10.20

LETTER OF CREDIT FACILITY AGREEMENT

This Letter of Credit Facility Agreement is dated as of this 29th day of June, 2001 by and between BANK OF OKLAHOMA, NATIONAL ASSOCIATION ("Lender"), and ALLIANCE RESOURCE PARTNERS, L.P., a Delaware limited partnership ("Borrower").

RECITALS

A. Borrower has requested a $10,000,000 line of credit ("Loan") from Lender for the issuance from time to time of Letters of Credit (defined below).

B. Subject to Borrower's compliance with all of the terms, conditions and covenants hereinafter set forth and predicated on Borrower's representations and warranties, each of which is material and is being relied upon by Lender, Lender agrees to issue from time to time Letters of Credit for the account of Borrower and for the benefit of Borrower and its subsidiaries in the amount and on the terms hereinafter set forth up to the total of the Letter of Credit Commitment.

AGREEMENT

For valuable consideration received and in consideration of the premises and of the mutual covenants and agreements contained herein, the parties hereto hereby agree to the following:

1. Definitions. The following terms shall have the meanings given.

1.1. "Advance" means the disbursement by Lender under a Letter of Credit to the beneficiary thereof for the account of Borrower.

1.2. "Agreement" means this Letter of Credit Facility Agreement, as amended, amended and restated, modified or supplemented from time to time in accordance with the terms hereof.

1.3. "Alliance Resource GP, LLC" means Alliance Resource GP, LLC, a Delaware limited liability company.

1.4. "Alliance Resource Master Credit Agreement" means the Credit Agreement, dated as of August 16, 1999, among AROP, as borrower and assignee of Alliance Resource GP, LLC, the banks, financial institutions and other institutional lenders from time to time parties thereto, the Swing Line Bank (as defined therein), The Chase Manhattan Bank ("Chase"), as paying agent, Deutsche Bank AG, New York Branch, as documentation agent, and Citicorp USA, Inc. and Chase as co-administrative agents, as the same may be amended, amended and restated, modified or supplemented from time to time in accordance with the terms thereof.

1.5. "AROP" means Alliance Resource Operating Partners, L.P., a Delaware limited partnership.

1.6. "Borrower Authority Documents" means the following documents as to the Borrower: (i) Certificate of Good Standing, dated within five (5) Business Days of the Effective Date, issued by the State in which the Borrower was formed; and (ii) Certificate, dated the Effective Date, from the managing general partner of the Borrower, substantially in form and content as set forth on Schedule "1.6" hereto, to which shall be attached the Certificate of Limited Partnership of the Borrower, certified by the Secretary of State of the State of Delaware as of a date that is within five (5) Business Days of the Effective Date, and a copy of the fully executed limited partnership agreement of the Borrower, together with all amendments, if any.

1.7. "Business Day" means any day other than a Saturday, Sunday or other day on which commercial banks in Oklahoma are authorized or required to close under the laws of the State of Oklahoma.

1.8. "Capital Stock" shall mean, with respect to any Person, any and all shares, units representing interests, participations, rights in or other equivalents (however designated) of such Person's capital stock, including (a) with respect to partnerships, partnership interests (whether general or limited) and any other interest or participation that confers upon a Person the right to receive a share of the profits and losses of, or distributions of assets of, such partnership, (b) with respect to limited liability companies, member interests, and (c) with respect to any Person, any rights (other than debt securities convertible into capital stock), warrants or options exchangeable for or convertible into such capital stock.

1.9. "Cash Equivalents" means any of the following: (a) marketable securities of any issuer (including, without limitation, any corporation or governmental authority) and, if applicable, of any duration; (b) common units issued by Borrower; and (c) any other item determined by Borrower's auditors to constitute cash or cash equivalents.

1.10. "Consolidated Subsidiary" means, with respect to any Person at any time for any period, any Subsidiary the accounts of which would be consolidated with those of such first Person in its consolidated financial statements as of such time.

1.11. "Consolidated EBITDA" means, with respect to the Borrower and its Consolidated Subsidiaries for any period, net income plus (i) interest expense, (ii) depreciation, obsolescence and amortization of property, (iii) capitalized lease expenses, (iv) the non-cash portion of advance royalties and any non-cash employee compensation expenses, and (v) tax expenses, all as determined in accordance with GAAP; provided, however, that net income shall exclude any net income or gain or loss during such period from (x) any change in accounting principles in accordance with GAAP, (y) any prior period adjustments resulting from any change in accounting principles in accordance with GAAP, and (z) any extraordinary or unusual items.

1.12. "Consolidated Funded Debt" means, with respect to the Borrower and its Consolidated Subsidiaries, long-term and short-term interest bearing obligations that would be required to be classified and accounted for as such in the consolidated balance sheet of the Borrower and its Consolidated Subsidiaries prepared in accordance with GAAP.

1.13. "Cure Period" shall have the meaning set forth in
Section 7 hereof.

1.14. "Debtor Relief Laws" shall mean the Bankruptcy Code of 1978 (Title 11 of the United States Code), as the same may be amended from time to time and any successor statute thereto (the "Federal Bankruptcy Code"), together with other applicable federal and state liquidation, conservatorship, bankruptcy, moratorium, rearrangement, insolvency, reorganization or similar laws affecting the rights and remedies of creditors generally, as in effect from time to time.

1.15. "Default" shall mean the occurrence of any of the events described in Section 6, below.

1.16. "Effective Date" shall have the meaning set forth in
Section 3 hereof.

1.17. "Federal Bankruptcy Code" shall have the meaning set forth in the definition of Debtor Relief Laws contained herein.

1.18. "GAAP" means generally accepted accounting principles as in effect from time to time.

1.19. "General Partner" means Alliance Resource Management GP, LLC, a Delaware limited liability company.

1.20. "General Partner Authority Documents" means the following documents as to the General Partner: (i) Certificate of Good Standing, dated within five (5) Business Days of the Effective Date, issued by the State in which the Borrower was formed; and (ii) Certificate, dated the Effective Date, from the Secretary or Assistant Secretary of the General Partner, substantially in form and content as set forth on Schedule "1.20" hereto, to which shall be attached a complete copy of the Certificate of Formation of the General Partner, certified by the Secretary of State of the State of Delaware as of a date that is within five (5) Business Days of the Effective Date, and a copy of the Amended and Restated Operating Agreement of the General Partner, together with all amendments, if any.

1.21. "Governmental Requirements" means all laws, orders, decrees, ordinances, rules and regulations of any Governmental Authority.

1.22. "Guarantor" means Alliance Resource GP, LLC.

1.23. "Guarantor Authority Documents" means the following documents as to the Guarantor: (i) Certificate of Good Standing, dated within five (5) Business Days of the

Effective Date, issued by the state in which the Guarantor was formed; and (ii) Certificate, dated the Effective Date, from the Secretary or Assistant Secretary of the Guarantor, substantially in form and content as set forth on Schedule "1.23" hereto, to which shall be attached a complete copy of the Certificate of Formation of the Guarantor, certified by the Secretary of State of the State of Delaware as of a date that is within five (5) Business Days of the Effective Date, and a copy of the Operating Agreement of the Guarantor, together with all amendments, if any.

1.24. "Guaranty Agreement" means the Guaranty, dated on or prior to the Effective Date, executed by the Guarantor, substantially in form and content as set forth on Schedule "1.24" hereto, as the same may be amended, amended and restated, modified or supplemented from time to time in accordance with the terms thereof.

1.25. "Letter of Credit" means any letter of credit issued pursuant to Section 2.1, for which, when issued, a Letter of Credit Fee shall be paid, as the same may be amended, modified or supplemented from time to time in accordance with the terms thereof.

1.26. "Letter of Credit Action" means the issuance, supplement, amendment, renewal, extension, modification or other action (other than an Advance) relating to a Letter of Credit.

1.27. "Letter of Credit Application" means an application for a Letter of Credit Action as shall at any time be in use by the Lender.

1.28. "Letter of Credit Commitment" means the commitment of the Lender to issue Letters of Credit in an amount up to $10,000,000, as the same may be reduced in accordance with Sections 2.4 and 7.1(iii) hereof.

1.29. "Letter of Credit Fee" means, with respect to any Letter of Credit, a fee of .95% per annum (calculated on the basis of a 360-day year and the actual number of days elapsed) on the daily average of the maximum amount available to be drawn from time to time under such Letter of Credit issued or renewed after the date hereof, payable quarterly in advance.

1.30. "Letter of Credit Issuance Fee" means a fee equal to that which is reasonable and customarily charged by Lender for issuing, reviewing and generally processing Letters of Credit.

1.31. "Letter of Credit Usage" means, as of any date of determination, the maximum amount available to be drawn under all outstanding Letters of Credit plus the aggregate amount of all drawings under the Letters of Credit honored by Lender and not reimbursed to Lender by the Borrower.

1.32. "Leverage Ratio" means, as of any date of determination, the ratio of Consolidated Funded Debt to Consolidated EBITDA of the Borrower and its Consolidated

Subsidiaries, calculated for the four (4) consecutive fiscal quarters ending on the last day of the fiscal quarter most recently completed.

1.33. "Loan Documents" means this Agreement and the Note.

1.34. "Matured Default" means any Default provided that any requirement for the giving of notice, the lapse of time, or both (including the expiration of the Cure Period, if applicable), or any other condition has been satisfied.

1.35. "Note" means the original, executed $10,000,000 Promissory Note, dated on or prior to the Effective Date, substantially in form and content set forth on Schedule "1.35" attached hereto, as the same may be amended, amended and restated, modified or supplemented from time to time in accordance with the terms thereof.

1.36. "Opinion of Borrower's Counsel" shall mean an opinion from Borrower's counsel, dated the Effective Date and addressed to Lender, which opinion shall be in form and content reasonably satisfactory to Lender and shall include, but not be limited to, the following: (a) Borrower has the authority and capacity to enter into and perform under the Loan Documents; (b) this Agreement and all other Loan Documents executed by Borrower in connection herewith are valid and binding obligations against Borrower, fully enforceable in accordance with their respective terms under applicable laws; (c) there are, to Borrower's counsel's knowledge, no actions or proceedings pending or threatened in any court or governmental department or agency which would affect the validity of this Agreement or any other Loan Documents; (d) the delivery by Borrower of this Agreement and the other Loan Documents and compliance by Borrower with the terms of this Agreement and all other Loan Documents do not conflict with or violate the constituent documents of Borrower; and (e) Borrower is a duly formed and validly existing limited partnership under the laws of the State of Delaware.

1.37. "Opinion of Guarantor's Counsel" shall mean an opinion from Guarantor's counsel, dated the Effective Date and addressed to Lender, which opinion shall be in form and content reasonably satisfactory to Lender and shall include, but not be limited to, the following: (a) Guarantor is a limited liability company duly formed and validly existing under the laws of the State of Delaware, (b) Guarantor has the authority and capacity to enter into and perform under the Guaranty Agreement; and (c) the Guaranty Agreement constitutes a legal, valid and binding obligation against Guarantor, enforceable in accordance with its terms.

1.38. "Person" means any individual, partnership, corporation (including a business trust), limited liability company, joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof.

1.39. "Subsidiary" means, with respect to any Person, any corporation limited liability company, partnership, joint venture, association, trust or other entity of which (or in which) more than 50% of (a) the issued and outstanding Capital Stock having ordinary

voting power to elect a majority of the board of directors of such corporation (irrespective of whether at the time Capital Stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency), (b) the interests in the capital or profits of such partnership, limited liability, joint venture or association with ordinary voting power to elect a majority of the board of directors (or Person performing similar functions) of such partnership, limited liability company, joint venture or association, or (c) the beneficial interests in such trust or other entity with ordinary voting power to elect a majority of the board of trustees (or Persons performing similar functions) of such trust or other entity, is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its Subsidiaries, or by one or more of such Person's Subsidiaries.

1.40. "Termination Date" shall mean the one-year anniversary of the Effective Date.

2. LETTERS OF CREDIT.

2.1. The Letter of Credit Commitment; Letter of Credit Fee. Subject to the terms and conditions hereof, at any time and from time to time from the Effective Date through the date that is three (3) Business Days prior to the Termination Date, the Lender shall take such Letter of Credit Actions as the Borrower may request; provided, however, that (i) the aggregate outstanding Letter of Credit Usage shall not exceed the Letter of Credit Commitment at any time, and (ii) each Letter of Credit Action shall be in a form reasonably acceptable to Lender and shall not violate any policies of Lender. Each Letter of Credit will be a nontransferable standby letter of credit to support payment and/or performance obligations of the Borrower or any of its Subsidiaries. No Letter of Credit shall expire more than 365 days after the date of issuance except that, at the request of Borrower, such Letter of Credit shall provide that it shall be automatically renewed for a one-year period unless the Lender, as issuer of such Letter of Credit, shall give at least 90 days advance notice to the beneficiary thereof that such Letter of Credit shall not be automatically renewed. If any Letter of Credit shall remain outstanding after the Termination Date or other date upon which Lender's Letter of Credit Commitment expires pursuant to the terms hereof, the Borrower shall, not later than sixty (60) days thereafter with respect to all such then outstanding Letters of Credit, (i) deposit cash or Cash Equivalents in an amount equal to one hundred and two percent (102%) of the Letter of Credit Usage as of the date such deposit shall be required in a collateral account with the Lender (which account shall, with respect to all cash collateral, bear interest for the account of the Borrower or be invested in Cash Equivalents at the direction, and for the account, of the Borrower), or (ii) cause the then outstanding Letters of Credit to be replaced and terminated. In the case of each Letter of Credit issued hereunder, a Letter of Credit Issuance Fee shall be payable to the Lender on the issuance date thereof and the Letter of Credit Fee with respect thereto shall be payable quarterly in advance. At least two (2) Business Days prior to the commencement of any quarterly period during which any Letter of Credit shall remain outstanding, the Lender shall deliver to the Borrower a statement showing the Letter of Credit Fee due for the next quarterly period, and the Borrower shall pay the Letter of Credit Fee then due not later than five (5) Business Days following receipt of such statement. In the event that any Letter of Credit shall have terminated prior to the end of any quarterly period as to which the Lender shall have received

such advance Letter of Credit Fee, the Lender shall refund to the Borrower the unearned portion of the Letter of Credit Fee in respect of the Letter of Credit that shall have early terminated.

2.2. Requesting Letter of Credit Actions. The Borrower may irrevocably request a Letter of Credit Action by delivering a Letter of Credit Application therefor to Lender, not later than 2:00 p.m. (Tulsa time) on the date which is two (2) Business Days prior to the date of the requested action therefor. Unless Lender determines that such Letter of Credit action is contrary to any requirement of law or policies of Lender or does not otherwise conform to the requirements of this Agreement, Lender shall effect such Letter of Credit Action. Notwithstanding anything to the contrary contained in any Letter of Credit Application, this Agreement shall control in the event that any term or provision of this Agreement shall conflict with any term or provision contained in any Letter of Credit Application.

2.3. Reimbursement of Payments Under Letters of Credit. The Borrower shall reimburse Lender for any payment that Lender makes under a Letter of Credit on or before the date of such payment except to the extent that such payment resulted from the Lender's gross negligence or willful misconduct.

2.4. Voluntary Reduction of Letter of Credit Commitment. At the written request of the Borrower from time to time, the Borrower shall have the right, at its option, to reduce the Letter of Credit Commitment from the then current amount of the Letter of Credit Commitment to an amount not less than $1,000,000.00; provided, however, that (i) the Borrower shall be in compliance with the terms and conditions contained herein and no Default shall have occurred and be continuing, (ii) the Letter of Credit Commitment shall not be reduced to an amount that is less than the Letter of Credit Usage then in effect and (iii) the Letter of Credit Commitment, as so reduced, may not thereafter be increased without the written consent of the Lender. Any such reduction of the Letter of Credit Commitment shall effect a reduction in the liquidity covenant required to be complied with on the part of the Guarantor as contemplated by Section 6.8 hereof.

3. CONDITIONS PRECEDENT TO LENDER'S OBLIGATION TO ISSUE INITIAL LETTER OF CREDIT. It is expressly agreed that Lender shall not be obligated to issue the initial Letter of Credit hereunder until the date (which must be a Business Day) on which all of the conditions set forth in Sections 3.1, 3.2 and 3.3 hereof shall have been satisfied, unless waived by Lender at its sole discretion (such date the "Effective Date"); provided that such conditions shall be deemed satisfied if the Lender shall have issued the initial Letter of Credit hereunder except to the extent expressly reserved by the Lender in writing on or prior to the Effective Date; provided, further, that if the Effective Date shall not have occurred by July 31, 2001, the obligation of the Lender hereunder to issue any Letter of Credit, and this Agreement, shall terminate. In the event Lender elects to waive any requirements or conditions contemplated by this Section 3, such waiver shall not preclude Lender from thereafter requiring full and complete performance of all terms, conditions and requirements hereof with regard to the issuance of any subsequent Letter of Credit.

3.1. Documents. Lender has received the following original, executed documents:

3.1.1. The Note;

3.1.2. The Guaranty Agreement;

3.1.3. Borrower Authority Documents;

3.1.4. General Partner Authority Documents;

3.1.5. Guarantor Authority Documents;

3.1.6. Opinion of Borrower's Counsel; and

3.1.7. Opinion of Guarantor's Counsel.

3.2. Representations and Warranties. The representations and warranties set forth under Section 5, below, shall be true and correct in all material respects on and as of the Effective Date except to the extent such representations and warranties relate solely to an earlier date, in which case such representations and warranties shall be true and correct in all material respects on and as of such earlier date.

3.3. No Default. No Default exists under this Agreement or any other Loan Documents.

4. FURTHER CONDITIONS PRECEDENT TO LENDER'S OBLIGATION TO ISSUE EACH LETTER OF CREDIT. The obligation of the Lender to issue any Letter of Credit hereunder shall be subject to the fulfillment of the conditions set forth in Sections 4.1 and 4.2 hereof unless waived by the Lender at its sole discretion; provided that such conditions shall be deemed satisfied if the Lender shall have issued such Letter of Credit except to the extent expressly reserved by the Lender in writing on or prior to the date of issuance of such Letter of Credit. In the event the Lender elects to waive any such conditions contemplated by this
Section 4, such waiver shall not preclude Lender from thereafter requiring full and complete performance of all terms, conditions and requirements hereof with regard to the issuance of any subsequent Letter of Credit.

4.1. Representations and Warranties. The representations and warranties set forth under Section 5, below, shall be true and correct in all material respects on and as of the date of any Letter of Credit Action with the effect as if made on such date except to the extent such representations and warranties shall be true and correct in all material respects on and as of such earlier date.

4.2. No Default. No Default exists under this Agreement or any other Loan Documents.

5. BORROWER REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender as of the Effective Date as follows:

5.1. Financial Statements. All financial statements heretofore delivered to Lender relating to the Borrower and Guarantor are true and correct in all material respects, have been prepared in accordance with Borrower's and Guarantor's past practices consistently applied, and fairly present (subject to year-end audit adjustments) the financial conditions reflected therein without material changes since the respective dates thereof.

5.2. Litigation. There are no actions, suits or proceedings pending or, to the knowledge of Borrower, threatened against or affecting Borrower, or involving the validity or enforceability of the Loan Documents at law or in equity, or before or by any governmental authority, except actions, suits and proceedings fully covered by insurance or for which adequate reserves exist or which, if adversely determined, would not substantially impair the ability of Borrower to pay when due any amounts which may become payable in respect of the Note; and to Borrower's knowledge, Borrower is not in default with respect to any order, writ, injunction, decree or demand of any court or any governmental authority.

5.3. Other Agreements. The consummation of the transaction hereby contemplated and the performance of this Agreement and the other Loan Documents by Borrower will not result in any breach of, or constitute a default under, any indenture, mortgage, lease, loan or credit agreement or any other material instrument or agreement to which Borrower is a party or by which Borrower may be bound or affected.

5.4. No Default. No Default presently exists under this Agreement or the Note and no event has occurred and is continuing which, with notice or the passage of time, or both, would constitute a Default under this Agreement or Note.

6. DEFAULT. The occurrence of any of the following shall constitute a default hereunder:

6.1. Nonpayment of Note. Nonpayment when due of any unpaid principal of or accrued interest under the Note.

6.2. Other Nonpayment. Nonpayment when due of any amount payable to Lender under the terms of this Agreement and, except in the case of any payment required to be made pursuant to Section 2.3 hereof, Borrower shall have failed to cure such default within ten (10) days following notice thereof from Lender.

6.3. Breach of Covenants. Nonsatisfaction by Borrower in the performance or observation of any covenant contained in this Agreement, or any other Loan Documents (other than as provided by Sections 6.1 and 6.2 hereof), following the Cure Period.

6.4. Representations and Warranties. Any representation, statement, certificate, schedule or report made or furnished to Lender by Borrower proves to be materially false or materially misleading at the time of the making thereof, or any warranty ceases to be complied with in any material respect, and Borrower fails to take or cause to be taken

corrective measures satisfactory to Lender within fifteen (15) business days after receipt of written notice from Lender relating to the particular default.

6.5. Insolvency. Borrower or Guarantor shall: (i) apply for or consent to the appointment of a receiver, trustee or a liquidator of Borrower or Guarantor or its or their properties; (ii) admit in writing the inability to pay its or their debts as they mature; (iii) make a general assignment for the benefit of creditors; (iv) commence any proceeding relating to the bankruptcy, reorganization, liquidation, receivership, conservatorship, insolvency, readjustment of debt, dissolution or liquidation of Borrower or Guarantor or, if action shall be taken against Borrower or Guarantor for the purpose of effecting any proceeding described in this clause (iv), such proceeding is not dismissed or stayed within sixty (60) calendar days of such proceeding filing date, or (v) becomes insolvent.

6.6. Other Loans. Default by the Borrower of any other loan, extension or credit which it may now or hereafter have with Lender (other than any loan or extension of credit made by Lender under the Alliance Resource Master Credit Agreement) after taking into account any applicable cure period.

6.7. Leverage Ratio. If the Leverage Ratio during any given rolling twelve month period equals or exceeds 4 to 1.

6.8. Guarantor Liquidity. If at any time the sum of (x) the Guarantor's Cash Equivalents plus (y) the then current market value of the common units of the Borrower beneficially owned by the Guarantor, in each case after deducting therefrom the value of any encumbrances imposed on any thereof, shall be less than 125% of the Letter of Credit Commitment hereunder or $12,500,000, whichever is greater, unless the Borrower shall have reduced the Letter of Credit Commitment in accordance with Section 2.4 hereof, in which case the Borrower shall be in compliance with this covenant so long as the sum of the amounts computed pursuant to clauses (x) and (y) of this Section 6.8 shall not be less than 125% of the Letter of Credit Commitment then in effect hereunder.

6.9. Guarantor Net Asset Position. If the Guarantor's total assets less its total liabilities (excluding the liability account entitled "Investments in Alliance Resource Partners, LP"), as determined in a manner consistent with the balance sheet of the Guarantor prepared as of April 2, 2001 and delivered to the Lender prior to the date hereof, shall be less than $30,000,000.

6.10. Alliance Resource Master Credit Agreement. An "Event of Default" occurs under the Alliance Resource Master Credit Agreement which is not cured within any applicable cure period permitted thereunder.

6.11. Debt. Without duplication of the provisions contained in
Section 6.6 hereof, an event of default occurs under any indenture, loan agreement, promissory note or other instrument of indebtedness, in each case in the principal amount of $10,000,000.00 or more,

to which Borrower or Guarantor is a party and which is not cured within any applicable cure period permitted thereunder.

7. REMEDIES. Upon the occurrence and continuance of a Default, Lender may, following a written notice and cure period of sixty (60) days for non-monetary defaults ("Cure Period"), at its option exercise any one (1) or more of the following remedies unless following the expiration of the Cure Period, but before the commencement of any such remedy, the Default shall have been cured:

7.1. Acceleration of Note. Lender (i) may by notice to the Borrower, declare the commitments to issue Letters of Credit to be terminated, whereupon the same shall forthwith terminate, (ii) may (A) by notice to the Borrower, declare the Note, all interest thereon and all other amounts payable under this Agreement to be forthwith due and payable, whereupon the Note, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower; provided, however, that in the event of an actual or deemed entry of an order for relief with respect to the Borrower under the Federal Bankruptcy Code, (x) the Letter of Credit Commitment shall automatically be terminated and (y) the Note, all such interest and all such other amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower, or
(iii) may, by notice to Borrower, reduce the Letter of Credit Commitment.

7.2. Deposits; Setoff. Set off, regardless of the adequacy of any other collateral, any deposits or other sums due from Lender to Borrower against any and all liabilities, direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, of Borrower to Lender under any Loan Document. Such sums shall at all times constitute collateral security for all indebtedness and obligations of Borrower to Lender under any Loan Document. The rights granted by this Section 7.2 shall be in addition to the rights of Lender under any statutory and case authority of the State of Oklahoma.

7.3. Selective Enforcement. In the event Lender shall elect to selectively and successively enforce its rights, such action shall not be deemed a waiver or discharge of any other lien, encumbrance or security instrument securing payment of the Note until such time as Lender shall have been paid in full all sums outstanding under the Note.

7.4. Waiver of Default. Lender may, at its option, by an instrument in writing signed by Lender, waive any Default which shall have occurred and any consequences of such Default and, in such event, Borrower and Lender shall be restored to their former respective rights and obligations hereunder. Any Default so waived shall, for purposes of this Agreement, be deemed to have been cured and not to be continuing; but no such waiver shall extend to any subsequent or other Default or impair any consequence of such subsequent or other Default or any of Lender's rights relating thereto.

7.5. Cumulative Remedies. The remedies herein provided shall be in addition to and not in substitution for the rights and remedies which would otherwise be vested in

Lender in law or equity, all of which rights and remedies are specifically reserved by Lender. The remedies herein provided or otherwise available to Lender shall be cumulative and may be exercised concurrently. The failure to exercise any of the remedies herein provided shall not constitute a waiver thereof, nor shall use of any of the remedies hereby provided prevent the subsequent or concurrent resort to any other remedy or remedies which by this Agreement or by law or equity shall be vested in Lender.

8. GENERAL CONDITIONS. The following conditions shall be applicable throughout the term of this Agreement:

8.1. Notices. All notices, consents, waivers, and other communications required or permitted to be given under this Agreement must be in writing and will be deemed to have been duly given when (a) delivered by hand (with written confirmation of receipt), (b) sent by telecopier (with written confirmation of receipt), provided that a copy is mailed by registered mail, return receipt requested, or (c) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and telecopier numbers set forth below (or to such other addresses and telecopier numbers as a party may designate by notice to the other parties):

To Borrower:

ALLIANCE RESOURCE PARTNERS, L.P.

c/o Alliance Resource Management GP, LLC 1717 South Boulder Avenue, Suite 600 Tulsa, Oklahoma 74119
Attn: Cary Marshall, Director, Corporate Finance Telefax: (918) 295-7357

with a copy to:

Alliance Resource Partners, L.P. c/o Alliance Resource Management GP, LLC 1717 South Boulder Avenue Tulsa, Oklahoma 74119
Attn: Thomas L. Pearson, Senior Vice President
- Law and Administration, General Counsel and Secretary Telefax: (918) 295-7361

and to:

Katten Muchin Zavis
1025 Thomas Jefferson Street, NW East Lobby, Suite 700
Washington, DC 20007
Attn: Steven C. Schnitzer, Esq.

Telefax: (202) 298-7570

To Lender:

BANK OF OKLAHOMA, NATIONAL ASSOCIATION
BOK Tower, 8 Southeast
1 Williams Center
Tulsa, Oklahoma 74172

Attn: Robert D. Mattax, Senior Vice President Telefax: (918) 295-0400

with copy to:

Riggs, Abney, Neal, Turpen, Orbison & Lewis 502 West Sixth Street
Tulsa, Oklahoma 74119 Attn: Harley W. Thomas, Esq.

Telefax: (918) 584-1603

or at such other address of which it shall have notified the party giving such notice in writing. Notices to in-house counsel or outside counsel of a party hereto shall not constitute sufficient notice to such party.

8.2. Amendment; Waiver. This Agreement may not be amended, modified, waived, discharged or terminated in any way, except by an instrument in writing executed by both parties hereto; provided, however, Lender may, in a writing that shall be required to be executed only by Lender: (i) extend the time for performance of any of the obligations of Borrower; (ii) waive any Default by Borrower; and (iii) waive the satisfaction of any condition that is precedent to the performance of Lender's obligations under this Agreement. In the event of a waiver of Default by Lender, such specific Default shall be deemed to have been cured and not continuing, but no such waiver shall extend to any subsequent or other Default or impair any consequence of such subsequent or other Default.

8.3. Governing Law. This Agreement, the other Loan Documents and all other documents issued and executed hereunder shall be deemed to be a contract made under the laws of the State of Oklahoma, and shall be construed by and governed in accordance with the laws of the State of Oklahoma, without giving effect to principles of conflicts of laws. Borrower hereby submits itself to the jurisdiction and venue of the Tulsa County District Court, or Federal Court (Northern District) situated in Oklahoma at Lender's election, except to the extent local law (if different) is required in connection with a foreclosure action.

8.4. Entire Agreement. This Agreement, the Note, any Letter of Credit Application executed in connection herewith, and the other instruments, statements or documents described herein constitute the entire agreement between Borrower and Lender, with any and all prior agreements and understandings being merged herein.

8.5. Binding Effect. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, legal representatives, successors and

permitted assigns; provided, however, that, without the consent of the Borrower, the Lender shall not transfer or assign any of its rights or obligations hereunder or all or any part of its Letter of Credit Commitment, the Note or any Advance except to another commercial bank organized under the laws of the United States having a combined capital and surplus and retained earnings of not less than $500,000,000.

8.6. Severability. Should any clause or provision of this Agreement or any instrument, document or agreement provided by Borrower to Lender hereunder be invalid or void for any reason, such invalid or void clause shall not adversely affect the remainder of this Agreement or any such instrument, document or agreement, and such remainder shall remain in full force and effect.

8.7. Costs. Borrower shall pay all reasonable costs, expenses, fees (e.g., reasonable attorney fees) incurred by Lender in connection with this transaction, including, without limitation, the reasonable fees of Riggs, Abney, Neal, Turpen, Orbison & Lewis, and recording/filing fees, taxes and related expenses.

9. AFFIRMATIVE COVENANTS. So long as the Note shall remain unpaid or Lender shall have any commitment to issue any Letter of Credit under this Agreement, Borrower will comply with the following:

9.1. Maintenance of Existence. Preserve and maintain its limited partnership existence and good standing under the laws of the State of Delaware and remain in good standing as a foreign limited partnership in the State of Oklahoma.

9.2. Maintenance of Records. Keep adequate records and books of account.

9.3. Compliance with Laws. Comply in all material respects with all laws, rules, regulations and orders applicable to Borrower, such compliance to include, without limitation, paying before the same become delinquent all taxes, assessments, and governmental charges imposed upon it or upon its property, subject to the right to contest if adequate reserves are established.

9.4. Notice of Litigation. Promptly after the commencement and notice thereof, Borrower shall deliver to Lender notice of all actions, suits and proceedings before any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, affecting Borrower which, if determined adversely to Borrower, could have a material adverse effect on the financial condition, properties or operations of Borrower and its Subsidiaries, taken as a whole.

9.5. Notice of Defaults. As soon as possible and in any event within five (5) days after the occurrence of each Default, a written notice setting forth the details of such Default and the action which is proposed to be taken by Borrower with respect thereto.

9.6. General Information. Such other information respecting the condition or operations, financial or otherwise, of Borrower as Lender may from time to time reasonably

request; provided, however, that so long as the Lender shall be receiving copies of all proxy statements, financial statements and reports that the Borrower sends to its unitholders, partners or members, and copies of all regular, periodic and special reports, and all registration statements, that the Borrower files with the Securities and Exchange Commission of the United States or any governmental authority that may be substituted therefor, or with any national securities exchange, in each case promptly after the sending or filing thereof, the Borrower shall have no obligation to deliver any other financial statements to the Lender hereunder. In addition, the Borrower shall deliver to the Lender, as soon as available but within 60 days following the end of each of the initial three quarters of the Borrower's fiscal year and within 120 days following the end of the Borrower's fiscal year, a statement demonstrating and computing compliance by the Borrower with the covenant required to be maintained by the Borrower pursuant to Section 6.7 (Leverage Ratio) hereof for the period then ended, together with a certificate of the Chief Financial Officer or Treasurer of the General Partner to the effect that the information contained therein is true and accurate as of the date of such certificate.

IN WITNESS WHEREOF, the parties hereto have executed and delivered this Loan Agreement as of the day and year first above written.

"Borrower"

ALLIANCE RESOURCE PARTNERS, L.P.,
a limited partnership

By: ALLIANCE RESOURCE MANAGEMENT GP,
LLC, the managing general partner

By         /s/ Michael L. Greenwood
   ---------------------------------------
   Name:   Michael L. Greenwood,
   Title:  Senior Vice President - Chief
           Financial Officer and Treasurer

"Lender"

BANK OF OKLAHOMA, NATIONAL ASSOCIATION

By         /s/ Robert D. Mattax
   --------------------------------------------
   Name:   Robert D. Mattax
   Title:  Senior Vice President

Schedule "1.6"

(Borrower Authority Documents)

[No separate Secretary's Certificate; See Schedule 1.20, the Secretary's Certificate attached to which is incorporated herein by reference.]

Schedule "1.20"

(General Partner Authority Documents)

Schedule "1.23"

(Guarantor Authority Documents)

Schedule "1.24"

(Guaranty Agreement)

Schedule "1.35"

(Note)

Exhibit 10.21

PROMISSORY NOTE

$10,000,000.00 July 31, 2001, Tulsa, Oklahoma

FOR VALUE RECEIVED, the undersigned, ALLIANCE RESOURCE PARTNERS, L.P. ("Maker"), promises to pay to the order of BANK OF OKLAHOMA, N.A.("Lender"), at its offices in Tulsa, Oklahoma, on demand, the principal sum of TEN MILLION AND NO/100 DOLLARS ($10,000,000.00) or, if less, the aggregate sum of all Advances made by Lender under the Letters of Credit issued for the account of Maker pursuant to the Letter of Credit Facility Agreement between Maker and Lender, dated as of June 29, 2001 (as the same may be amended, modified or supplemented from time to time in accordance with the terms thereof, the "Credit Agreement") to the extent Lender shall have not been reimbursed for such Advances as required by Section 2.3 of the Credit Agreement, together with interest thereon per annum at the Prime Rate as provided herein. Capitalized terms used herein without definition shall have the meanings ascribed to them in the Credit Agreement.

If any payment shall be due on a Saturday or Sunday or upon any other day on which state or national banks in the State of Oklahoma are closed for business by virtue of a legal holiday for such banks, such payment shall be due and payable on the next succeeding banking day and interest shall accrue to such day. Interest on any Advance not so reimbursed shall accrue from the date outstanding hereunder to (but not including) the date paid and shall be computed on the actual number of days elapsed (365 or 366) based upon a 360-day year.

"Prime Rate" shall mean a fluctuating interest rate per annum as in effect from time to time, which interest rate per annum shall at all times be equal to the rate of interest announced publicly from time to time (whether or not charged in each instance) by Chase Manhattan Bank, N.A., at New York, NY ("Rate Bank"), as its base rate or general reference rate. Each change in the Prime Rate (or any component thereof) shall become effective hereunder without notice to Maker (which notice is hereby expressly waived by Maker), on the effective date of each such change. Should the Rate Bank abolish or abandon the practice of announcing or publishing a Prime Rate, then the Prime Rate used during the remaining term of this Note shall be that interest rate or other general reference rate then in effect at the Rate Bank which, from time to time, in the reasonable judgment of Lender, most effectively approximates the initial definition of the "Prime Rate." Maker acknowledges that Lender may, from time to time, extend credit to other borrowers at rates of interest varying from, and having no relationship to, the Prime Rate. The rate of interest payable upon the indebtedness evidenced by this Note shall not, however, at any time exceed the maximum rate of interest permitted under the laws of the State of Oklahoma for loans of the type and character evidenced by this Note.

All payments under this Note shall be made in legal tender of the United States of America or in other immediately available funds at Lender's office described above, and no credit shall be given for any payment received by check, draft or other instrument or item until such time as the holder hereof shall have received credit therefor from the holder's collecting agent or, in the event no collecting agent is used, from the bank or other financial institution upon which said check, draft or other instrument or item is drawn.

From time to time the maturity date of this Note may be extended or this Note may be renewed, in whole or in part, or a new note of different form may be substituted for this Note and/or the rate of interest may be changed, or changes to this Note may be made in consideration of any Letter of Credit Action, and the holder of this Note, from time to time, may waive or surrender, either in whole or in part, any rights, guarantees, security interests or liens given for the benefit of the holder of this Note in connection herewith; but no such occurrences shall in any manner affect, limit, modify or otherwise impair any rights, guarantees or security of the holder of this Note not specifically waived, released or surrendered in writing, nor shall any maker, guarantor, endorser or any person who is or might be liable hereon, either primarily or contingently, be released from such liability by reason of the occurrence of any such event. The holder hereof, from time to time, shall have the unlimited right to release any person who might be liable hereon; and such release shall not affect or discharge the liability of any other person who is or might be liable hereon.

If any payment required by this Note to be made is not made when due, or if any Default occurs under the Credit Agreement or if any "event of default" occurs under the provisions of any mortgage, security agreement, assignment, pledge or other document or agreement which provides security for the indebtedness evidenced by this Note, the holder hereof may, at its option, without notice or demand, declare this Note in default and all indebtedness due and owing hereunder immediately due and payable. Interest from the date of default on such principal balance and on any past due interest hereunder shall accrue at the rate of two percent (2%) per annum above the nondefault interest rate accruing hereunder. The Maker hereby waives protest, presentment, demand, and notice of protest and nonpayment in case this Note or any payment due hereunder is not paid when due; and the Maker agrees to any renewal, extension, acceleration, postponement of the time of payment, substitution, exchange or release of collateral and to the release of any party or person primarily or contingently liable without prejudice to the holder hereof and without notice to the Maker or any endorser, guarantor or surety. Maker and any guarantor, endorser, surety or any other person who is or may become liable hereon will, on demand, pay all costs of collection, including reasonable attorney fees of the holder hereof in attempting to enforce payment of this Note and reasonable attorney fees for defending the validity of any document securing this Note as a valid first and prior lien.

Upon the occurrence of any Default, Lender shall have the right, immediately and without further action by it, to set off against this Note all money owed by Lender in any capacity to the Maker or any guarantor, endorser or other person who is or might be liable for payment hereof, whether or not due, and also to set off against all other liabilities of Maker to Lender all money owed by Lender in any capacity to Maker; and Lender shall be deemed to have exercised such right of setoff and to have made a charge against such money immediately upon the occurrence of such Default even though such charge is made or entered into the books of Lender subsequently thereto.

This Note is the promissory note issued pursuant to the Credit Agreement and is given for an actual loan of money for business purposes and not for personal, agricultural or residential purposes, and is executed and delivered in the State of Oklahoma and shall be governed by and

construed in accordance with the laws of the State of Oklahoma, without giving effect to principles of conflicts of laws.

ALLIANCE RESOURCE PARTNERS, L.P.

By: ALLIANCE RESOURCE MANAGEMENT
GP, LLC, the managing general partner

By:         /s/ Michael L. Greenwood
    ---------------------------------------
    Name:   Michael L. Greenwood
    Title:  Senior Vice President - Chief
            Financial Officer and Treasurer

Exhibit 10.22

GUARANTY

THIS GUARANTY is dated July 31, 2001, (the "Guaranty"), and made by ALLIANCE RESOURCE GP, LLC, a Delaware limited liability company ("Guarantor"), in favor of the BANK OF OKLAHOMA, N.A. ("Lender").

PRELIMINARY STATEMENT. Alliance Resource Partners, L.P., a Delaware limited partnership (the "COMPANY" or "BORROWER"), is party to a Letter of Credit Facility Agreement, dated as of June 29, 2001 (as amended, amended and restated, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"; the capitalized terms defined therein and not otherwise defined herein being used herein as therein defined) with Lender. Guarantor shall receive, directly or indirectly, a benefit from the issuance of the Letters of Credit under the Credit Agreement and will derive substantial direct and indirect benefits from the transactions contemplated by the Credit Agreement. It is a condition precedent to issuing the Letters of Credit by the Lender under the Credit Agreement from time to time that Guarantor shall have executed and delivered this Guaranty.

NOW, THEREFORE, in consideration of the premises and in order to induce the Lender to issue Letters of Credit from time to time, Guarantor, hereby agrees as follows:

Section 1. Guaranty; Limitation of Liability. (a) Guarantor hereby absolutely, unconditionally and irrevocably guarantees the punctual payment when due, whether at scheduled maturity or on any date of a required prepayment or by acceleration, demand or otherwise, of all obligations of the Company now or hereafter existing under or in respect of the Loan Documents (including, without limitation, any extensions, modifications, substitutions, amendments or renewals of any or all of the foregoing obligations) (such obligations being the "Guaranteed Obligations"), and agrees to pay any and all reasonable expenses
(including, without limitation, reasonable fees and expenses of counsel)
incurred by the Lender in enforcing any rights under this Guaranty or any Loan Document. To the extent permitted by law, without limiting the generality of the foregoing, Guarantor's liability shall extend to all amounts that constitute part of the Guaranteed Obligations and would be owed by any other party to Lender under or in respect of the Loan Documents but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving such other party.

(b) Guarantor and, by its acceptance of this Guaranty, Lender hereby confirm that it is the intention of all such Persons that this Guaranty and the Guaranteed Obligations of Guarantor hereunder not constitute a fraudulent transfer or conveyance for purposes of or under any Debtor Relief Laws (including the Uniform Fraudulent Conveyance Act and the Uniform Fraudulent Transfer Act) to the extent applicable to this Guaranty and the Guaranteed Obligations of Guarantor hereunder. To effectuate the foregoing intention, the Lender and the Guarantor hereby irrevocably agree that the Guaranteed Obligations of Guarantor under this Guaranty at any time shall be limited to the maximum amount as will result in the Guaranteed Obligations of such Guarantor under this Guaranty not constituting a fraudulent transfer or conveyance.

Section 2. Guaranty Absolute. To the extent permitted by law, Guarantor guarantees that the Guaranteed Obligations will be paid strictly in accordance with the terms of the Loan Documents, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of Lender with respect thereto. To the extent permitted by law, the obligations of Guarantor under or in respect of this Guaranty are independent of the Guaranteed Obligations, and a separate action or actions may be brought and prosecuted against Guarantor to enforce this Guaranty, irrespective of whether any action is brought against the Borrower or any other Person guarantying or pledging assets as collateral security for the Guaranteed Obligations or whether the Borrower or any such other Person is joined in any such action or actions. To the extent permitted by law, the liability of Guarantor under this Guaranty shall be irrevocable, absolute and unconditional irrespective of, and Guarantor hereby irrevocably waives any defenses it may now have or hereafter acquire in any way relating to, any or all of the following:

(a) any lack of validity or enforceability of any Loan Document or any agreement or instrument relating thereto;

(b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations under or in respect of the Loan Documents, or any other amendment or waiver of or any consent to departure from any Loan Document, including, without limitation, any increase in the Guaranteed Obligations resulting from the extension of additional credit to Company or otherwise;

(c) any taking, exchange, release or non-perfection of any collateral, or any taking, release or amendment or waiver of, or consent to departure from, any other guaranty, for all or any of the Guaranteed Obligations;

(d) any manner of application of any collateral, or proceeds thereof, to all or any of the Guaranteed Obligations, or any manner of sale or other disposition of any collateral for all or any of the Guaranteed Obligations;

(e) any change, restructuring or termination of the corporate structure or existence of Company;

(f) any failure of Lender to disclose to Company any information relating to the business, condition (financial or otherwise), operations, performance, properties or prospects of Company now or hereafter known to Lender (Guarantor waiving any duty on the part of the Lender to disclose such information); or

(g) any other circumstance (including, without limitation, any statute of limitations) or any existence of or reliance on any representation by Lender that might otherwise constitute a defense available to, or a discharge of, Company or any other guarantor or surety.

This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Guaranteed Obligations is rescinded or must otherwise be returned by

Lender or any other Person upon the insolvency, bankruptcy or reorganization of the Borrower or otherwise, all as though such payment had not been made.

Section 3. Waivers and Acknowledgments. (a) To the extent permitted by law, Guarantor hereby unconditionally and irrevocably waives promptness, diligence, notice of acceptance, presentment, demand for performance, notice of nonperformance, default, acceleration, protest or dishonor and any other notice with respect to any of the Guaranteed Obligations and this Guaranty and any requirement that Lender protect, secure, perfect or insure any lien or any property subject thereto or exhaust any right or take any action against Company or any other Person or any collateral.

(b) To the extent permitted by law, Guarantor hereby unconditionally and irrevocably waives any right to revoke this Guaranty and acknowledges that this Guaranty is continuing in nature and applies to all Guaranteed Obligations, whether existing now or in the future.

(c) To the extent permitted by law, Guarantor hereby unconditionally and irrevocably waives (i) any defense arising by reason of any claim or defense based upon an election of remedies by Lender that in any manner impairs, reduces, releases or otherwise adversely affects the subrogation, reimbursement, exoneration, contribution or indemnification rights of Guarantor or other rights of Guarantor to proceed against Company, any other guarantor or any other Person or any collateral and (ii) any defense based on any right of set-off or counterclaim against or in respect of the Guaranteed Obligations of Guarantor hereunder.

(d) To the extent permitted by law, Guarantor hereby unconditionally and irrevocably waives any duty on the part of Lender to disclose to Guarantor any matter, fact or thing relating to the business, condition (financial or otherwise), operations, performance, properties or prospects of Company or any of its subsidiaries now or hereafter known by Lender.

(e) Guarantor acknowledges that it will receive substantial direct and indirect benefits from the financing arrangements contemplated by the Loan Documents and that the waivers set forth in Section 2 and this Section 3 are knowingly made in contemplation of such benefits.

Section 4. Subrogation. Guarantor hereby unconditionally and irrevocably agrees not to exercise any rights that it may now have or hereafter acquire against the Borrower that arise from the existence, payment, performance or enforcement of Guarantor's obligations under or in respect of this Guaranty or any Loan Document, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or remedy of Lender against the Borrower, or any other insider guarantor whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including, without limitation, the right to take or receive from the Borrower, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim, remedy or right, unless and until all of the Guaranteed Obligations and all other amounts payable under this Guaranty shall have been paid in full in cash and the Letter of Credit Commitment shall have expired or been terminated. If any amount shall be paid to

Guarantor in violation of the immediately preceding sentence at any time prior to the later of (a) the payment in full in cash of the Guaranteed Obligations and all other amounts payable under this Guaranty, and (b) the Termination Date, such amount shall be received and held in trust for the benefit of Lender, shall be segregated from other property and funds of Guarantor and shall forthwith be paid or delivered to the Lender in the same form as so received (with any necessary endorsement or assignment) to be credited and applied to the Guaranteed Obligations and all other amounts payable under this Guaranty, whether matured or unmatured, in accordance with the terms of the Loan Documents, or to be held as collateral for any Guaranteed Obligations or other amounts payable under this Guaranty thereafter arising. If (i) Guarantor shall make payment to Lender of all or any part of the Guaranteed Obligations, (ii) all of the Guaranteed Obligations and all other amounts payable under this Guaranty shall have been paid in full in cash, and (iii) the Termination Date shall have occurred, the Lender will, at Guarantor's request and expense, execute and deliver to Guarantor appropriate documents, without recourse and without representation or warranty, necessary to evidence the transfer by subrogation to Guarantor of an interest in the Guaranteed Obligations resulting from such payment made by such Guarantor pursuant to this Guaranty.

Section 5. Payments Free and Clear of Taxes, Etc. (a) Any and all payments made by any Guarantor under or in respect of this Guaranty or any Loan Document shall be made free and clear of and without deduction for any and all present or future taxes (other than any taxes that are imposed on the Lender's overall net income by the United States and taxes that are imposed on the Lender's overall net income (and franchise taxes imposed in lieu thereof) by the state or other jurisdiction under the laws of which the Lender is organized or any political subdivision thereof) (the "Taxes"). If Guarantor shall be required by law to deduct any Taxes from or in respect of any sum payable under or in respect of this Guaranty or any Loan Document to Lender, (i) the sum payable by Guarantor shall be increased as may be necessary so that after Guarantor and the Lender have made all required deductions (including deductions applicable to additional sums payable under this Section 5), the Lender receives an amount equal to the sum it would have received had no such deductions been made, (ii) Guarantor shall make all such deductions, and (iii) Guarantor shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law.

(b) In addition, Guarantor agrees to pay any present or future other Taxes that arise from any payment made by or on behalf of Guarantor under or in respect of this Guaranty or any Loan Document or from the execution, delivery or registration of, performance under, or otherwise with respect to, this Guaranty and the Loan Documents.

(c) Guarantor will indemnify Lender for and hold it harmless against the full amount of Taxes, and for the full amount of taxes of any kind imposed by any jurisdiction on amounts payable under this Section 5, imposed on or paid by Lender and any liability (including penalties, additions to tax, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be made within 30 days from the date Lender makes written demand therefor.

(d) Within 30 days after the date of any payment of Taxes by or on behalf of Guarantor, Guarantor shall furnish to the Lender, at its address referred to in Section 9, the

original or a certified copy of a receipt evidencing such payment. In the case of any payment hereunder by or on behalf of Guarantor through an account or branch outside the United States or by or on behalf of Guarantor by a payor that is not a United States person, if Guarantor determines that no taxes are payable in respect thereof, Guarantor shall furnish, or shall cause such payor to furnish, to the Lender, at such address, an opinion of counsel acceptable to the Lender stating that such payment is exempt from taxes. For purposes of subsection (d) of this Section 5, the terms "UNITED STATES" and "UNITED STATES PERSON" shall have the meanings specified in Section 7701 of the Internal Revenue Code.

Section 6. Representations and Warranties. Guarantor hereby represents and warrants that Guarantor has, independently and without reliance upon Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Guaranty, and Guarantor has established adequate means of obtaining from the Borrower on a continuing basis information pertaining to, and is now and on a continuing basis will be completely familiar with, the business, condition (financial or otherwise), operations, performance, properties and prospects of the Borrower. In addition, the Guarantor further represents and warrants to the Lender as follows:

(a) All financial statements heretofore delivered to Lender relating to Guarantor are true and correct in all material respects, have been prepared in accordance with Guarantor's past practices consistently applied, and fairly present (subject to year-end audit adjustments) the financial conditions reflected therein without material changes since the respective dates thereof;

(b) There are not actions, suits or proceedings pending or, to the knowledge of Guarantor, threatened against or affecting Guarantor, or involving the validity or enforceability of this Guaranty at law or in equity, or before or by any governmental authority, except actions, suits and proceedings fully covered by insurance or for which adequate reserves exist or which, if adversely determined, would not substantially impair the ability of Guarantor to pay when due any amounts which may become payable in respect of this Guaranty; and to Guarantor's knowledge, Guarantor is not in default with respect to any order, writ, injunction, decree or demand of any court or any governmental authority;

(c) The consummation of the transaction hereby contemplated and the performance of this Guaranty by Guarantor will not result in any breach of, or constitute a default under, any indenture, mortgage, lease, loan or credit agreement or any other material instrument or agreement to which Guarantor is a party or by which Guarantor may be bound or affected; and

(d) No default presently exists under this Guaranty and no event has occurred and is continuing which, with notice or the passage of time, or both, would constitute a default under this Guaranty.

Section 7. Covenants; Delivery of Financial Information. Guarantor covenants and agrees that, so long as any part of the Guaranteed Obligations shall remain unpaid or the Letter of Credit Commitment shall be in effect, Guarantor will:

(a) perform and observe all of the terms, covenants and agreements set forth in the Loan Documents on its part to be performed or observed or that the Borrower has agreed to cause Guarantor to perform or observe;

(b) deliver to the Lender, as soon as available but within 60 days following the end of each of the Guarantor's fiscal quarters (other than the last fiscal quarter of any fiscal year), an internally prepared balance sheet, income statement and statement of cash flows of the Guarantor for the fiscal quarter then ended, prepared in accordance with GAAP except to the extent deviated therefrom in accordance with the Guarantor's past practices;

(c) deliver to the Lender, as soon as available but within 120 days following the end of the Guarantor's fiscal year, an internally prepared balance sheet, income statement and statement of cash flows of the Guarantor for the fiscal year then ended, prepared in accordance with GAAP except to the extent deviated therefrom in accordance with the Guarantor's past practices; and

(d) deliver to the Lender, as soon as available but within 60 days following the end of each of the initial three quarters of the Guarantor's fiscal year and within 120 days following the end of the Guarantor's fiscal year, a statement demonstrating and computing compliance by the Guarantor with the covenants required to be maintained by the Guarantor pursuant to Sections 6.8 (Liquidity) and
6.9 (Net Asset Position) of the Credit Agreement for the period then ended.

The financial statements and compliance certificate required to be delivered pursuant to clauses (b), (c) and (d) of this Section 7 shall be accompanied by a certificate of the Chief Financial Officer or Treasurer of the Guarantor to the effect that the information contained therein is true and accurate as of the date of such certificate.

Section 8. Amendments, Guaranty Supplements, Etc. (a) No amendment or waiver of any provision of this Guaranty and no consent to any departure by Guarantor therefrom shall in any event be effective unless the same shall be in writing and signed by the Lender, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

Section 9. Notices, Etc. All notices, consents, waivers, and other communications required or permitted to be given under this Guaranty must be in writing and will be deemed to have been duly given when (a) delivered by hand (with written confirmation of receipt), (b) sent by telecopier (with written confirmation of receipt), provided that a copy is mailed by registered mail, return receipt requested, or (c) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and telecopier numbers set forth below (or to such other addresses and telecopier numbers as a party may designate by notice to the other parties):

To Guarantor

Alliance Resource GP, LLC 1717 South Boulder Avenue Tulsa, Oklahoma 74119
Attn: Cary Marshall, Director, Corporate Finance Telefax: (918) 295-7357

with a copy to:

Alliance Resource Partners, L.P. c/o Alliance Resource Management GP, LLC 1717 South Boulder Avenue Tulsa, Oklahoma 74119
Attn: Thomas L. Pearson, Senior Vice President - Law and Administration, General Counsel and Secretary Telefax: (918) 295-7361

and to:

Katten Muchin Zavis
1025 Thomas Jefferson Street, NW East Lobby, Suite 700
Washington, DC 20007
Attn: Steven C. Schnitzer, Esq.

Telefax: (202) 298-7570

To Lender:

Bank of Oklahoma, National Association BOK Tower, 8 Southeast 1 Williams Center
Tulsa, Oklahoma 74172 Attn: Robert D. Mattax, Senior Vice President Telefax: (918) 295-0400

with copy to:

Riggs, Abney, Neal, Turpen, Orbison & Lewis 502 West Sixth Street
Tulsa, Oklahoma 74119 Attn: Harley W. Thomas, Esq.

Telefax: (918) 584-1603

or at such other address of which it shall have notified the party giving such notice in writing. Notices to in-house counsel or outside counsel of a party hereto shall not constitute sufficient notice to such party.

Section 10. No Waiver; Remedies. No failure on the part of Lender 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.

Section 11. Right of Set-off. Upon (a) the occurrence and during the continuance of any Default, and (b) the delivery of the notice and expiration of the Cure Period provided by Section 6 of the Credit Agreement, the Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by Lender, to or for the credit or the account of Guarantor against any and all of the Guaranteed Obligations of Guarantor now or hereafter existing under the Loan Documents, irrespective of whether Lender shall have made any demand under this Guaranty or any Loan Document and although such Guaranteed Obligations may be unmatured. Lender agrees promptly to notify Guarantor after any such set-off and application; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. The rights of Lender under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) that Lender may have.

Section 12. Indemnification. (a) Without limitation on any other Guaranteed Obligations of Guarantor or remedies of the Lender under this Guaranty, Guarantor shall, to the fullest extent permitted by law, indemnify, defend and save and hold harmless Lender and its respective officers, directors, employees, agents and advisors (each, an "INDEMNIFIED PARTY") from and against, and shall pay on demand, any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and expenses of counsel) that may be incurred by or asserted or awarded against any Indemnified Party in connection with or as a result of any failure of any Guaranteed Obligations to be the legal, valid and binding obligations of Company enforceable against Company in accordance with their terms.

(b) Guarantor hereby also agrees that none of the Indemnified Parties shall have any liability (whether direct or indirect, in contract, tort or otherwise) to the Guarantor or any of their respective officers, directors, employees, agents and advisors, and Guarantor hereby agrees not to assert any claim against any Indemnified Party on any theory of liability, for special, indirect, consequential or punitive damages arising out of or otherwise relating to the Loan Documents, the actual or proposed use of the proceeds under the Loan Documents or any of the transactions contemplated by the Loan Documents.

(c) Without prejudice to the survival of any of the other agreements of Guarantor under this Guaranty, the agreements and obligations of Guarantor contained in Section 1(a) (with respect to enforcement expenses), the last sentence of Section 2, Section 5 and this

Section 12 shall survive the payment in full of the Guaranteed Obligations and all of the other amounts payable under this Guaranty.

Section 13. Subordination. Guarantor hereby subordinates any and all debts, liabilities and other obligations owed to Guarantor by Company (the "Subordinated Obligations") to the Guaranteed Obligations to the extent and in the manner hereinafter set forth in this Section 13:

(a) Prohibited Payments, Etc. Except during the continuance of any Matured Default (including the commencement and continuation of any proceeding under any Debtor Relief Law relating to the Company), Guarantor may receive regularly scheduled payments from Company on account of the Subordinated Obligations. After the occurrence and during the continuance of any Matured Default (including the commencement and continuation of any proceeding under any Debtor Relief Law relating to Company), however, unless the Lender otherwise agrees, Guarantor shall not demand, accept or take any action to collect any payment on account of the Subordinated Obligations.

(b) Prior Payment of Guaranteed Obligations. In any proceeding under any Debtor Relief Law relating to Company, Guarantor agrees that the Lender shall be entitled to receive payment in full in cash of all Guaranteed Obligations (including all interest and expenses accruing after the commencement of a proceeding under any Debtor Relief Law, whether or not constituting an allowed claim in such proceeding ("POST PETITION INTEREST") before Guarantor receives payment of any Subordinated Obligations.

(c) Turn-Over. After the occurrence and during the continuance of any Matured Default (including the commencement and continuation of any proceeding under any Debtor Relief Law relating to the Company), Guarantor shall, if the Lender so requests, collect, enforce and receive payments on account of the Subordinated Obligations as trustee for the Lender and deliver such payments to the Lender on account of the Guaranteed Obligations (including all Post Petition Interest), together with any necessary endorsements or other instruments of transfer, but without reducing or affecting in any manner the liability of Guarantor under the other provisions of this Guaranty.

(d) Lender Authorization. After the occurrence and during the continuance of any Matured Default (including the commencement and continuation of any proceeding under any Debtor Relief Law relating to the Company), the Lender is authorized and empowered (but without any obligation to so do), in its discretion, (i) in the name of Guarantor, to collect and enforce, and to submit claims in respect of, Subordinated Obligations and to apply any amounts received thereon to the Guaranteed Obligations (including any and all Post Petition Interest), and (ii) to require Guarantor (A) to collect and enforce, and to submit claims in respect of, Subordinated Obligations and (B) to pay any amounts received on such obligations to the Lender for application to the Guaranteed Obligations (including any and all Post Petition Interest).

Section 14. Continuing Guaranty; Assignments under the Credit Agreement. This Guaranty is a continuing guaranty and shall (a) remain in full force and effect until the latest of (i) the payment in full in cash of the Guaranteed Obligations and all other amounts payable under this Guaranty and
(ii) the Termination Date, (b) be binding upon the Guarantor, its successors

and assigns and (c) inure to the benefit of and be enforceable by the Lender and its successors, permitted transferees and permitted assigns. Without limiting the generality of clause (c) of the immediately preceding sentence, the Lender may assign or otherwise transfer all or any portion of its rights and obligations under the Credit Agreement (including, without limitation, all or any portion of its Letter of Credit Commitment, the Advances owing to it and the Note held by it) to any other Person to the extent permitted by and in accordance with Section 8.5 of the Credit Agreement, and such other permitted transferee shall thereupon become vested with all the benefits in respect thereof granted to Lender herein or otherwise. Guarantor shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lender.

Section 15. Execution in Counterparts. This Guaranty and each amendment, waiver and consent with respect hereto may be executed in any number of counterparts and by difference parties thereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Guaranty by telecopier shall be effective as delivery of an original executed counterpart of this Guaranty.

Section 16. Governing Law. This Guaranty shall be deemed to be a contract made under the laws of the State of Oklahoma, and shall be construed by and governed in accordance with the laws of the State of Oklahoma, without giving effect to principles of conflicts of laws. Guarantor hereby submits itself to the jurisdiction and venue of the Tulsa County District Court, or Federal Court (Northern District) situated in Oklahoma, at Lender's election, except to the extent local law (if different) is required in connection with a foreclosure action.

IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly executed and delivered by or on its behalf as of the date first above written.

ALLIANCE RESOURCE GP, LLC

By         /s/ Michael L. Greenwood
   ---------------------------------------
   Name:   Michael L. Greenwood
   Title:  Senior Vice President - Chief
           Financial Officer and Treasurer

Exhibit 10.23

LETTER OF CREDIT FACILITY AGREEMENT

This Letter of Credit Facility Agreement is dated as of this 30th day of August, 2001 by and between FIFTH THIRD BANK, an Ohio banking corporation ("Lender"), and ALLIANCE RESOURCE PARTNERS, L.P., a Delaware limited partnership ("Borrower").

RECITALS

A. Borrower has requested a $10,000,000 line of credit ("Loan") from Lender for the issuance from time to time of Letters of Credit (defined below).

B. Subject to Borrower's compliance with all of the terms, conditions and covenants hereinafter set forth and predicated on Borrower's representations and warranties, each of which is material and is being relied upon by Lender, Lender agrees to issue from time to time Letters of Credit for the account of Borrower and for the benefit of Borrower and its subsidiaries in the amount and on the terms hereinafter set forth up to the total of the Letter of Credit Commitment.

AGREEMENT

For valuable consideration received and in consideration of the premises and of the mutual covenants and agreements contained herein, the parties hereto hereby agree to the following:

1. Definitions. The following terms shall have the meanings given.

1.1. "Advance" means the disbursement by Lender under a Letter of Credit to the beneficiary thereof for the account of Borrower.

1.2. "Agreement" means this Letter of Credit Facility Agreement, as amended, amended and restated, modified or supplemented from time to time in accordance with the terms hereof.

1.3. "Alliance Resource GP, LLC" means Alliance Resource GP, LLC, a Delaware limited liability company.

1.4. "AROP" means Alliance Resource Operating Partners, L.P., a Delaware limited partnership.

1.5. "Borrower Authority Documents" means the following documents as to the Borrower and the General Partner: (i) Certificate of Good Standing, dated within five (5) Business Days of the Effective Date, issued by the State in which the Borrower was formed; (ii) Certificate of Good Standing, dated within five (5) Business Days of the Effective Date,

issued by the State in which the General Partner was formed; and (iii) Certificate, dated the Effective Date, from the Secretary or Assistant Secretary of the General Partner, substantially in form and substance as set forth on Schedule "1.5" hereto, to which shall be attached (A) the Certificate of Limited Partnership of the Borrower and the Certificate of Formation of the General Partner, in each case certified by the Secretary of State of the State of Delaware as of a date that is within five (5) Business Days of the Effective Date, and (B) a copy of the fully executed limited partnership agreement of the Borrower and the limited liability company operating agreement of the General Partner, in each case together with all amendments thereto, if any.

1.6. "Business Day" means any day other than a Saturday, Sunday or other day on which commercial banks in Cincinnati, Ohio are authorized or required to close under the laws of the State of Ohio.

1.7. "Capital Stock" shall mean, with respect to any Person, any and all shares, units representing interests, participations, rights in or other equivalents (however designated) of such Person's capital stock, including (a) with respect to partnerships, partnership interests (whether general or limited) and any other interest or participation that confers upon a Person the right to receive a share of the profits and losses of, or distributions of assets of, such partnership, (b) with respect to limited liability companies, member interests, and (c) with respect to any Person, any rights (other than debt securities convertible into capital stock), warrants or options exchangeable for or convertible into such capital stock.

1.8. "Cash Equivalents" means any of the following: (a) cash;
(b) marketable securities of any issuer (including, without limitation, any corporation or governmental authority) and, if applicable, of any duration; (c) common and subordinated units issued by Borrower and beneficially owned by the Guarantor; and (d) any other item determined in accordance with GAAP to constitute cash or cash equivalents.

1.9. "Consolidated Subsidiary" means, with respect to any Person at any time for any period, any Subsidiary the accounts of which would be consolidated with those of such first Person in its consolidated financial statements as of such time.

1.10. "Consolidated EBITDA" means, with respect to the Borrower and its Consolidated Subsidiaries for any period, net income plus (i) interest expense, (ii) depreciation, obsolescence and amortization of property, (iii) capitalized lease expenses, (iv) the non-cash portion of advance royalties and any non-cash employee compensation expenses, and (v) tax expenses, all as determined in accordance with GAAP; provided, however, that net income shall exclude any net income or gain or loss during such period from (x) any change in accounting principles in accordance with GAAP, (y) any prior period adjustments resulting from any change in accounting principles in accordance with GAAP, and (z) any extraordinary or unusual items.

1.11. "Consolidated Funded Debt" means, with respect to the Borrower and its Consolidated Subsidiaries, long-term and short-term interest bearing obligations that would be required to be classified and accounted for as such in the consolidated balance sheet of the Borrower and its Consolidated Subsidiaries prepared in accordance with GAAP.

1.12. "Cure Period" shall have the meaning set forth in
Section 7 hereof.

1.13. "Debtor Relief Laws" shall mean the Bankruptcy Code of 1978 (Title 11 of the United States Code), as the same may be amended from time to time and any successor statute thereto (the "Federal Bankruptcy Code"), together with other applicable federal and state liquidation, conservatorship, bankruptcy, moratorium, rearrangement, insolvency, reorganization or similar laws affecting the rights and remedies of creditors generally, as in effect from time to time.

1.14. "Default" shall mean the occurrence of any of the events described in Section 6 hereof.

1.15. "Effective Date" shall have the meaning set forth in
Section 3 hereof.

1.16. "Federal Bankruptcy Code" shall have the meaning set forth in the definition of Debtor Relief Laws contained herein.

1.17. "GAAP" means generally accepted accounting principles as in effect from time to time.

1.18. "General Partner" means Alliance Resource Management GP, LLC, a Delaware limited liability company.

1.19. "Governmental Requirements" means all laws, orders, decrees, ordinances, rules and regulations of any Governmental Authority.

1.20. "Guarantor" means Alliance Resource GP, LLC.

1.21. "Guarantor Authority Documents" means the following documents as to the Guarantor: (i) Certificate of Good Standing, dated within five (5) Business Days of the Effective Date, issued by the state in which the Guarantor was formed; and (ii) Certificate, dated the Effective Date, from the Secretary or Assistant Secretary of the Guarantor, substantially in form and content as set forth on Schedule "1.21" hereto, to which shall be attached a complete copy of the Certificate of Formation of the Guarantor, certified by the Secretary of State of the State of Delaware as of a date that is within five (5) Business Days of the Effective Date, and a copy of the Operating Agreement of the Guarantor, together with all amendments, if any.

1.22. "Guaranty Agreement" means the Guaranty, dated on or prior to the Effective Date, executed by the Guarantor, substantially in form and content as set forth on Schedule "1.22" hereto, as the same may be amended, amended and restated, modified or supplemented from time to time in accordance with the terms thereof.

1.23. "Letter of Credit" means any letter of credit issued pursuant to Section 2.1, for which, when issued, a Letter of Credit Fee shall be paid, as the same may be amended, modified or supplemented from time to time in accordance with the terms thereof.

1.24. "Letter of Credit Action" means the issuance, supplement, amendment, renewal, extension, modification or other action (other than an Advance) relating to a Letter of Credit.

1.25. "Letter of Credit Commitment" means the commitment of the Lender to issue Letters of Credit in an amount up to $10,000,000, as the same may be reduced in accordance with Sections 2.4 and 7.1(iii) hereof.

1.26. "Letter of Credit Fee" means, with respect to any Letter of Credit, a fee of .80% per annum (calculated on the basis of a 360-day year and the actual number of days elapsed) on the daily average of the maximum amount available to be drawn from time to time under such Letter of Credit issued or renewed after the date hereof, payable quarterly in arrears.

1.27. "Letter of Credit Issuance Fee" means a fee equal to that which is reasonable and customarily charged by Lender for issuing, reviewing and generally processing Letters of Credit.

1.28. "Letter of Credit Usage" means, as of any date of determination, the maximum amount available to be drawn under all outstanding Letters of Credit plus the aggregate amount of all drawings under the Letters of Credit honored by Lender and not reimbursed to Lender by the Borrower.

1.29. "Leverage Ratio" means, as of any date of determination, the ratio of Consolidated Funded Debt to Consolidated EBITDA of the Borrower and its Consolidated Subsidiaries, calculated for the four (4) consecutive fiscal quarters ending on the last day of the fiscal quarter most recently completed.

1.30. "Matured Default" means any Default provided that any requirement for the giving of notice, the lapse of time, or both (including the expiration of the Cure Period, if applicable), or any other condition has been satisfied.

1.31. "Opinion of Borrower's and Guarantor's Counsel" shall mean an opinion from Borrower's and Guarantor's counsel, dated the Effective Date and addressed to Lender, substantially in form and content as set forth on Schedule "1.31" hereto.

1.32. "Person" means any individual, partnership, corporation (including a business trust), limited liability company, joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof.

1.33. "Prime Rate" shall have the meaning set forth in Section 2.3 hereof.

1.34. "Subsidiary" means, with respect to any Person, any corporation limited liability company, partnership, joint venture, association, trust or other entity of which (or in which) more than 50% of (a) the issued and outstanding Capital Stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether at the time Capital Stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency), (b) the interests in the capital or profits of such partnership, limited liability, joint venture or association with ordinary voting power to elect a majority of the board of directors (or Person performing similar functions) of such partnership, limited liability company, joint venture or association, or (c) the beneficial interests in such trust or other entity with ordinary voting power to elect a majority of the board of trustees (or Persons performing similar functions) of such trust or other entity, is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its Subsidiaries, or by one or more of such Person's Subsidiaries.

1.35. "Termination Date" shall mean the one-year anniversary of the Effective Date; provided, however, that the Termination Date shall be automatically extended for successive periods of one-year each without the requirement of notice or otherwise unless the Lender shall have given written notice to the Borrower at least sixty (60) days' prior to then applicable Termination Date that it has elected not to extend the term of this Agreement for a successive one-year period.

2. LETTERS OF CREDIT.

2.1. The Letter of Credit Commitment; Letter of Credit Fee. Subject to the terms and conditions hereof, at any time and from time to time from the Effective Date through the date that is three (3) Business Days prior to the Termination Date, the Lender shall take such Letter of Credit Actions as the Borrower may request; provided, however, that (i) the aggregate outstanding Letter of Credit Usage shall not exceed the Letter of Credit Commitment at any time, and (ii) each Letter of Credit Action shall be in a form reasonably acceptable to Lender and shall not violate any policies of Lender. Each Letter of Credit will be a nontransferable standby letter of credit to support payment and/or performance obligations of the Borrower or any of its Subsidiaries. No Letter of Credit shall expire more than 365 days after the date of issuance except that, at the request of

Borrower, such Letter of Credit shall provide that it shall be automatically renewed for a one-year period unless the Lender, as issuer of such Letter of Credit, shall give at least 90 days' advance notice to the beneficiary thereof that such Letter of Credit shall not be automatically renewed. If any Letter of Credit shall remain outstanding after the Termination Date or other date upon which Lender's Letter of Credit Commitment expires pursuant to the terms hereof, the Borrower shall, not later than sixty (60) days thereafter with respect to all such then outstanding Letters of Credit, (i) deposit cash or Cash Equivalents in an amount equal to one hundred and two percent (102%) of the Letter of Credit Usage as of the date such deposit shall be required in a collateral account with the Lender (which account shall, with respect to all cash collateral, bear interest for the account of the Borrower or be invested in Cash Equivalents at the direction, and for the account, of the Borrower), or
(ii) cause the then outstanding Letters of Credit to be replaced and terminated. In the case of each Letter of Credit issued hereunder, a Letter of Credit Issuance Fee shall be payable to the Lender on the issuance date thereof and the Letter of Credit Fee with respect thereto shall be payable quarterly, in arrears. Following the expiration of any quarterly period during which any Letter of Credit shall remain outstanding, the Lender shall deliver to the Borrower a statement showing the Letter of Credit Fee due for the quarterly period then ended, and the Borrower shall pay the Letter of Credit Fee then due not later than five (5) Business Days following receipt of such statement.

2.2. Requesting Letter of Credit Actions. The Borrower may irrevocably request a Letter of Credit Action by delivering a written request therefor to Lender, not later than 2:00 p.m. (Tulsa time) on the date which is two (2) Business Days prior to the date of the requested action therefor. Such written request shall specify (a) the name and address of the beneficiary of the Letter of Credit to which such request relates, (b) the date on which the Borrower requires the Lender to issue such Letter of Credit, (c) the expiration date of such Letter of Credit, (d) the face amount of such Letter of Credit and (e) such other matters as shall be appropriate. Unless Lender determines that such Letter of Credit action is contrary to any requirement of law or policies of Lender or does not otherwise conform to the requirements of this Agreement, Lender shall effect such Letter of Credit Action.

2.3. Reimbursement of Payments Under Letters of Credit. The Borrower shall reimburse Lender for any payment that Lender makes under a Letter of Credit on or before the date of such payment except to the extent that such payment resulted from the Lender's gross negligence or willful misconduct. In the event that the Lender shall request reimbursement prior to such date of payment under a Letter of Credit, the Borrower shall not be required to deliver to the Lender such reimbursed amount more than three (3) Business Days prior to such date of payment. In the event that the Borrower shall have failed to reimburse the Lender not later than such date of payment, the Borrower shall pay to the Lender interest on the amount required to be reimbursed to the Lender. With respect to any payment made by the Lender under a Letter of Credit and

not so reimbursed by the Borrower on or prior to the date of such payment, interest shall accrue thereon per annum at the Prime Rate (as defined below) plus four percent (4%) from the date of such payment to (but not including) the date of reimbursement hereunder and shall be computed based on a 360-day year, actual number of days elapsed. If any payment shall be due on a day that is not a Business Day, such payment shall be due and payable on the next succeeding Business Day and interest shall accrue to such day. "Prime Rate" shall mean a fluctuating interest rate per annum as in effect from time to time, which interest rate per annum shall at all times be equal to the rate of interest announced publicly from time to time (whether or not charged in each instance) by the Lender at its principal office ("Rate Bank"), as its base rate or general reference rate. Each change in the Prime Rate (or any component thereof) shall become effective hereunder without notice to the Borrower (which notice is hereby expressly waived by the Borrower), on the effective date of each such change. Should the Rate Bank abolish or abandon the practice of announcing or publishing a Prime Rate, then the Prime Rate used shall be that interest rate or other general reference rate then in effect at the Rate Bank which, from time to time, in the reasonable judgment of Lender, most effectively approximates the initial definition of the "Prime Rate." The Borrower acknowledges that Lender may, from time to time, extend credit to other borrowers at rates of interest varying from, and having no relationship to, the Prime Rate. The rate of interest payable upon any such unreimbursed payment under a Letter of Credit shall not, however, at any time exceed the maximum rate of interest permitted under the laws of the State of Ohio for loans of the type and character outstanding hereunder.

2.4. Voluntary Reduction of Letter of Credit Commitment. At the written request of the Borrower from time to time, the Borrower shall have the right, at its option, to reduce the Letter of Credit Commitment from the then current amount of the Letter of Credit Commitment to an amount not less than $1,000,000.00; provided, however, that (i) the Borrower shall be in compliance with the terms and conditions contained herein and no Default shall have occurred and be continuing, (ii) the Letter of Credit Commitment shall not be reduced to an amount that is less than the Letter of Credit Usage then in effect and (iii) the Letter of Credit Commitment, as so reduced, may not thereafter be increased without the written consent of the Lender. Any such reduction of the Letter of Credit Commitment shall effect a reduction in the liquidity covenant required to be complied with on the part of the Guarantor as contemplated by Section 6.8 hereof.

3. CONDITIONS PRECEDENT TO LENDER'S OBLIGATION TO ISSUE INITIAL LETTER OF CREDIT. It is expressly agreed that Lender shall not be obligated to issue the initial Letter of Credit hereunder until the date (which must be a Business Day) on which all of the conditions set forth in Sections 3.1, 3.2 and 3.3 hereof shall have been satisfied, unless waived by Lender at its sole discretion (such date the "Effective Date"); provided that such conditions shall be deemed satisfied if the Lender shall have issued the initial Letter of Credit hereunder except to the extent expressly reserved by the Lender in writing on or prior to the Effective Date; provided, further, that if the Effective Date shall not have occurred by August 31,

2001, the obligation of the Lender hereunder to issue any Letter of Credit, and this Agreement, shall terminate. In the event Lender elects to waive any requirements or conditions contemplated by this Section 3, such waiver shall not preclude Lender from thereafter requiring full and complete performance of all terms, conditions and requirements hereof with regard to the issuance of any subsequent Letter of Credit.

3.1. Documents. Lender has received the following original, executed documents:

3.1.1. The Guaranty Agreement;

3.1.2. Borrower Authority Documents;

3.1.3. Guarantor Authority Documents; and

3.1.4. Opinion of Borrower's and Guarantor's Counsel.

3.2. Representations and Warranties. The representations and warranties set forth under Section 5 hereof shall be true and correct in all material respects on and as of the Effective Date except to the extent such representations and warranties relate solely to an earlier date, in which case such representations and warranties shall be true and correct in all material respects on and as of such earlier date.

3.3. No Default. No Default exists under this Agreement.

4. FURTHER CONDITIONS PRECEDENT TO LENDER'S OBLIGATION TO ISSUE EACH LETTER OF CREDIT. The obligation of the Lender to issue any Letter of Credit hereunder shall be subject to the fulfillment of the conditions set forth in Sections 4.1 and 4.2 hereof unless waived by the Lender at its sole discretion; provided that such conditions shall be deemed satisfied if the Lender shall have issued such Letter of Credit except to the extent expressly reserved by the Lender in writing on or prior to the date of issuance of such Letter of Credit. In the event the Lender elects to waive any such conditions contemplated by this
Section 4, such waiver shall not preclude Lender from thereafter requiring full and complete performance of all terms, conditions and requirements hereof with regard to the issuance of any subsequent Letter of Credit.

4.1. Representations and Warranties. The representations and warranties set forth under Section 5 hereof shall be true and correct in all material respects on and as of the date of the issuance of such Letter of Credit with the effect as if made on such date except to the extent such representations and warranties relate solely to an earlier date, in which case such representations and warranties shall be true and correct in all material respects on and as of such earlier date.

4.2. No Default. No Default exists under this Agreement.

5. BORROWER REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender as of the Effective Date as follows:

5.1. Financial Statements. All financial statements heretofore delivered to Lender relating to the Borrower and Guarantor are true and correct in all material respects, have been prepared in accordance with Borrower's and Guarantor's past practices consistently applied, and fairly present (subject to year-end audit adjustments) the financial conditions reflected therein without material changes since the respective dates thereof.

5.2. Litigation. There are no actions, suits or proceedings pending or, to the knowledge of Borrower, threatened against or affecting Borrower, or involving the validity or enforceability of this Agreement at law or in equity, or before or by any governmental authority, except actions, suits and proceedings fully covered by insurance or for which adequate reserves exist or which, if adversely determined, would not substantially impair the ability of Borrower to pay when due any amounts which may become payable hereunder; and to Borrower's knowledge, Borrower is not in default with respect to any order, writ, injunction, decree or demand of any court or any governmental authority.

5.3. Other Agreements. The consummation of the transaction contemplated hereby and the performance of this Agreement by Borrower will not result in any breach of, or constitute a default under, any indenture, mortgage, lease, loan or credit agreement or any other material instrument or agreement to which Borrower is a party or by which Borrower may be bound or affected.

5.4. No Default. No Default presently exists under this Agreement and no event has occurred and is continuing which, with notice or the passage of time, or both, would constitute a Default under this Agreement.

6. DEFAULT. The occurrence of any of the following shall constitute a default hereunder:

6.1. Draws Not Reimbursed. Nonpayment of any amount required to be reimbursed to Lender by Borrower pursuant to and in accordance with Section 2.3 hereof after the same becomes due or payable for more than ten (10) days following notice thereof from Lender.

6.2. Other Nonpayment. Nonpayment when due of any other amount payable to Lender under the terms of this Agreement and Borrower shall have failed to cure such default within thirty (30) days following notice thereof from Lender.

6.3. Breach of Covenants. Nonsatisfaction by Borrower in the performance or observance of any covenant contained in this Agreement (other than as provided by Sections 6.1 and 6.2 hereof), following the Cure Period.

6.4. Representations and Warranties. Any representation, statement, certificate, schedule or report made or furnished to Lender by Borrower hereunder or pursuant hereto proves to be materially false or materially misleading at the time of the making thereof, or any warranty hereunder ceases to be complied with in any material respect, and Borrower fails to take or cause to be taken corrective measures satisfactory to Lender within fifteen (15) Business Days after receipt of written notice from Lender relating to the particular default.

6.5. Insolvency. Borrower or Guarantor shall: (i) apply for or consent to the appointment of a receiver, trustee or a liquidator of Borrower or Guarantor or its or their properties; (ii) admit in writing the inability to pay its or their debts as they mature; (iii) make a general assignment for the benefit of creditors; (iv) commence any proceeding relating to the bankruptcy, reorganization, liquidation, receivership, conservatorship, insolvency, readjustment of debt, dissolution or liquidation of Borrower or Guarantor or, if action shall be taken against Borrower or Guarantor for the purpose of effecting any proceeding described in this clause (iv), such proceeding is not dismissed or stayed within sixty (60) calendar days of such proceeding filing date, or (v) becomes insolvent.

6.6. Other Loans. Default by the Borrower of any other loan, extension or credit which it may now or hereafter have with Lender after taking into account any applicable cure period.

6.7. Leverage Ratio. If the Leverage Ratio during any given rolling twelve month period equals or exceeds 4 to 1.

6.8. Guarantor Liquidity. If at any time the then current market value of the Guarantor's Cash Equivalents shall be less than 125% of the Letter of Credit Commitment in effect from time to time hereunder (including as such Letter of Credit Commitment shall be reduced, if at all, from time to time in accordance with Section 2.4 hereof).

7. REMEDIES. Upon the occurrence and continuance of a Default, Lender may, following a written notice and cure period of sixty (60) days for non-monetary defaults ("Cure Period"), at its option exercise any one (1) or more of the following remedies unless following the expiration of the Cure Period the Default shall have been cured:

7.1. Acceleration. Lender (i) may by notice to the Borrower, declare the commitments to issue Letters of Credit to be terminated, whereupon the same shall forthwith terminate, (ii) may (A) by notice to the Borrower, declare the maximum

amount available to be drawn under all Letters of Credit then outstanding, together with all other amounts payable under this Agreement, to be forthwith due and payable, whereupon such maximum amount and all such other amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower; provided, however, that in the event of an actual or deemed entry of an order for relief with respect to the Borrower under the Federal Bankruptcy Code, (x) the Letter of Credit Commitment shall automatically be terminated and (y) such maximum amount and all such other amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower, or (iii) may, by notice to Borrower, reduce the Letter of Credit Commitment.

7.2. Deposits; Setoff. Set off, regardless of the adequacy of any other collateral, any deposits or other sums due from Lender to Borrower against any and all liabilities, direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, of Borrower to Lender under this Agreement. Such sums shall at all times constitute collateral security for all indebtedness and obligations of Borrower to Lender under this Agreement. The rights granted by this Section 7.2 shall be in addition to the rights of Lender under any statutory and case authority of the State of Ohio.

7.3. Selective Enforcement. In the event Lender shall elect to selectively and successively enforce its rights, such action shall not be deemed a waiver or discharge of any other lien, encumbrance or security instrument securing payment of the amounts owing hereunder until such time as Lender shall have been paid in full all sums outstanding hereunder.

7.4. Waiver of Default. Lender may, at its option, by an instrument in writing signed by Lender, waive any Default which shall have occurred and any consequences of such Default and, in such event, Borrower and Lender shall be restored to their former respective rights and obligations hereunder. Any Default so waived shall, for purposes of this Agreement, be deemed to have been cured and not to be continuing; but no such waiver shall extend to any subsequent or other Default or impair any consequence of such subsequent or other Default or any of Lender's rights relating thereto.

7.5. Cumulative Remedies. The remedies herein provided shall be in addition to and not in substitution for the rights and remedies which would otherwise be vested in Lender in law or equity, all of which rights and remedies are specifically reserved by Lender. The remedies herein provided or otherwise available to Lender shall be cumulative and may be exercised concurrently. The failure to exercise any of the remedies herein provided shall not constitute a waiver thereof, nor shall use of any of the remedies hereby provided prevent the subsequent or concurrent resort to any other remedy or remedies which by this Agreement or by law or equity shall be vested in Lender.

8. GENERAL CONDITIONS. The following conditions shall be applicable throughout the term of this Agreement:

8.1. Notices. All notices, consents, waivers, and other communications required or permitted to be given under this Agreement must be in writing and will be deemed to have been duly given when (a) delivered by hand (with written confirmation of receipt), (b) sent by telecopier (with written confirmation of receipt), provided that a copy is mailed by registered mail, return receipt requested, or (c) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and telecopier numbers set forth below (or to such other addresses and telecopier numbers as a party may designate by notice to the other parties):

To Borrower:

Alliance Resource Partners, L.P.

c/o Alliance Resource Management GP, LLC 1717 South Boulder Avenue, Suite 600 Tulsa, Oklahoma 74119
Attn: Cary Marshall, Director, Corporate Finance Telefax: (918) 295-7357

with a copy to:

Alliance Resource Partners, L.P. c/o Alliance Resource Management GP, LLC 1717 South Boulder Avenue Tulsa, Oklahoma 74119
Attn: Thomas L. Pearson, Senior Vice President - Law and Administration, General Counsel and Secretary Telefax: (918) 295-7361

and to:

Katten Muchin Zavis
1025 Thomas Jefferson Street, NW East Lobby, Suite 700
Washington, DC 20007
Attn: Steven C. Schnitzer, Esq.

Telefax: (202) 298-7570

To Lender:

Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263

Attn: Marie B. Magnin
Telefax: (513) 744-6757

or at such other address of which it shall have notified the party giving such notice in writing. Notices to in-house counsel or outside counsel of a party hereto shall not constitute sufficient notice to such party.

8.2. Amendment; Waiver. This Agreement may not be amended, modified, waived, discharged or terminated in any way, except by an instrument in writing executed by the part against who enforcement of such amendment, modification, waiver, discharge or termination shall be sought. In the event of a waiver of Default by Lender, such specific Default shall be deemed to have been cured and not continuing, but no such waiver shall extend to any subsequent or other Default or impair any consequence of such subsequent or other Default.

8.3. Governing Law. This Agreement shall be deemed to be a contract made under the laws of the State of Ohio, and shall be construed by and governed in accordance with the laws (including the Uniform Commercial Code) of the State of Ohio, without giving effect to principles of conflicts of laws. This Agreement shall be supplemented by the Uniform Customs and Practices for Documentary Credits, 1993 Revision, International Chamber of Commerce Publication No. 500 (the "UCP") to the extent the provisions of the UCP are not inconsistent with the terms hereof or the laws of the State of Ohio. Any Letter of Credit issued pursuant hereto shall be governed by the laws of such jurisdiction and the UCP to the extent provided therein.

8.4. Entire Agreement. This Agreement, any Letter of Credit Application executed in connection herewith, and the other instruments, statements or documents described herein constitute the entire agreement between Borrower and Lender with respect to the subject matter hereof, with any and all prior agreements and understandings being merged herein.

8.5. Binding Effect. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, legal representatives, successors and permitted assigns; provided, however, that, without the consent of the Borrower, the Lender shall not transfer or assign any of its rights or obligations hereunder or all or any part of its Letter of Credit Commitment or any Advance except to another

commercial bank organized under the laws of the United States having a combined capital and surplus and retained earnings of not less than $500,000,000.

8.6. Severability. Should any clause or provision of this Agreement or any instrument, document or agreement provided by Borrower to Lender hereunder be invalid or void for any reason, such invalid or void clause shall not adversely affect the remainder of this Agreement or any such instrument, document or agreement, and such remainder shall remain in full force and effect.

8.7. Costs. Borrower shall pay all reasonable costs and expenses (including reasonable legal fees of its outside attorneys) incurred by Lender in connection with the negotiation and documentation of the transactions contemplated hereby and the performance and enforcement of the terms hereof.

9. AFFIRMATIVE COVENANTS. So long as Lender shall have any commitment to issue any Letter of Credit under this Agreement or any Letter of Credit which has not been fully cash collateralized remains outstanding, Borrower will comply with the following:

9.1. Maintenance of Existence. Preserve and maintain its limited partnership existence and good standing under the laws of the State of Delaware and remain in good standing as a foreign limited partnership in the State of Oklahoma.

9.2. Maintenance of Records. Keep adequate records and books of account.

9.3. Compliance with Laws. Comply in all material respects with all laws, rules, regulations and orders applicable to Borrower, such compliance to include, without limitation, paying before the same become delinquent all taxes, assessments, and governmental charges imposed upon it or upon its property, subject to the right to contest if adequate reserves are established.

9.4. Notice of Litigation. Promptly after the commencement and notice thereof, Borrower shall deliver to Lender notice of all actions, suits and proceedings before any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, affecting Borrower which, if determined adversely to Borrower, could have a material adverse effect on the financial condition, properties or operations of Borrower and its Subsidiaries, taken as a whole.

9.5. Notice of Defaults. As soon as possible and in any event within five (5) days after becoming aware of the occurrence of each Default, a written notice setting forth the details of such Default and the action which is proposed to be taken by Borrower with respect thereto.

9.6. General Information. Such other information respecting the condition or operations, financial or otherwise, of Borrower as Lender may from time to time reasonably request; provided, however, that so long as the Lender shall be receiving copies of all proxy statements, financial statements and reports that the Borrower sends to its unitholders, partners or members, and copies of all regular, periodic and special reports, and all registration statements, that the Borrower files with the Securities and Exchange Commission of the United States or any governmental authority that may be substituted therefor, or with any national securities exchange, in each case promptly after the sending or filing thereof, the Borrower shall have no obligation to deliver any other financial statements to the Lender hereunder. In addition, the Borrower shall deliver to the Lender, as soon as available but within 60 days following the end of each of the initial three quarters of the Borrower's fiscal year and within 120 days following the end of the Borrower's fiscal year, a statement demonstrating and computing compliance by the Borrower with the covenant required to be maintained by the Borrower pursuant to Section
6.7 (Leverage Ratio) hereof for the period then ended, together with a certificate of the Chief Financial Officer or Treasurer of the General Partner to the effect that the information contained therein is true and accurate as of the date of such certificate.

IN WITNESS WHEREOF, the parties hereto have executed and delivered this Loan Agreement as of the day and year first above written.

"Borrower"

ALLIANCE RESOURCE PARTNERS, L.P.,
a limited partnership

By: ALLIANCE RESOURCE MANAGEMENT GP,
LLC, the managing general partner

By        /s/ Michael L. Greenwood
  ______________________________________
   Name:  Michael L. Greenwood,
   Title: Senior Vice President - Chief
          Financial Officer and
          Treasurer

"Lender"

FIFTH THIRD BANK

By       /s/ Kevin C.M. Jones
  __________________________________________
   Name:     Kevin C.M. Jones
   Title:    Vice President

Schedule "1.5"

(Borrower Authority Documents)

Schedule "1.21"

(Guarantor Authority Documents)

Schedule "1.22"

(Guaranty Agreement)

Schedule "1.31"

(Opinion of Borrower's and Guarantor's Counsel)

Exhibit 10.24

GUARANTY

THIS GUARANTY is dated August 30, 2001 (the "Guaranty"), and made by ALLIANCE RESOURCE GP, LLC, a Delaware limited liability company ("Guarantor"), in favor of the FIFTH THIRD BANK, an Ohio banking corporation ("Lender").

PRELIMINARY STATEMENT. Alliance Resource Partners, L.P., a Delaware limited partnership (the "BORROWER"), is party to a Letter of Credit Facility Agreement, dated as of August 30, 2001 (as amended, amended and restated, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"; the capitalized terms defined therein and not otherwise defined herein being used herein as therein defined) with Lender. Guarantor shall receive, directly or indirectly, a benefit from the issuance of the Letters of Credit under the Credit Agreement and will derive substantial direct and indirect benefits from the transactions contemplated by the Credit Agreement. It is a condition precedent to issuing from time to time the Letters of Credit by the Lender under the Credit Agreement that Guarantor shall have executed and delivered this Guaranty.

NOW, THEREFORE, in consideration of the premises and in order to induce the Lender to issue Letters of Credit from time to time, Guarantor, hereby agrees as follows:

Section 1. Guaranty; Limitation of Liability. (a) Guarantor hereby absolutely, unconditionally and irrevocably guarantees the punctual payment when due, whether at scheduled maturity or on any date of a required prepayment or by acceleration, demand or otherwise, of all obligations of the Borrower now or hereafter existing under or in respect of the Credit Agreement (including, without limitation, any extensions, modifications, substitutions, amendments or renewals of any or all of the foregoing obligations) (such obligations being the "Guaranteed Obligations"), and agrees to pay any and all reasonable expenses
(including, without limitation, reasonable fees and expenses of counsel)
incurred by the Lender in enforcing any rights under this Guaranty or the Credit Agreement. To the extent permitted by law, without limiting the generality of the foregoing, Guarantor's liability shall extend to all amounts that constitute part of the Guaranteed Obligations and would be owed by any other party to Lender under or in respect of the Credit Agreement but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving such other party.

(b) Guarantor and, by its acceptance of this Guaranty, Lender hereby confirm that it is the intention of all such Persons that this Guaranty and the Guaranteed Obligations of Guarantor hereunder not constitute a fraudulent transfer or conveyance for purposes of or under any Debtor Relief Laws (including the Uniform Fraudulent Conveyance Act and the Uniform Fraudulent Transfer Act) to the extent applicable to this Guaranty and the Guaranteed Obligations of Guarantor hereunder. To effectuate the foregoing intention, the Lender and the Guarantor hereby irrevocably agree that the Guaranteed Obligations of Guarantor under this Guaranty at any time shall be limited to the maximum amount as will result in the Guaranteed Obligations of such Guarantor under this Guaranty not constituting a fraudulent transfer or conveyance.

Section 2. Guaranty Absolute. To the extent permitted by law, Guarantor guarantees that the Guaranteed Obligations will be paid strictly in accordance with the terms of the Credit

Agreement, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of Lender with respect thereto. To the extent permitted by law, the obligations of Guarantor under or in respect of this Guaranty are independent of the Guaranteed Obligations, and a separate action or actions may be brought and prosecuted against Guarantor to enforce this Guaranty, irrespective of whether any action is brought against the Borrower or any other Person guarantying or pledging assets as collateral security for the Guaranteed Obligations or whether the Borrower or any such other Person is joined in any such action or actions. To the extent permitted by law, the liability of Guarantor under this Guaranty shall be irrevocable, absolute and unconditional irrespective of, and Guarantor hereby irrevocably waives any defenses it may now have or hereafter acquire in any way relating to, any or all of the following:

(a) any lack of validity or enforceability of the Credit Agreement or any agreement or instrument relating thereto;

(b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations under or in respect of the Credit Agreement, or any other amendment or waiver of or any consent to departure from the Credit Agreement, including, without limitation, any increase in the Guaranteed Obligations resulting from the extension of additional credit to the Borrower or otherwise;

(c) any taking, exchange, release or non-perfection of any collateral, or any taking, release or amendment or waiver of, or consent to departure from, any other guaranty, for all or any of the Guaranteed Obligations;

(d) any manner of application of any collateral, or proceeds thereof, to all or any of the Guaranteed Obligations, or any manner of sale or other disposition of any collateral for all or any of the Guaranteed Obligations;

(e) any change, restructuring or termination of the corporate structure or existence of the Borrower;

(f) any failure of Lender to disclose to the Borrower any information relating to the business, condition (financial or otherwise), operations, performance, properties or prospects of the Borrower now or hereafter known to Lender (Guarantor waiving any duty on the part of the Lender to disclose such information); or

(g) any other circumstance (including, without limitation, any statute of limitations) or any existence of or reliance on any representation by Lender that might otherwise constitute a defense available to, or a discharge of, the Borrower or any other guarantor or surety.

This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Guaranteed Obligations is rescinded or must otherwise be returned by Lender or any other Person upon the insolvency, bankruptcy or reorganization of the Borrower or otherwise, all as though such payment had not been made.

Section 3. Waivers and Acknowledgments. (a) To the extent permitted by law, Guarantor hereby unconditionally and irrevocably waives promptness, diligence, notice of acceptance, presentment, demand for performance, notice of nonperformance, default, acceleration, protest or dishonor and any other notice with respect to any of the Guaranteed Obligations and this Guaranty and any requirement that Lender protect, secure, perfect or insure any lien or any property subject thereto or exhaust any right or take any action against Borrower or any other Person or any collateral.

(b) To the extent permitted by law, Guarantor hereby unconditionally and irrevocably waives any right to revoke this Guaranty and acknowledges that this Guaranty is continuing in nature and applies to all Guaranteed Obligations, whether existing now or in the future.

(c) To the extent permitted by law, Guarantor hereby unconditionally and irrevocably waives (i) any defense arising by reason of any claim or defense based upon an election of remedies by Lender that in any manner impairs, reduces, releases or otherwise adversely affects the subrogation, reimbursement, exoneration, contribution or indemnification rights of Guarantor or other rights of Guarantor to proceed against Borrower, any other guarantor or any other Person or any collateral and (ii) any defense based on any right of set-off or counterclaim against or in respect of the Guaranteed Obligations of Guarantor hereunder.

(d) To the extent permitted by law, Guarantor hereby unconditionally and irrevocably waives any duty on the part of Lender to disclose to Guarantor any matter, fact or thing relating to the business, condition (financial or otherwise), operations, performance, properties or prospects of Borrower or any of its subsidiaries now or hereafter known by Lender.

(e) Guarantor acknowledges that it will receive substantial direct and indirect benefits from the financing arrangements contemplated by the Credit Agreement and that the waivers set forth in Section 2 hereof and this
Section 3 are knowingly made in contemplation of such benefits.

Section 4. Subrogation. Guarantor hereby unconditionally and irrevocably agrees not to exercise any rights that it may now have or hereafter acquire against the Borrower that arise from the existence, payment, performance or enforcement of Guarantor's obligations under or in respect of this Guaranty or the Credit Agreement, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or remedy of Lender against the Borrower, or any other insider guarantor whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including, without limitation, the right to take or receive from the Borrower, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim, remedy or right, unless and until all of the Guaranteed Obligations and all other amounts payable under this Guaranty shall have been paid in full in cash and the Letter of Credit Commitment shall have expired or been terminated. If any amount shall be paid to Guarantor in violation of the immediately preceding sentence at any time prior to the later of (a) the payment in full in cash of the Guaranteed Obligations and all other amounts payable under this Guaranty, and (b) the Termination Date, such amount shall be received and held in trust for the benefit of Lender, shall be segregated from other property and funds of Guarantor and shall forthwith be paid or delivered to the Lender in the same form as so received (with any necessary endorsement or assignment) to be credited and applied to

the Guaranteed Obligations and all other amounts payable under this Guaranty, whether matured or unmatured, in accordance with the terms of the Credit Agreement, or to be held as collateral for any Guaranteed Obligations or other amounts payable under this Guaranty thereafter arising. If (i) Guarantor shall make payment to Lender of all or any part of the Guaranteed Obligations, (ii) all of the Guaranteed Obligations and all other amounts payable under this Guaranty shall have been paid in full in cash, and (iii) the Termination Date shall have occurred, the Lender will, at Guarantor's request and expense, execute and deliver to Guarantor appropriate documents, without recourse and without representation or warranty, necessary to evidence the transfer by subrogation to Guarantor of an interest in the Guaranteed Obligations resulting from such payment made by such Guarantor pursuant to this Guaranty.

Section 5. Representations and Warranties. Guarantor hereby represents and warrants that Guarantor has, independently and without reliance upon Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Guaranty, and Guarantor has established adequate means of obtaining from the Borrower on a continuing basis information pertaining to, and is now and on a continuing basis will be completely familiar with, the business, condition (financial or otherwise), operations, performance, properties and prospects of the Borrower. In addition, the Guarantor further represents and warrants to the Lender as follows:

(a) All financial statements heretofore delivered to Lender relating to Guarantor are true and correct in all material respects, have been prepared in accordance with Guarantor's past practices consistently applied, and fairly present (subject to year-end audit adjustments) the financial conditions reflected therein without material changes since the respective dates thereof;

(b) There are not actions, suits or proceedings pending or, to the knowledge of Guarantor, threatened against or affecting Guarantor, or involving the validity or enforceability of this Guaranty at law or in equity, or before or by any governmental authority, except actions, suits and proceedings fully covered by insurance or for which adequate reserves exist or which, if adversely determined, would not substantially impair the ability of Guarantor to pay when due any amounts which may become payable in respect of this Guaranty; and to Guarantor's knowledge, Guarantor is not in default with respect to any order, writ, injunction, decree or demand of any court or any governmental authority;

(c) The consummation of the transaction hereby contemplated and the performance of this Guaranty by Guarantor will not result in any breach of, or constitute a default under, any indenture, mortgage, lease, loan or credit agreement or any other material instrument or agreement to which Guarantor is a party or by which Guarantor may be bound or affected; and

(d) No default presently exists under this Guaranty and no event has occurred and is continuing which, with notice or the passage of time, or both, would constitute a default under this Guaranty.

Section 6. Covenants; Delivery of Financial Information. Guarantor covenants and agrees that, so long as any part of the Guaranteed Obligations shall remain unpaid or the Letter of Credit Commitment shall be in effect, Guarantor will:

(a) perform and observe all of the terms, covenants and agreements set forth in the Credit Agreement on its part to be performed or observed or that the Borrower has agreed to cause Guarantor to perform or observe;

(b) deliver to the Lender, as soon as available but within 60 days following the end of each of the Guarantor's fiscal quarters (other than the last fiscal quarter of any fiscal year), an internally prepared balance sheet, income statement and statement of cash flows of the Guarantor for the fiscal quarter then ended, prepared in accordance with GAAP except to the extent deviated therefrom in accordance with the Guarantor's past practices;

(c) deliver to the Lender, as soon as available but within 120 days following the end of the Guarantor's fiscal year, an internally prepared balance sheet, income statement and statement of cash flows of the Guarantor for the fiscal year then ended, prepared in accordance with GAAP except to the extent deviated therefrom in accordance with the Guarantor's past practices; and

(d) deliver to the Lender, as soon as available but within 60 days following the end of each of the initial three quarters of the Guarantor's fiscal year and within 120 days following the end of the Guarantor's fiscal year, a statement demonstrating and computing compliance by the Guarantor with the covenants required to be maintained by the Guarantor pursuant to Section 6.8 (Liquidity) of the Credit Agreement for the period then ended.

The financial statements and compliance certificate required to be delivered pursuant to clauses (b), (c) and (d) of this Section 6 shall be accompanied by a certificate of the Chief Financial Officer or Treasurer of the Guarantor to the effect that the information contained therein is true and accurate as of the date of such certificate.

Section 7. Amendments, Guaranty Supplements, Etc. (a) No amendment or waiver of any provision of this Guaranty and no consent to any departure by Guarantor therefrom shall in any event be effective unless the same shall be in writing and signed by the Lender, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

Section 8. Notices, Etc. All notices, consents, waivers, and other communications required or permitted to be given under this Guaranty must be in writing and will be deemed to have been duly given when (a) delivered by hand (with written confirmation of receipt), (b) sent by telecopier (with written confirmation of receipt), provided that a copy is mailed by registered mail, return receipt requested, or (c) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and telecopier numbers set forth below (or to such other addresses and telecopier numbers as a party may designate by notice to the other parties):

To Guarantor:

Alliance Resource GP, LLC
1717 South Boulder Avenue
Tulsa, Oklahoma 74119

Attn: Cary Marshall, Director, Corporate Finance Telefax: (918) 295-7357

with a copy to:

Alliance Resource Partners, L.P. c/o Alliance Resource Management GP, LLC 1717 South Boulder Avenue Tulsa, Oklahoma 74119
Attn: Thomas L. Pearson, Senior Vice President - Law and Administration, General Counsel and Secretary Telefax: (918) 295-7361

and to:

Katten Muchin Zavis
1025 Thomas Jefferson Street, NW East Lobby, Suite 700
Washington, DC 20007
Attn: Steven C. Schnitzer, Esq.

Telefax: (202) 298-7570

To Lender:

Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263

Attn: Marie B. Magnin
Telefax: (513) 744-6757

or at such other address of which it shall have notified the party giving such notice in writing. Notices to in-house counsel or outside counsel of a party hereto shall not constitute sufficient notice to such party.

Section 9. No Waiver; Remedies. No failure on the part of Lender 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.

Section 10. Right of Set-off. Upon (a) the occurrence and during the continuance of any Default and (b) the delivery of the notice and expiration of the Cure Period provided by Section 6 of the Credit Agreement, the Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by Lender, to or for the credit or the account of Guarantor against any and all of the Guaranteed Obligations of

Guarantor now or hereafter existing under the Credit Agreement, irrespective of whether Lender shall have made any demand under this Guaranty or the Credit Agreement and although such Guaranteed Obligations may be unmatured. Lender agrees promptly to notify Guarantor after any such set-off and application; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. The rights of Lender under this
Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) that Lender may have.

Section 11. Survival. Without prejudice to the survival of any of the other agreements of Guarantor under this Guaranty, the agreements and obligations of Guarantor contained in Section 1(a) (with respect to enforcement expenses) and the last sentence of Section 2 shall survive the payment in full of the Guaranteed Obligations and all of the other amounts payable under this Guaranty.

Section 12. Continuing Guaranty; Assignments under the Credit Agreement. This Guaranty is a continuing guaranty and shall (a) remain in full force and effect until the latest of (i) the payment in full in cash of the Guaranteed Obligations and all other amounts payable under this Guaranty and
(ii) the Termination Date, (b) be binding upon the Guarantor, its successors and assigns and (c) inure to the benefit of and be enforceable by the Lender and its successors, permitted transferees and permitted assigns. Without limiting the generality of clause (c) of the immediately preceding sentence, the Lender may assign or otherwise transfer all or any portion of its rights and obligations under the Credit Agreement (including, without limitation, all or any portion of its Letter of Credit Commitment and the Advances owing to it) to any other Person to the extent permitted by and in accordance with Section 8.5 of the Credit Agreement, and such other permitted transferee shall thereupon become vested with all the benefits in respect thereof granted to Lender herein or otherwise. Guarantor shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lender.

Section 13. Execution in Counterparts. This Guaranty and each amendment, waiver and consent with respect hereto may be executed in any number of counterparts and by difference parties thereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Guaranty by telecopier shall be effective as delivery of an original executed counterpart of this Guaranty.

Section 14. Governing Law. This Guaranty shall be deemed to be a contract made under the laws of the State of Ohio, and shall be construed by and governed in accordance with the laws of the State of Ohio, without giving effect to principles of conflicts of laws.

IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly executed and delivered by or on its behalf as of the date first above written.

ALLIANCE RESOURCE GP, LLC

By    /s/ Michael L. Greenwood
   _________________________________________
   Name:  Michael L. Greenwood
   Title: Senior Vice President - Chief
          Financial Officer and Treasurer

Exhibit 10.25

LETTER OF CREDIT FACILITY AGREEMENT

This Letter of Credit Facility Agreement is dated as of this 2nd day of October, 2001 by and between BANK OF THE LAKES, NATIONAL ASSOCIATION ("Lender"), and ALLIANCE RESOURCE PARTNERS, L.P., a Delaware limited partnership ("Borrower").

RECITALS

A. Borrower has requested a $5,000,000 line of credit ("Loan") from Lender for the issuance from time to time of Letters of Credit (defined below).

B. Subject to Borrower's compliance with all of the terms, conditions and covenants hereinafter set forth and predicated on Borrower's representations and warranties, each of which is material and is being relied upon by Lender, Lender agrees to issue from time to time Letters of Credit for the account of Borrower and for the benefit of Borrower and its subsidiaries in the amount and on the terms hereinafter set forth up to the total of the Letter of Credit Commitment.

AGREEMENT

For valuable consideration received and in consideration of the premises and of the mutual covenants and agreements contained herein, the parties hereto hereby agree to the following:

1. Definitions. The following terms shall have the meanings given.

1.1. "Advance" means the disbursement by Lender under a Letter of Credit to the beneficiary thereof for the account of Borrower.

1.2. "Agreement" means this Letter of Credit Facility Agreement, as amended, amended and restated, modified or supplemented from time to time in accordance with the terms hereof.

1.3. "Alliance Resource GP, LLC" means Alliance Resource GP, LLC, a Delaware limited liability company.

1.4. "Alliance Resource Master Credit Agreement" means the Credit Agreement, dated as of August 16, 1999, among AROP, as borrower and assignee of Alliance Resource GP, LLC, the banks, financial institutions and other institutional lenders from time to time parties thereto, the Swing Line Bank (as defined therein), The Chase Manhattan Bank ("Chase"), as paying agent, Deutsche Bank AG, New York Branch, as documentation agent, and Citicorp USA, Inc. and Chase as co-administrative agents, as the same may be amended, amended and restated, modified or supplemented from time to time in accordance with the terms thereof.

1.5. "AROP" means Alliance Resource Operating Partners, L.P., a Delaware limited partnership.

1.6. "Borrower Authority Documents" means the following documents as to the Borrower: (i) Certificate of Good Standing, dated within five (5) Business Days of the Effective Date, issued by the State in which the Borrower was formed; (ii) Certificate of Good Standing, dated within five (5) Business Days of the Effective Date, issued by the State in which the General Partner was formed; and (iii) Certificate, dated the Effective Date, from the managing general partner of the Borrower, substantially in form and content as set forth on Schedule "1.6" hereto, to which shall be attached (A) the Certificate of Limited Partnership of the Borrower and the Certificate of Formation of the General Partner, in each case certified by the Secretary of State of the State of Delaware as of a date that is within five (5) Business Days of the Effective Date, and (B) a copy of the fully executed limited partnership agreement of the Borrower and the Limited Liability Company Operating Agreement of the General Partner, in each case together with all amendments thereto, if any.

1.7. "Business Day" means any day other than a Saturday, Sunday or other day on which commercial banks in Owasso, Oklahoma are authorized or required to close under the laws of the State of Oklahoma.

1.8. "Capital Stock" shall mean, with respect to any Person, any and all shares, units representing interests, participations, rights in or other equivalents (however designated) of such Person's capital stock, including (a) with respect to partnerships, partnership interests (whether general or limited) and any other interest or participation that confers upon a Person the right to receive a share of the profits and losses of, or distributions of assets of, such partnership, (b) with respect to limited liability companies, member interests, and (c) with respect to any Person, any rights (other than debt securities convertible into capital stock), warrants or options exchangeable for or convertible into such capital stock.

1.9. "Cash Equivalents" means any of the following: (a) marketable securities of any issuer (including, without limitation, any corporation or governmental authority) and, if applicable, of any duration; (b) cash; and (c) any other item determined by Borrower's auditors to constitute cash or cash equivalents.

1.10. "Consolidated Subsidiary" means, with respect to any Person at any time for any period, any Subsidiary the accounts of which would be consolidated with those of such first Person in its consolidated financial statements as of such time.

1.11. "Consolidated EBITDA" means, with respect to the Borrower and its Consolidated Subsidiaries for any period, net income plus (i) interest expense, (ii) depreciation, obsolescence and amortization of property, (iii) capitalized lease expenses, (iv) the non-cash portion of advance royalties and any non-cash employee compensation expenses, and (v) tax expenses, all as determined in accordance with GAAP; provided, however, that net income shall exclude any net income or gain or loss during such period from (x) any change in accounting principles in accordance with GAAP, (y) any prior period

adjustments resulting from any change in accounting principles in accordance with GAAP, and (z) any extraordinary or unusual items.

1.12. "Consolidated Funded Debt" means, with respect to the Borrower and its Consolidated Subsidiaries, long-term and short-term interest bearing obligations that would be required to be classified and accounted for as such in the consolidated balance sheet of the Borrower and its Consolidated Subsidiaries prepared in accordance with GAAP.

1.13. "Cure Period" shall have the meaning set forth in
Section 7 hereof.

1.14. "Debtor Relief Laws" shall mean the Bankruptcy Code of 1978 (Title 11 of the United States Code), as the same may be amended from time to time and any successor statute thereto (the "Federal Bankruptcy Code"), together with other applicable federal and state liquidation, conservatorship, bankruptcy, moratorium, rearrangement, insolvency, reorganization or similar laws affecting the rights and remedies of creditors generally, as in effect from time to time.

1.15. "Default" shall mean the occurrence of any of the events described in Section 6 below.

1.16. "Effective Date" shall have the meaning set forth in
Section 3 hereof.

1.17. "Federal Bankruptcy Code" shall have the meaning set forth in the definition of Debtor Relief Laws contained herein.

1.18. "GAAP" means generally accepted accounting principles as in effect from time to time.

1.19. "General Partner" means Alliance Resource Management GP, LLC, a Delaware limited liability company.

1.20. "Governmental Requirements" means all laws, orders, decrees, ordinances, rules and regulations of any Governmental Authority.

1.21. "Guarantor" means Alliance Resource GP, LLC.

1.22. "Guarantor Authority Documents" means the following documents as to the Guarantor: (i) Certificate of Good Standing, dated within five (5) Business Days of the Effective Date, issued by the state in which the Guarantor was formed; and (ii) Certificate, dated the Effective Date, from the Secretary or Assistant Secretary of the Guarantor, substantially in form and content as set forth on Schedule "1.22" hereto, to which shall be attached a complete copy of the Certificate of Formation of the Guarantor, certified by the Secretary of State of the State of Delaware as of a date that is within five (5) Business Days of the Effective Date, and a copy of the Operating Agreement of the Guarantor, together with all amendments, if any.

1.23. "Guaranty Agreement" means the Guaranty, dated on or prior to the Effective Date, executed by the Guarantor, substantially in form and content as set forth on Schedule "1.23" hereto, as the same may be amended, amended and restated, modified or supplemented from time to time in accordance with the terms thereof.

1.24. "Hereto," "herein," "hereby," "hereunder," "hereof," and similar expressions refer to this Agreement and not to any particular article, section, subsection, clause, subdivision, or other portion hereof and include any and every amending agreement and agreement supplemental or ancillary hereto.

1.25. "Letter of Credit" means any letter of credit issued pursuant to Section 2.1, for which, when issued, a Letter of Credit Fee shall be paid, as the same may be amended, modified or supplemented from time to time in accordance with the terms thereof.

1.26. "Letter of Credit Action" means the issuance, supplement, amendment, renewal, extension, modification or other action (other than an Advance) relating to a Letter of Credit.

1.27. "Letter of Credit Application" means an application for a Letter of Credit Action substantially in the form of Schedule "1.27" hereto.

1.28. "Letter of Credit Commitment" means the commitment of the Lender to issue Letters of Credit in an amount up to $5,000,000, as the same may be reduced in accordance with Sections 2.4 and 7.1(iii) hereof.

1.29. "Letter of Credit Fee" means, with respect to any Letter of Credit, a fee of .95% per annum (calculated on the basis of a 360-day year and the actual number of days elapsed) on the daily average of the maximum amount available to be drawn from time to time under such Letter of Credit issued or renewed after the date hereof, payable quarterly in advance.

1.30. "Letter of Credit Issuance Fee" means a fee equal to that which is reasonable and customarily charged by Lender for issuing, reviewing and generally processing Letters of Credit.

1.31. "Letter of Credit Usage" means, as of any date of determination, the maximum amount available to be drawn under all outstanding Letters of Credit plus the aggregate amount of all drawings under the Letters of Credit honored by Lender and not reimbursed to Lender by the Borrower.

1.32. "Leverage Ratio" means, as of any date of determination, the ratio of Consolidated Funded Debt to Consolidated EBITDA of the Borrower and its Consolidated

Subsidiaries, calculated for the four (4) consecutive fiscal quarters ending on the last day of the fiscal quarter most recently completed.

1.33. "Loan Documents" means this Agreement and the Note.

1.34. "Matured Default" means any Default provided that any requirement for the giving of notice, the lapse of time, or both (including the expiration of the Cure Period, if applicable), or any other condition has been satisfied.

1.35. "Note" means the original, executed $5,000,000 Promissory Note, dated on or prior to the Effective Date, substantially in form and content set forth on Schedule "1.35" attached hereto, as the same may be amended, amended and restated, modified or supplemented from time to time in accordance with the terms thereof.

1.36. "Opinion of Borrower's and Guarantor's Counsel" shall mean an opinion from Borrower's and Guarantor's counsel, dated the Effective Date and addressed to Lender, substantially in the form of Schedule "1.36" hereto.

1.37. "Person" means any individual, partnership, corporation (including a business trust), limited liability company, joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof.

1.38. "Subsidiary" means, with respect to any Person, any corporation, limited liability company, partnership, joint venture, association, trust or other entity of which (or in which) more than 50% of (a) the issued and outstanding Capital Stock having ordinary voting power to elect a majority of the board of directors of such corporation ( irrespective of whether at the time Capital Stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency), (b) the interests in the capital or profits of such partnership, limited liability, joint venture or association with ordinary voting power to elect a majority of the board of directors (or Person performing similar functions) of such partnership, limited liability company, joint venture or association, or (c) the beneficial interests in such trust or other entity with ordinary voting power to elect a majority of the board of trustees (or Persons performing similar functions) of such trust or other entity, is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its Subsidiaries, or by one or more of such Person's Subsidiaries.

1.39. "Termination Date" shall mean the one-year anniversary of the Effective Date.

2. LETTERS OF CREDIT.

2.1. The Letter of Credit Commitment; Letter of Credit Fee. Subject to the terms and conditions hereof, at any time and from time to time from the Effective Date through the date that is three (3) Business Days prior to the Termination Date, the Lender shall take such Letter of Credit Actions as the Borrower may request; provided, however, that (i) the aggregate outstanding Letter of Credit Usage shall not exceed the Letter of Credit

Commitment at any time, and (ii) each Letter of Credit Action shall be in a form reasonably acceptable to Lender and shall not violate any policies of Lender. Each Letter of Credit will be a nontransferable standby letter of credit to support payment and/or performance obligations of the Borrower or any of its Subsidiaries. No Letter of Credit shall expire more than 365 days after the date of issuance except that, at the request of Borrower, such Letter of Credit shall provide that it shall be automatically renewed for a one-year period unless the Lender, as issuer of such Letter of Credit, shall give at least 90 days advance notice to the beneficiary thereof that such Letter of Credit shall not be automatically renewed. If any Letter of Credit shall remain outstanding after the Termination Date or other date upon which Lender's Letter of Credit Commitment expires pursuant to the terms hereof, the Borrower shall, not later than sixty (60) days thereafter with respect to all such then outstanding Letters of Credit,
(i) deposit Cash Equivalents in an amount equal to one hundred and two percent (102%) of the Letter of Credit Usage as of the date such deposit shall be required in a collateral account with the Lender (which account shall, with respect to all cash collateral, bear interest for the account of the Borrower or be invested in Cash Equivalents (other than cash) at the direction, and for the account, of the Borrower), or (ii) cause the then outstanding Letters of Credit to be replaced and terminated. In the case of each Letter of Credit issued hereunder, a Letter of Credit Issuance Fee shall be payable to the Lender on the issuance date thereof and the Letter of Credit Fee with respect thereto shall be payable quarterly in advance. At least two (2) Business Days prior to the commencement of any quarterly period during which any Letter of Credit shall remain outstanding, the Lender shall deliver to the Borrower a statement showing the Letter of Credit Fee due for the next quarterly period, and the Borrower shall pay the Letter of Credit Fee then due not later than five (5) Business Days following receipt of such statement (unless such statement shall be delivered more than five (5) Business Days prior to the commencement of any quarterly period, in which case the Borrower shall not be required to pay the Letter of Credit fee then due prior to the first Business Day of the quarterly period as to which such fee shall relate). In the event that any Letter of Credit shall have terminated prior to the end of any quarterly period as to which the Lender shall have received such advance Letter of Credit Fee, the Lender shall refund to the Borrower the unearned portion of the Letter of Credit Fee in respect of the Letter of Credit that shall have early terminated.

2.2. Requesting Letter of Credit Actions. The Borrower may irrevocably request a Letter of Credit Action by delivering a Letter of Credit Application therefor to Lender, not later than 2:00 p.m. (Tulsa time) on the date which is two (2) Business Days prior to the date of the requested action therefor. Unless Lender determines that such Letter of Credit action is contrary to any requirement of law or policies of Lender or does not otherwise conform to the requirements of this Agreement, Lender shall effect such Letter of Credit Action. Notwithstanding anything to the contrary contained in any Letter of Credit Application, this Agreement shall control in the event that any term or provision of this Agreement shall conflict with any term or provision contained in any Letter of Credit Application.

2.3. Reimbursement of Payments Under Letters of Credit. The Borrower shall reimburse Lender for any payment that Lender makes under a Letter of Credit on or, at the request of the Lender, not more than three (3) Business Days before the date of such payment

except to the extent that such payment resulted from the Lender's gross negligence or willful misconduct.

2.4. Voluntary Reduction of Letter of Credit Commitment. At the written request of the Borrower from time to time, the Borrower shall have the right, at its option, to reduce the Letter of Credit Commitment from the then current amount of the Letter of Credit Commitment to an amount not less than $1,000,000.00; provided, however, that (i) the Borrower shall be in compliance with the terms and conditions contained herein and no Default shall have occurred and be continuing, (ii) the Letter of Credit Commitment shall not be reduced to an amount that is less than the Letter of Credit Usage then in effect and (iii) the Letter of Credit Commitment, as so reduced, may not thereafter be increased without the written consent of the Lender. Any such reduction of the Letter of Credit Commitment shall effect a reduction in the liquidity covenant required to be complied with on the part of the Guarantor as contemplated by Section 6.8 hereof.

3. CONDITIONS PRECEDENT TO LENDER'S OBLIGATION TO ISSUE INITIAL LETTER OF CREDIT. It is expressly agreed that Lender shall not be obligated to issue the initial Letter of Credit hereunder until the date (which must be a Business Day) on which all of the conditions set forth in Sections 3.1, 3.2 and 3.3 hereof shall have been satisfied, unless waived by Lender at its sole discretion (such date the "Effective Date"); provided that such conditions shall be deemed satisfied if the Lender shall have issued the initial Letter of Credit hereunder except to the extent expressly reserved by the Lender in writing on or prior to the Effective Date; provided, further, that if the Effective Date shall not have occurred by October 15, 2001, the obligation of the Lender hereunder to issue any Letter of Credit, and this Agreement, shall terminate. In the event Lender elects to waive any requirements or conditions contemplated by this Section 3, such waiver shall not preclude Lender from thereafter requiring full and complete performance of all terms, conditions and requirements hereof with regard to the issuance of any subsequent Letter of Credit.

3.1. Documents. Lender has received the following original, executed documents:

3.1.1. The Note;

3.1.2. The Guaranty Agreement;

3.1.3. Borrower Authority Documents;

3.1.4. Guarantor Authority Documents; and

3.1.5. Opinion of Borrower's and Guarantor's Counsel.

3.2. Representations and Warranties. The representations and warranties set forth under Section 5, below, shall be true and correct in all material respects on and as of the Effective Date except to the extent such representations and warranties relate solely to an earlier date, in which case such representations and warranties shall be true and correct in all material respects on and as of such earlier date.

3.3. No Default. No Default exists under this Agreement or any other Loan Documents.

4. FURTHER CONDITIONS PRECEDENT TO LENDER'S OBLIGATION TO ISSUE EACH LETTER OF CREDIT. The obligation of the Lender to issue any Letter of Credit hereunder shall be subject to the fulfillment of the conditions set forth in Sections 4.1 and 4.2 hereof unless waived by the Lender at its sole discretion; provided that such conditions shall be deemed satisfied if the Lender shall have issued such Letter of Credit except to the extent expressly reserved by the Lender in writing on or prior to the date of issuance of such Letter of Credit. In the event the Lender elects to waive any such conditions contemplated by this
Section 4, such waiver shall not preclude Lender from thereafter requiring full and complete performance of all terms, conditions and requirements hereof with regard to the issuance of any subsequent Letter of Credit.

4.1. Representations and Warranties. The representations and warranties set forth under Section 5, below, shall be true and correct in all material respects on and as of the date of any Letter of Credit Action with the effect as if made on such date except to the extent such representations and warranties relate solely to an earlier date, in which case such representations and warranties shall be true and correct in all material respects on and as of such earlier date.

4.2. No Default. No Default exists under this Agreement or any other Loan Documents.

5. BORROWER REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender as of the Effective Date as follows:

5.1. Financial Statements. All financial statements heretofore delivered to Lender relating to the Borrower and Guarantor are true and correct in all material respects, have been prepared in accordance with Borrower's and Guarantor's past practices consistently applied, and fairly present (subject to year-end audit adjustments) the financial conditions reflected therein without material changes since the respective dates thereof.

5.2. Litigation. There are no actions, suits or proceedings pending or, to the knowledge of Borrower, threatened against or affecting Borrower, or involving the validity or enforceability of the Loan Documents at law or in equity, or before or by any governmental authority, except actions, suits and proceedings fully covered by insurance or for which adequate reserves exist or which, if adversely determined, would not substantially impair the ability of Borrower to pay when due any amounts which may become payable in respect of the Note; and to Borrower's knowledge, Borrower is not in default with respect to any order, writ, injunction, decree or demand of any court or any governmental authority.

5.3. Other Agreements. The consummation of the transaction hereby contemplated and the performance of this Agreement and the other Loan Documents by Borrower will not result in any breach of, or constitute a default under, any indenture,

mortgage, lease, loan or credit agreement or any other material instrument or agreement to which Borrower is a party or by which Borrower may be bound or affected.

5.4. No Default. No Default presently exists under this Agreement or the Note and no event has occurred and is continuing which, with notice or the passage of time, or both, would constitute a Default under this Agreement or Note.

6. DEFAULT. The occurrence of any of the following shall constitute a default hereunder:

6.1. Nonpayment of Draws or Note. Nonpayment when due of any unpaid principal of or accrued interest under the Note.

6.2. Other Nonpayment. Nonpayment when due of any amount payable to Lender under the terms of this Agreement and, except in the case of any payment required to be made pursuant to Section 2.3 hereof, Borrower shall have failed to cure such default within ten (10) days following notice thereof from Lender, it being understood that a failure to pay under Section 2.3 hereof automatically constitutes a default.

6.3. Breach of Covenants. Nonsatisfaction by Borrower in the performance or observation of any covenant contained in this Agreement, or any other Loan Documents (other than as provided by Sections 6.1 and 6.2 hereof), following the Cure Period.

6.4. Representations and Warranties. Any representation, statement, certificate, schedule or report made or furnished to Lender by Borrower hereunder or pursuant hereto proves to be materially false or materially misleading at the time of the making thereof, or any warranty hereunder ceases to be complied with in any material respect, and Borrower fails to take or cause to be taken corrective measures satisfactory to Lender within fifteen (15) Business Days after receipt of written notice from Lender relating to the particular default.

6.5. Insolvency. Borrower or Guarantor shall: (i) apply for or consent to the appointment of a receiver, trustee or a liquidator of Borrower or Guarantor or its or their properties; (ii) admit in writing the inability to pay its or their debts as they mature; (iii) make a general assignment for the benefit of creditors; (iv) commence any proceeding relating to the bankruptcy, reorganization, liquidation, receivership, conservatorship, insolvency, readjustment of debt, dissolution or liquidation of Borrower or Guarantor or, if action shall be taken against Borrower or Guarantor for the purpose of effecting any proceeding described in this clause (iv), such proceeding is not dismissed or stayed within sixty (60) calendar days of such proceeding filing date, or (v) becomes insolvent.

6.6. Other Loans. Default by the Borrower of any other loan, extension or credit which it may now or hereafter have with Lender after taking into account any applicable cure period.

6.7. Leverage Ratio. If the Leverage Ratio during any given rolling twelve month period equals or exceeds 4 to 1.

6.8. Guarantor Liquidity. If at any time the sum of (x) the then current market value of the Guarantor's Cash Equivalents plus (y) the then current market value of the common units of the Borrower beneficially owned by the Guarantor, in each case after deducting therefrom the value of any encumbrances imposed on any thereof, shall be less than 125% of the Letter of Credit Commitment then in effect hereunder or $6,250,000, whichever is greater, unless the Borrower shall have reduced the Letter of Credit Commitment in accordance with
Section 2.4 hereof, in which case the Borrower shall be in compliance with this covenant so long as the sum of the amounts computed pursuant to clauses (x) and (y) of this Section 6.8 shall not be less than 125% of the Letter of Credit Commitment then in effect hereunder.

6.9. Guarantor Net Asset Position. If the Guarantor's total assets less its total liabilities (excluding the liability account entitled "Investments in Alliance Resource Partners, LP"), as determined in a manner consistent with the balance sheet of the Guarantor prepared as of April 2, 2001 and delivered to the Lender prior to the date hereof, shall be less than $30,000,000.

6.10. Alliance Resource Master Credit Agreement. An "Event of Default" occurs under the Alliance Resource Master Credit agreement which is not cured within any applicable cure period permitted thereunder.

6.11. Debt. An event of default occurs under (a) (i) the letter of credit facility agreement entered into by the Borrower with Bank of Oklahoma, dated as of June 29, 2001, as the same may be amended, modified or supplemented from time to time in accordance with the terms thereof, or (ii) the letter of credit facility agreement entered into by the Borrower with Fifth Third Bank, dated as of August 30, 2001, as the same may be amended, modified or supplemented from time to time in accordance with the terms thereof, or (b) any other indenture, loan agreement, promissory note or other instrument of indebtedness, in the principal amount of $10,000,000.00 or more, to which Borrower or Guarantor is a party and which, in the case of clause
(a) or (b), is not cured within any applicable cure period permitted thereunder.

7. REMEDIES. Upon the occurrence and continuance of a Default, Lender may, following a written notice and cure period of sixty (60) days for non-monetary defaults ("Cure Period"), at its option exercise any one (1) or more of the following remedies unless following the expiration of the Cure Period, but before the commencement of any such remedy, the Default shall have been cured:

7.1. Acceleration of Note. Lender (i) may by notice to the Borrower, declare the commitments to issue Letters of Credit to be terminated, whereupon the same shall forthwith terminate, (ii) may by notice to the Borrower, declare the maximum amount available to be drawn under all Letters of Credit then outstanding, together with all amounts owing under

the Note, all interest thereon and all other amounts payable under this Agreement to be forthwith due and payable, whereupon such maximum amount available to be so drawn, such amounts owing under the Note, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower; provided, however, that in the event of an actual or deemed entry of an order for relief with respect to the Borrower under the Federal Bankruptcy Code, (x) the Letter of Credit Commitment shall automatically be terminated and (y) such maximum amount available to be so drawn, such amounts owing under the Note, all such interest and all such other amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower, or (iii) may, by notice to Borrower, reduce the Letter of Credit Commitment.

7.2. Deposits; Setoff. Set off, regardless of the adequacy of any other collateral, any deposits or other sums due from Lender to Borrower against any and all liabilities, direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, of Borrower to Lender under any Loan Document. Such sums shall at all times constitute collateral security for all indebtedness and obligations of Borrower to Lender under any Loan Document. The rights granted by this Section 7.2 shall be in addition to the rights of Lender under any statutory and case authority (now or hereafter existing) of the State of Oklahoma.

7.3. Selective Enforcement. In the event Lender shall elect to selectively and successively enforce its rights, such action shall not be deemed a waiver or discharge of any other lien, encumbrance or security instrument securing payment of the Note until such time as Lender shall have been paid in full all sums outstanding under the Note.

7.4. Waiver of Default. Lender may, at its option, by an instrument in writing signed by Lender, waive any Default which shall have occurred and any consequences of such Default and, in such event, Borrower and Lender shall be restored to their former respective rights and obligations hereunder. Any Default so waived shall, for purposes of this Agreement, be deemed to have been cured and not to be continuing; but no such waiver shall extend to any subsequent or other Default or impair any consequence of such subsequent or other Default or any of Lender's rights relating thereto.

7.5. Cumulative Remedies. The remedies herein provided shall be in addition to and not in substitution for the rights and remedies which would otherwise be vested in Lender in law or equity, all of which rights and remedies are specifically reserved by Lender. The remedies herein provided or otherwise available to Lender shall be cumulative and may be exercised concurrently. The failure to exercise any of the remedies herein provided shall not constitute a waiver thereof, nor shall use of any of the remedies hereby provided prevent the subsequent or concurrent resort to any other remedy or remedies which by this Agreement or by law or equity shall be vested in Lender.

8. GENERAL CONDITIONS. The following conditions shall be applicable throughout the term of this Agreement.

8.1. Notices. All notices, consents, waivers, and other communications required or permitted to be given under this Agreement must be in writing and will be deemed to have been duly given when (a) delivered by hand (with written confirmation of receipt), (b) sent by telecopier (with written confirmation of receipt), provided that a copy is mailed by registered mail, return receipt requested, or (c) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and telecopier numbers set forth below (or to such other addresses and telecopier numbers as a party may designate by notice to the other parties):

To Borrower:

ALLIANCE RESOURCE PARTNERS, L.P.

c/o Alliance Resource Management GP, LLC 1717 South Boulder Avenue, Suite 600 Tulsa, Oklahoma 74119
Attn: Cary Marshall, Director, Corporate Finance Telefax: (918) 295-7357

with a copy to:

Alliance Resource Partners, L.P. c/o Alliance Resource Management GP, LLC 1717 South Boulder Avenue Tulsa, Oklahoma 74119

Attn:    Thomas L. Pearson, Senior Vice President - Law and
         Administration, General Counsel and Secretary
Telefax: (918) 295-7361

and to:

Katten Muchin Zavis
1025 Thomas Jefferson Street, NW East Lobby, Suite 700
Washington, DC 20007
Attn: Steven C. Schnitzer, Esq.

Telefax: (202) 298-7570

To Lender:

BANK OF THE LAKES, NATIONAL ASSOCIATION
12401 East 86th Street North
Owasso, Oklahoma 74055

Attn: Scott Yandell, President & Chief Executive Officer Telefax: (918) 274-0347

with copy to:

Stuart, Biolchini, Turner & Givray 3300 First Place Tower 15 East 5th Street
Tulsa, Oklahoma 74103
Attn: Albert J. Givray, Esq.

Telefax: (918) 582-3033

or at such other address of which it shall have notified the party giving such notice in writing. Notices to in-house counsel or outside counsel of a party hereto shall not constitute sufficient notice to such party.

8.2. Amendment: Waiver. This Agreement may not be amended, modified, waived, discharged or terminated in any way, except by an instrument in writing executed by both parties hereto; provided, however, Lender may, in a writing that shall be required to be executed only by Lender: (i) extend the time for performance of any of the obligations of Borrower; (ii) waive any Default by Borrower; and (iii) waive the satisfaction of any condition that is precedent to the performance of Lender's obligations under this Agreement. In the event of a waiver of Default by Lender, such specific Default shall be deemed to have been cured and not continuing, but no such waiver shall extend to any subsequent or other Default or impair any consequence of such subsequent or other Default.

8.3. Governing Law. This Agreement, the other Loan Documents and all other documents issued and executed hereunder shall be deemed to be a contract made under the laws of the State of Oklahoma, and shall be construed by and governed in accordance with the laws of the State of Oklahoma, without giving effect to principles of conflicts of laws. Borrower hereby submits itself to the jurisdiction and venue of the Tulsa County District Court, or Federal Court (Northern District) situated in Oklahoma at Lender's election, except to the extent local law (if different) is required in connection with a foreclosure action.

8.4. Entire Agreement. This Agreement, the Note, any Letter of Credit Application executed in connection herewith, and the other instruments, statements or documents described herein constitute the entire agreement between Borrower and Lender, with any and all prior agreements and understandings being merged herein.

8.5. Binding Effect. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, legal representatives, successors and permitted assigns; provided, however, that, without the consent of the Borrower, the Lender shall not transfer or assign any of its rights or obligations hereunder or all or any part of its Letter of Credit Commitment, the Note or any Advance except to another commercial bank organized under the laws of the United States having a combined capital and surplus and retained earnings of not less than $500,000,000, except that Lender may sell not more than four (4) participations to one or more Lender-chosen banks or other entities in all or a portion of Lender's rights and obligations under the Loan Documents with the understanding that (a) each such participation shall be in an amount of not less than $400,000, (b) any such sale or participation shall not affect the rights and duties of Lender hereunder to the Borrower and the Borrower shall deal exclusively with the Lender with respect to the Loan Documents and the performance of the Lender's obligations and the exercise of the Lender's rights hereunder, and (c) no such participant under any participation shall have the right to approve any amendment or waiver of any provision of any Loan Document, or any consent to or departure by the Lender from any provision of any Loan Document, except to the extent that such amendment, waiver or consent would have the effect of reducing the principal of or interest on the Note or any fees payable by Borrower hereunder.

8.6. Severability. Should any clause or provision of this Agreement or any instrument, document or agreement provided by Borrower to Lender hereunder be invalid or void for any reason, such invalid or void clause shall not adversely affect the remainder of this Agreement or any such instrument, document or agreement, and such remainder shall remain in full force and effect.

8.7. Costs. Borrower shall pay all reasonable costs, expenses, fees (e.g., reasonable attorney fees) incurred by Lender in connection with this transaction, including, without limitation, the reasonable fees of Stuart, Biolchini, Turner & Givray, and recording/filing fees, taxes and related expenses, as well as other customary charges or expenses incurred by Lender in connection with payment under or performance of a Letter of Credit.

9. AFFIRMATIVE COVENANTS. So long as the Note shall remain unpaid or Lender shall have any commitment to issue any Letter of Credit under this Agreement or any Letter of Credit which has not been fully cash collateralized remains outstanding, Borrower will comply with the following:

9.1. Maintenance of Existence. Preserve and maintain its limited partnership existence and good standing under the laws of the State of Delaware and remain in good standing as a foreign limited partnership in the State of Oklahoma.

9.2. Maintenance of Records. Keep adequate records and books of account.

9.3. Compliance with Laws. Comply in all material respects with all laws, rules, regulations and orders applicable to Borrower, such compliance to include, without

limitation, paying before the same become delinquent all taxes, assessments, and governmental charges imposed upon it or upon its property, subject to the right to contest if adequate reserves are established.

9.4. Notice of Litigation. Promptly after the commencement and notice thereof, Borrower shall deliver to Lender notice of all actions, suits and proceedings before any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, affecting Borrower which, if determined adversely to Borrower, could have a material adverse effect on the financial condition, properties or operations of Borrower and its Subsidiaries, taken as a whole.

9.5. Notice of Defaults. As soon as possible and in any event within five (5) days after the occurrence of each Default, a written notice setting forth the details of such Default and the action which is proposed to be taken by Borrower with respect thereto.

9.6. General Information. Such other information respecting the condition or operations, financial or otherwise, of Borrower as Lender may from time to time reasonably request; provided, however, that so long as the Lender shall be receiving copies of all proxy statements, financial statements and reports that the Borrower sends to its unitholders, partners or members, and copies of all regular, periodic and special reports, and all registration statements, that the Borrower files with the Securities and Exchange Commission of the United States or any governmental authority that may be substituted therefor, or with any national securities exchange, in each case promptly after the sending or filing thereof, the Borrower shall have no obligation to deliver any other financial statements to the Lender hereunder. In addition, the Borrower shall deliver to the Lender, as soon as available but within 60 days following the end of each of the initial three quarters of the Borrower's fiscal year and within 150 days following the end of the Borrower's fiscal year, a statement demonstrating and computing compliance by the Borrower with the covenant required to be maintained by the Borrower pursuant to Section
6.7 (Leverage Ratio) hereof for the period then ended, together with a certificate of the Chief Financial Officer or Treasurer of the General Partner to the effect that the information contained therein is true and accurate as of the date of such certificate.

IN WITNESS WHEREOF, the parties hereto have executed and delivered this Loan Agreement as of the day and year first above written.

"Borrower"

ALLIANCE RESOURCE PARTNERS, L.P.,
a limited partnership

By: ALLIANCE RESOURCE MANAGEMENT GP,
LLC, the managing general partner

By:      /s/ Michael L. Greenwood
   __________________________________________
    Name:  Michael L. Greenwood
    Title: Senior Vice President - Chief
           Financial Officer and Treasurer

"Lender"

BANK OF THE LAKES, NATIONAL ASSOCIATION

By:  /s/ Scott Yandell
  ___________________________
  Name:  Scott Yandell
  Title:

Schedule "1.6"

(Borrower Authority Documents)

Schedule "1.22"

(Guarantor Authority Documents)

Schedule "1.23"

(Guaranty Agreement)

Schedule "1.27"

(Form of Letter of Credit Application)

Schedule "1.35"

(Note)

Schedule "1.36"

(Opinion of Borrower's and Guarantor's Counsel)

Exhibit 10.26
PROMISSORY NOTE

$5,000,000.00 October 2, 2001 Tulsa, Oklahoma

FOR VALUE RECEIVED, the undersigned, ALLIANCE RESOURCE PARTNERS, L.P. ("Maker"), promises to pay to the order of BANK OF THE LAKES, N.A. ("Lender"), at its offices in Collinsville, Oklahoma, on demand, the principal sum of FIVE MILLION AND NO/100 DOLLARS ($5,000,000.00) or, if less, the aggregate sum of all Advances made by Lender under the Letters of Credit issued for the account of Maker pursuant to the Letter of Credit Facility Agreement between Maker and Lender, dated as of October 2, 2001 (as the same may be amended, modified or supplemented from time to time in accordance with the terms thereof, the "Credit Agreement") to the extent Lender shall have not been reimbursed for such Advances as required by Section 2.3 of the Credit Agreement, together with interest thereon per annum at the Prime Rate as provided herein. Capitalized terms used herein without definition shall have the meanings ascribed to them in the Credit Agreement.

If any payment shall be due on a Saturday or Sunday or upon any other day on which state or national banks in the State of Oklahoma are closed for business by virtue of a legal holiday for such banks, such payment shall be due and payable on the next succeeding banking day and interest shall accrue to such day. Interest on any Advance not so reimbursed shall accrue from the date outstanding hereunder to (but not including) the date paid and shall be computed on the actual number of days elapsed (365 or 366) based upon a 360-day year.

"Prime Rate" shall mean a fluctuating interest rate per annum as in effect from time to time, which interest rate per annum shall at all times be equal to the rate of interest announced publicly from time to time (whether or not charged in each instance) by Chase Manhattan Bank, N.A., at New York, NY ("Rate Bank"), as its base rate or general reference rate. Each change in the Prime Rate (or any component thereof) shall become effective hereunder without notice to Maker (which notice is hereby expressly waived by Maker), on the effective date of each such change. Should the Rate Bank abolish or abandon the practice of announcing or publishing a Prime Rate, then the Prime Rate used during the remaining term of this Note shall be that interest rate or other general reference rate then in effect at the Rate Bank which, from time to time, in the reasonable judgment of Lender, most effectively approximates the initial definition of the "Prime Rate." Maker acknowledges that Lender may, from time to time, extend credit to other borrowers at rates of interest varying from, and having no relationship to, the Prime Rate. The rate of interest payable upon the indebtedness evidenced by this Note shall not, however, at any time exceed the maximum rate of interest permitted under the laws of the State of Oklahoma for loans of the type and character evidenced by this Note.

All payments under this Note shall be made in legal tender of the United States of America or in other immediately available funds at Lender's office described above, and no credit shall be given for any payment received by check, draft or other instrument or item until such time as the holder hereof shall have received credit therefor from the holder's collecting agent or, in the event no collecting agent is used, from the bank or other financial institution upon which said check, draft or other instrument or item is drawn.

From time to time the maturity date of this Note may be extended or this Note may be renewed, in whole or in apart, or a new note of different form may be substituted for this Note and/or the rate of interest may be changed, or changes to this Note may be made in consideration of any Letter of Credit Action, and the holder of this Note, from time to time, may waive or surrender, either in whole or in part, any rights, guarantees, security interests or liens given for the benefit of the holder of this Note in connection herewith; but no such occurrences shall in any manner affect, limit, modify or otherwise impair any rights, guarantees or security of the holder of this Note not specifically waived, released or surrendered in writing, nor shall any maker, guarantor, endorser or any person who is or might be liable hereon, either primarily or contingently, be released from such liability by reason of the occurrence of any such event. The holder hereof, from time to time, shall have the unlimited right to release any person who might be liable hereon; and such release shall not affect or discharge the liability of any other person who is or might be liable hereon.

If any payment required by this Note to be made is not made when due, or if any Default occurs under the Credit Agreement or if any "event of default" occurs under the provisions of any mortgage, security agreement, assignment, pledge or other document or agreement which provides security for the indebtedness evidenced by this Note, the holder hereof may, at its option, without notice or demand, declare this Note in default and all indebtedness due and owing hereunder immediately due and payable. Interest from the date of default on such principal balance and on any past due interest hereunder shall accrue at the rate of two percent (2%) per annum above the nondefault interest rate accruing hereunder. The Maker hereby waives protest, presentment, demand, and notice of protest and nonpayment in case this Note or any payment due hereunder is not paid when due; and the Maker agrees to any renewal, extension, acceleration, postponement of the time of payment, substitution, exchange or release of collateral and to the release of any party or person primarily or contingently liable without prejudice to the holder hereof and without notice to the Maker or any endorser, guarantor or surety. Maker and any guarantor, endorser, surety or any other person who is or may become liable hereon will, on demand, pay all costs of collection, including reasonable attorney fees of the holder hereof in attempting to enforce payment of this Note and reasonable attorney fees for defending the validity of any document securing this Note as a valid first and prior lien.

Upon the occurrence of any Default, Lender shall have the right, immediately and without further action by it, to set off against this Note all money owed by Lender in any capacity to the Maker or any guarantor, endorser or other person who is or might be liable for payment hereof, whether or not due, and also to set off against all other liabilities of Maker to Lender all money owed by Lender in any capacity to Maker; and Lender shall be deemed to have exercised such right of setoff and to have made a charge against such money immediately upon the occurrence of such Default even though such charge is made or entered into the books of Lender subsequently thereto.

This Note is the promissory note issued pursuant to the Credit Agreement and is given for an actual loan of money for business purposes and not for personal, agricultural or residential purposes, and is executed and delivered in the State of Oklahoma and shall be governed by and construed in accordance with the laws of the State of Oklahoma, without giving effect to principles of conflicts of laws.

ALLIANCE RESOURCE PARTNERS, L.P.

By: ALLIANCE RESOURCE MANAGEMENT
GP, LLC, the managing general partner

By:        /s/ Michael L. Greenwood
   -----------------------------------
Name:  Michael L. Greenwood
Title: Senior Vice President - Chief
       Financial Officer and Treasurer

Exhibit 10.27
GUARANTY

THIS GUARANTY is dated October 2, 2001 (the "Guaranty"), and made by ALLIANCE RESOURCE GP, LLC, a Delaware limited liability company ("Guarantor"), in favor of the BANK OF THE LAKES, N.A. ("Lender").

PRELIMINARY STATEMENT. Alliance Resource Partners, L.P., a Delaware limited partnership (the "COMPANY" or "BORROWER"), is party to a Letter of Credit Facility Agreement, dated as of October 2, 2001 (as amended, amended and restated, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"; the capitalized terms defined therein and not otherwise defined herein being used herein as therein defined) with Lender. Guarantor shall receive, directly or indirectly, a benefit from the issuance of the Letters of Credit under the Credit Agreement and will derive substantial direct and indirect benefits from the transactions contemplated by the Credit Agreement. It is a condition precedent to issuing the Letters of Credit by the Lender under the Credit Agreement from time to time that Guarantor shall have executed and delivered this Guaranty.

NOW, THEREFORE, in consideration of the premises and in order to induce the Lender to issue Letters of Credit from time to time, Guarantor, hereby agrees as follows:

Section 1. Guaranty; Limitation of Liability. (a) Guarantor hereby absolutely, unconditionally and irrevocably guarantees the punctual payment when due, whether at scheduled maturity or on any date of a required prepayment or by acceleration, demand or otherwise, of all obligations of the Company now or hereafter existing under or in respect of the Loan Documents (including, without limitation, any extensions, modifications, substitutions, amendments or renewals of any or all of the foregoing obligations) (such obligations being the "Guaranteed Obligations"), and agrees to pay any and all reasonable expenses
(including, without limitation, reasonable fees and expenses of counsel)
incurred by the Lender in enforcing any rights under this Guaranty or any Loan Document. To the extent permitted by law, without limiting the generality of the foregoing, Guarantor's liability shall extend to all amounts that constitute part of the Guaranteed Obligations and would be owed by any other party to Lender under or in respect of the Loan Documents but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving such other party.

(b) Guarantor and, by its acceptance of this Guaranty, Lender hereby confirm that it is the intention of all such Persons that this Guaranty and the Guaranteed Obligations not constitute a fraudulent transfer or conveyance for purposes of or under any Debtor Relief Laws (including the Uniform Fraudulent Conveyance Act and the Uniform Fraudulent Transfer Act) to the extent applicable to this Guaranty and the Guaranteed Obligations. To effectuate the foregoing intention, the Lender and the Guarantor hereby irrevocably agree that the Guaranteed Obligations under this Guaranty at any time shall be limited to the maximum amount as will result in the Guaranteed Obligations under this Guaranty not constituting a fraudulent transfer or conveyance.

Section 2. Guaranty Absolute. To the extent permitted by law, Guarantor guarantees that the Guaranteed Obligations will be paid strictly in accordance with the terms of the Loan Documents, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction

affecting any of such terms or the rights of Lender with respect thereto. To the extent permitted by law, the obligations of Guarantor under or in respect of this Guaranty are independent of the Guaranteed Obligations, and a separate action or actions may be brought and prosecuted against Guarantor to enforce this Guaranty, irrespective of whether any action is brought against the Borrower or any other Person guarantying or pledging assets as collateral security for the Guaranteed Obligations or whether the Borrower or any such other Person is joined in any such action or actions. To the extent permitted by law, the liability of Guarantor under this Guaranty shall be irrevocable, absolute and unconditional irrespective of, and Guarantor hereby irrevocably waives any defenses it may now have or hereafter acquire in any way relating to, any or all of the following:

(a) any lack of validity or enforceability of any Loan Document or any agreement or instrument relating thereto;

(b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations under or in respect of the Loan Documents, or any other amendment or waiver of or any consent to departure from any Loan Document, including, without limitation, any increase in the Guaranteed Obligations resulting from the extension of additional credit to Company or otherwise;

(c) any taking, exchange, release or non-perfection of any collateral, or any taking, release or amendment or waiver of, or consent to departure from, any other guaranty, for all or any of the Guaranteed Obligations;

(d) any manner of application of any collateral, or proceeds thereof, to all or any of the Guaranteed Obligations, or any manner of sale or other disposition of any collateral for all or any of the Guaranteed Obligations;

(e) any change, restructuring or termination of the corporate structure or existence of Company;

(f) any failure of Lender to disclose to Company any information relating to the business, condition (financial or otherwise), operations, performance, properties or prospects of Company now or hereafter known to Lender (Guarantor waiving any duty on the part of the Lender to disclose such information); or

(g) any other circumstance (including, without limitation, any statute of limitations) or any existence of or reliance on any representation by Lender that might otherwise constitute a defense available to, or a discharge of, Company or any other guarantor or surety.

This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Guaranteed Obligations is rescinded or must otherwise be returned by Lender or any other Person upon the insolvency, bankruptcy or reorganization of the Borrower or otherwise, all as though such payment had not been made.

Section 3. Waivers and Acknowledgments. (a) To the extent permitted by law, Guarantor hereby unconditionally and irrevocably waives promptness, diligence, notice of acceptance, presentment, demand for performance, notice of nonperformance, default, acceleration, protest or dishonor and any other notice with respect to any of the Guaranteed Obligations and this Guaranty and any requirement that Lender protect, secure, perfect or insure any lien or any property subject thereto or exhaust any right or take any action against Company or any other Person or any collateral.

(b) To the extent permitted by law, Guarantor hereby unconditionally and irrevocably waives any right to revoke this Guaranty and acknowledges that this Guaranty is continuing in nature and applies to all Guaranteed Obligations, whether existing now or in the future.

(c) To the extent permitted by law, Guarantor hereby unconditionally and irrevocably waives (i) any defense arising by reason of any claim or defense based upon an election of remedies by Lender that in any manner impairs, reduces, releases or otherwise adversely affects the subrogation, reimbursement, exoneration, contribution or indemnification rights of Guarantor or other rights of Guarantor to proceed against Company, any other guarantor or any other Person or any collateral and (ii) any defense based on any right of set-off or counterclaim against or in respect of the Guaranteed Obligations.

(d) To the extent permitted by law, Guarantor hereby unconditionally and irrevocably waives any duty on the part of Lender to disclose to Guarantor any matter, fact or thing relating to the business, condition (financial or otherwise), operations, performance, properties or prospects of Company or any of its subsidiaries now or hereafter known by Lender.

(e) Guarantor acknowledges that it will receive substantial direct and indirect benefits from the financing arrangements contemplated by the Loan Documents and that the waivers set forth in Section 2 and this Section 3 are knowingly made in contemplation of such benefits.

Section 4. Subrogation. Guarantor hereby unconditionally and irrevocably agrees not to exercise any rights that it may now have or hereafter acquire against the Borrower that arise from the existence, payment, performance or enforcement of Guarantor's obligations under or in respect of this Guaranty or any Loan Document, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or remedy of Lender against the Borrower, or any other insider guarantor whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including, without limitation, the right to take or receive from the Borrower, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim, remedy or right, unless and until all of the Guaranteed Obligations and all other amounts payable under this Guaranty shall have been paid in full in cash and the Letter of Credit Commitment shall have expired or been terminated. If any amount shall be paid to Guarantor in violation of the immediately preceding sentence at any time prior to the later of (a) the payment in full in cash of the Guaranteed Obligations and all other amounts payable under this Guaranty, and (b) the Termination Date, such amount shall be received and held in trust for the benefit of Lender, shall be segregated from other property and funds of Guarantor and shall forthwith be paid or delivered to the Lender in the same form as so received (with any necessary endorsement or assignment) to be credited and applied to

the Guaranteed Obligations and all other amounts payable under this Guaranty, whether matured or unmatured, in accordance with the terms of the Loan Documents, or to be held as collateral for any Guaranteed Obligations or other amounts payable under this Guaranty thereafter arising. If (i) Guarantor shall make payment to Lender of all or any part of the Guaranteed Obligations, (ii) all of the Guaranteed Obligations and all other amounts payable under this Guaranty shall have been paid in full in cash, and (iii) the Termination Date shall have occurred, the Lender will, at Guarantor's request and expense, execute and deliver to Guarantor appropriate documents, without recourse and without representation or warranty, necessary to evidence the transfer by subrogation to Guarantor of an interest in the Guaranteed Obligations resulting from such payment made by such Guarantor pursuant to this Guaranty.

Section 5. Payments Free and Clear of Taxes, Etc. (a) Any and all payments made by any Guarantor under or in respect of this Guaranty or any Loan Document shall be made free and clear of and without deduction for any and all present or future taxes (other than any taxes that are imposed on the Lender's overall net income by the United States and taxes that are imposed on the Lender's overall net income (and franchise taxes imposed in lieu thereof) by the state or other jurisdiction under the laws of which the Lender is organized or any political subdivision thereof) (the "Taxes"). If Guarantor shall be required by law to deduct any Taxes from or in respect of any sum payable under or in respect of this Guaranty or any Loan Document to Lender, (i) the sum payable by Guarantor shall be increased as may be necessary so that after Guarantor and the Lender have made all required deductions (including deductions applicable to additional sums payable under this Section 5), the Lender receives an amount equal to the sum it would have received had no such deductions been made, (ii) Guarantor shall make all such deductions, and (iii) Guarantor shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law.

(b) In addition, Guarantor agrees to pay any present or future other Taxes that arise from any payment made by or on behalf of Guarantor under or in respect of this Guaranty or any Loan Document or from the execution, delivery or registration of, performance under, or otherwise with respect to, this Guaranty and the Loan Documents.

(c) Guarantor will indemnify Lender for and hold it harmless against the full amount of Taxes, and for the full amount of taxes of any kind imposed by any jurisdiction on amounts payable under this Section 5, imposed on or paid by Lender and any liability (including penalties, additions to tax, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be made within 30 days from the date Lender makes written demand therefor.

(d) Within 30 days after the date of any payment of Taxes by or on behalf of Guarantor, Guarantor shall furnish to the Lender, at its address referred to in Section 9, the original or a certified copy of a receipt evidencing such payment. In the case of any payment hereunder by or on behalf of Guarantor through an account or branch outside the United States or by or on behalf of Guarantor by a payor that is not a United States person, if Guarantor determines that no taxes are payable in respect thereof, Guarantor shall furnish, or shall cause such payor to furnish, to the Lender, at such address, an opinion of counsel acceptable to the Lender stating that such payment is exempt from taxes. For purposes of subsection (d) of this Section 5, the terms "UNITED STATES"

and "UNITED STATES PERSON" shall have the meanings specified in Section 7701 of the Internal Revenue Code.

Section 6. Representations and Warranties. Guarantor hereby represents and warrants that Guarantor has, independently and without reliance upon Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Guaranty, and Guarantor has established adequate means of obtaining from the Borrower on a continuing basis information pertaining to, and is now and on a continuing basis will be completely familiar with, the business, condition (financial or otherwise), operations, performance, properties and prospects of the Borrower. In addition, the Guarantor further represents and warrants to the Lender as follows:

(a) All financial statements heretofore delivered to Lender relating to Guarantor are true and correct in all material respects, have been prepared in accordance with Guarantor's past practices consistently applied, and fairly present (subject to year-end audit adjustments) the financial conditions reflected therein without material changes since the respective dates thereof;

(b) There are not actions, suits or proceedings pending or, to the knowledge of Guarantor, threatened against or affecting Guarantor, or involving the validity or enforceability of this Guaranty at law or in equity, or before or by any governmental authority, except actions, suits and proceedings fully covered by insurance or for which adequate reserves exist or which, if adversely determined, would not substantially impair the ability of Guarantor to pay when due any amounts which may become payable in respect of this Guaranty; and to Guarantor's knowledge, Guarantor is not in default with respect to any order, writ, injunction, decree or demand of any court or any governmental authority;

(c) The consummation of the transaction hereby contemplated and the performance of this Guaranty by Guarantor will not result in any breach of, or constitute a default under, any indenture, mortgage, lease, loan or credit agreement or any other material instrument or agreement to which Guarantor is a party or by which Guarantor may be bound or affected; and

(d) No default presently exists under this Guaranty and no event has occurred and is continuing which, with notice or the passage of time, or both, would constitute a default under this Guaranty.

Section 7. Covenants; Delivery of Financial Information. Guarantor covenants and agrees that, so long as any part of the Guaranteed Obligations shall remain unpaid or the Letter of Credit Commitment shall be in effect, Guarantor will:

(a) perform and observe all of the terms, covenants and agreements set forth in the Loan Documents on its part to be performed or observed or that the Borrower has agreed to cause Guarantor to perform or observe;

(b) deliver to the Lender, as soon as available but within 60 days following the end of each of the Guarantor's fiscal quarters (other than the last fiscal quarter of any fiscal

year), an internally prepared balance sheet, income statement and statement of cash flows of the Guarantor for the fiscal quarter then ended, prepared in accordance with GAAP except to the extent deviated therefrom in accordance with the Guarantor's past practices;

(c) deliver to the Lender, as soon as available but within 120 days following the end of the Guarantor's fiscal year, an internally prepared balance sheet, income statement and statement of cash flows of the Guarantor for the fiscal year the ended, prepared in accordance with GAAP except to the extent deviated therefrom in accordance with Guarantor's past practices; and

(d) deliver to the Lender, as soon as available but within 60 days following the end of each of the initial three quarters of the Guarantor's fiscal year and within 120 days following the end of the Guarantor's fiscal year, a statement demonstrating and computing compliance by the Guarantor with the covenants required to be maintained by the Guarantor pursuant to Sections 6.8 (Liquidity) and
6.9 (Net Asset Position) of the Credit Agreement for the period then ended.

The financial statements and compliance certificate required to be delivered pursuant to clauses (b), (c) and (d) of this Section 7 shall be accompanied by a certificate of the Chief Financial Officer or Treasurer of the Guarantor to the effect that the information contained therein is true and accurate as of the date of such certificate.

Section 8. Amendments, Guaranty Supplements, Etc. No amendment or waiver of any provision of this Guaranty and no consent to any departure by Guarantor therefrom shall in any event be effective unless the same shall be in writing and signed by the Lender, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

Section 9. Notices, Etc. All notices, consents, waivers, and other communications required or permitted to be given under this Guaranty must be in writing and will be deemed to have been duly given when (a) delivered by hand (with written confirmation of receipt), (b) sent by telecopier (with written confirmation of receipt), provided that a copy is mailed by registered mail, return receipt requested, or (c) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and telecopier numbers set forth below (or to such other addresses and telecopier numbers as a party may designate by notice to the other parties):

To Guarantor:

Alliance Resource GP, LLC
1717 South Boulder Avenue
Tulsa, Oklahoma 74119

Attn: Cary Marshall, Director, Corporate Finance Telefax: (918) 295-7357

with a copy to:

Alliance Resource Partners, L.P. c/o Alliance Resource Management GP, LLC 1717 South Boulder Avenue Tulsa, Oklahoma 74119

Attn:    Thomas L. Pearson,
         Senior Vice President - Law and Administration,
         General Counsel and Secretary
Telefax: (918) 295-7361

and to:

Katten Muchin Zavis
1025 Thomas Jefferson Street, NW East Lobby, Suite 700
Washington, DC 20007
Attn: Steven C. Schnitzer, Esq.

Telefax: (202) 298-7570

To Lender:

Bank of the Lakes, National Association 12401 East 86th Street North Owasso, Oklahoma 74055 Attn: Scott Yandell, President & Chief Executive Officer Telefax: (918) 274-0347

with copy to:

Stuart, Biolchini, Turner & Givray 3300 First Place Tower 15 East 5th Street
Tulsa, Oklahoma 74103
Attn: Albert J. Givray, Esq.

Telefax: (918) 582-3033

or at such other address of which it shall have notified the party giving such notice in writing. Notices to in-house counsel or outside counsel of a party hereto shall not constitute sufficient notice to such party.

Section 10. No Waiver; Remedies. No failure on the part of Lender 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.

Section 11. Right of Set-off. Upon (a) the occurrence and during the continuance of any Default, and (b) the delivery of the notice and expiration of the Cure Period provided by Section 6 of the Credit Agreement, the Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by Lender, to or for the credit or the account of Guarantor against any and all of the Guaranteed Obligations now or hereafter existing under the Loan Documents, irrespective of whether Lender shall have made any demand under this Guaranty or any Loan Document and although such Guaranteed Obligations may by unmatured. Lender agrees promptly to notify Guarantor after any such set-off and application; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. The rights of Lender under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) that Lender may have.

Section 12. Indemnification. (a) Without limitation on any other Guaranteed Obligations or remedies of the Lender under this Guaranty, Guarantor shall, to the fullest extent permitted by law, indemnify, defend and save and hold harmless Lender and its respective officers, directors, employees, agents and advisors (each, an "INDEMNIFIED PARTY") from and against, and shall pay on demand, any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and expenses of counsel) that may be incurred by or asserted or awarded against any Indemnified Party in connection with or as a result of any failure of any Guaranteed Obligations to be the legal, valid and binding obligations of Company enforceable against Company in accordance with their terms.

(b) Guarantor hereby also agrees that none of the Indemnified Parties shall have any liability (whether direct or indirect, in contract, tort or otherwise) to the Guarantor or any of their respective officers, directors, employees, agents and advisors, and Guarantor hereby agrees not to assert any claim against any Indemnified Party on any theory of liability, for special, indirect, consequential or punitive damages arising out of or otherwise relating to the Loan Documents, the actual or proposed use of the proceeds under the Loan Documents or any of the transactions contemplated by the Loan Documents.

(c) Without prejudice to the survival of any of the other agreements of Guarantor under this Guaranty, the agreements and obligations of Guarantor contained in Section 1(a) (with respect to enforcement expenses), the last sentence of Section 2, Section 5 and this Section 12 shall survive the payment in full of the Guaranteed Obligations and all of the other amounts payable under this Guaranty.

Section 13. Subordination. Guarantor hereby subordinates any and all debts, liabilities and other obligations owed to Guarantor by Company (the "Subordinated Obligations") to the Guaranteed Obligations to the extent and in the manner hereinafter set forth in this Section 13:

(a) Prohibited Payments, Etc. Except during the continuance of any Matured Default (including the commencement and continuation of any proceeding under any Debtor Relief Law relating to the Company), Guarantor may receive regularly scheduled payments from Company on account of the Subordinated Obligations. After the occurrence and during the continuance of any

Matured Default (including the commencement and continuation of any proceeding under any Debtor Relief Law relating to Company), however, unless the Lender otherwise agrees, Guarantor shall not demand, accept or take any action to collect any payment on account of the Subordinated Obligations.

(b) Prior Payment of Guaranteed Obligations. In any proceeding under any Debtor Relief Law relating to Company, Guarantor agrees that the Lender shall be entitled to receive payment in full in cash of all Guaranteed Obligations (including all interest and expenses accruing after the commencement of a proceeding under any Debtor Relief Law, whether or not constituting an allowed claim in such proceeding ("POST PETITION INTEREST") before Guarantor receives payment of any Subordinated Obligations.

(c) Turn-Over. After the occurrence and during the continuance of any Matured Default (including the commencement and continuation of any proceeding under any Debtor Relief Law relating to the Company), Guarantor shall, if the Lender so requests, collect, enforce and receive payments on account of the Subordinated Obligations as trustee for the Lender and deliver such payments to the Lender on account of the Guaranteed Obligations (including all Post Petition Interest), together with any necessary endorsements or other instruments of transfer, but without reducing or affecting in any manner the liability of Guarantor under the other provisions of this Guaranty.

(d) Lender Authorization. After the occurrence and during the continuance of any Matured Default (including the commencement and continuation of any proceeding under any Debtor Relief Law relating to the Company), the Lender is authorized and empowered (but without any obligation to so do), in its discretion, (i) in the name of Guarantor, to collect and enforce, and to submit claims in respect of, Subordinated Obligations and to apply any amounts received thereon to the Guaranteed Obligations (including any and all Post Petition Interest), and (ii) to require Guarantor (A) to collect and enforce, and to submit claims in respect of, Subordinated Obligations and (B) to pay any amounts received on such obligations to the Lender for application to the Guaranteed Obligations (including any and all Post Petition Interest.

Section 14. Continuing Guaranty; Assignment under the Credit Agreement. This Guaranty is a continuing guaranty and shall (a) remain in full force and effect until the latest of (i) the payment in full in cash of the Guaranteed Obligations and all other amounts payable under this Guaranty and (ii) the Termination Date, (b) be binding upon the Guarantor, its successors and assigns and (c) inure to the benefit of and be enforceable by the Lender and its successors, permitted transferees and permitted assigns. Without limiting the generality of clause (c) of the immediately preceding sentence, the Lender may assign or otherwise transfer all or any portion of its rights and obligations under the Credit Agreement (including, without limitation, all or any portion of its Letter of Credit Commitment, the Advances owing to it and the Note held by it) to any other Person to the extent permitted by and in accordance with
Section 8.5 of the Credit Agreement, and such other permitted transferee shall thereupon become vested with all the benefits in respect thereof granted to Lender herein or otherwise. Guarantor shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lender.

Section 15. Execution in Counterparts. This Guaranty and each amendment, waiver and consent with respect hereto may be executed in any number of counterparts and by different parties thereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Guaranty by telecopier shall be effective as delivery of an original executed counterpart of this Guaranty.

Section 16. Governing Law. This Guaranty shall be deemed to be a contract made under the laws of the State of Oklahoma, and shall be construed by and governed in accordance with the laws of the State of Oklahoma, without giving effect to principles of conflicts of laws. Guarantor hereby submits itself to the jurisdiction and venue of the Tulsa County District Court, or Federal Court (Northern District) situated in Oklahoma, at Lender's election, except to the extent local law (if different) is required in connection with a foreclosure action.

IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly executed and delivered by or on its behalf as of the date first above written.

ALLIANCE RESOURCE GP, LLC

By       /s/ Michael L. Greenwood
  ----------------------------------------
Title:  Senior Vice President -
        Chief Financial Officer
        and Treasurer

Exhibit 10.28

GUARANTY FEE AGREEMENT

GUARANTY FEE AGREEMENT, dated as of July 31, 2001 (the "Agreement"), between Alliance Resource Partners, L.P., a Delaware limited partnership ("ARLP"), and Alliance Resource GP, LLC, a Delaware limited liability company and the special general partner of ARLP (the "SGP").

W I T N E S S E T H:

WHEREAS, contemporaneously with the execution and delivery hereof, ARLP is entering into that certain Letter of Credit Facility Agreement, dated as of the date hereof (the "Bank of Oklahoma Letter of Credit Facility Agreement"), between ARLP and the Bank of Oklahoma, N.A. ("Bank of Oklahoma"), pursuant to which the Bank of Oklahoma, N.A. has provided to ARLP a letter of credit facility in an aggregate amount of $10,000,000.00;

WHEREAS, ARLP has requested the SGP to, from time to time, guaranty the indebtedness of ARLP created or from time to time to be created under letter of credit facility agreements in an aggregate amount of up to $30,000,000.00 (each, a "Letter of Credit Facility" and, collectively, the "Letter of Credit Facilities");

WHEREAS, to induce the SGP to issue from time to time a guaranty of the indebtedness of ARLP created under the letter of credit facility agreements, ARLP has agreed to pay a fee to the SGP with respect to each guaranty, if any, issued by the SGP; and

WHEREAS, in connection with the execution and delivery by ARLP of the Bank of Oklahoma Letter of Credit Facility Agreement, the SGP has delivered to the Bank of Oklahoma a written guaranty of the indebtedness owing by ARLP thereunder;

NOW, THEREFORE, in consideration of the premises and the mutual agreements and covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

Section 1. Guaranty Fee. In the event that the SGP shall deliver a written guaranty of the indebtedness of ARLP created under any Letter of Credit Facility, ARLP shall pay to the SGP a fee equal to 0.30% per annum on the daily average of the face amount of the letters of credit issued and outstanding from time to time under such Letter of Credit Facility, payable quarterly in arrears based on a 360-day year, actual number of days elapsed. The fee payable hereunder is a usage fee and not an unused portion fee, and no guaranty fee shall be payable hereunder with respect to the unused portion of the letter of credit capacity under a Letter of Credit Facility.

Section 2. Procedure for Payment of Fee. As soon as reasonably practicable following the end of a calendar quarter, ARLP shall advise the SGP of the amount of the fee due and payable hereunder for the calendar quarter then ended, and ARLP shall pay the amount then due not later than five (5) business days following the end of such quarter.

Section 3. Governing Law; Miscellaneous. This Agreement shall be governed by and construed in accordance with the laws of the State of Oklahoma, without regard to principles of conflicts of laws. This Agreement may be executed in any number of counterparts and by different parties hereto on separate counterparts, each complete set of which, when so executed and delivered by the parties hereto, shall be an original, but all such counterparts shall, when taken together, constitute but one and the same instrument.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective duly authorized officers as of the date first written above.

Alliance Resource Partners, L.P.

By: Alliance Resource Management GP, LLC,
its managing general partner

By:         /s/ Michael L.Greenwood
    --------------------------------------
    Name:    Michael L. Greenwood,
    Title:   Senior Vice President -
             Chief Financial Officer
             and Treasurer

Alliance Resource GP, LLC

By:          /s/ Thomas L. Pearson
   ---------------------------------------
      Name:  Thomas L. Pearson
      Title: Senior Vice President - Law
             and Administration